T C A Srinivasa-Raghavan: Farming – Barking up the wrong trees

In 1984, the Editor of The Financial Express, the late N S Jagannathan, asked me to compare the average per acre earnings of a farmer with that of a senior driver in the public sector.

To help me along, he gave me the balance sheets and annual reports of about a dozen public sector undertakings (PSUs). In those days, the salaries of all those who earned more than Rs 3,000 per month had to be revealed.

The exercise didn’t take very long: whereas a senior driver earned around Rs 36,000 a year, a farmer earned around Rs 6,000-8,000 per acre. The annual income of senior PSU drivers today is around Rs 3.5-4 lakh a year while that of farmers is around Rs 40,000 – if they are lucky.

Two and a half decades later, another editor from Chennai told me that a journalist who was earning Rs 24,000 a year for filing one story a day in 1994 – mostly re-writing press releases – now earned about Rs 6 lakh a year for doing exactly the same thing.

Justification, not explanation
Economics tells us what a factor of production earns depends on its productivity. Well, then, economics is wrong.

How come a driver and a journalist earn so much more today even though there has not been any increase in their productivity, while a farmer whose productivity has at least tripled in this period, earns so much less?

Even if you look at it from a social utility point of view, are drivers and journalists more socially useful than farmers that they should earn so much more? If that were so, then primary school teachers should be earning more than Rs 10,000 a month, which is less than what a private driver costs now.

There is no sensible answer to these questions, except in some vague sense through substitutability, value addition, demand-supply mismatches and other mumbo jumbo of economics.

But economics often confuses justification for explanation, so we need not pay it too much attention.

A mug’s game
The hard truth is this: farming, throughout history, everywhere in the world, has made no commercial sense except when accompanied by a huge exploitation of farm labour by people owning very large tracts of land.

The same investments of capital, time and effort have yielded huge multiples of income elsewhere, as traders will testify.

The ‘terms of trade’ – the ratio of what a farmer pays to others and what he receives from them – are in farmers’ favour only very rarely. Slice and dice it whichever way you like, a farmer’s lot has not been a happy one.

At the risk of hugely annoying the romantics, we need to admit that a farmer has no skills comparable to other sources of livelihood, which is why democracies tend to subsidise farm incomes.

The truth is that productivity increases in agriculture come from improvements in technology, not any improvements in the farmer’s skills, such as they are. Indeed, where value addition as a measure of skill levels is concerned, almost all other professions are superior, even traditional rural ones such as pottery, tanning, tailoring, ironsmith and so on. In short, take away technology (which is what environmental activists want) and there is nothing left.

And the technology question brings us to the crux of the Indian issue: our succession laws and their impact on farmers’ – as opposed to farm – incomes.

Size matters, especially here
The link is not obvious but the fact is that for technology to work, that too on the scale we want it to, the land being cultivated cannot be handkerchief size.

And here is the dismaying truth: India, says Census 2011, has over 118 million farming households, of which 85 million own just a couple of hectares or so, which, thanks to fragmentation, are actually just one-acre-or-less plots.

This has happened because of our inheritance laws that tend to divide a holding equally between successors. The more the number of sons, the greater the division.

In just one generation, a 20-acre holding can become four five-acre farms. In the next generation, it becomes even smaller.

This problem was first pointed out in 1988 by the late Samar Sen, who was asked to write a report on taking the Green Revolution to eastern India. He recommended a review of succession and inheritance laws. He was ignored.

The time has come for the government to ask the NITI Aayog to look into this problem. The laws need some simple tweaking that will prevent sub-division and fragmentation.

If we don’t do this, then, it will be goodbye technology, goodbye productivity, hello suicides.

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