Land reforms: Unfinished business

Let me begin with an apocryphal story. Several years ago, the new Secretary, Ministry of Agriculture of the Government of India, on his first day at work, was being conducted around his office by a young Deputy Secretary. After walking several floors and winding his way through the labyrinthian corridors of Krishi Bhavan, the Secretary paused and asked: “Tell me, how many people work in this ministry?” “A little over 20,000 people, sir,” the Deputy Secretary replied enthusiastically. With incredulity writ large on his face, “And I thought the farmers in the country do agriculture and produce crops,” was the laconic observation of the Secretary.

Reading excerpts from the 14-volume report of the ‘Committee on Doubling Farmers’ Incomes’ reminded me of this anecdote. Yes, the aim of doubling farmers’ incomes by 2022-23 is a laudable declaration of intent and the report of the committee does provides a bird’s-eye view of what could be done -- a wish list, if you will -- and the broad strategy. Since agriculture is a state subject, it is now left to the states to resolve the question of how to do it. Being closer to the ground, the states have a worm’s-eye view of agriculture and ought to know they have to be cautious in applying market economics to households that are essentially not market-oriented. It is also far too important for this to peter out as have other similar announcements after a blaze of media attention -- ‘Skill India Mission’ (August 2014), ‘Make in India’ (September 2014), ‘Start-Up India’ (January 2016), ‘Stand-Up India’ (April 2016) have all but retreated from active praxis.

The future hinges on how the states address the unfinished business of land reforms.

Policy uncertainty on and the inadequate pace of agriculture reforms across India illustrate the divided state of mind with which state governments address the difficult task of envisioning the future of the Indian farmer. The agrarian problem raises two policy questions: First, the desirability of the transformation of Indian agriculture to a capitalist form of production and whether rescinding land reform legislation is the way to do this; second, how the agriculture sector can or should produce surplus despite the structural constraint of small land holdings.

The vast majority of farm households -- an overwhelming 85% -- are marginal and small holdings and rely primarily on own family labour, and consume half or more of what they produce. Economists characterise this as subsistence farming. The predominant economic feature of the farmer household is its limited resources and the narrow range of economic choices before it. Since rain-fed agriculture predominates, soil, water and climate conditions combine to compel the farmer to produce the same crop or set of crops year after year. Farming practices remain unchanged, relying on simple implements and limited mechanisation. From a market perspective, the return the farm household seeks is simple and undifferentiated -- after meeting expenditure and debt obligations -- to have enough produce to feed itself. The farm household is not a link between the ‘products market’ on the one side and the ‘factors market’ on the other. Indeed, it is a micro model of the two rolled into one. A sure and certain way of misunderstanding farm households in India is to view them as a business.

The time has clearly come for a systematic, evidence-based analysis of small and marginal farm households in the aggregate as a production sector. Such an analysis must be based on first principles -- of the farmer and his household as a form of social organisation – and agriculture as a capitalist form of business is certainly not one such. Big business has in the past lobbied for free entry into agricultural production, demanding a shift towards corporate farming. Government policy is tending towards those in a position to make substantial investments in land; and those who own capital will benefit most from rescinding land reform legislations. In effect, this will accentuate regional and social inequalities and its implications are far-reaching, for the structure of society and the future shape of politics.

In the warm afterglow of the ‘Green Revolution’, for several years, sustained high prices for food grains made investment in the production of high-yielding varieties of paddy, wheat, maize and millets extraordinarily remunerative. Non-agriculturists of various hues rushed to the countryside to invest in agricultural land, gentlemen farmers if you will. Yet, today, the rarest type to come across in rural India is a genuine capitalist producer who invests in dryland farming, and invests in land development or expanding the scale.

Government therefore needs to address the specific question of how to achieve economy of scale to transform agriculture into a technology-led, high productivity sector, with marginal land holding as a structural constraint. Innovative land-leasing and/or contract farming arrangements can enable consolidation at scale. They can also work as a new form of organisation that provides the participant farmer a basic minimum income from rent for the land, and a share in the proceeds from the farm produce as wages. This might well serve as a new form of economic organisation by which the farmer retains ownership of the land, and in the aggregate, the agriculture sector produces at scale. The model leasing/contract farming laws drafted by the Government of India must serve as the starting point to seriously explore this option.

The prospects for the vast mass of small cultivators of the present day are far from clear. If for no other reason, their very number makes it impossible for any of them to become capitalist farmers. Whether they will continue in the low-level equilibrium trap or whether they will be able to adopt modern methods and perhaps combine farming with non-farm employment, will depend on the sustained policy attention agriculture reforms receives in the future. Else, as in the past, to the extent that the governments ever intended to do more than toy with the idea of introducing agrarian reforms, doubling farmers’ incomes will be no more successful than several of the other fanciful schemes that the mandarins in Delhi dream up.

(The writer is Director, Public Affairs Centre, Bengaluru)