Is Indian agriculture an asset or a liability?

By Debashish Mitra

The total NPA”s in the country is estimated to be over Rs 10 lakh crores…of which the farm sector is approximately only Rs 68,000 crores.

The inspiration to write this article was born out of the realisation, that how little is known about the country’s agricultural economy and its rural anonymous masses, except as percentage statistics, of population, GDP, or now more recently, farmer suicides and farm loan waivers. Especially so, by the policy makers consisting of bureaucrats, politicians, industry leaders, Bankers, writers,  consultants, scientists, literally anyone involved with this sector or the country’s economy. These groups of people are those who today command and lead the country and decide its future.

Two questions have been asked by the writer, to upwards of over a 100 numbers. These include Chairpersons of Banks, Senior Bureaucrats, MP’s, senior and top corporate honchos, 4 figure plus turnover industrialists, PE fund managers, consulting firms, people who decide where the capital of the country is invested.

The questions are 1) What is India’s total annualised steel output ( chosen as a key comparator as there is this misconception that a nation’s global standing and steel production are correlated), and 2)  its total agricultural output, which is seemingly not relevant to its global standing. Sadly, there has never been a correct answer to these questions.

For those who don’t know, India’s annualised steel output is approximately 80 million tons ( with a 130 million ton capacity vs China’s capacity which is 900 million!) versus the country’s agricultural output which is , hold your breath, over a Billion tons! Consisting of approximately 280 million tons of grains ( a probable understatement as it does not include subsistence farming home consumption stocks, which practically every farmer keeps), over 300 million tons of fruits and vegetables, 175 million tons of milk, add sugar, cotton, jute, tea, coffee, spices, poultry, fish including marine, goatery, piggery, minor forest produce, and if to this is added a number of smaller items like commercial trees, flowers, honey, medicinal plants, and all other such products that come from our rural economy, we comfortably cross a billion tons.

This production,  and multiproduct growth, is happening well under the radar screen of all those who cry hoarse about the farm sector crisis, doubling of farm incomes, or loan write offs, as if these will be the panacea for the ills that afflict this sector. Statistics are couched in percentage contribution to GDP, and tend to hide more than they reveal. The 17% number of Agriculture of GDP (equivalent to the contribution of industry to GDP) doesn’t take into account the purchasing power generated by subsistence farming, which along with the sales of a billion tons of agri produce, is driving the rural consumption story. Importantly, this involves a billion people, almost 20% of the planet’s population.

So where then, is the issue? Is the agro economy and rural India an asset or a liability? Is investment in steel more important, or agriculture and the rural economy? Let’s look at some other statistics to figure out where the real crisis is.

The total NPA”s in the country is estimated to be over `10 lakh crores…of which the farm sector is approximately only `68,000 crores.  Pretty much similar to what UPA 1 wrote off in 2008. If that sum is seen as an investment, the farmers have responded by almost doubling output across products in the last 10 years. This too, with still predominantly primitive means of farming, small farm holdings, single crop rain fed farming, lack of mechanisation, water management systems and micro-irrigation, limited access to high yielding varieties of seeds, plant protection tools, nutrient management, amongst others. If modern farming is widely adopted, India’s agricultural output will across 2 billion tons in the next 6 to 7 years! Is any one of the urban based decision makers aware of what this means, and what could be the consequences if it is not addressed?

Let’s now look at the steel sector. About 60% of the production is dominated by one family, a large industrial group and a public sector behemoth. An example of concentration of wealth and national capital. The total borrowings of the Steel sector is over 300,000 crores, and gross NPA’s are approximately 115,000 crores or 38%!

Contrast  that with the Agriculture sector in which the formal sector debt is approximately Rs 10 lakh crores with an NPA of only `68,000 crores or 6%. It is pertinent to add, that the government is planning to recapitalise the public sector banks with a sum that is close to that of the entire agriculture sector NPA. Unfortunately, very little of that will be used for this sector.

The growth of micro credit organisations, who lend at over upwards of 26-28% interest, is happening mainly in rural India. In comparison the borrowing of urban lenders is  at half this cost be it the big industrial, or the small urban borrower. However, for the banks who fund these MFI’s, and the urban borrowers, their rate of CASA growth or deposits is much higher in rural areas than urban ones. Doesn’t this amounts to a transfer of wealth and subsidy for urban India from rural India. ( A polite term for day light robbery!)

Let’s now come to two seemingly connected issues, which seem to have taken centre stage, especially after the recent elections. Farm distress, farmer suicides and farm loan waiver.  Whilst it’s understood that farm distress is the malaise and farmer suicides the symptom, is farm loan waiver the answer? Clearly not. The issue is much deeper. It devolves to what are we as a nation focusing on? A billion tons produced by a billion people? Or, the noise and attraction of 300 million urban dwellers of whom, 10 million own 70% of the nation’s wealth?  Or 80 million tons of steel, most of it crude, with very little value added?

Unless there is a complete change of mindset, that we accept we are predominantly an agriculture based nation, and always have been, the malaise will continue. The oft quoted number of India’s share of global GDP in the 15thand 16thcentury of over 15% never focuses on its source, agri produce…spices and condiments. This is the only sector, which can solve all the country’s major problems, be it current account deficits, the dependence on fossil fuels, or even the trade imbalance with China. Certainly steel cannot.

We need to make agriculture a central force of global power, feed the world, use it as a diplomatic source of influence akin to the PL 480 program of the United States that we were enslaved by, and also use modern technologies to convert the food waste as a source of fuel for the masses in place of a fossil fuel, LPG.

Once we do that, the answers to the malaise will be obvious. This is the only sector that can create a vast network of MSME’s which can be part of the eco system of value creation, and that too, in the rural and semi-urban areas, generating employment in the millions, and benefitting the billon and stopping migration of hundreds of millions.

Source: The Asian Age

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