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Agriculture in India: Both Weak and Strong |
Second
largest population in the world, third largest economy, fourth largest
agricultural sector… In reference to India, superlatives abound. And
yet, 400 million Indians live on less than a dollar a day, 212 million
are undernourished and the United Nations Development Programme has
ranked India 127th (out of 177) in terms of the human development index.1
How is it that this country, an agricultural giant and a driver of
worldwide growth, is not able to ensure food security at home? What
strategy can India implement nationally and with regard to international
negotiations in particular?
I. An agricultural giant incapable of ensuring the food security of its own population
India is a “giant on shaky ground”; although the agricultural sector is
of utmost importance, the country faces structural handicaps that have
prevented it from rooting out famine and poverty.
A. Agriculture: An economic sector of utmost importance
Agriculture’s share in India’s economy is significant, albeit in
decline. Although the sector accounted for 22 percent of gross domestic
product (GDP) in 2005 – next to 51 percent for services and 27 percent
for industry – it remains the leading industry for employing close to
two thirds of the country’s working population.
Furthermore,
India has as much usable farmland as the European Union: 180 million
hectares – 140 million of which are planted, covering approximately 60
percent of the country’s total land area.
The Indus and
Brahmaputra regions in the north of the country (including the Assam
plain, Uttar Pradesh and Punjab), traversed by the Ganges and graced
most by the benefits of the monsoons, are the country’s most fertile
regions where most agricultural production takes place, sugar cane and
wheat production in particular.
These “natural” advantages in part explain India’s leading position with regard to many agricultural products.
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B. A sector highly exposed to the vagaries of weather and up against significant structural handicaps
1. Highly exposed to the vagaries of weather
India’s agricultural sector is exposed, along with all of the world’s
agricultural sectors, to the vagaries of weather, yet is highly
sensitive to these variations given that most agricultural production
depends on the monsoon. Precipitation falls from June to September, and
its level of intensity determines the production levels for the year,
particularly for wheat, which is a staple food in India. “Bad” monsoons,
which bring insufficient or excessive levels of precipitation, can
cause significant drops in yields,3 thereby submitting production in India to a high degree of variability.
2. Insufficient productivity
India’s agricultural sector is also characterized by insufficient
productivity, due to several factors such as the miniaturization of
agricultural players, limited use of mechanized farming techniques, a
lack of adequate equipment and infrastructure and the harmful
consequences of the “Green Revolution” of the 1970s.
a. Highly miniaturized and insufficiently mechanized local production
The average farm in India covers a surface area of 1.5 hectares.4This
compares to an average surface area of 50 hectares in France (30 times
larger) and an average of 200 hectares in the United States (130 times
larger). This characteristic is a legacy of the post-independence farm
reforms of 1947, which aimed to redistribute land to poor farmers by
placing limitations on the size of real estate. Although the Indian
government is currently working to encourage farm expansions, which
would create more profitable productions units due to economies of
scale, real estate nonetheless continues to be divided into even smaller
units with each new generation due to customary and succession laws.5.
This fragmentation of farmland is a factor behind the limited use of
mechanized farming techniques and prevents the development of a more
organized and productive agricultural sector.
b. Insufficient investment, particularly in infrastructure
Insufficient investment, particularly in infrastructure, is visible and
has a direct effect on India’s agricultural productivity. Facilities
for the storage and keeping of crops (cold chain) are lacking and lead
to tremendous losses, which for produce can represent up to 40 percent
of the harvest.
Additionally, only 30 percent of usable
farmland is equipped with irrigation systems. A drop in public
investment since the 1970s and a lack of upkeep have caused wear and
tear of irrigation pipes, leading in turn to the loss of over one-third
of water transported. Given the increase in non-farm related water needs
due to population growth, conflicts over water usage rights are on the
rise.
c. The “boomerang effect” of the Green Revolution
The “Green Revolution” launched by Prime Minister Jawaharlal Nehru in
the late 1970s boosted the agricultural sector by increasing yields, but
also had the disadvantage of increasing production costs. At a time
when agricultural prices were on the decline worldwide, this rise in
production costs affected India’s ability to compete and led many small
farmers into desperate straits. Faced with this “scissors effect” (drop
in prices and rise in costs), India’s farmers took on significant debt
to gain new factors of production6 eand
access to inputs, which happened to be quite costly given that they were
imported. The much-anticipated results never materialized, however, and
the trend of rising costs gained momentum. While it cost 30 dollars to
produce a ton of wheat in 1985, by 1998 it cost no less than 80! A study
published in the British medical research journal The Lancet in 2002
revealed that the agricultural regions of southern India held the sad
world record suicide rate, at 58 suicides per 100,000 inhabitants (four
times the average in other countries).
In addition, the
widespread and indiscriminate use of fertilizer and pesticides has
degraded soils. We see today that the fears expressed by Monkombu
Swaminathan,7father of India’s “Green
Revolution,” in 1968 regarding the consequences of poor irrigation and
excessive use of pesticides, were well founded and are now true. A
portion of the country’s usable farmland has consequently been seriously
degraded, with soil salinization and drops in water table height
commonplace in some regions.
The combination of these three
factors explains why the average productivity of Indian farms falls well
below the averages for the European Union (EU) and China. 8
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3. Famine and poverty remain significant handicaps
With 212 million malnourished individuals (as many as in 1992), India is the country most severely affected by malnourishment9 in the world. In addition, one third of the country’s population lives below the extreme poverty line,10 the majority of those individuals representing the agricultural sector.
The “landless farmer” movement has highlighted the distress felt by
thousands of Indian farmers who have been forced to abandon land that
was requisitioned for the creation of industrial free zones. Close to 40
percent of all Indians are landless and 23 percent live in what a
leader of Ekta Parishad, an Indian NGO,11refers
to as abject poverty. Although the government recently appeared to have
taken note of their grievances (in 2007, opposition to the construction
of a pharmaceutical plant and shipyards, redistribution of land), any
measures taken were marginal and the structural changes needed to
promote equity have yet to be made.
In debt or broke (see
above), many farmers have decided to migrate to the cities in hopes of
better days. The phenomenon, seen in many developing countries, leads to
the creation of “underdevelopment traps” that are affecting India’s
pace of development, due to:
> The costs brought about by increased inequalities and poverty, particularly with relation to social policies.
> The urban market’s inability to absorb the working population from agriculture.
> An increase in shantytowns and the creation of megapolises.
> A worsening of problems related to health, hygiene and education.
The situation in India is therefore paradoxical: a giant in global
agriculture, the country is incapable of feeding its own population and
meeting the challenges and issues that the 21st century holds. Will the
strategy that India has adopted for international negotiations, at the
WTO in particular, enable it to meet those goals?
II. Agriculture: For India, a strategic sector that requires a new development paradigm
According to most of the International Institutions such as the WTO and
the World Bank, a full liberalization of international trade would
“automatically” benefit India. The reality is anything but; far from
being a source of development, unregulated free trade carries
significant risks. A new approach is therefore required.
A. The WTO’s idyllic and theoretical vision: The “one best way” development paradigm
According to the WTO, India would have everything to gain from a full
liberalization of the international markets for agriculture, industry
and services alike. The liberalization of international agricultural
trade would allow India to develop and meet the great challenges it
faces:
> Import, at lower cost,
an increased variety of products that would help the country react to
Westernized modes of consumption. Indians have started to modify their
dietary habits, and for the time being, imported products alone are able
to satisfy their expectations and new needs, given that national food
production is insufficient both in quantity and in diversity.
>Boost
its exportation of agricultural goods and thereby reduce the country’s
trade balance deficit. Its balance of trade is largely negative,
particularly within the agricultural sector. While imports grew by 64
percent from 1998 to 2001, exports fell by 7 percent over the same
period. This is mainly because the Indian government neglected the
export market for quite some time, concentrating instead on supplying
the national market. The country’s exports served at the time as a way
to sell off surplus food.
>
Stimulate its economic growth by increasing its share in the
international trade of agricultural and agrifood products (currently at
1.2 percent) and benefitting as much as possible from the growing
potential of Indian demand, stimulated by population growth and improved
purchasing power.
> Promote
national development and the fight to end famine and poverty by granting
the country’s population access to less expensive products via the
elimination of customs duties.
The WTO also purports that free
trade in services would be essential for economic growth and development
in India, for it holds certain competitive advantages, particularly in
the profitable economic sectors of new technologies and computing.
Additionally, the accumulated benefits of free trade in services could,
via a “snowball” effect, benefit India’s other economic sectors, the
agricultural sector in particular.
CPascal Lamy,
Director-General of the WTO, said as much in a speech given at the
London School of Economics in October 2007: “Services underpin virtually
every economic activity needed in the production and distribution of
other goods and services (…) we need services to help realize the
economy-wide gains from trade and to amplify whatever market access
might be achieved in agriculture and industrial products.”
And yet, the breakdown of the most recent G412
talks that took place in Potsdam in June 2007 demonstrates that the
WTO’s approach is idyllic and strictly theoretical. For if there are
only advantages to free trade, why would India have walked away from the
negotiating table?
Why would it have taken the risk of
compromising the negotiation process as a whole, when a significant
share of its growth (services and industry) hinges on it, and this to
preserve an economic sector that, once liberalized, will only marginally
contribute to its economic growth in comparison to the other two
sectors?
A much more complex reality that calls for the creation of a new development paradigm
Reality has run counter to the WTO’s grand predictions and shown just
how true the “agricultural exception” is. The automatic succession of
beneficial effects touted by the Director of the WTO in fact hides much
more complex realities, not the least of which are food security, the
social equilibrium of a population hit hard by malnutrition,
insufficient yields and uncertainty over climate factors. Consequently,
three factors undermine the WTO’s international free trade strategy for
India and prove the need for a new international development paradigm.
> When India sneezes, the world’s agricultural markets catch cold…
Demand from India is a significant driver of worldwide growth, an
influence that continues to grow. In the context of a global supply
deficit, low inventories and a growing liberalization of markets, India
is increasingly exposed to the fluctuations of the international markets
… yet the opposite is also true: India’s positions on the international
markets significantly destabilize world prices, as evidenced by the
recent bid solicitations for wheat.
These are set to grow in
number, given that food security is a strategic, national defense issue
for India, which must, above all, ensure that its 1.1 billion
inhabitants are fed. Aware of this, the Indian government is adjusting
customs duties to ensure sufficient domestic supply.13.The
government is also monitoring imports of agricultural goods deemed
sensitive in nature (for competing directly with nationally-produced
goods), such as dairy, fruit, nuts, coffee, tea, grains, food oils and
spices. The government may also decide to limit exports in order to
preserve national supply and the stability of domestic prices (this
happened in 2006 for legume exports). Wheat exports were also
prohibited, in February 2007, to contain a rise in domestic prices.
>
The liberalization of international agricultural trade, combined with
the establishment of intellectual property barriers, is detrimental to
India’s agricultural sector, today unable to meet the challenges they
present.
With the liberalization of international
agricultural trade, products imported at lower cost will enter into
direct competition with locally-produced goods. At the same time,
India’s exports will suffer due to exports from other emerging countries
that are better able to compete given their more modern agricultural
techniques.
Finally, the TRIPS and TRIPS-plus agreements, which
establish significant intellectual property barriers, will cause direct
harm to India’s agricultural sector, as the benefits of innovation will
be reaped by foreign companies rather than Indian companies or farmers,
due to the intellectual property game. The phenomenon can already be
observed today with rice.
> Cities will not absorb the agricultural workforce
According to Subir Gokarn, an economist with the rating agency Crisil,
an Indian subsidiary of Standard & Poor’s, “a traditional
development model would call for a transition from agriculture to
industry, and later to services. But in India, we are moving directly
from agriculture to the service sector, a sector that creates only
skilled jobs. Industry, for its part, is not growing fast enough to
absorb the droves of farmers."
This non-absorption of
agricultural workers by the other economic sectors, concentrated in the
cities, has led to the formation of megapolises, a phenomenon seen and
well known in many LDCs, along with the formation of “underdevelopment
traps.” This is affecting India’s development potential in a variety of
ways, the most significant of which is related to the transfer of
resources; rising inequalities and poverty give rise to a certain number
of direct costs (related to social welfare as well as crime-fighting
expenditures) and indirect costs (growth of the informal economy and
rising crime). These costs and expenditures are sapping resources that
would be better used elsewhere, for example as investments in the
private sector and infrastructure.
This phenomenon has,
furthermore, been exacerbated by Indian society’s segmentation into
castes, which hinders absorption of the agricultural workforce.
Moving away from the WTO’s idyllic and theoretical approach, according
to which there is “one best way” toward economic growth and development,
is vital, and the future of India depends on it. A new paradigm must be
developed, one that would take into account regional specificities
while ensuring that they mesh with international rules, centered on two
strong notions – regulation of the agricultural markets and
international cooperation.
For this to happen, three criteria must converge:
> Adoption of a comprehensive and true-to-life vision of the realities of the agricultural sector.
What is the current status of the world’s agricultural markets?
>
Definition of principles of governance for the world’s agricultural
markets that is capable of meeting current and future challenges.
What vision do we have for agriculture at the international level?
> Development of instruments for guidance and market regulation, to ensure that the set objectives are attained.
How do we ensure that we not stray from the “development path” defined in the first two criteria? |
A satisfactory answer has yet to be provided for any of these three
strategic questions. WOAgri has been working to that end since December
2005, defining principles of governance within an integrated framework,
developing the NAR Rating Agency and building the WOAGRI economic model,
the first simulations of which are set to take place within the
upcoming days.
This is why the current “break” in the WTO Doha
Round negotiations must not be perceived as a danger for India and the
other developing countries. Rather, it provides a unique opportunity to
reconsider the terms of the debate and provides a convincing argument
for agriculture to be accorded “special” consideration within
international negotiations.
This new approach with regard to a
global governance of agriculture should not, however, lead India to
forget the need to reform its agricultural sector. Several possible
avenues have been broached:
> A new Green Revolution, to allow India to diversify its agricultural sector while increasing its respect for ecosystems.
>
Increased investment in infrastructure, to modernize its agricultural
system and avoid production losses, and in research to lessen India’s
reliance on foreign research laboratories (in the area of high-yield
plant research, in particular) and to enable India’s farmers to
withstand international competition.
> Continued pursuit of the ambitious draft14
“National Rural Employment Guarantee Scheme” (NREGS) policy to ensure a
minimum wage for all heads of agricultural families throughout the
year.
WOAgri éditorial
| 1
The human development index (HDI) is a statistical tool that measures a
country’s health/life expectancy, knowledge/education and standard of
living levels.
2
Millet is an annual, herbaceous plant from the grass family, cultivated
as a food crop. It is a coarse grain, cultivated for its seeds and
well-adapted to semi-arid zones.
3
The 2007 monsoon was the most brutal of the last thirty years;
devastating floods caused over 1,400 deaths and victimized 25 million
people in India, Bangladesh and Nepal.
4 Figures from the L'ouverture du marché indien report (see above)
5
India’s milk production sector provides another telling illustration of
this miniaturization of production: in addition to the sector’s high
geographical concentration (90 percent is produced in the northern and
northwestern states), over half of all production is carried out by
small farmers who have only one or two cows. Although India is the
world’s leading milk producer, it has one of the lowest productivity
levels. This can mainly be attributed to a lack of pastureland and many
animal-related weaknesses related to factors such as diet and breed
genetics.
6 They have been using high-yield plants for the past few years.
7
Indian geneticist who served as Executive Director of the International
Rice Research Institute (IRRI) in the Philippines until 1987. Former
President of the World Conservation Union and recipient of the 1987
World Food Prize.
8
Annual yields for wheat and rice are, respectively, 2.7 tons per
hectare (half of the EU’s yield) and 1.9 tons per hectare (half China’s
yield). These figures were published by the Embassy of France in India
(Economic Mission) in a report entitled, L'ouverture du marché indien.
9
Malnutrition, or undernutrition, is characterized by an insufficient
food intake for meeting an individual’s daily energy needs.
10 Population living on less than a dollar a day.
11 Source: Les paysans sans terre envahissent New Delhi, Le Figaro, with AFP and BBC (October 28, 2007).
12
At the most recent meeting of the G4 (India, Brazil, European Union and
the United States), Kamal Nath, India’s Minister of Trade, walked away
from the negotiating table along with his Brazilian counterpart.
13
The average rate observed for customs duties on imports is 40.8
percent, a figure well above the 14.1 percent rate for non-agricultural
goods.
14
Initially, the scheme was estimated at an annual cost of 400 billion
rupees (USD 9 billion). The figure listed in the national budget
presented on February 28, 2006 was just 117 billion rupees.
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Advocating for
agricultural market
regulation and global
food governance | |
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