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Business Commentary/Dilip Thakore

Aversion to potato chips contradicts BJP's agriculture thrust

One of the top priorities of the new Bharatiya Janata Party-led 18-party government is the industrialisation of Indian agriculture. In the coalition's national agenda for governance, agriculture development gets top billing with the promise that 60 per cent of the massive $ 22 billion (Rs 8,750 billion) public investment envisaged for the Ninth Plan period (1997 to 2002) will be invested in the agriculture sector.

Given the socioeconomic reality that 70 per cent of the nation's population lives in rural India and that over two-thirds of the national workforce is (under) employed in the agriculture sector, this is an unexceptionable, laudable, and overdue statement of government intent. Unfortunately, there is a sense of deja vu about such rural sector oriented pronouncements that have been made time and again from on high to little avail.

Rural India remains an area of darkness characterised by mass illiteracy, numbing poverty, marketing ignorance, and obsolete technology. This is because neither the nation's central planners nor politicians and bureaucrats have a clue about the pressing needs and priorities of India's rural population.

Whenever the subject of rural development is broached, the Pavlovian response of liberal and not-so-liberal left intellectuals who dominate the public debate is land reform. However, this basic reform, which has paralysed successive administrations in New Delhi and the state capitals for half a century, has been realised by Father Time. The constant division of village landholdings between successive generations of sons and brothers has transformed rural India into a mosaic of small and largely suboptimal farms.

Now, if the BJP-led coalition in New Delhi is serious about its intent to revive Indian agriculture, it should begin the process of corporatisation of agriculture by giving Indian industry the green light to purchase or lease wastelands for timber and pulp reafforestation, a proposal which has been foolishly blocked for several decades.

A second long overdue reform required in the rural sector is the complete freedom to buy and sell land which has been denied to rural citizens for almost five decades. In most states, unwarranted paternalistic legislation forbids the sale of farm land to 'non-agriculturists' except with special government permission. Such legislation has not only had the effect of artificially depressing the price of agriculture landholdings, but has sprung a rich income stream for politicians and bureaucrats vested with discretionary powers to permit farmland sale for residential or industrial use.

Such restrictive and price-depressant legislation is of doubtful constitutional validity as it negates the fundamental right to own and dispose of property as also equality before the law. If an urban flat or house owner can sell his property to the highest bidder, there is no rationale for denying rural citizens a similar freedom. The paternalistic rationale of such legislation that illiterate farmers are likely to be shortchanged by city slickers is out of sync with the new era of economic liberalisation and deregulation.

It is indeed arguable that post-Independence India's conspicuous failure to develop a strong rural industry base is attributable to this ill-conceived and clumsy state-level legislation. The professedly agriculture-oriented BJP-led coalition government would give rural India a big development boost if it takes the initiative to marketise agriculture landholdings.

The other ills that plague the agriculture sector are well known. And the gravest of these manmade ills is the near total failure to develop a rural infrastructure which could have facilitated the marketisation of Indian agriculture. Contrary to popular belief, marketing, not production, is the soft underbelly of Indian agriculture. Despite the fact that per hectare yields of Indian farmers suffer in comparison with those of farmers in the West and Southeast Asia, there is no gainsaying that dramatic productivity gains have been recorded by them. But given the almost total paucity of cold chains, chronic shortage of transport, and abysmal quality road networks, realising fair prices for their produce is a persistent nightmare for India's 140 million farmer families.

Against this backdrop, the BJP leadership's aversion to importing 'potato chip technology' is likely to contradict the coalition government's professed bias in favour of agriculture sector development. For the simple reason that it is the big bad multinationals who possess the highly sophisticated technology and capital required to develop effective cold chains and food processing enterprises. It's quite obvious that Indian industry doesn't have this technology. Because, for the past four decades and more, despite being the world's largest producer of fruits and vegetables, India has earned the dubious distinction of wasting an estimated 40 per cent of its annual horticulture produce.

It's all very well to make the right sounding populist noises about spending more for the development of the hitherto arbitrarily subsidised agriculture sector. But the most important lesson to be learned from India's failed economic development effort is that problems are not likely to be resolved if money is thrown at them. Therefore, Indian agriculture is unlikely to experience as a growth surge merely because 60 per cent of Ninth Plan investment is canalised into the agriculture sector. On the contrary, there is a strong possibility that most of the additional allocations made will, in time-honoured tradition, disappear without a trace.

The moral of this story is that developing the agriculture sector requires more than greater monetary allocation. The fundamental problems which have stunted the growth -- and particularly the prosperity -- of India's 700 million rural citizens are policy related. Consistent drafting of farm savings into non-performing public sector enterprises, active discouragement of the growth of corporate farming, and the related failure to develop a strong food processing industry are the primary causes of rural India's underdevelopment. These policy failures have to be addressed first.

Dilip Thakore