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Business Commentary/Dilip Thakore

The cruel blows inflicted upon India's farmers

One of the greatest and most cruel injustices of the failed socialistic model of economic development adopted by post-Independence India is the raw deal which the nation's central planners have given rural India. Though there has been open, uninterrupted and continuous short-changing of the nation's rural population for over five decades, only now are the contours of this monumental injustice becoming manifest.

A recent study of the nation's horticulture industry commissioned by the Confederation of Indian Industry and conducted by the world-famous US-based management consultancy firm McKinsey & Co indicates that this agri-industry has been woefully neglected.

According to the study, though India is the second largest producer of fruits and vegetables in the world, its processed food industry is abysmally underdeveloped. Barely two per cent of the horticulture produce of rural India is preserved and processed. As a consequence over 40 million tonnes of the nation's fruit and vegetable production rots before it can get to the market inflicting an annual income loss estimated at over Rs 230 billion ($ 6.38 billion) upon the nation's farmers. The supreme irony of five decades of central planning and the licence-permit raj is that a nation in which widespread hunger and deprivation is an omnipresent reality, is the world's most wasteful society.

One would have thought that the most obvious priorities of central planning inspired by the now wholly discredited Soviet development model, would have been to provide food, clothing and shelter to the general populace. Yet after half a century of centrally planned economic development it is becoming increasingly apparent that the most neglected sectors of the economy are precisely those capable of meeting these basic needs of the population. The CII-McKinsey study confirms that despite lip service to democracy, the post-Independence Indian economic development effort has been chillingly faithful to the Soviet model which squeezed the peasantry to finance heavy industry.

Apologists of the centrally planned development model are quick to cite the success of the Green Revolution which has quadrupled the nation output of foodgrains to almost 200 million tonnes per year. But the truth is that the gains of the Green Revolution have been harvested by urban India by way of low prices of foodgrains. The net effect of a complex system of power, fertiliser and irrigation subsidies counter-balanced with food subsidies and a failure to develop a marketing infrastructure for agriculture produce has been the steady impoverishment of the peasantry. Currently, rural per capita income is less than half of urban income.

The more articulate among farmers leaders -- Sharad Joshi, Dr Verghese Kurien and the late Charan Singh among others -- have been arguing against the adverse terms of trade, transactional restrictions and paltry investment in rural infrastructure development which the nation's peasantry has suffered for over five decades. But the intelligentsia and the media hitherto dominated by leftist intellectuals paid scant attention to their pleas for a more equitable deal for the nation's farmers.

Perhaps the only farmer's leader who has been able to attain a measure of success in securing an equitable deal for farmers is the Anand (in Gujarat)-based Kurien. And his success in securing higher milk prices for the nation's farmers is rooted in the ingenious manner in which he mobilised capital for investment in technology and building a functional infrastructure for the dairy industry.

In effect, the CII-McKinsey study calls for the implementation of this model of development for the nation's high-potential horticulture industry.

Not a day too soon either. Amazingly, despite two-thirds of the population being engaged in agriculture, the nation boasts only 8,200 cold storage facilities with a holding capacity of a mere 8.7 million tonnes against the annual horticulture output of over 100 million tonnes. Road or rail transport with cold storage facilities is virtually non-existent. Little wonder that recently farmers near Bangalore dumped an estimated 10,000 tonnes of fresh tomatoes on the highway in protest against the below rock-bottom prices which are inevitable if downstream storage and processing facilities are unavailable.

This studied neglect of agri-businesses has been compounded by numerous restrictions imposed upon the movement of agricultural produce, forced levies, export bans, high transportation costs and the imposition of unjustifiably high taxes on processed fruits and vegetables. Moreover, despite ministerial proclamations, the ground-level reality is that financial institutions including ICICI and IFCI are very reluctant to finance horticulture produce processing projects. Deprived of remunerative farm-gate prices and condemned to perpetual distress selling, the so-called affluent Indian farmer is a contradiction in terms.

Even as India's economic liberalisation and reform agenda is the subject of passionate debate within the urban intelligentsia, it would be pertinent to bear in mind that the starting point of the economic reforms which have transformed newly-affluent China and the nations of South East Asia into economic tigers was agriculture sector reforms and development. Unless a rural infrastructure is built and the agriculture sector is consciously developed to stimulate sustained mass demand, Indian industry will continue to be plagued by the inexplicable recessionary cycles it is experiencing currently.

Dilip Thakore