Simple Learning From Gujarat

For some years, surveys have been finding that a significant proportion of farmers want to give up farming.

Underlying this phenomenon are two contradictory trends at play. First is the distress of the poorest, small and marginal farmer (SMF), who till less than two hectares of land and are 85 per cent of cultivators, and second is the rural landless labour, who account for some 30 per cent of India’s 220 million workforce in agriculture in 2012. At the micro-level, for the SMF, when a crop fails (as for many due to the recent unseasonal rain), and if the farmers are indebted, their situation becomes hopeless. If, in addition, they happen to be share-croppers (rather than owner-cultivators), and are also indebted (especially to moneylenders), hopelessness could lead to suicide when the crop fails.

While this phenomenon is true at the micro-level for SMF, at the macro-level in agriculture, there are two positive forces at play. First, it was only since 2004-2005, as GDP (gross domestic product) growth rate, including agriculture, rose sharply, that for the first time in India 37 million workers left agriculture in the seven years to 2011-12. While the share of the workforce in agriculture had been declining prior to 2004, construction investment has grown rapidly between 2004-2005 and 2011-12 leading to landless labour leaving agriculture to become construction workers. A Lewisian structural shift had begun.

The second path-breaking development that began was that for the first time in Indian history there occurred an absolute decline in the numbers of the poor, as real wages rose rapidly. While income poverty incidence declined by 0.7 percentage points per annum between 1993-94 and 2004-05, between 2004-05 and 2011-12 it tended to decline at over double that rate (a 2 percentage points). However, further hastening the rate of poverty reduction will be crucially dependent upon the fortunes of agriculture (both crop and non-crop).

In post-independent India, the growth rate of agriculture has rarely exceeded 3 per cent per annum, and even then it has been barely above 3 per cent. Hence, we cannot claim that there has been an agricultural revolution in India, despite a green revolution in the 1970s and 1980s. East Asia achieved a 6 per cent agri growth rate between 1950 and 1980.

The Indian paradox is that mechanisation is occurring apace in agriculture, and rural consumption is rising, but farm yields are growing too slowly. In the past 18 months, the new government could have taken many steps to benefit farmers, simply learning from the successes of agriculture in Gujarat.

Raising yields require the inappropriate use of fertiliser, arising from the market-distorting and soil-health destroying fertiliser subsidy to manufacturers is ended quickly (and replaced by a cash transfer to farmers). But the new government has shown no signs of fertiliser subsidy reform, other than advocating that each farmer should get his soil tested, and maintain a soil-health card (as Gujarat does).

Raising yields also requires the rapid rejuvenation of the farm extension system, whereby extension workers help the farmer with new knowledge. The agricultural research and extension system had deteriorated in Gujarat, as in the rest of India. But the Gujarat government after 2000 unbundled the massive Gujarat Agricultural University into four independent universities with a large increase in resources and autonomy. Its scientists then were mobilised to rejuvenate the moribund ‘training and visit’ extension model. Partly due to extension work, Gujarat farmers have shifted en masse from a 13:7.5:1 nitrogen-phosphorus-potassium composition in fertiliser use which was harmful to crops/soil, to a 6.5:3.5:1 composition, thus reducing cost, increasing production and improving net income.

Raising yields also require both better management of water resources and the pricing of electricity for farms. In both, Gujarat has shown the way — which partly explains why Gujarat experienced a growth rate in agriculture that is at least twice (about 6.7 per annum) the national average, despite being semi-arid. While excessive groundwater use in the grain belt of Punjab and Haryana has caused a serious fall in the groundwater table there and elsewhere in India, the Gujarat government, by contrast, supported farmers to undertake decentralised rainwater harvesting and groundwater recharge work. This started as a mass movement.

Secondly, the government popularised micro-irrigation (i.e. the use of sprinklers, drip irrigation) to prevent inefficient use of water during irrigation common all over India. While the UPA government underfunded the subsidy to encourage sprinklers/sprayers/drip irrigation, which requires a capital investment by farmers, the Gujarat government developed a subsidy-loan programme which is by far the best offered by states to adopters of micro-irrigation. As a result, the spread of micro-irrigation is more rapid in Gujarat than other states. To be fair, the 2015-16 Budget did introduce the Pradhanmantri Gram Sinchai Yojana to provide ‘per drop more crop’.

Gujarat’s approach to power supply for agriculture also offers lessons for other states. All over the country, electricity is in short-supply, including for agriculture. Yet, most Indian states charge a subsidised flat-tariff for farm power supply. But Gujarat ensured quality power supply for limited hours for agriculture, for which farmers were willing to pay.

Raising farmer earnings require not only improved yields but also fewer middlemen. The latter requires the reform of APMC Acts. Gujarat was among the early states to amend the APMC Act to enable farmers to directly sell their produce to wholesalers or exporters, without having to operate through ‘arhatiyas’ or commission agents. The amendment also enabled conditions that encouraged the spread of contract farming. The government also encouraged large corporates to establish retail chains and source their produce directly from farmers.

Raising earnings for farmers also requires diversification into non-crop, such as milk production. Again, Gujarat has been a leader in milk production in the country (based on its rural roads) since 1970 that offers lessons for the rest of India. Since the rural roads are now in place in most of India, there is need to extend extension services beyond crops to livestock (but also fisheries).

What is holding back the central government from encouraging states to adopt Gujarat’s own best practices, despite a PM from that state?