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Agriculture has been a major source of living for majority of Indians, traditionally. It is believed that about 70% people are engaged in agriculture which contributes only 15% of our GDP. By itself, this is a proof of extreme inefficiency of this sector in economic terms because 70% people contribute only 15% of GDP whereas the remaining 30% people contribute 85%!. By Indian standards of productivity itself, agriculture is highly in-competitive despite massive direct and indirect government supports, near insulation from taxation and strong political lobby that this sector enjoys.

Internationally, farm yields in India are insultingly poor, and are just about 1/4th of the best. And this is despite India enjoying among the most suitable conditions for agriculture whereas many of the best suffer from extreme climatic conditions not permitting them to carry on with this outdoor activity round the corner. For instance, Israel is the most productive country in the world for cotton and cow milk. The whole are West Asia is a desert suffering from extreme heat during summer and extreme cold during the winter, in comparison with India. Despite these additional climatic vagaries, Israel achieves yields of 4.6 tons/hectare in cotton as against just 1.6 tons/hectare by India. Likewise, Turkey achieves a productivity of 3.7 tons/hectare of soyabean as against 1.1 tons/hectare achieved by India.

Thus, in major crops grown in India, our productivity is 1/3rd to 1/4th of the best in the world which means we have a proven potential to augment our farm produce 3 to 4 times if we concentrate on achieving same standards of productivity as these countries. That we should be able to do much better than them because we have been blessed with much less extreme climatic conditions, is a bonus to prove our mettle and provide lead in the world.

 

Economic value

Indian yields

 

worlds best yield

Potential output

 

2009 prices,$/bil

(2010) tons/hect.

 

(2010) tons/hect.

at best yields ($/bil)

Wheat

                         12.00

2.8

8.9

Netherlands

                              38.14

Rice

                         38.42

3.3

10.8

Australia

                            125.74

Soyabean

                            3.33

1.1

3.7

Turkey

                              11.20

Cotton

                            8.13

1.6

4.6

Israel

                              23.37

Cow milk

                         17.13

1.2

10.3

Israel

                            147.03

Fresh vegetables

                            5.97

13.4

76.8

USA

                              34.22

Tomato

                            4.59

19.3

524.9

Belgium

                            124.83

Onions

                            3.17

16.6

67.3

Ireland

                              12.85

Potato

                            5.67

19.9

44.3

USA

                              12.62

Mangoes

                            9.00

6.3

40.6

Cape Verde

                              58.00

Sugar Cane

                            8.90

66

125

Peru

                              16.86

 

116.31

     

                            604.87

Growth per annum, in agriculture only

420%

National GDP considering agriculture at 15% part of GDP

63%

Effect on per capita income on PPP basis (current $3800)

6194

(Source : http://en.wikipedia.org/wiki/Agriculture_in_India#Output)

 

In fact, the effect on total GDP will be at least 3 to 4 times because agricultural growth will lead to more infrastructure (warehouses, highways, ports, transportation, banking and insurance etc), processing industries etc, and therefore, success of achieving world standards of productivity should be expected to catapult our per capital income from current US$3,800 (on PPP basis) to at least US$10,000 which should be enough to bridge the gap between India and China. Once there, India can expect to keep flying at high altitude because success changes attitude of the people and make them more success oriented and more positive, and ultimately far more likely to succeed more.

If we reflect on the productivity growth in last 30 years, the picture is disappointing:-

Crop

Avt Yld, kg/hectare

Growth

 

1970-71

1990-91

2010-11

rate/year

       

CAGR

Rice

1123

1740

2240

2.33%

Wheat

1307

2281

2938

2.74%

Sugarcane

48322

65395

68596

1.17%

Cotton

106

225

510

5.38%

Pulses

524

578

689

0.92%

Oilseeds

579

771

1325

2.80%

Tea

1182

1652

1669

1.16%

(same source)

From the above table, it is evident that after the green revolution of early 60s, India has been suffering from dyslexia by achieving insignificant growth rates of 1 to under 3 % with only exception of cotton going upto 5.38%. At this rate, we will take 68 years to catch up with Australia in rice productivity provided Australia has achieved its limit and unable to improve this yield any further. Likewise, we are going to take 52 years and 42 years to catch up with Peru and Israel in productivity of sugar cane and cotton, again with the assumption that they are stuck at these levels which is quite impossible given that technology has an uncanny knack of surprising us time and again, and is really limitless. That being the case, India can never compete with the world, even in sector which is the primary source of living for us despite our supposedly riding high wave of technology and productivity in services sector.

It is not that the highest yields of these crops is any aberration to be considered more of an exception. Comparison of relative productivity as evident from world rankings of India reconfirms the poor state of affairs as evident from the followings:-

Crop

India’s rank

Out of total countries

Rice

30

148

Peanut

13

19

Cotton

14

20

Corn

19

21

Soyabean

21

21

Wheat

10

26

(Source: www.nationalmaster.com)

Thus, India has been a bottom performer in most of the world rankings even in sectors like soyabean where it is supposed to be a major player. One can easily imagine the phenomenal potentials India enjoys in turning the tables on poverty and all other social problems which emanate basically from poverty.

Dairy sector is similarly dismal as well. India is world’s largest producer of milk but its dairy sector is characterized by low input/low yield. India’s productivity per cattle is only about 956 ltrs/cow per year, whereas the same in China is about 3700 ltrs/cow per annum, and 8400 ltrs/cow in USA. Israel is the hero of the world with 11,706 kg/cow per year productivity. In other words, our milk productivity is not even 10% of that in Israel, and not even 1/3rd of that in China. Since we revere cows in India, it is absolutely a matter of shame for us, and not just insulting as it proves our incompetence across the world.

Success feeds on success. China is a classic example. China was and technically continues to be a communist country which is enough to seal its fate as a financial failure as evident from the whole of East Europe which fell bankrupt by 1990, and had to dump the impractical ideology of socialism or communism, and come back to adopt capitalism for success. China’s per capita income was slightly lower than India’s till 1979 when it resorted to economic reforms. By 2003, it surged far ahead of India and today, there is no comparison between the two countries at all. The direct consequence of this tremendous economic growth is also reflected in tremendous political and military clout China enjoys the world over, and India left sulking as evident in recent developments with USA regarding a diplomatic officer’s handcuffing over an alleged visa fraud. Political analysts are unanimous that if it were exactly the same situation with a Chinese diplomatic officer of same rank, USA’s handling would have been very different. Thus, economic success brings with it political and military success as well.

Per Capita Income in 1990 International dollars (PPP):

Country

1950

1973

2003

India

619

853

2160

China

448

838

4803

(Source-link: en.wikipedia.org)

Focus areas for improvement:

Fortunately, there is no rocket science in agriculture which was mankind’s first economic activity on road to civilization. Improvements will require following focus areas to concentrate upon:-

1. Irrigation facilities - India is known to have perennial water problems basically due to its failure to harness the rain water which mostly does into the sea. Water availability in India is 1880 cubic meter per capita which places us on a shameful 123 rank out of 169 countries, and the position is not improving at all. Through proper water management projects, we can solve water problem for all purposes including irrigation. We need to focus on irrigation as our high priority area in time bound manner.

2. Warehousing/cold storages - Wastage of our crops are as colossal as poor productivity. Our warehousing capacity is inadequate even for existing farm produce which ought to go up to three times if we succeed in matching the best productivity norms. Obviously, massive warehousing capacity will need to be made. Private entrepreneurs are keen to set up such warehouses as evident from frequent discontinuation of state subsidy for these facilities. Since this activity is not financially lucrative given the high cost of land, government will need to develop large warehousing clusters offering cheap land the way it has been offering for industrial uses. Further subsidy may be directed to specific thrust areas to encourage prompt creation of such capacities.

3. Farm techniques - though there is no rocket science in agriculture, productivity depends a lot on various techniques used in cultivation, timing, resource conservation like drip irrigation etc which can be easily studied by Scientists of the Deptt of Agriculture visiting those high productive countries, conduct experiments for adapting them to local conditions, and then, take a massive drive to educate farmers on adopting these techniques. Seed and pesticides companies routinely carry out such activities but government with all its resources, and basically nothing else to do in the Deptt of Agriculture, should do it for best effectiveness.

4. Free import and export of farm produce – government needs to go out of control on imports and exports which should be free like any other product, barring normal customs duty. This will make agriculture market friendly and farmers will switch to crops that generate higher values world-wide which is a reflection of gaps in demand and supply. Such freedom to export whenever international prices are higher, will enable farmer to benefit from higher demand overseas and freedom to import whenever international prices are lower will enable consumer to avoid being taken for a ride by domestic shortages, real or artificial, and at the same time, encourage farmers to be more competitive to withstand such imports. Such exposure to competition will encourage farmers to improve farm productivity, exactly the way entrepreneurs do in trade and industry.

5. Redefine government’s role in agriculture, from regulator to facilitator – currently, government is controlling agriculture a great deal. It declares Minimum Support Prices for various foodgrains at which it buys from the farmers and at the same time, the market is required to pay at least this much price. There is State Support Price as well. Further, in order to appease the farmers lobby, state governments go out of way to be friends with them by announcing further bonuses to be paid over and above the MSP. Similarly, laws require all the farm produce to be sold in government Mandis where the middlemen by crops at 1.3rd the price a retail consumer is required to pay. In certain crops like sugar-cane, there is too much of government control virtually killing the sugar industry.

The above measures are primary measures in addition to what government has been attempting, though ineffectively, being large scale setting up of food processing industries, development of infrastructure like roads, ports etc. Such measures are required to create demand for the higher output coming out of productivity gains.

No big deal? Quite true. There is no realization of eternal truth to understand that our farm yields need to be competitive like any other economic activity. It comes as a basic understanding to an entrepreneur in private sector, but for government in India to appreciate that, Lord Vishnu is required to take 25th avtar. Until then, unfortunate consumers will have to keep supporting the unviable agriculture enabling politicians to keep harvesting their vote bank.


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Category Others, Other Articles by - CA Anil Garg 



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