The Future of Farming in India 2020

Farmers are the backbone of our society. They are the ones who provide us all the food that we eat. As a result, the entire population of the country depends on farmers. Be it the smallest or the largest country. Because of them only we are able to live on the planet. Thus Farmers are the most important people in the world. Though farmers have so much importance still they do not have proper living.

India is an agricultural country. Agriculture is “only” ~16 % of GDP but the largest sector for employment. Officially farmers are only a few hundred million, but adding family members who help or occasionally farm, as also wage labourers, the number of farm workers is likely to be closer to half a billion people. But how many people would India need farming if it were as labour efficient as the US for growing crops? I am not suggesting it is possible, or even desirable (large, mechanised farms with massive chemical and water inputs) but as a thought exercise? Just four million people. 

Farming as a Viable Livelihood?

Agriculture is dying, OK, not as in the production of food but as a desirable profession. For all the bucolic if not romanticised portrayals of farming and a rural lifestyle, it is really a thankless, risky, and even back-breaking job, especially as undertaken by the masses, which is subsistence agriculture. One bad yield, whether due to errant rains, pests, etc., and most farmers have no buffer available. This also makes farmers risk averse, with an implicit cost of capital some 50-100% (!), which is essentially one season or one year of horizon. Most are not able to undertake long term investments, innovation, or major change.

The clearest indicator of the problems of agriculture as a profession is how there are actually shortfalls of labour in some areas, with larger farms relying on imported farm labourers, drawn not just from the neighbouring states but from the far ends of the country (especially the north-east) and even Nepal. Younger generations do not want to follow their parents’ footsteps, which pushes urbanisation. Unfortunately, urban areas, while offering more opportunities, also relegate many to low-end jobs.

Farmers tell me the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA or MGNREGA, formerly NREGA) has heightened the problem. In fact, Schedule I Clause 12 of NREGA (2005) states, “As far as practicable, a task funded under the Scheme shall be performed by using manual labour and not machines.” This highlights how MNREGA has really been about jobs, instead of output or productivity. But instead of slicing the pie, agriculture needs to focus on growing the pie. Adding employment into farms is unlikely to change yields much, and certainly will not increase revenues sufficiently to compensate for increased labour costs. One possibility is for MNREGA to coordinate with cropping cycles, to enable a more steady balance of opportunities (and labour supply). Not only are farm sizes in India very small, they are declining due to population growth and competition for land. Per National Sample Survey Organisation (NSSO) estimates the average size is some 1.2 hectares only, and the median is lower. Other estimates places indicate 70% of farmers operating below one hectare in size. In farming, size matters. On average, smaller holdings lose money, i.e., their household costs are higher than revenues, a chunk of which come from non-farming activities. The smallest farms are afloat since they do not pay for labour, relying entirely on the family, and they consume much of what they produce, influencing the choice of crops.

So how does a farmer make more money? Let us hold off on changing crops, as market-focused changes often lead to future risks with debt and price volatility, such as for the fabled guar plant, whose gumhas been exported for shale gas production to the US. The simplest means to make more money is to produce more with less input, meaning productivity. But herein lays the fundamental problems. Indian productivity is not so low, and is very good in selected crops, especially sugar. For cereals, using Food and Agricultural Organization (FAO) data for 2012, the yield of Indian cereals is 2.88 tons/ha, versus 3.67 for the world average. Even Western Europe showed a yield of 6.65 tons/ha, implying we can double our output per hectare, but not much more. 

However, even if we doubled or tripled our output, would that double or triple farmer’s earnings? No, since a glut would reduce prices. I have met cutting edge farmers who use high-tech methods (importing their seeds from Israel and the Netherlands), whose per acre yields are 20 times the average. But their much higher yield does not even require additional labour – and much of what they need is for packaging, which is seasonal.

Existing Solutions are Outdated or Ineffective

Indian support for agriculture has had multiple drivers, some ostensibly noble (keeping food affordable), some less so (vote bank politics). Support has ranged from administered prices (both to farmers and end-users through ration shops or other schemes) to subsidised or even free inputs such as power, water, and fertiliser.

At some point, we need the political will to question current support mechanisms to check their equity, efficiency, and macroeconomic impact. Perhaps current policies are the wrong medicines for the problems – we blame execution failures as the problem, but maybe it is really a problem of diagnosis. The problem is not just leakage per se, famously diagnosed by a former Prime Minister, but is far worse: a fundamentally broken system.

If Not Agriculture, What Else?

Given limits to farming as a viable profession for hundreds of millions of people, even efficient and sustainable farming, the government needs to give other sectors the same political focus they have given farmers. Most job growth has been from the informal sector, partly for structural reasons including small operations and labour regulations that burden growth, but also because of a proclivity for employers to desire “cheap labour”. But existing cheap labour is unlikely to be skilled or efficient. 

Much has been written about India’s skills problem. Infosys famously runs its “university” (training campus) for incoming hires because quality from most colleges isn’t up to par. If we don’t have appropriate skilling for our graduates, what realistic hope is there that some government programs will re-skill farmers for new jobs? Vocational training is one option, but India can also do far more emphasising technology and agriculture skilling efforts such as Digital Green.