Making of a Migrant - II - Agriculture
A deep dive as how misplaced policy interventions / wrong metrics have kept indian farmers poor and reduced them from a proud land tiller to poor migrant/house-help/ maid with little dignity in city!
Agriculture - Of all systematic wealth transfer programs, Agriculture is most interesting. In India agriculture or rather farmers have remained a very hot issue since independence.
In India, for the last 60 odd years, every Govt and its budget has one singular focus that is to work for farmers and improve their conditions. Billions are being spent on doing that with schemes, loans, policies and whatnot. Interestingly, everyone connected with farmers be it experts, professors at agriculture universities, ministers, agencies, bankers, agriculture companies (pesticides/farm equipment/fertiliser and food), all have flourished except farmers!
So what is happening! While land and natural resources are sudden and brutal wealth transfer mechanism enforced by State (Central & State Govts) in partnership with interested parties, wealth transfer in agriculture is a slow and steady method of wealth erosion. It is a game of compounding but in reverse order.
Look at the inflation rate or rather growth in prices of key consumables of an average Indian since 2004 (yes farmers are also average Indian)
The chart below shows price growth in higher education, hospitalisation, fuel, potatoes and wheat. One need not be an statistician to know as who will be looser here.
These figures are rather self-explanatory and this price movement ensures that anybody having agriculture as a source of livelihood, will loose out in the medium to long term as they will be perpetually running a negative balance sheet.
A negative balance sheet along with negative profit and loss account, bankrupts and push one in perpetual debt. A black hole from which no amount of farm waiver loan can rescue the people inside it.
Negative P/L and balance sheet ensure that people living on agriculture are not able to sustain and instead become a source of cheap labour in cities in form of driver, maids, low wage factory workers. It is the finest form of wealth transfer which helps all ie Indian state, middle class, city dwellers, capital owners
Now before the enlightened soul of you jump on the word “middle man” stop there. Indian middle class hates middlemen.
Any agriculture crisis, any pitch by startups to VCs, any speech on reforms, the target is always middlemen. The interesting part is that almost 90% of the Indian middle class is middleman only. When One is neither providing labour (to produce), nor providing capital, but shining PPTs/XLS sheets, being a broker (mutual fund investor, fund manage,), consultant or being part of a supply chain, one is middle man only. Anyway going back to Agriculture
There are some main actors when it comes to the poor state of farmers in India - 1. Policymakers 2. Govt 3. Middle Class 4. Media
Policymakers are in love with farmers, They are generally educated in top US/UK universities and well-travelled. They have seen farmers of US, UK, Russia and Australia and probably of the whole world. And in their all innocence, they want to make Indian farmers like farmers of all places forgetting a minor issue that India is not UK / UA / Russia or Israel. All these societies are capital surplus and labour scarce countries while India is reverse ie capital scarce labour surplus country. Hence applying policies of these countries is trying to fit a square in a circle or pushing leopard to learn flying. Does not work.
So what is the damage - well everything - i.e lot of focus is on improving productivity. Higher productivity ! when you are selling your product below cost .. well.. The other gem which is hidden but bigger damage is India’s inflation index. But on that later.
So how does, media, middle-class, policy guys(govt) gang together to ensure farmers remain poor. One interesting example is the Onions. Every 3-4 years, Onions see a spike in price. A normal process for any commodity. But In India, things goes for a toss,
The moment Onion goes crazy, The media goes crazy. It is another matter that almost half of India does not eat onion and even if it eats onion, it does not consume more than 5 kg a month. It is not salt that one needs to have it. If it is super cheap still consumption won't increase and if it is expensive, one can drop it.
But Media goes crazy and the middle class goes crazy. And then Govt goes crazy. Well, they have a reason to go crazy as some 2-3 elections have been lost or won on issues of onions.
And here comes the role of our cute US-educated policymakers. Indian inflation index has almost 50% weightage of food items and one of the very few countries which have seasonal food items as part of the inflation index. So what is the impact?
300% jump in onion price creates a massive impact on inflation while 10% yearly increase on housing (in case of rent) does not create any impact (0.9%). Now, how many Indians pay onion equivalent EMI / Rent on an absolute basis.
Result of all this hyperactivity is that Govt moves in overdrive, high prices are curtailed, export is banned. Middlemen are blamed. Next year onion prices collapse but nobody bats an eyelid. Middlemen generally are on annual vacation during price collapse.
Imagine for a moment if same governance practises are employed say on stock markets - where profit is capped but losses are unlimited! Or on any other activity!
This cycle gets repeated almost every year on one or another commodity and every year some more farmers/tillers / workers lose their shirt and migrate to the city in search of some bread by trading their dignity and self-respect.
Now sensitive among you may point out what is the option? Won’t high food prices impact the city poor!! Well true and hence the story does not end here.
Worldwide Govts supports farm producers through a process called "Producer support estimate" ( thanks to Ramandeep Singh Mann for bringing this out)
To manage food prices, worldwide Govts pay farmers directly some part of the food-producing cost. EU pays around 19%, China Pays around 14%-16%, USA pays around 10%
Well, so much how much India will be paying? With farmer focus and so much policy work, DBT and whatnot, this % shall be at least at par with EU if not higher!
Well, surprise or rather on expected lines - Indian support to agriculture is negative. India extracts -5.7% from farmers while the whole world pays more than 10%. ( this was for year 2016-18).
So this is the state of affair. As we speak or type, some farmer or tiller is getting bankrupt and wondering the option ahead. While India moves on.
— The End —
Previous - Making of a Migrant
Additional Reading
Why Indian farmers are poor - thread
Ramandeep singh thread on Producer Support Estimate -
OECD report on producer support estimate of various countries (https://www.oecd-ilibrary.org/sites/39bfe6f3-en/1/2/2/12/index.html?itemId=/content/publication/39bfe6f3-en&_csp_=51ec64fa22c00b0491ec73dc26aa9d45&itemIGO=oecd&itemContentType=book)
