March 22, 1996
A CALL TO THE NATION
Commercial Agriculture as an Engine for
Rural Development, Industrialization
and Full Employment
Based on a study and strategy prepared by the International Commission on Peace and Food
The Indian nation is on the move. The people are astir. Agriculture is blooming. Industry is booming. The legacy of self-deprecation and self-doubt inherited from the colonial period have given way to a new-found dynamism, confidence and sense of self-determination. No longer harping critically about its past, the country has come to recognize its commendable achievements and become aware of the tremendous opportunities which the future holds for even more rapid progress. This change in attitude and this emerging consciousness of opportunity are the most essential ingredients for accelerating development.
Strategy to Complement the Economic Liberalization
The international community has noted with some amazement India's impressive gains over the last five years in recovering from the severe economic problems brought on by high rates of inflation, high budget deficits, and falling foreign exchange reserves. Today the country enjoys a very low inflation rate, comfortable reserves of hard currency and an industrial growth rate approaching 12%. Exports are growing at a phenomenal rate of 24%. Employment generation has risen from an average of 4.8 million new jobs per annum in the 1980s and a low of 3 million just five years ago to a record 7.2 million last year.
These gains are remarkable and beyond the expectations of even the most far-sighted analysts. However, even if the most optimistic targets are achieved, it will not ensure that rising incomes and employment opportunities will be available to all who presently live in poverty. The problem with the economic reform package is not that it is stimulating the rapid growth of some sectors, especially industry and exports, but that it is not doing enough for the 70% of the population residing in rural areas, of which 65% are engaged in agriculture.
India needs a new strategy to complement the economic reforms, a strategy designed to take full advantage of the country's agro-climatic advantages, huge tracks of cultivable land, and large internal market to stimulate a rapid development of the rural economy.
Agriculture as an Engine for Industrialization
Rising productivity and profitability from agriculture was a primary cause of the Industrial Revolution in England during the early 19th Century. It raised the purchasing power of the rural population, stimulated greater demand for manufactured goods and led to the growth of industries. In America too, rising productivity in agriculture was a strong spur to the development of the manufacturing sector at the turn of the century.
The rapid development of South Korea, Taiwan, and Malaysia provides ample evidence that an agriculture-driven strategy can act as a powerful engine for raising rural incomes, industrialization and employment generation. More recently, commercial agriculture has been a powerful engine for economic development in Thailand, where 70% of the population is still employed in the farm sector.
India's Competitive Advantage in Agriculture
India possesses four outstanding competitive advantages in agriculture comparable to those of any other country in the world. First, it has regions which are climatically favourable for cultivation of every commercially-important plant species grown in other parts of the world - ranging from temperate orchard crops such as almonds and apples to tropical mangoes and pineapple. Second, the country already possesses the largest acreage of irrigated land in the world with 40% of the potential still to be tapped. Third, the gap between present productivity and proven technological potential is very large for most crops; yet even so, the country is already among the world's top three producers of tea, cotton, sugar, food grains, groundnut, coffee, eggs and milk. Fourth, the country has an abundance of available skilled, educated, technical and scientific manpower.
From Minimum Needs to Maximum Potentials
During the colonial period India suffered from food deficits and severe famines. Thus, in the early days of India's Independence, it was natural for the Government to focus its attention on production of sufficient food grains to meet the minimum dietary needs of a rapidly expanding population. As a result of the Green Revolution, India defied the dire predictions of international experts by doubling its food grain production within a decade and achieving self-sufficiency in cereal crops. Since then, the agricultural sector has ceased to receive the attention it deserves. Combating the threat of famine is no longer a pressing priority, but that does not mean agriculture has fulfilled its mission.
It is time to stop thinking of agriculture simply as a means to provide for the minimum food needs of an expanding population. We must come to look upon agriculture as a business and do everything possible to maximize productivity, incomes and employment in this sector. This is as important for the individual farmers trying to maximizing the living standards of their families with limited land and financial resources as it is for companies seeking profitable investments in the agri-business sector.
Rising farm incomes will generate tremendous demand for consumer goods, equipment, processing and distribution industries stimulating rapid growth in industry and rising job opportunities in both the rural and urban sectors. Here lies a strategy that can bring prosperity to the Indian people.
Creating Rural Jobs as a Counter to Urban Migration
Agriculture is the key to generating full employment in the country. This sector not only provides on-farm employment but also generates employment opportunities in processing industries, manufacturing, food distribution and the transport sector. Although less than 3% of the US population is currently engaged in farming, one out of every three jobs in America is related to the production, processing, distribution or export of agricultural produce.
Wherever agriculture has become modernized in India, labour has become scarce. Progressive agricultural centers such as Coimbatore, Pune and Punjab have also become centers of industrialization, where many farmers shy away from labour intensive crops because workers are finding higher paid employment opportunities in industry.
Full development of India's potential for commercial agriculture, agro-industry, agri-business and agro-exports can eradicate poverty and unemployment within the decade. A study undertaken for the International Commission on Peace and Food concluded that full development of the India's agricultural potential can lead to the creation of more than 100 million new jobs. The study indicates that the cost of creating employment through this approach is by far the most cost-effective and affordable strategy. In fact, it can be accomplished with the available resources and without dependence on external resources by a reprioritization of plan investments.
A detailed micro-level study of Pune District by the Agricultural Finance Corporation has confirmed this potential. AFC's report identifies a wide range of commercially viable opportunities for both private farmers and the corporate sector, and estimated that 750,000 jobs can be created in this single district through an agriculture-led strategy. Similar studies need to be conducted throughout the country to fully document the potential at the local level.
According to one estimate, for every ton of additional foodgrains produced in India, one new job is created in the economy. Rising productivity in agriculture can stimulate the growth of agro-industries, food processing and distribution, and demand for new industrial plants and machinery. It will also increase demand for consumer good, household appliances and tourism in the rural sector, creating a boom in related sectors.
Growing Domestic Demand
Achieving nutritional security for the Indian masses will require a significant increase in daily intake of calories, protein, vitamins and minerals. The present nutritional gap represents a vast pent-up demand for more and better quality foods while can be translated into commercial opportunities for India's farmers.
Indians consume an average of 40 grams per day of horticulture products compared to a normal nutritional demand of 90 grams. As incomes rise, the domestic market for horticulture products is projected to increase by 60% over the next six years. Overall, there is scope for placing an additional 1 million acres under horticulture crops. This will generate demand for 100 new commercial hybrid seed production units in the country.
Sugar consumption in India has tripled over the last three decades and now exceeds 13 kg. per person per year. Yet even current levels of consumption remain very low compared with those of other developing countries: 21 kg. in Kenya, 31 kg. in Argentina, 33 kg. in Egypt, 44 kg. in Brazil and 45 kg. in Mexico. Over the next decade, rising incomes are projected to increase India's domestic consumption to 25 kg. per capita. This will create demand for at least 300 new sugar mills. Failure to anticipate surging demand could lead to massive sugar imports.
Tremendous Export Opportunities
India has the potential to become a global leader in agriculture. Already agriculture exports, including textiles, have risen from Rs 10,000 crores to Rs 40,000 crores over the past five years. Grape and mango exports to Western Europe are rapidly increasing.
Floriculture is a $40 billion global industry that is projected to reach $70 billion by year 2000, of which international trade in cut flowers accounts for $6 billion. India's exports of cut flower have risen from $2 million to $10 million annually over the past five years, but the potential is 100 fold greater. New floriculture projects are already springing up around the country.
Exports of processed fruits and vegetable, cotton textiles, sugar, and fish have vast potential. Processing can multiply the export value of farm
produce by 50 to 500 times and open up vast international markets. India currently processes less than 2% of its agricultural produce compared with 30% in Brazil, 70% in USA and 82% in Malaysia.
India's mushroom exports are mushrooming. Over the past three years not less than nine export-oriented mushroom projects with an investment of more than Rs.130 crores have been established in joint venture with foreign companies.
Despite being the second largest producer of silk in the world, India's share of world silk trade is less than 5%. Improving the quality of domestic silk production offers a lucrative opportunity for exports.
Closing the Productivity Gap
The potential for raising agricultural productivity is enormous. India ranks at or near bottom of the list of countries in the world in terms of productivity per acre for almost all major crops. With 60% more arable land, India produces less than half the quantity of foodgrains grown by China. Brazilian yields of black pepper are six times higher than India utilizing varieties original imported from India. In rice, Indian yields are one third the level in North Korea. Maize yields are one-sixth the level of Chile. Wheat yields are one-third Ireland's average. Soyabean yields are one-third the level achieved in South Africa. Productivity in pulses is one-tenth the level of France. In groundnut Indian yields are one-sixth Israel's average.
India agriculture suffers from low productivity of its soil and water resources. Raising productivity means increasing profitability. Indian farmers have vast scope for generating higher incomes in agriculture. The average yield of tomato in India is 12 tons per acre versus 34 tons in the USA, but yields as high as 38 tons have been achieved by commercial farmers in India generating net profit in excess of Rs 50,000 per acre. Average net incomes ranging between Rs 40,000 and Rs 1,00,000 per acre are now being achieved by some modern farmers employing advanced cultivation practices on a range of vegetable, flower and fruit crops.
HIGH PROFIT AGRICULTURE
Actual yields & profits of a scientific farmer in Tamil Nadu
Yield per acre
Optimizing India's Soil and Water Potential
A shift in perspective is needed from viewing agriculture merely as an occupation and source of food, to recognizing that it is a business. Regardless of whether the farming is done by a small cultivator with one or two acres or a large corporation, the aim is the same - to generate the highest yields and income per unit of land, water and capital employed.
From a commercial perspective, India is generating less income for its farmers per unit of available land and water. This low water and soil productivity can be overcome by adopting proven modern technologies for soil restoration and water conservation. Thus far Indian farmers and scientists have focused on raising productivity through the application of marco-nutrients, nitrogen, phosphorus and potassium, while largely ignoring the crucial role of micro-nutrients in bringing forth the full genetic potential of plant materials.
According to demonstrations recently carried out in several regions of India under the direction of Dr. C. Lakshmanan, a California-based
Cabbage harvest by Bihar tribals
agricultural consultant, it has been shown that the timely application of missing micro nutrients based on scientific soil tests can double the yields of most crops in the very first year and double net incomes too. These results have been achieved while significantly reducing the input of macro-nutrients. This approach has enabled tribal farmers in Bihar to dramatically improve maize productivity and to earn an average income of Rs 75,000 per acre from cabbage.
Despite the widespread belief that shortage of water is a critical constraint in Indian agriculture, the fact is that water is often being wastefully used due to inefficient irrigation technology. Indian farmers visiting American farms were surprised to learn that their US counterparts stop watering tomato 45 days before harvest compared to two days here under desert-like climatic conditions as severe as those in India, yet the US farmers obtain yields up to six times the Indian average.
In many cases excess of water is washing away precious nutrients, reducing soil fertility and inhibiting plant growth. Application of water saving technologies can raise the productivity of water in Indian agriculture by two, three or four times its present level, resulting in higher yields, greater production, higher incomes and more jobs.
Creating Rural Entrepreneurs
With the rights technology and management practices, agriculture offers lucrative for entrepreneurs. A ten acre farm growing a combination of cash crops such as sugar, cotton, fruits, vegetables and flowers can earn Rs. 5 lakhs or more per annum for a rural family.
Although it is widely believed that the problem of educated unemployment cannot be solved, a shortage of agricultural graduates is actually developing due to the rapid development of commercial agriculture. A single agri-business enterprise has recruited more than 250 agricultural graduates within the past two years.
When the commercial potentials of agriculture are fully recognized, students will flock to agricultural colleges and universities as a course of preference and many agricultural graduates who come from rural families will return to the land to become entrepreneurial commercial farmers, rather than migrating to urban areas in search for employment. Professional farmers should come to acquire the social status and prestige once accorded to government employment and now granted to industry.
Need for new organizations
The technology and capital required to bring about a second revolution in Indian agriculture are readily available and well within the country's means. But another critical ingredient is needed to galvanize the rural sector for rapid growth - organization. Indian agriculture can benefit immensely from an induction of professional management and marketing capabilities to handle processing and distribution in the post-harvest phase of agri-business.
The division of the agricultural sector into 100 million small holdings has long retarded the emergence of effective rural enterprises. Baring a few bright exceptions such as the dairy and sugar industries in some states, the cooperative sector has been too encumbered by bureaucratic regulations to generate dynamic agricultural firms.
Rural Aquaculture Estates
Fresh water fish and prawn culture can be a highly remunerative undertaking for rural farmers, provided that they have access to appropriate technology, feeds, processing and marketing facilities. One approach is for Government to establish rural aquaculture estates and lease out small production ponds to farmers and landless labour. Each estate could consist of 20 to 25 acres of ponds, each pond .25 acres in size and equipped with machinery for aeration and drainage. Each estate should have a centralized source of pure water, power, feed and processing plant, cold storage and marketing facilities. Utilizing fast growing varieties, each pond can generate a minimum of Rs 50,000 per acre net profit per annum.
New models and innovative approaches are needed to bring small producers together to form viable rural enterprises. One option is for groups of farmers to constitute their own firms for joint production, processing and marketing. Integrated horticulture corporations owned by the growers can coordinate production, processing and marketing of a
range of fruits and vegetables grown over a 1000 acre extent. Integrated sericulture projects can be established in which all the essential operations from mulberry cultivation to spinning of silk yarn and weaving of silk fabric can be brought together in a small cluster of villages, minimizing the need for middlemen and maximizing profits to the primary producers.
Role for the Corporate Sector
But efforts to organize the farm community should not blind us to the very constructive and valuable role which the corporate sector has played and can continue to play in generating rural prosperity. As a result of the exploitation of the country by foreign firms during the colonial period, it came to be widely accepted that the interests of the business community and the interests of the Indian masses were irreconcilably opposed to one another. Despite the development of a large domestic entrepreneurial class and a ten-fold growth of private and public limited companies during the past quarter century, this out-dated thinking continues to obscure the opportunities for mutually beneficial cooperation between the formal and informal sectors of the economy.
The network of producer dairy cooperatives linked into a national milk grid by the National Dairy Development Board and the linkage between small cane growers and large sugar mills for processing and marketing sugar are examples of successful models that can be extended to other crops. Similar models of cooperation can and should be established for promoting horticulture crops, poultry, and freshwater aquaculture.
In some cases the country will benefit by encouraging private sector firms to become primary producers as well. India has over 100 million hectares of uncultivated and degraded wastelands which is not generating any benefit either to the rural population or the country as a whole. Large tracks of this land can be converted into productive cultivable land by an infusion of capital and sophisticated technology to tap deep aquifers, install drip irrigation facilities and in some cases green houses. The cost and technical input required to develop these lands may be far beyond the means of small farmers in the area, but can be undertaken by agri-business
corporations. Already some 200 companies have taken up commercial agriculture, restoring productivity to degraded wastelands and generating both on-farm and off-farm employment opportunities for the rural population. One firm has placed 18,000 acres of uncultivated land under intensive cultivation of horticulture crops
The corporate sector can also play a role in stemming and reversing the degradation of India's forests. Out of 67 million hectares classified as forest, only about 60% presently has good tree cover. Remote sensing data indicate the covered area is declining at the rate of 1.5 million hectares annually. The task of reversing this degradation is beyond the means of government to accomplish on its own. Appropriate policies need to be formulated to encourage the private sector to invest in planting the barren areas and farming portions of the tree crops which they raise under contractual agreements with the forest authorities, according to practices commonly by many highly industrialized nations. Such arrangements will generate job opportunities and enhance supplies of much needed wood products.
India's Unique Opportunity
Never before has India been poised for such rapid economic progress. Never before have the opportunities been so great or the country so ready. Now what is needed is to generate a widespread awareness of the potentials at all levels of the society - among political leaders, administrators, farmers and the corporate sector. It took the leaders of India's Freedom Movement more than half a century to achieve Independence largely because it took that long to convince the Indian elite and masses that such a goal was achievable. It has taken another half century for the Indian nation to cast off the oppressive legacy of colonialism and to rediscover its own inherent dynamism and resourceful. It need not take another half century to convert this rich capacity into material accomplishments. What is needed now is a national Prosperity Movement to realize the goal of Indian economic accomplishment. If pursued with confidence and determination, India can achieve widespread prosperity within a decade
The time has come for a broad-based initiative to seize the opportunity!
ACTION PLAN FOR PROSPERITY 2000