Land Of(Missed)Opportunity

In spite of being endowed with fertile soil and a favourable agro-climatic condition, Bihar’s agricultural sector has remained short of cutting edge in recent times. Since the benefits of Five Year Plans couldn't reach the state, the total food grain production continues to stand below the minimum requirement. In the recent years, however, Bihar’s economy has shown signs of resilience, visible through the constructive approach towards development. Nevertheless, rural Bihar is not getting its due from the opportunities generated by rapid economic growth. This is because the languishing rate of agricultural growth caused by an inadequate support mechanism, asymmetric new wage rates followed by the rise in public spending and natural imbalances (such as floods and drought).

The general perception about the agricultural scenario in Bihar is that it can be the food bastion for India but the current state of affairs is not very encouraging on that front. The agriculture linked industries are not really working out and conventional farming is not generating profitable returns, which is delinking the productive cycle from traditional set of systems.

In the initial decades after Independence, agricultural productivity in Bihar was better compared to other states, but now it is trailing below the national average. Statistically, some achievements have been established on the scale of production with the state government stepping in but the lurking dangers from 'unnaturally high farming wage rates' and the 'dwindling size of land holding' are being ignored. The most worrying reality is the average size of a farm, which is 0.37 hectare or less; one of the lowest in India (according to The Planning Commission of India’s estimation, 2009). At this rate collective farming would remain the only option if farm land-fragmentation isn’t checked using a more effective, alternate mechanism, soon.

The bifurcation of Bihar in the year 2000 has made the role of the primary sector even more critical, as Jharkhand now houses most of the industries and the mineral resources. So, Bihar’s economic prospects strongly rely on agriculture. It is the most vital component of the state's socio-economic structure, as the sector provides 90 per cent of the rural population their livelihood. It also contributes to about one-third of the gross domestic product of the state, which is a staggering figure.

Over the last few decades, Bihar has witnessed remarkable agricultural development with the adoption of scientific methods, but shockingly such growth has been inequitable and imbalanced. The basic reason is the highly problematic land ownership pattern which, with some geographic variations, still persists in most parts of the Bihar. For example, with radical movements for land reform, north Bihar has a progressive system of land ownership as compared to south and central Bihar, where feudalism has not been uprooted. In other parts of Bihar, land reforms could not take off as the situation on the ground remains at status quo.

According to the National Sample Survey Organisation (NSSO-2003), marginal and small farmers, who constituted 96.5 per cent of the total landowning community, owned 66 per cent of land. The medium and large farmers, who constituted only 3.5 per cent of the landowning community, owned 34 per cent of the land. Of the latter, the large owners (constituting only 0.1 per cent of total) owned 4.63 of total land. In absolute terms, this 0.1 per cent of large owners owned a little over eight lakh hectares or 19.76 lakh acres of land-a big size of land in a land starved state. The wrong landholding pattern hampers the healthy prospects of agricultural progress in the state and creates a skewed picture of economic growth altogether.

With a high density of population, the absolute level of poverty continues to be high in Bihar, making it one of India's poorest states. Both rural poverty at 42.1 per cent and urban poverty at 34.6 per cent were significantly higher than the national average (28.3 per cent for the rural areas and 25.7 per cent for the urban areas) during 2004-05 (Government of Bihar 2008-09). As a result, marginal land holders, individual labourers and casual non-farm labour are poor. The politics of state governance could be attributed as the force behind such pathetic arrangements, where 'non-issues' have been given prominence over basic livelihood issues: the irresponsible phase — from 1990-2004 — was the height of such follies.

Social security systems such as government educational institutions, public healthcare facilities and public distribution system have improved in recent years and when combined with the phenomenon of migration, as powerful means of social mobility, engenders mixed outcomes for rural Bihar. Migration was once a suitable option in Bihar's agrarian society, empowering the poor against exploitation as well as helping them escape the ironies of economic distress and caste exploitation in their home state. Things have changed a little in the last eight years and no longer are the temporary migrants from Bihar — who hitherto worked as farmhands for meagre wages —a cheap source of labour.

This would have counted as constructive change but greater social mobility is not enhancing entrepreneurial zeal in the state. The new agrarian atmosphere is in fact killing the conventional productive mechanism due to the unaffordable cost of services and goods, which has surfaced in recent years. Besides the effects of public spending, the state's rapidly growing housing upsurge poses a severe challenge to farming and related activities. We all know, the days of ‘kachha’ housing are over but the way unplanned construction is being given the name of 'progress' blurs the real state of affairs. The truth of matter is that the growth of other sectors comes at the cost of farming and allied occupations.

Today, the ground realities of rural Bihar are hardly being noticed by institutions or experts working on policy matters: their placid demeanour is largely shaped through the 'bandwagon' of applause for changing Bihar, even where it is changing in an unhealthy manner. It is true that now manual labourers from Bihar can negotiate better for their services but it is disappointing that 'money from outside' at cost of local productive engagements is being preferred. This damages the natural/social fabric, and distances the state from the control of economic policies. It further attracts the wrath of cynical regional biases towards these 'unsolicited migrants' from Assam to Maharashtra.

Worse than the national average, Bihar has received attention from self proclaimed 'policy think tanks' and genuine research organisations, supported by the government. In the absence of proper statistical data and insights, the local government officials have less to say 'on record' in response of any queries made about the pathetic agricultural conditions in state. Bihar government's initiatives look progressive, but there is a huge discrepancy between what was promised and what has been delivered. So far, against the claims of near about 200MOUs related to industrial set-ups in Bihar (including agro-processed industries), few are actually working.

Bihar could have retrieved in well shape, a losing co-operative system through channelizing investments in the cash generating agri-businesses like, fisheries, sugar production, fruits farming, dairy etc, alas, the tall claims were mostly forgotten and north Bihar remained without major industries.. The two prominent and erstwhile industrialised districts, Darbhanga and Madhubani have more than a dozen dysfunctional industrial infrastructures, where once paper, spinning products and sugar were produced on a large scale. These industries were based on local agricultural inputs and hence were supported local farming and enterprise. At that time farmers were not in a wretched condition although their reliance on external money was negligible.

Despite these impediments, rural Bihar is likely to be less gloomy than other distressed terrains of the country, as the people of the state are witnessing change in a positive direction. In absolute terms, Bihar has a long road to walk to generate balanced growth and attain its lost edge in agriculture, besides acquiring a continuing flow of public spending and attracting private investments.

The National Council of Applied Economic Research’s agricultural outlook and analysis report states: "The global scenario for the food commodities has also been affected by the adverse weather conditions. The estimates by FAO, USDA and other international agencies indicate decline in the world production of grains in 2012-13 as compared to the previous year." So, time is ripe now for Nitish Kumar’s government to focus on core areas to save the state’s agriculture from a vicious tailspin.

Atul Kumar Thakur
(The author works on policy issues. He can be reached at atul_mdb@rediffmail.com
The views expressed here are personal)
(Published in Businessworld,19December2012)

The case of agricultural diversification in India

The decline in the share of agriculture in India’s GDP has been rapid in the post-liberalisation era; despite the fact that the growth of agricultural income during the 1990’s has been marginally better than the corresponding rate of growth in the 1980’s. Growth in agriculture stagnated towards the end of the 1990’s and has decelerated thereafter. In this context, the composition of income from agriculture and allied sectors of the economy has been suited.
Agricultural diversification has been achieved as a larger area of land is now utilised for the cultivation of high value corps. With trade liberalisation, the relative prices of exportable commodities have increased rapidly and those of importable commodities have comparatively decreased. In the short run, a continuous increase in the relative price of a commodity enhances its production more often by substituting it for importable commodities without any statistical effect on the cropped area. As a result, the share of exportable commodities has increased in the total value of agricultural output.

Here it would be apt to rely on a study based on alternate measures ( namely the Simpson index),of diversification for understanding the state of affairs and concentration of non-food corps on several factors such as income, land distribution, irrigation intensity, institutional credit, road density, urbanisation and market penetration. Regression analysis suggests that increased road density, urbanisation encourages commercialisation of agriculture and with commercialisation, farms in a region are increasingly specialised in the production of certain crops and crops-groups as per the resource infrastructure and institutions of the region.
Considering the multi-dimensional importance of agriculture diversification, it is important to understand the drivers of agricultural diversification in the country. Changes in the relative prices of corps have influenced the crop enterprise mix immensely. Price is basically a reflection of the demand and supply situation. In a closed economy, the prices that farmers receive alternately, farm harvest price is influenced by the minimum support price (MSP) and the MSP has been influencing acreage under crops. But in several growing economies, minimum support prices (MSPs) for agricultural commodities have been increased in recent past. Apart from contributing to food price inflation, this increases the spread between prices paid to producers and subsidised prices charged to consumers, fueling the fiscal burden. Since MSPs need not always extend to all agricultural commodities and public procurement need not cover all commodities either, this creates perverse price signals and distorts resource allocation.
Triggered by food price increases, there have been interventions on the consumption side, including price controls, consumption subsidies, food aid, food for work arrangements, cash transfers and the elimination of taxes on consumption across a range of countries. Are these fiscally sustainable? Do they lead to additional distortions? Do they lead to supply-side adjustments or are they knee-jerk reactions? But in India’s case, agricultural diversification has not affected much through the price rise or policy response directed on that —so the case of agricultural diversification remains positive in India.
The per capita income is hypothesised to affect the diversification as measured with the percent of non-food crops in either way. The non-food crops more specifically, fruits and vegetables are increasingly recognised as a new source of growth in agricultural income. On the other hand, an increase in the per capita income is the cause of a shift in consumers’ preferences from staple food items to fruit and vegetables. Such changes in the dietary pattern are the causes of a diversification in the production portfolio. This implies a positive effect of income on the percent of gross cultivation areas (GCA) under non-food crops in the country.
The size and the quality of land has always been an important factor in agricultural production relations. The average size of operational holding is often considered an important determinant of crop diversification. These variables are supposed to have a negative effect on diversification indices. Many populous states of India such as Bihar, UP etc are witnessing the growth of small size of farmland, which is affecting productivity and income involved with this. After an extent, the role of technology in improving productivity while alternately reducing the unit cost of production and conserving natural resources cannot be overemphasised. Thus, land management is the need of hour to sustain the welcome pattern of agricultural diversification.
The kind of growth in agriculture during the 1990’s has widened rural inequity. Leakage in the rural economy has increased with the inequitable growth of income in the system. Some of the increased leakage in the rural economy is also associated with the kind of growth of manufacturing and how the process of rural development is being handled by the (state) governments and policy agencies. Consequently, it’s evident that very few policy measures are properly responding to the haunting problems in rural areas under the inefficient local administrative machinery that instead forward the pace of implementation of central plans and create many bottlenecks for stretching the project for all wrong ends.
A forward looking, speedy metamorphosis of India’s bottom tier administration would be the pre-imminent step for retaining agriculture as an occupational option and further for thinking of carrying on with its bright materialistic side that comes through diversification and knowledge based farming.
Atul Kumar Thakur
June 24,2012, Sunday, New Delhi
Email: summertickets@gmail.com
(Published in Governance now,June 2002/http://www.governancenow.com/news/public-reporter/case-agricultural-diversification-india )