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Why the government keeps Indians poor

Last updated on: March 27, 2007 17:51 IST

A bit of digression at the outset is crucial to understand the depth of food depravation, associated poverty and the resultant food insecurity prevailing in India.

For the ordinary Indian it must be shocking to know that food security in India is a falsehood propagated repeatedly by the government since the mid-eighties.

To understand the enormity of the falsehood, let me put things in perspective. The net per capita food availability in India in 1971 was 394 gm per day. This was just after the onset of Green Revolution in India. Exactly 30 years later, in 2001, the net per capita of foodgrain availability was 396 gm per day: a princely rise of 2 gm! In effect, for over 30 years our farm growth has barely kept pace with our population growth. This sets up the debate.

A comparison with other countries is central to understanding the extent of food shortage prevailing in India. Advanced countries, on a per capita basis, consume anywhere between 500 gm to 600 gm per day. Such healthy consumption in these countries is supplementary to the substantial quantity of meat, fruits, vegetables and milk.

On this score, our consumption on a per capita level is far below the world average and significantly below the average of the developed countries. It would seem that, we as a nation, seem to have declared food self-sufficiency on virtually empty stomachs.

A reference to China is unavoidable here. China, a country with approximately 1.2 times our population, produces approximately 450 MT of foodgrain every year -- more than double that of India. Does this comparison with other countries not blow the myth of self-sufficiency in India?

What is appalling is the fact that even after the British took over the reins of India, they constituted a commission to look into the quantity of food required in India, should India were to be hit by a famine. For this purpose, the per capita food consumption was held to be 500 gm per day by the said commission. It has to be noted that the British fixed this norm for consumption of Indians during a famine. It would seem that our colonial oppressors had a more charitable view than our own democratically elected government!

A callous approach to agriculture

Thousands of farmers have committed suicide in India in the past few years. Yet governments, both in the States and at the Centre, have been shying away from dealing with the issue appropriately. While there has been occasional media outcry, the 'packages' announced by the government have hardly made an impact. And if these packages do take effect, experience shows that this would at best be insignificant.

The issue is not merely of agriculture, food security and farmers: it is something much more. Agriculture is far too central to the Indian economy than can be imagined by many of us. It is our route to food security, economic well-being, poverty alleviation and, crucially, national security.

But like all other things in India, the seriousness of the issue is inversely proportional to the attention it gets.

Structural issues remain un-addressed

At the root of the current crisis in the farm sector is the fact that decades of neglect has de-legitimised the farm sector. There are a number of structural issues that remain un-addressed within the farm sector today. These include:

Farm Credit: Lack of an appropriate lending mechanism, which means farmers are forced to obtain credit at exorbitant rates from the informal sector. Though credit expansion by the formal sector has taken place in the recent past, it is inadequate.

Soaring costs of inputs: Apart from interest costs, other input costs (viz. seeds, power, etc) -- barring fertiliser -- have shown significant increase in the past few years. This rise in input costs has been disproportionately higher than the rise in the selling price of farm produce. Naturally farmers are reeling under huge debt, a sure sign of a losing economy.

Lack of water: Water is crucial to farm activity. Successive years of drought in many parts of India have reduced agriculture in India to a gamble on the monsoon. With a mere 40 per cent of farmland irrigated, Indian farmers have been at the mercy of the weather gods. Under the liberalisation programme, the fundamental assumption is that virtually every government activity can be privatized: however, it needs to be understood that irrigation and capital formation within the farm sector cannot be privatised so easily in India. It has to remain a government function, essentially.

Farmers are entrepreneurs. They take risks. Their risk gets compounded due to the vagaries of monsoon. They do not look to the State as a benefactor. Rather they would prefer the government to be a genuine facilitator in lowering these risks.

Today a farmer gets a fraction of the final retail price while a substantial portion of the prices that we pay for our food goes to the retailers, wholesalers, middlemen and others. These are structural issues that can be addressed only by the government.

And due to these distortions within the system we are witness to a strange paradox: rise in prices of farm products strangely resulting in farmers committing suicide.

However, due to fiscal orthodoxy and indifference to the farm sector, the government has been reluctant to deal with this issue of capital formation in the farm sector. And in areas where the government has done so, it has been far from satisfactory.

A leading daily in Chennai had recently exposed as to how despite the government spending in excess of Rs 35,000 crore (Rs 350 billion) in the past decade or so under the Accelerated Irrigation Benefit Programme (AIBP), there has not even been a marginal increase in the gross farm land under irrigation in the country, which virtually stands at 40% of the total farm land.

The Indian economy has yet to mature to expect that the private sector would step in to the space created due to the government's exit. If the government cannot handle this crucial issue -- of rural infrastructure -- why do we have governments?

The government spends about Rs 26,000 crore (Rs 260 billion) every year on food subsidy, through the public distribution system (PDS), for those living below the poverty line. It is estimated that for every Re 1 of subsidy to reach the ultimate beneficiary, the government has to spend approximately Rs 7 on the administrative mechanism. In fact, of the 300 million poor estimated to be below the poverty line in the country, only 25 per cent are estimated to have access to PDS.

The rest are left to fend for themselves. In effect, the government's programme -- in intent and in execution -- leaves a lot to be desired.

Yet, is it a failure of the delivery system, or is there something more to it than meets the eye?

Keeping farmers poor, a grand design

Speaking on the issue of farmers and the general lack of food security prevailing in the country, I suggested to a retired bureaucrat (who held very high positions in the Government of India) that India must double its food production from its existing 200 MT. This, I argued, would boost the income of the farmers as well as provide access to food at far cheaper rates to those living below the poverty line.

The bureaucrat was appalled. Clearly stating that India required nothing more than 200-220 MT of foodgrain, he dismissed my line of reasoning.

Crucially, through a paradigm of shortages, the government and its officers have increased their relevance, power and authority. In contrast, farmers have been reduced to play the role of applicants and would forever remain in the clutches of the State and its draconian agencies.

The net result of our 'planned' neglect of the farm sector has meant that today approximately 50 per cent of our population is malnourished. Some international agencies report that certain pockets in India suffer from acute malnutrition more than some African regions.

Robust growth in the farm sector acts as a trigger for overall economic growth. Economists have been repeatedly pointing out that a one per cent growth in the farm sector acts as a significant multiplier in industry and the services sectors, leading to increases in aggregate demand within the Indian economy.

Despite a decade and half after the initiation of reforms, the government has yet to come out of its socialist mindset vis-à-vis the farm sector. This is not without purpose and falls within the government's grand design of keeping farmers -- and India -- poor.

The failure of the farmers comes with an attendant and natural bonus -- it can ensure that a substantial portion of our population is underfed, under-clothed and mired in acute poverty. And that directly increases the importance of the government, the politicians and the bureaucrats.

If farmers were to succeed, it would mean the failure of our politicians and the brand of politics practiced in this country since 1947 by the Left and the Right.

And that explains why the government is keen on a failed farm sector: the idea is to merely keep it on a life support system, allow it neither to die nor to bloom. And that ensures that India remains poor, while its politicians are rich.

The author is a Chennai-based Chartered Accountant. He can be contacted at

M R Venkatesh