AAP and BJP won the elections in the City but the fundamental problem lies in villages. The stunning debut of AAP in the Delhi elections gives some hope that the fight against the insidious cancer of corruption has entered a new stage. However, the country is still very far from tackling a much bigger problem, a structural and secular problem of mammoth proportions.
We need to understand the root causes so that appropriate solutions can be found other wise our government will continue to lavish massive amounts of subsidies and populist programs. The result will be persistently large fiscal deficits, higher interest rates, populist measures ..... and a return to days of the so-called "Hindu rate of growth".
10. Patriarchy: Ownership, private property, territoriality, a state of perpetual conflict, struggle for survival - all of these lead to a stubbornly entrenched patriarchy.
9. Ground Water Depletion: From two lakh pump sets in 2001 extracting groundwater, to over 20 million in 2009. Government's green revolution policies and subsidies on pumps has resulted in one-third of country’s districts been termed 'unsafe' for ground water extraction.
8. Debt & Suicide: Points 1-7 tell the story why farmers cannot be anything but in debt. It is a structural problem. Due to debt, about 1.98 lakh farmers committed suicide between 2001 and 2012 according to India Rural Development Report 2012-13.
7. Land rich, cash poor: I know of farmers that own 15-20 acres of land who are running perpetually in loss from their farming operations. Unable to recover even a percentage of their costs, they are constantly short of cash. They are particularly susceptible to politicians who use their black money to buy votes.
6. Territoriality: The ownership of a defined piece of land brings with it pride of ownership, the benefits of private property but also brings with it the negative aspects of territoriality. In the animal kingdom, territoriality is often accompanied by aggression but in humans, this is manifested as an attempt to affect, influence or control the actions and interactions of people, things, relationships etc. Khap panchayats are perhaps one example of this phenomenon.
5. Monsoon dependency: When the British did the first land division in India, they found it easy enough to divide the land but dividing the water was not so easy. You can divide the land in a million sections but how can you ensure that each piece has its proportionate share of water?
The over dependence of individual farmers on rainfall became much more exaggerated from here onwards. The impact of even a small drought becomes magnified due to fragmentation - in his book "Late Victorian Holocausts", author Mike Davis records the numerous famines that occurred during the 18th century in India. Wikipedia records 16 famines between 1769-1944 in which an estimated 50 million Indians died.
4. Predictably losing business model: Millions of farmers producing commodity items, sowing at the same time and harvesting at the same time. Means the market is flooded with commodity items at harvest time which naturally leads to a supply glut and prices drop like a stone. Farmers cannot even recover their costs and government has to step in with numerous subsidies and populist support programs.
3. Atrocious macro economics: 115 million mom and pop farms are a recipe for an economic disaster. In India, the failure rate of small scale industries (SSI) is 90%. Even in advanced economies such as the United States, the failure rate of small agricultural businesses is approximately 60%. With 115 million farms in India, the scale and size of potential failures is nothing short of catastrophic.
2. Perpetual conflict: Fragmentation goes hand in hand with conflict - inter-family, intra-family, extended family and inter-caste conflicts over land division and control over water. Conflicts tend to persist over generations and the farmer spends more time in court trying to settle land claims than in farming. Azim Premji famously said that in all his travels across India looking for land to expand Wipro, he found that over 80% of the land was in some kind of dispute.
1. Ownership structure: This is the #1 problem by far. After each generation, the farm fragments so it can be divided amongst the next generation. With 115 million farms in India, the scope of potential conflict is unimaginably large.
It is not that the government is unaware of the above, just that the solution they keep trying is old and tired. They have not kept pace with the times. In today's age of sophisticated finance and supercomputers, there is a need to look at innovative ways by which the problem of fragmentation can be mitigated and overcome.
I believe the concept of REIT (Real Estate Investment Trust) can be applied here. REIT operates like an Investment Trust that owns and manages income-producing property, only in this case the income producing property will be farms. The unit holders will be the farmers themselves, who will own shares in proportion to their ownership interest in farms. In the case of a land division event, more paper shares will be issued, but the land itself will not be further sub-divided.
The concept needs to explored in greater detail but it holds the promise of sharply reducing the negative impacts listed above. (About the Contributor: Sanjay Garg is an Associate Director with Global Bank)
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