It’s the agriculture, stupid

The fastest growing economy with falling inflation, rising FDI and declining interest rates, and yet there are long faces everywhere. A decimated Opposition is feeling rejuvenated, and the government looks more than a little besieged. How can politics so defy economic indicators? Explanation for this lies in farming, in the cruel fact that India may no longer be an agrarian economy but still has an agricultural policy. Let’s see how.

Why rural India matters: Agriculture’s share in economic GDP may be low but in electoral, political equivalent of GDP, it is about 60 per cent

You can look at numbers and statistics in many different ways. One, of course, is the old, if sexist, truism about statistics being like a bikini, revealing what is interesting and concealing what is vital.

The other, from the pre-bikini era is Benjamin Disraeli’s definition of statistics being worse than “lies, damned lies”. But none of the two apply to reading data on agriculture in a poor country with a per capita income in the $1,500 category.

Because, for their real meaning to be understood, farm statistics must be first translated from simple numerals or graphics into politics.

As Prime Minister Narendra Modi also seems to have figured out lately, Indian politics is first and foremost about the farmer, and never mind the fact that his contribution to national GDP is now below 15 per cent.

Or maybe because it is only 15 per cent. Nothing about Indian politics is so straightforward, except its organic linkage with the farmer.

There is celebration now that India’s GDP grew at 7.3 per cent in financial year 2014-15. Projections for 2015-16 are 7.8 per cent (Finance Ministry) and 7.6 per cent (RBI).

It should still give India a first opportunity to beat China in annual growth rate, forgetting for this heady moment an enormously larger base there. Yet there seems such concern in the government, and the markets are responding accordingly.

The fastest growing economy with falling inflation, rising FDI and declining interest rates, and yet there are long faces everywhere.

A decimated Opposition is feeling rejuvenated, and the government looks more than a little besieged. How can politics so defy economic indicators? Explanation for this lies in farming, in the cruel fact that India may no longer be an agrarian economy but still has an agricultural policy. Let’s see how.

While India grew by 7.3 per cent last year, agriculture was stagnant, at .02 per cent, with food-grain production falling a little over 5 per cent.

The previous year saw overall growth at 6.9 per cent, and 3.6 per cent wasn’t too bad for agriculture. But if you look at 1.5 per cent growth in 2012-13, you get a three-year growth average of 1.7 per cent in farm production, trailing overall national growth by three-fourths.

This is the key data point underlying rural distress, and complicating politics for Modi early in his term. It isn’t just one ill-fated Rabi (winter) crop cursed by fiendish weather.

To the breathless trumpeters of industry-led growth-this columnist admits to being one-this is confusing. As with all fast-developing economies, the share of farming is declining in India’s GDP as services and manufacturing rise, which is how it should be.

And so what if agriculture is struggling, because you need to pull more people out of economic obsolescence into more productive pursuits.

So urbanise, industrialise, and that should be the perfect justification for easing the laws to allow acquisition of more of farmers’ land.

Once again, here I have to be conscious of where I am headed because I strongly support the new land acquisition law.

Again, the picture changes once you remind yourself that you are looking at agricultural figures, and not any old statistics. India’s foremost expert on farm economics and markets, Infosys Chair Professor at New Delhi-based ICRIER (Indian Council for Research on International Economic Relations) Ashok Gulati estimates that 49 per cent of India’s workforce is employed in farming.

And since rural families tend to be larger on an average, this would mean anything from 55-60 per cent of our population is farm-dependent. Now reverse the equation: half the workforce produces just a seventh of the GDP and nearly two-third of India subsists on it.

Broadly, then, the farmer earns less than a fourth of what others do on an average. Then you add that this population has averaged 1.7 per cent growth for three years against overall economy’s 6 per cent. You get the picture of rural distress.

Again, Gulati, whose help in finding evidence of my political hypothesis of Indian agriculture I most gratefully acknowledge, points out that farm growth reduces poverty two to three times faster than other sectors together.

According to the World Development Report of 2008, for China, this farm growth-poverty reduction coefficient is as high as 3.5 times-and even for Latin America 2.7.

It stands to reason when you look back at more than half the population living on one-seventh of national income, thereby accounting for the bulk of the real poor.

There are broadly two schools of economists on the importance of farming. One, led by my old friend, fellow limousine liberal and brilliant columnist Surjit Bhalla, underlines its obsolescence and the fact that large economies rarely hit higher than 4 per cent growth in the farm sector over any length of time.

The other, which we may call the Gulati school, asks, why not? China saw agricultural growth twice as high between 1978 and ’84, early years of its reform.

Another good question is, if averaging more than 4 per cent wasn’t possible, how come at least five states in India have done it for a decade now? And each of these is larger than many nations.

And now the clincher: each one of these five states is a BJP stronghold, three of the five have returned the same chief minister to power for the third time. Similarly, at the other end of the spectrum, the biggest laggard, Kerala, with a marginal negative growth, is mired in terminal anti-incumbency.

Middling Maharashtra too has got tired of Congress-NCP. And Uttar Pradesh, at 2 per cent, brings up what you may call the secular rate of farm growth to rival the old notional Hindu rate and has not re-elected anybody in decades.

Bihar, another laggard (though better than UP) broke the trend in 2010 only because massive road building had boosted overall growth greatly in Nitish Kumar‘s first five years.

Here then is my central Doctrine of Agro-Political Incumbency. It is also the reason why the chart accompanying this article is such a killer app to tracking-and cracking-political fortunes even in an industrialising, urbanising India.

Agriculture’s share in the economic GDP may be below 15 per cent. But in electoral and political equivalent of GDP, it is about 60 per cent.

The fun part is that both Rahul Gandhi and Modi have figured it out.

That is why Rahul’s campaign is centred on farm distress, and by linking the land bill with it, he has turned the momentum of national discourse, bringing the Opposition back from the dead. India has had two indifferent crops already, and if the forecast of drought comes through, there will be three.

That’s where Rahul is coming from. But it is also the reason Modi, our sharpest public figure in a long time, has shifted tracks. Look at his speeches and interviews in the course of his government’s first anniversary.

All address rural India, the farmer, the poor. In Mathura, he even said capitalists, “Dhanna Seths”, do not provide jobs, the smallest guy does.

That figure of 0.2 per cent farm growth and the average of 1.7 per cent over three years is much too overwhelming even for an overall growth of 7.3 per cent this year and three-year average of 6 per cent. Because we are talking political GDPs here.

June, 2015

By: Shekhar Gupta
Source: Pakistan Today