Monday, June 1, 2009

One last learning for India - 5. Agriculture is not holy

In India, agriculture is a “saintly” profession, from a public policy perspective. It is mollycoddled worse than even the French farming industry. Income from agriculture is completely tax exempt. Food and fertilizer subsidy eat an enormous proportion of the government’s budget. Power (when it comes) is free for farmers in most states. Loans are often waived for farmers, especially at election times, which come all too frequently. At least from a government’s perspective, agriculture is the most virtuous of professions. And yet given half a chance, most farmers would give it up and run.

Its easy to see why this conferring of sainthood on agriculture. Most of India is rural. The majority of the population is engaged in agriculture. To the older generation, food shortages are not some distant memory – even in my childhood I have stood in a line to buy rations (and I am not that old !!). So agriculture must be “protected” at all costs.

China has many similar characteristics to India. A large proportion of the population is engaged in agriculture. Famine is not unfamiliar – many living Chinese can remember the hard times when there was not enough to eat. China is even more vulnerable than India on food – only 15% of China’s land is arable . India’s is more than double this number. And yet China has chosen not to erroneously mollycoddle agriculture like India has done.

China has chosen as its objectives – improving the economic condition of the people and food security. India has chosen protecting agriculture as an objective. China’s objective is an objective. India’s objective is a means to an end.

China is agnostic across sectors – whatever improves the economic condition of the people is fine. Be it industry, be it agriculture, be it whatever. It will support whatever brings jobs and prosperity. No special favours to any particular sector. Special favours galore to economic improvement. On food security, China is venturing overseas and relying on trade. Its buying up land in Africa and trading for food. It believes it can achieve its objectives without subsidizing agriculture endlessly.

I think there’s lots in the China model for India to learn. Agriculture is not the holy cow. Economic prosperity is the holy cow.