Sunday, 27 September 2020

Economic Model Boosting Indian Economy

By Dr. Alok Chakrawal
Updated: September 9, 2020 11:04 am

The primary sector (agricultural sector) is contributing approximately 16% to the total Gross Domestic Product (GDP) in India. The most important feature of our land farming is that we are still carrying on our agricultural business on traditional methods. In other word we do not use scientific methods in agricultural sector. As per the estimates, approximately 500 million population is engaged in agricultural and its allied economic activities. In case we switch over to scientific farming, only four crore (40 million) people are required to contribute the same amount of contribution to the GDP. It means 46 crore farmers are engaged in unproductive activities in villages contributing nothing to the economy. Even we do not switch over the scientific farming, almost 26 crore people are not required in the traditional farming; and the current level of contribution could be done by only 24 crore farmers. There is another explanation of this data i.e. there is disguised unemployment in villages of India. Indian agricultural sector is grossly unattended and unmanaged at the state and Central Government level.

We must understand that the road of success of Indian economy originates form the villages. But unfortunately, villages are the most neglected and least prioritized sector. As per the estimates of 2018, 65.97% of Indian population lives in villages. In absolutes terms, this comes around 88 crores people of the present total population. As a matter of fact, bucolic life is not preferred by today’s youth. Even girls in village are interested to settle down in adjoining cities after marriage. There is a fast depletion of rural population to urban and semi-urban areas.


Small Land Size and Limited Options

We need to understand that why rural life is no longer attractive for larger group of people living in villages. There are number of socio-economic factors responsible for it. One of the major economic factors is that agriculture is not a profitable occupation for marginal and small farmers anymore. Size of farming land is very small available to the small and marginal farmers. It is declining day by day due to population growth, competition for land, urbanization and many other reasons. As per the NSSO Survey of 2016, average farm size in India is 1.2 hectares only. But this the national average. There are farmers having less than half acres of land as the NSSO data reveals that one in three farm household has less than 0.4 hectares of land. Small land size doesn’t allow a farmer to get benefitted by the economies of scale. There are 0.5% large farmers having more than 10 hectares of farming land in India.

Let us make it clear that land farming is not the only economic activity in villages of India. There are multiple avenues of livelihood and that needs to be strengthened. The break-up of village revenue is as follows – Cultivation 47.9%, Wages 32.25, Livestock 11.9%, and Non-farm Business 8%. The National Sample Survey Office (NSSO) clarifies that sugarcane earns the highest income per household; and cotton, soyabean, rice, and maize have the earning per house hold in decreasing order after it. By and large, we are still cultivating traditional crops. Indian farmers need to be educated and trained in terms of enhancing their agricultural income by improvising crops and cultivated agro products.

Low Income High Cost

We must look into the input cost break-up of farming business. The highest cost incurred on an item is the fertilizers i.e. almost one fourth (24%) of the total input cost. Next highest input cost is labour 22.5%, followed by other expenses 20.8%, seeds 11.4%, pesticides 7.5%, rent for land 7.2%, irrigation 3.2%, and machine maintenance 2%. Fertilizer is pilfering the income of poor farmers in India. This is the scenario when fertilizer is subsidized by the Government. We need to understand the importance of organic cultivation to discourage the use of fertilizers in cultivation activities.

As per the data available, 85% of Indian farmers are marginal farmers. There is a serious gap in their income and expenditure of agricultural activities. Marginal farmers are having close to Rs. 4,000 monthly income whereas their monthly estimated expenditure is Rs. 5,500 approximately. Big farmers having landholding of 10 hectares of land or more are having average monthly income of Rs. 50,000; whereas their monthly expenditure on agricultural affairs are just around Rs. 15,000. This is a clear revelation that marginal farmers are not able to get benefitted by economy of scale; and they have to incur more incremental higher cost on the farming business. Small pieces of land have put Indian farmers in distress economic conditions. Number of farmers are committing suicide just because of poor financial conditions. They are caught in nets of moneylenders, landlords, the Government babus and so-called social stigmas. Approximately 80% of farmers in Andhra Pradesh are in debt trap and Telangana is just close to it i.e. 75%. Tamil Nadu, Kerala, Karnataka, and Maharashtra are the other severely hit state by debt traps among farmers.


Unplanned and Unnecessary Urbanization

The quality of urban life in India is getting deteriorated day by day. Pollution level has already crossed danger level in metropolitan cities like Delhi, Kolkata, Pune, Mumbai, Chennai, etc. Public transportation is on the verge of breaking down. Metro trains in Delhi and Local trains in Mumbai are horribly over crowded. You need to gather herculean courage by public transportation means in metro cities in India. COVID-19 has exposed brutally the state of our public and private healthcare system in urban areas.  Rampant urbanization is creating trouble for speedy growth of the economy. At the same time rural people are not having enough opportunities of jobs and employment; and, hence they migrate to urban and semi urban areas in the search of livelihood. Student coming from village background to the urban life hardly go back to their villages. 11.04% Indian population was living in urban areas in 1911 which expected to grow up 40.76% by the year 2030. The National Democratic Alliance (NDA) Government launched the Smart City Mission on May 25, 2015, to address the issue of planned urban development. A budget of Rs. 98,000 crores was earmarked to make 100 identified cities as smarty cities. 500 cities were identified for rejuvenation under the Smart City mission of the Central Government. So far as the planned cities in India are concerned, we can remember Chandigarh and Gandhinagar in absolute terms. The time has come that we should be careful enough for urban life in India. Rich and premium class people in India have started shifting to villages for a healthy and peaceful life.


Economic Development Model for India

Indian economy is still under take-off stage as suggested by W. W. Rostow. Despite seventy years of planned expenditures and efforts, we are still a developing economy. As per global agencies estimates we are the fifth largest economy in the world with a GDP of $ 2.8 trillion. But this is also a fact that we are the second largest country in terms of population. As compared to China, USA, Russia and many other countries we have comparatively lesser size of land available for cultivation and economic activities. However, size of the land is not a measure of economic development – Japan and Israel are the greatest examples of extra ordinary economic development with limited piece of land. Each and every developed economy has its own strategy deployed for the purpose. Some countries have achieved economic strength on the basis of autocracy (dictatorship) viz. China and North Korea but such prosperity does not long; and that is why it cannot be placed under sustainable development. Indian economic policies are good but it is implemented very poorly. India is suffering from bad governance and dishonest bureaucracy. During a flood affect region in Odisha in 1985, the then Prime Minister of India admitted that only 15 paise out of a rupee reached the ultimate beneficiary. The present Government at eh Centre has a mammoth task to make India the economic leader of the world. Nevertheless, this task is not an impossible one. What is needed for it is courage, determination, commitment, honesty and the most important one – patriotism. Japan and Israel have become great economies in the world just because of unmatchable patriotism and endless dedication for the nation.

India can achieve unprecedented economic growth and development with some outstanding ideas explained here below under several headings representing particular, issue, aspect and segment. However, its microplanning would be needed before its implementation. These just an indicative thought explained to certain extend with assumptions and economic conditions mentioned here above. These ideas need further discussions and modification at different levels of governance, enforcement, enactment and imposition.

Balanced Approach

All central and state governments have been advocating rural development since 1947. Political parties give promises of rural and urban development in their election manifestos every five years during election times. But the brutal fact is that hardly any party takes honest care of the promises made during elections campaigns. The very first thing to realize in the wake of economic development is that rural and urban economies are complementary to each other. We cannot think of smart cities keeping our villages in miserable economic conditions. At the same time, strong urban support is needed for an overall development of village economy in India. We need to accept the fact that blind industrialization and urbanization will hamper Indian economy very badly. India has lost more than 15,000 square kilometers of forest in the last three decades just for the sake of industrialization. Deforestation is a serious concern for sustainability of Indian economy. Of course, 84% of the GDP is coming from urban and industrial areas but it will to zero if we cut off from villages. Hence, we need to accept the significance of balanced approach of economic development; and give equal attention to rural and urban development.

Collective Farming

We have been advocating since the beginning that India is agriculture-oriented economy. But the fact is that we have not been paying due attention to the issues and hurdles in the process of village-based economy. How can we think of garnering surplus from agricultural activities where 85% of farmers have very small pieces of land for the purpose of economic activities? No farmer would be able to get benefitted from economies of scale with such small pieces of land. Further, farmer do not have sufficient money for shifting to scientific farming such as testing of soil, water conservation, drip irrigation, green house farming, use of sophisticated machines and tools, etc.

Collective farming is a mode of enterprise where farmers of small size of land holding should come together to enhance land productivity and cost effectiveness of agricultural efforts. Collective farming is basically clubbing together lands of small farmers and utilizing resources community resources on rationale basis. Individual and marginal farmers cannot bear the cost of initiating scientific cultivation and experimenting economies of scale. Collective farming will eradicate disguised unemployment.  It is for sure that ‘Collective Farming’ will enhance agricultural produce per household considerably. There is very less chances that farmer will come together for initiating collective farming on their own as there are plenty of socio-economic issues in every village. Small farmers may join it voluntarily or the state or central governments may float some possible schemes in this regard.

The impact of experimenting collective farming will be too high but an indicative graphical presentation of collective farming is given here below to understand its positive side.

Impact of Collective Farming

The above figure depicts the geometric jump in the agricultural produce with the implementaion of ‘Collective Farming’ concept. The expected agricultural produce is expected to grow manifold with the adoption of ‘Collective Farming’. There are logical and scientific reasons of such growth in the ultimate agri-produce such as savings from economies of scale, productive division of labour, efficient planning of agricultural cycle, timely execution of palns for optimum agri-produce, systematic and organised collective efforts by a larger group of farmers, availability of sizable piece of land for farming, adequate treatment of the fields for suitable crop farming, cheaper cost of farmoing due to organised farming, complementary and suplementary efforts of farmers to grow the produce in maniforld manner, highly effective marketing strategies for the agri-produce, cost effictiveness, larger pool of finacial resources, optimum utilization of resources, and the most important factor is scientific farming. All these positive factors will certainly enhance agricultural produce of Indian farmers beyond expectaions of the Governments and farmers. In a way ‘Collective Farming’ will pave the path of judicious utilization of national resources for the sake of most desired dreams of Mahatma Gandhi i.e. ‘Village Development’.


Role of Government in Collective Farming

The role of Government, especially the Central Government of India, is very crutial in the implemetation of ‘Collective Farming’. The Central Government of India will have to initiate this proposal through the Ministry of Agriculture in collaboration with the Ministry of Finance or even more relevant ministries. The Central Government has to launch this concept of ‘Collective Farming’ on sample study (test case) basis in certain identified area with the consensus of the respective state government/s. The implemetaion of this concept needs at least two to three years after its successful sample study (test case) as mentioned here above.

The Government has to identify certain village/s in consultation with the respective State Government. The Government representative – Village Development Officer or Block Development Officer or any other designated officer will approach farmers to

join this scheme of ‘Collective Farming’. The Government Officer shall be responsible for explaining the concept and motivating the farmers to join the scheme with full support. Once the Government Officer has got consent from needed number of farmers with sizable piece of land for the implementation of the scheme, he/she will constitute an organization in the form of cooperative, committee, trust, society or any other innovative structure for effective implementation of the scheme. Of course, the Government (both State and Central Government) will be significant part of the formed organization. The Government official may assure the farmers a minimum guaranteed income having assumptions of future agri-produce. The Government can think of consolidating subsidies and aids given to the villages, farmers and associates. Such consolidated fund may be diverted for successful implementation of ‘Collective Farming’.

Once the consent is procured from all participating farmer, the land of all farmers shall be clubbed together. For avoiding future disputes with regard to ownership of the land, a geo marking document of land size, location, and boundaries should be preserved with Government machinery and individual farmers. The Government will deploy best of the agricultural scientists to assess the quality of soil, climate and water in the region where ‘Collective Farming’ is to be implemented. Specific crop shall be identified for cultivation on the basis of recommendations of agricultural scientists. The role of Government does not end at harvesting level but it continues even after in form of effective marketing of agri-produce. The income from ‘Collective Farming’ is certainly going to be beyond expectations of farmers and governments. The Government should claim its proportionate income in accordance with the invested money. The Collective Farming Cooperative (or Committee) shall make provisions for future growth and development out of the surplus revenue. The Government will set-up cold-storage and ware-houses for enhancing time-value of agri-produce. ‘Collective Farming’ will lead to cluster processing units, village development centre, agri-produce marketing, IT facility centre in villages and other innovative scheme for overall growth and development of Indian villages.

Before getting into action, the Government needs to set-up a comprehensive committee for studying viable locations and preparing complete manual of its implementation. The idea of ‘Collective Farming’ mentioned here above is just an indication. There are many inter-linked and associated models of growth and development of Indian economy. Such models shall be made available for consideration of readers, policy-makers, critics, thinkers and all other stakeholders of the Indian economy in future.


By Dr. Alok Chakrawal

(The writer is a Professor, Saurashtra University, Rajkot, Gujarat)


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