Should India’s farm sector learn from the past to move forward?
‘Agriculture is our wisest pursuit, because it will in the end contribute most to real wealth, good morals, and happiness.’ —Thomas Jefferson
Agriculture is often rightly described as the backbone of the Indian economy. According to the India Brand Equity Foundation, agriculture is the primary source of livelihood for about 58 percent of India’s population, and the Gross Value Added by agriculture, forestry and fishing is being estimated at Rs 17.67 trillion ($274.23 billion) in FY18. In fact, since Independence, our agriculture output has grown from 145 million metric tons (MMT) to over 750 MMT in volume terms.
While this thriving sector is a testimony to the sheer variety of crops that are grown here, policymakers have found it challenging to create a one-size-fits-all policy, which is crucial for land reforms, food security, irrigation and even the dairy industry. This can be seen in the fact that despite the five-fold increase in agriculture output, the sector’s contribution to the country’s GDP has declined since 1947 from 43 percent to 16 percent today! While government statistics show that that nearly 145 million agricultural labourers and 120 million cultivators are ‘employed’ in this sector, the sad reality is that much of this is ‘disguised unemployment’. This means that the per capita contribution to GDP by the population dependent on agriculture is one-fifth of the per capita contribution by those dependent on other means of livelihoods (including the urban poor)!
A study in contradictions
Did you know that India no longer suffers from a shortage of food at a macro level? Rather, we have a surplus! Our warehouses are overflowing with a buffer stock of food grains, some of which are two years old. Yet, 30 percent of our population continues to languish below the poverty line and often goes hungry! This is to do with the distribution of income, rather than productivity in agriculture. Historically, migration from rural to urban has been a popular recourse to mitigate the risks of farming.
India has seen the largest migration in absolute numbers. A large number of rural youth migrate to nearby towns or even more prosperous villages in search of employment. Most of them work as agricultural labour, construction workers, contract workers at mandis, factories, bus stations, and railway stations. These jobs are low-paying and irregular in nature. However, income is immediate and, unlike in agriculture, does not have long gestation periods. As a result of this migration, farming is often left to the elders and women in the family. The uneducated rural poor also move in large numbers from labour-surplus states like Rajasthan, Bihar, Odisha and Assam to labour-deficit states like Gujarat, Karnataka, Andhra Pradesh and Kerala. This poses its own set of challenges in terms of infrastructure and basic human dignity for the migrants. These realities and contradictions on the ground call for unique solutions. Any sustainable model has to factor in ‘income enhancement’ and ‘employment generation’ as critical metrics. As we will see in the next section, income enhancement in agriculture is a delicate balance between price increases and productivity increases.
How bad is food inflation?
Subbanna is a 48-year-old farmer from Malepadu village in Andhra Pradesh’s Chittoor district. For more than six years, he has been carrying the produce from his 1.5 acre land holding to the Madanapalle tomato market. The wholesale market operates almost like a clearinghouse, complete with auctions. Subbanna had been cultivating tomato for six years in a row. It’s become an attractive crop in the region because prices have been firm and farmers are earning good returns. One Sunday morning in December 2017, hundreds of farmers from within a 30-kilometre radius of the market had gathered for the auction. The buyers knew in advance that there was a bumper crop this time. The bidding started at a mere Rs 2 per kg, and buyers were confident to acquire the entire supply at this rate. For Subanna and the other farmers, the cost of cultivating tomatoes was Rs 6 per kg. He was in a quandary.
He could have dumped the produce as a sign of protest or sold for Rs 2 per kg taking home the pittance he was offered. The former would work only if all the farmers were in consensus. And giving up any income was a tall ask. Subbanna himself had two children and was the sole provider for family.
So, he took what he could and went home with a heavy heart. Despite being equipped with the latest technology and productivity tools, he was defeated by market forces. Subanna’s story is not unique and this is the fate of the majority of Indian farmers.
Sadly, most initiatives, both private and public, have generally focussed on improving productivity and have not been centred around the farmers or the environment. Given the low elasticity in demand for cereals and vegetables to some extent, even the slightest excess of supply/production can result in steep price drops. Farmers frequently end up with lower incomes than what they spent when there is a bump in production! Large supplies, combined with low prices, invariably benefit input suppliers and secondary processors the most.
According to a World Bank report, during the period from 1960–2001, the global demand for rice and wheat showed a decreasing trend while production continued to grow! As a result, the prices for both these commodities declined during this period. In a welfare democracy like India, the challenge is to balance the interest of farmers with that of the urban middle and lower class consumers. A high price benefits the farmers but has an adverse impact on consumers. This means that when the farmers make a healthy income, the brunt is borne by the consumer!
However, it is important to differentiate inflation and price volatility. Inflation is when the prices rise and stay there, before rising further. Price volatility is a relatively severe two-way swing in prices. One can logically argue that a healthy and moderate inflation in food prices is in the best interest of both the farmer and the economy. It may also make sense to take a fresh look at the methodology of computing the Wholesale Price Index (WPI) or Consumer Price Index (CPI). To the layperson, it may seem difficult to fathom why the price volatility of tomatoes and onions should determine the monetary policy of a nation!
Judicious use of technology can help fix this problem.
Now, let’s try and understand why Subanna was forced to settle to sell the produce at a significant loss. Tomato is one of the easier crops to cultivate. It gives a high yield of 30–40 MT per acre over a 120-day crop cycle. It is a profitable crop even when the realisation is a modest 50 percent over cost. There are multiple seed and input companies promoting tomatoes, and hence, its cultivation has grown threefold since the turn of the century to touch nearly 21 MMT. High prices during a previous crop cycle incentivise more farmers to cultivate tomato. The result is a glut and a crash in price. Therefore, savvier farmers usually avoid harvesting a crop that did well in the previous crop cycle! But this wisdom is vetoed by seed companies and input suppliers with sales pitches that build unrealistic expectations.
We all know that (Income = Price*Quantity). We know that low elasticity of demand results in the price dropping faster than the quantity goes up. This results in a decline in total income. One can explain this using the game theory, where individuals in certain circumstances adopt and display behaviours that eventually hurt everyone. In other words, what appears perfectly rational for an individual is irrational for the group. Similarly, such large conversion to a single crop is unhealthy for the environment, leading to increased input requirements year after year. As more and more farmers are motivated to grow tomatoes, prices crash and everyone suffers.
Cue: Technology to the rescue
There are over 500 million smartphone users in India, most of whom have never even had access to a landline phone. More than 320 million of these smartphone users consume data. Leveraging this smartphone penetration, there are a host of agritech startups that are addressing some of these problems by equipping the farmer with data and information that can help in better decision making. Most of these decisions are around what to grow, when to grow and how to grow; or what to buy, when to buy and how to buy; or when to sell and where to sell.
Geographic Information Systems (GIS) tools and online web resources can help farmers conduct crop forecasting and manage their agriculture production by utilising multispectral imagery collected by satellites, fix wing Aircraft or Unmanned Aerial Vehicles (UAVs) and provide Normalised Difference Vegetation Index (NDVI) and other vegetation/ soil indices, together with crop stress information. This data is used in regional GIS or Computer Aided Design (CAD) management systems and web portals. The ability of GIS to analyse and visualise agricultural environments and workflows could prove to be very beneficial to those involved in the farming industry.
Technologies like these can help balance the demand and supply in a manner that would ensure better returns to the farmers without fleecing customers. In future, if tomato sowing data is mapped and shared real time, it can help the farmers make the right decision and prevent price fluctuations beyond a band, serving both the farmers and the consumers. Weather forecasting tools may be used to help farmers decide the time of sowing and move to smart agriculture. In the light of climate change and rain-fed agriculture, it will become a lifeline for many farmers. Mobile apps today allow farmers to access complex knowledge and information at the press of a button. There are apps like ‘Plantix’ where they can upload pictures of their crops and get real-time advice on mitigating pests and diseases.
Other ecommerce companies like ‘Agrostar’ are providing inputs like fertilisers, nutrition management as well as pest management products to the farmers, bringing transparency in input prices and reliability in their quality. Technology can strengthen the system of gathering prices across markets and with real-time online dissemination. Online trading demands standardisation of quality grades and reliable assaying mechanisms.
Trading through online platforms may become a viable option in the not too distant future. Discerning farmers can participate and take control of their destiny. It would potentially allow farmers in the remotest corners of India to have access to markets across the country. The Electronic National Agricultural Market (eNAM), which linked all 585 primary market yards by March 2018 is the first baby step in this direction.
The fact that a large part of our farming community is uneducated and unfamiliar with technology can create further opportunities for service providers in rural areas. The educated rural youth may have an opportunity for gainful self-employment.
In today’s world of online retail, there is a greater opportunity of disintermediating the supply chain to give the maximum share of the customer rupee to the farmer. Technology and the right business models are true enablers, offering complete price transparency and visibility to the farmer. The bridging of the information and knowledge gap can help farmers rapidly scale their incomes. Aggregation and dissemination of real- time information on sowing, harvesting and pricing can move agriculture from an ‘open’ production system to a ‘closed’ production system. When farming is able to bring a predictable monthly income to the rural youth as well as the farmer, it will reduce migration and put less strain on urban social infrastructure.
And agriculture can become cool again!
The Amul story is a case in point. Inspired by the vision of farmer leader Tribhuvan Das Patel, it brought the science of modern marketing, and robust distribution network that helped value-added products reach across the country. to farmers. It adopted the latest world-class technology to bring world-class products to the customer to fulfil their changing needs. It has remained at the cutting edge to compete effectively against the biggest and brightest corporates of the world. All of these led to one result: a remunerative market for the farmer.
However, subsequent attempts to replicate the Amul India story in other states and sectors have met with limited success. Summing up the biggest challenge, Dr Kurien once said, ‘It is easy to get a hundred Kuriens, but where is Tribhuvandas?’
Changing consumer trends create new opportunites
The Green Revolution heralded in the 1950s was motivated by the immediate food security needs of a newly independent India. As people are becoming more health-conscious, they are shifting to diets that are low in carbohydrates, but high in protein, vitamins and minerals. This health consciousness is also a by-product of affluence.
Millets are considered to be super foods, as they are also ‘gluten-free’. At the same time, these crops are mainly rain-fed, with very little water/input requirements. Thus, these grains are both healthy as well as good for the environment. Millets, that were until recently considered a poor man’s food and could never be seen in the kitchens or dining tables of the affluent, are now considered cool and trendy.
We seem to have come full circle 60 years after the Green Revolution! Another clear shift we see is in consumption of fruits and vegetables. India’s horticulture production surpassed its cereal production for the first time in 2014. The trend continues unabated. Fruit consumption is growing both in terms of the quantity as well as varieties. Hitherto unknown fruits like kiwi, dragon fruit, rambutan, and avocado as well as vegetables like lettuce, bok choy, bell pepper, kale, rocket and zucchini are being consumed in increasing quantities. Rare apple varieties like Fuji, Gala, and Granny Smith have become commonplace now. We probably need to drive this shift further.
Similarly, if we push the consumption of fruit and vegetables, it will not only add to the farmers’ income, but also potentially reduce the expenditure on healthcare. Imports have played a major role in reshaping the consumer expectations around quality, seasonality and price of certain fruits.
Apples are a case in point. Today, we import over 300,000 MT of apples, in addition to the domestic production of around 2 MMT. These imports motivate the domestic industry to improve quality, variety, productivity and remain competitive. The import duty of around 50 percent ensures that there is a level-playing field for our farmers. It also brings in over $500 million in additional revenue to the exchequer. The shift from core cereals and pulses to fruits, vegetables, poultry, dairy, piggery, fishery and bee-keeping, provides a way forward in terms of opportunities for the farmers to augment their income in line with the changing consumer trends. It also creates the foundation for more sustainable agriculture that is in harmony with nature. And, above all, it can generate more employment for the youth.
What is heartening is that this narrative has been built into the policies and priorities of the current government through focussed initiatives like the Blue Revolution, Sweet Revolution, etc.
Sustainable and climate smart agriculture
A well-kept secret in the farming community is that farmers grow the food they consume organically (without fertiliser and pesticides) but sell food that is grown with these aids. Therefore, they understand that chemically-grown food is not the best, but commercial compulsions get the better of them.
People born before 1970s have seen the complete cycle during their lifetime. During their childhood, everything used to be ‘organic’ and chemical free. Then hybrid varieties in food were introduced and white sugar became the norm, as against brown sugar used earlier. These hybrid varieties needed extensive use of chemicals. Now there is a growing movement to want to go back to ‘organic’. Earlier organic and healthy was the norm and now it is a small niche being used by some savvy marketers to create differentiation.
There is a renewed focus on traditional and sustainable ways of farming in India, with governments like Andhra Pradesh committing to Zero Budget Natural Farming (ZBNF) methods propounded by agriculturist Subhash Palekar. This is a welcome discourse. The challenge is knowledge dissemination and market linkages.
The future of agriculture looks promising. The futuristic global trends in agriculture are around Precision Farming, Urban Farming, Aquaponics, Hydroponics and Protected Green House Cultivation. Interestingly, there are highly qualified young professionals who are experimenting with all these models in places like Bengaluru, Hyderabad, Pune and Gurugram. They are looking at high-tech sensors, cameras, robots, and even drones to monitor key parameters like moisture, temperature, nutrition, the colour of leaves, pest incidence, etc. They are building complex models to interpret the data thus collected and translate that into actionable insights. They are also building automation to run these setups like a modern food factory. Farming is being looked at with new vigour and fascination. Whether these trends become a part of mainstream agriculture or remain fads is the big question. We are optimistic and believe that some of them will be real game changers. The profile of the farmer is set to undergo a transformation. Drudgery will give way to knowledge-intensive smart farming. And that would be true Freedom! To reap the demographic dividend, agriculture will need to take centre stage with unflinching commitment.
As David Landes once said, ‘Development is long; logic, short’. It is indeed a long haul!
(Vipul Mittal also addressed the disruption of the farm sector in the book "Cutting the Gordian Knot: India's Quest for Prosperity" by T.N. Hari and Hari Menon, Bloomsbury, 2018)