India vs Bharat

In the last blog we have seen that rural India is deprived in two ways. The infrastructure in villages is pathetic. The archaic method of farming generates little income for rural people. The low income in agriculture is reflected in statistics. Only 17% of India’s GDP comes from agriculture while 29% comes from Industry and a whopping 54% from service. But 60% of workers work in agriculture while 12% work in industry and 28% in service sector.
From this data we can say that for every Rs 100 that the average agricultural worker earns, the industrial worker earns Rs 853 and the service worker earns Rs 680. While it is true that the very high average income of industrial and service workers is skewed partly because of existence of some millionaires in these sectors, the effect is small.
Another way to look at the plight of farm workers is to note that almost 100% of farmers and farm workers are in unorganized sector while in industry and service sectors significant number of workers work in the organized sector. In general, it has been noticed that workers in organized sector get better wage and benefits from the employer. The only two non-farm sectors where large number of people works in unorganized sector are construction and hotel/restaurants.
As we have seen before, 60% of all workers work in agriculture and with mechanization the farm workforce can be reduced to 6%. This means that farm workers are massively underemployed. Every government and politician knows this fact. But none of them is brave enough to proactively tackle this issue or even admit it. From left to right, all parties expect farm workers to have a little better life as GDP grows. The low productivity and underemployment keeps half the population of India in perennial poverty. While in absolute terms, their standard of living goes up, relative to urban people they still live a miserable life. No political party even dreams of enabling the farm laborer the same standard of living as, say an elementary school teacher of a government school.
The only way to reduce rural poverty and lack of infrastructure is to wean rural population away from farming and into urban jobs. Therefore we need a two-pronged approach:
1) Allow mechanization of farming so that farm productivity goes up, requires fewer laborers and the income of farm laborers increase massively
2) Start urbanization on a massive scale so that the surplus farm workers can migrate to urban areas and get better job

In West Bengal there was significant land reform by Congress and Left Front governments where large number of farm workers became owner of small farmland. What we need across India now is another form of land reform where large investors and corporations are allowed to buy up as much land as they need for farming. The corporations will pay prevailing market rate or higher to the small farm owners. With thousands or millions of acres of contiguous farmland in corporate hand, they can introduce state of the art mechanized farming. Unless the value added per worker can be increased, the worker’s income cannot rise. Today, the value added per farm worker in India is only $385 per year whereas in USA it is $39000 per year. With large land at its disposal, corporations would be able to introduce state of the art farming procedures and mechanization.

Why are governments so reluctant in introducing this type of change? First, they are afraid of massive unemployment in villages and resultant migration to urban areas. There is a knee-jerk response to such changes that says that corporate farming will bring back feudal Zamindari system. Second, they are scared of losing control that they wield today over rural population.

Let me expand on the second point. Most rural folks are poor. The poorer you are, the more you are dependent on the government. If you are poor, you will look for BPL (below poverty level) quota and subsidies and handouts from the government that the average middle class, urban citizen does not look for. It is in the ruling party’s interest to keep people poor in order to maintain a permanently dependent vote bank. If corporate farming is introduced, then the workers will be loyal to the corporation and not the state government. Even small farmers are dependent on the government since they get subsidized or free inputs such as electricity and water. These subsidies also destroy the market mechanism which would have ensured most efficient utilization of resources. If you get water for free why would you care about limiting water usage in your farm? Why would you even think about drip irrigation?

It is often said that India is divided in two segments: India and Bharat. While India may be shining, Bharat is languishing. There is some truth to this. But those who claim this including those who are left-minded usually belong to India --- the middle class citizens who usually work in government or other organized sector. I will focus specifically on government and public sector units since these are run fully or partially from taxpayers’ money. The government and public sector companies are extremely generous when it comes to employee’s salary or benefits. Today, in impoverished West Bengal, a public high school teacher with M.A and B.Ed degrees starts at a gross pay of Rs 18000 per month. The prevailing market rate is lower. But the government pays this salary based on the rationale that it is the minimum required for a Bhadrolok (gentry) family to survive. In other words, open market is not permitted to determine the remuneration. It would be fine with me if the leftist government of West Bengal defied market and made sure that every household gets the income needed to survive irrespective of the value of its labor in open market. Of course this idea is utopian. Therefore, the West Bengal as well as other state and central governments distribute largesse only to the tiny middle class while ignoring the huge impoverished class. The school teacher gets salary based on need but when he shops vegetable in the market or hires a maid, the maid and the sabjiwalla are completely subjected to conditions of open market. The school teacher does not pay the maid a salary based on her need but whatever the prevailing market rate is. In the leftist terminology of class struggle, it is the unorganized poor class that is getting exploited by a connivance of a section of the middle class and government. I will not blame the middle class workers in private sector because they are paid market rate.