Agriculture reform for India
A La Trobe economist is contributing to the global debate on how we can help the rural poor.
It is essential that India undertakes agricultural reforms if the country is to move out of its poverty cycle, says La Trobe economist, Professor Sisira Jayasuriya. India has the largest number of very poor people in the world, he says, mostly farmers and agricultural labourers struggling to make a living out of their small plots of arable land.
At last year’s Doha round of meetings on international agricultural reform, the United States was pushing for India to open up to the global market. India was reluctant because it felt that the livelihood of 200 million farmers would be at jeopardy.
‘It is easy for the US to push in this direction when it heavily subsidises its own agriculture sector,’ says the professor, who is sympathetic to the cause of India’s rural poor. ‘Most US subsidies go to farmers who are millionaires.’
By contrast, eighty per cent of farmers in India live on less than two hectares, most with no irrigation. This means farmers are very vulnerable to the vagaries of weather; in a good season, for example, a typical rice farmer may harvest two tonnes of rice. This is just enough to feed his family, but insufficient to meet other basic needs.
In a bad season production might be down to half a tonne. Other rules and regulations restrict investment in storage and processing. As a result, thirty to forty per cent of all fruit and vegetables are wasted, and only two per cent are commercially processed.
Everyone agrees reform is necessary, but how is it to be achieved? One measure would be to remove the hotchpotch of trade restrictions within the country, says Professor Jayasuriya. People may have plenty of rice or wheat in one part of the country and very little in another, yet they can not move food freely from surplus to deficit areas.
‘If you think that is strange,’ he says, ‘then consider that free trade in eggs and milk between New South Wales and Victoria was restricted until the 1990s, despite the prohibition of interstate trade restrictions in the Australian constitution!’
He predicts that if domestic barriers to internal trade and investment in food processing and storage facilities were removed, areas less suitable for rice and cereal grain production could shift to horticulture, pulses or livestock.
‘This would lead to higher farm incomes and a drop in the price of fruit and vegetables which many people – often vegetarians – cannot aff ord.
The next target, he says, is the global market. ‘India has been opening up since the early 1990s and it has been doing quite well. The process has proceeded further in manufactured goods than in agriculture. Unfortunately, global agricultural markets are heavily distorted by the policies of developed countries, which makes India reluctant to open up even though it is in its long term interest to do so.’
Professor Jayasuriya has been involved in four years of research on these issues in collaboration with a team of senior Indian economists at the National Council of Applied Economics Research in Delhi. This research has been sponsored by the Australian Centre for International Agricultural Research.
While in India, Professor Jayasuriya, left, and Professor Max Corden from the University of Melbourne met India’s Prime Minister, Dr Manmohan Singh, right.
Study of all aspects of Indian market
Professor Jayasuriya and his co-researchers have looked at all aspects of the Indian agricultural market, from farm level to global economics. They have done field surveys of farmers, talked to government officials, buyers and companies and analysed published economic data.
If India opens up for free trade, he predicts rice production will benefit more than wheat production. ‘This is desirable in the sense that India can produce rice more efficiently than wheat.’
Australia will benefit because India’s wheat and other agricultural commodity imports are likely to go up. Irrigated regions in the Punjab and Tamil Nadu produce the highest yields of rice, and they could expand their production. However, farmers in Andhra Pradesh and Bihar, where yields are low, might suff er if trade is liberalised.
Professor Jayasuriya says the reality is that many farmers will have to leave their land if economic conditions are to improve for them. ‘It’s like trying to live on the Nullarbor for these people,’ he says. ‘They will never do more than eke out a living. They would like to stay where they are and have more money, but farm sizes do not permit it.’
From a historical perspective, he points out that massive agricultural transformation has been a feature of both the modern and postmodern ages. ‘The enclosure of the commons in England, which allowed massive increases in agricultural productivity and helped the industrial revolution, not only ushered in rapid economic growth in England but had global effects, including the colonisation of Australia.
‘More recently, in China, the percentage of the population living in cities has doubled in the last twenty years to reach 40 per cent. This has been accompanied by a massive reduction in poverty from 84 to 16 per cent.’
He predicts similar movements of people in India. In the next fifty years the percentage of people working in agriculture will drop from more than 50 to just 10 per cent.
‘The culture will change. India has the largest number of illiterate people in the world. They are more concerned with how to feed their children and educate them for a better future than anything else. Most parents want a different future for their children than working the land. People move when they have a chance.’
Professor Jayasuriya and his colleagues presented their findings last year to senior Indian policy makers in Delhi.