Farm and Factory

Arguing in support of the Land Acquisition Bill in the Rajya Sabha in March, Finance Minister Arun Jaitley emphasised the need to reduce the number of people in the country who subsist on agriculture. “The share of GDP of agriculture is 15 percent, and 60 percent of the population shares that 15 percent,” he said. “So you have to bring people out of agriculture and create jobs in manufacturing.” This was as succinct a summary as any of the government’s intentions with regard to agriculture and industry.

While the aim itself cannot be faulted, the concrete measures taken towards it so far suggest that Jaitley’s is a facile formulation, and one that conceals far more than it reveals. Jaitley’s assertion begins with an indisputable fact, central to the challenge of India’s growth: if wealth is to be distributed more equitably, it will be vital to reduce the number of people who depend on farming. A great part of the wealth being generated in this country is not reaching a large section of the population; and farmers suffer most severely from this inequity, which is only increasing with time. In the 1994 financial year, agriculture generated 28 percent of the country’s GDP, and 62 percent of total employment; by 2010, these figures had fallen to 15 percent and 53 percent respectively. Thus, the decrease in agriculture’s share of total GDP was far greater than the decrease in the number of people the sector supports.

But Jaitley’s conclusion, that jobs in manufacturing offer a way out, does not follow from this. It is based on the premise that, in general, if more jobs become available in sectors such as manufacturing, people move out of agriculture in greater numbers, allowing those who remain in it levels of affluence comparable to those of their counterparts in urban India.

A look at the evidence available suggests reality is more complicated. Consider the figures (in millions of people) for employment from 1999 to 2009:

Between 2004 and 2009, India witnessed a fall in the absolute number of people employed in agriculture. This was also the period of India’s highest rate of economic growth in modern history. Belying Jaitley’s reasoning, however, the number of manufacturing jobs actually declined during these years; industrial growth was fuelled largely by increases in productivity, not labour participation. From the data, it’s clear there is only one sector that could have absorbed those who left farming: construction.

Looking at other demographic trends gives us a more complete picture of these changes. Census data show that India’s number of cultivators—those who have a supervisory role in agricultural work, whether on their own or on leased land—decreased from 127 million in 2001 to 119 million in 2011, even as the average size of landholdings shrank and small holdings grew less profitable. Meanwhile, the number of farm labourers—those who work in the fields for wages—increased from 107 million to 144 million in the same period. Considered alongside the steady migration from villages to cities over the same time, these data suggest that many labourers migrate to cities to take up unskilled construction work—in many cases the only jobs they are equipped for.

Jaitley’s statement conceals the simple fact that the vast majority of those trying to move away from agriculture are of no use to the manufacturing sector. The fact that most rural migrants to urban India end up becoming construction workers suggests that, despite the drawbacks of village life, the decision to move is in most cases not voluntary, but born out of some degree of coercion.

One possible way of changing this, of course, is to improve the skills of those migrating to cities in search of jobs. Concomitantly, since a workforce is of little use if in poor health, we will also have to address the healthcare needs of this population. So if, as the government suggests, its “Make in India” policy will lead to a vast increase in manufacturing jobs, shifting people into those jobs from farming would require it to invest in rural education and health.

That investment is not happening on the ground. This government has actually slashed its expenditure on health. As far as rural education is concerned, it has inherited a mess from its predecessor. While there has been a large expansion of educational opportunities since the implementation of the Right to Education Act in 2009, this has come with a very real fall in standards. The Annual Status of Education Reports, prepared by the NGO Pratham, do a commendable job of mapping the status of education across the country. What they reveal about rural government schools over the last few years makes for depressing reading. From 2010 to 2014, the proportion of class 5 students in these schools who could perform simple subtraction fell from 64 percent to 51 percent, while the percentage of class 8 students who could divide a three-digit number by a single digit fell from 67 to 44. Education of this quality is no preparation for even a basic manufacturing job.

Meanwhile, those who remain in agriculture are not receiving adequate support from the government. Between the 2014 and 2015 financial years, the budget for agricultural research and extension has remained at Rs3,691 crore; spending on irrigation has come down from Rs1,900 crore to Rs600 crore; and funding for rural development has dropped from Rs80,043 crore to Rs71,642 crore. The latest budget document states: “It may however be noted that despite reduction in Central assistance to State Plan in respect of most programmes, overall outlay for the programme will remain unchanged with States pooling resources from their enhanced devolution”—or, that the overall outlay for rural development has not fallen. Of course, owing to inflation, an unchanged overall allotment is, in fact, a budget cut in real terms. This administration seems to believe that simply creating urban jobs will ameliorate rural problems; it fails to see the contradictions in offering workers urban jobs without strengthening rural infrastructure and amenities.

Ironically, this neglect comes from a government whose political future may well depend on the rural economy ability to absorb a greater number of those seeking employment. A 2014 report by the research and analysis company CRISIL argues that, in the short term, the country has to depend on the agricultural economy’s ability to take on more people if unemployment is to be stemmed. In view of the slowdown of the economy post 2010, the report says, “nonagricultural employment … could, at best, grow by 38 million from 2011–12 to 2018–19.” This is

insufficient to absorb India’s growing labour force—estimated to rise by 51 million over the same period. Thus, due to the lack of adequate opportunities in industry and services sector, an additional 12 million will be forced to either depend on low productivity agriculture or remain unemployed. If some of these people do not resort to farm employment, India’s unemployment rate will be seen to rise above its current level of 2.2% (2011–12) in the years ahead.

The national crisis that lies ahead as a result of emphasising urban over rural development has already played out at state level—in Andhra Pradesh, during the second chief ministerial term of Chandrababu Naidu, between 1999 and 2004. Earlier, Naidu had commissioned the consultancy McKinsey to draw up a blueprint for the state’s development. The document, titled “Vision 2020,” laid out a vision for the future very like that of the Modi government today. It spoke of “e-governance,” of using information technology to provide better services in specially developed cities, decentralisation, and involving the private sector in health care. It envisaged a rapid expansion of infrastructure and services to fuel growth and employment, which, by 2020, was to reduce the share of the state’s population dependant on agriculture from 70 percent to 40 percent.

In practice, this approach resulted in a deterioration of rural infrastructure, as is likely to occur under the Modi government. By 2004, Naidu was voted out of power. He has learnt his lesson: in his current stint as chief minister, he speaks of making agriculture profitable through waiving farmers’ loans and appointing new extension workers. Nearly a year into Naidu’s current term, the proportion of Andhra Pradesh’s population dependent on agriculture still hovers at around 70 percent, even as farming’s share of the state’s gross domestic product has fallen from what it was during his previous stint in power.

The larger problem here is that electoral corrections in response to flawed policies often arrive too late. By investing in rural infrastructure and amenities in a sustained manner rather than merely occasionally, in order to gain votes ahead of elections, the government can gradually place skilled and educated migrants in jobs that provide a basic standard of living in urban areas. This administration is taking the opposite tack—while paying lip service to equality, it is ensuring that cheap and easily exploitable labour remains available to aid urban growth.

An earlier version of this article misstated the percentage figures for the planned reduction of Andhra Pradesh's agriculture-dependent population presented in the Vision 2020 document. The Caravan regrets the error.