Monday, 14 January, 2008

Boosting the Rural Economy. Incomplete, Dump of my thoughts

I happened to read the June 11th issues of the India Today. The cover story Grain Drain provides a gloomy picture of the nation’s food reserves and production capacity. Some of the issues ailing the agro sector are
i. Land holding of a typical farmer has decreased significantly over the years. This means a farmer today has a smaller piece of land, and finds it difficult to produce enough quantity (of crop) to get back his costs.
ii. In the past 6-7 years, all the regions of the country have witnessed atleast two droughts/floods, if not more. This means that for those two years, the farmer has not been able to repay his loans, and hence has a bleak possibility of getting further loan. This is the driving factor for farmer suicides.
iii. A critical problem is that around 70% of the population is dependant on agriculture. It is very difficult to deliver any benefits on such a large scale.
Given these problems, a primary school student will provide a solution like – increase land holdings of farmer, help him get enough money and reduce the size of farming community. What we need is a solution as simple as that!!
The government should allow, and mandate, large private companies to invest in agriculture. Obscure! Is it? Let me tell you the benefits for the parties involved.

It’s not a new idea for private companies to invest in agriculture. Tata has been doing it for its tea business, much like other tea companies.
The telecom revolution started initially in the metros and soon spread over to the large cities. Even as the telcos started growing in the cities, they had spread to the towns. Now that the telephone connections have stagnated in the urban areas, the growth is being driven by the demand in the small towns and large villages. You will surely witness the same pattern in retail. Now, have a look at the companies operating in the telecom sector – Reliance, Bharti (Airtel), Tatas, Birlas (Idea). You will see that these business houses are going to drive retail sector also. They need to build efficient procurement and delivery systems. Still not clear?
One of the biggest problems today’s farmers have is the scale of operation. The farmers more or less continue to operate on the same land for attractive salaries (yes, you read it right!) by Reliance (Reliance, as a synonym for innovative business practices). The Reliance, in turn, gets the right to dictate the farmer what crop to grow, collaborate with neighbouring ‘salaried’ farmer, share resources like well, bore-well, motors, tractors etc.
Long ago, my father was working for a nationalised bank and pursuing his law course as well. My grandfather, a businessman, took a promise from my father that he will not practice law, only because a bank job would guarantee a ‘known’ monthly income, irrespective of competence and other factors such as luck, business environment etc. Similarly, the farmer would be happy to take a salary, and get insured against drought, flood or any other natural calamity and be absolved of loan, buying seeds and fertilisers and so on.

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