Economic growth in India is 'exclusively' for?

Indian economy has been growing at an average of 8% in the past decade. The agricultural sector has clocked an average increase in output from around 2% to 3% in the past decade and agricultural sector contributes about 18% to India's GDP. It is constantly being said that the agricultural output has to grow at 4% per annum to meet the food demand of the country. During a recent panel discussion on the topic "India's Future Agenda" in Davos World Economic Forum, Montek Singh Ahluwalia, the Deputy Chairman of India's Planning Commission, gave a rough calculation as an answer to a question asked by a gentleman from the panel-floor. The question was something like - According to the World Bank, landlessness being the best predictor of poverty in India, what are the steps taken by the government to address poverty? The Deputy Chairman was right to say that giving land to the poor is not the solution and there is not much free land available. Remember, around 70% of India's population of 1.1 billion depend on agriculture for their incomes. Most of them are farmers and most of them live on less than $2 a day. Some farmers might not own land and might actually do farming in the land that is leased. But in any case, the leasing of land should not be the cost-issue that gives them low net-incomes. In fact, most of the land that is leased should be cheaper compared to the output produced by theoretical terms. Okay before I proceed, let me tell you the calculation that the Deputy Chairman gave : With the assumption that the agricultural output is increased to grow at 4% per annum and with the population projected to grow at 1.5% a year while the economy grows at an average of 8%, then the growth per capita will be 6.5%. So now it is essential that people move out of agricultural sector into other sectors (industries) at the rate of 2.5% annually so that the income levels for the people producing 4% agricultural output remains high enough for a good standard of living. Well, when looked from a very generic perspective, I agree with what he is trying to say even though I might have to disagree with the "4%" number because with the Indian middle class growing at a rapid rate and as more number of people move out of poverty due to increasing globalization, more number of people will be willing to consume healthier food in the coming years and in order to meet this demand, agricultural output might have to grow at more than 4% starting from within a decade.

But there are other various points that we have to confront here. First of all, why is the agricultural output so low even when we have so much population working in that sector? And more number of people in agriculture means that more land is cultivated. With so much cultivation, why is the gross national agricultural output growing at such a weak pace? In fact, due to poor monsoon rains, agricultural output is expected to decrease in fiscal 2009-2010. And increasing industrialization is taking away many fertile cultivable lands. The answer to the above questions is a complete lack of investment in the agricultural sector. One poor monsoon season in 2009 and 70% of India's population suffers directly and the rest suffer in the name of food-price inflation. And the policy makers keep thinking of whether this food-inflation would slip into the broader inflation! Huh! While private investments are necessary to achieve higher growth in the agricultural sector, it is the duty of the government to make some essential initial investments in agricultural-infrastructure that will pave way for private investments. It is a national shame that India being an agrarian economy for generations, still depends heavily on monsoon rains every year for desired and needed agricultural output. There is still NO organizational structure put in place to eliminate the middle-men and increase incomes for the farmers. And there is - very low, if not none, investments in agricultural universities and research; very poor transportation-infrastructure in rural India for the farmers to transport their goods; NO cold-storage facilities available to store excess farm-goods; no proper water management techniques to store rain water and inadequate supply of electricity to rural India to carry out irrigation activities. I feel that we could have more output even at present conditions by just facilitating some kind of cold-storage for farm-goods. Almost one-third, if not more, of the farm goods get spoiled before it reaches the market and poor transportation infrastructure is another reason to be blamed here. Speaking in the same forum, Venu Srinivasan, President of CII (Confederation of Indian Industry), spoke about how the poor quality government subsidies like providing urea is actually spoiling the land and affecting the farmers in the longer term even though it might look all good in the short term. (I am not very sure about how correct Mr. Srinivasan's point is). Also, the Public Distribution System (PDS) is enormously flawed. Well, with the expected introduction of national identity card that is due in a few years, I expect the efficiency of the PDS to improve to a certain extent.

It is expected, whether desired or not, that a good chunk of the population will continuously keep moving out of agriculture due to increasing industrialization and low-incomes in agriculture. But if high grade investments are not done in agricultural sector, then we will see a decrease in agricultural output every year while the population keeps growing and this will result in a direct threat to the country's food security. While India keeps moving up the economic ladder it is important that everyone is taken along. What India needs now is not just "growth" but "inclusive growth". Everyone knows that India is a very diverse nation but we do not need a new kind of wide ranging diversity now - in the living standards of the people.