No free lunches in India

It seems that the people who matter in this country have a simple enough formula for life and liberty. We should open up the market, create opportunity for the organised industry, mix and stir, and then the work will be done. They will tell you that this will mean taking risks. It is another matter that they will not define who and what is at risk. If you object, you will be told that you are archaic, or worse still a communist, who wants to perpetuate poverty in the country. A leading editor has called ‘us’ kind of people ‘povertarians’ because we resist the only one way of economic governance — embrace global markets, be competitive, build infrastructure, wealth will follow and this will give money for social welfare schemes.

The fact is that we can only pray that their kind of people know what they are doing. We hope they know how they will succeed when just about all other countries that have walked this road have not. We desperately hope they understand the consequences of what it means if they take apart this country but just can’t put it back again.

I say this in a fortnight when the government is faced with a price rise of food commodities — from pulses to sugar and vegetables — and decides to open the doors to import by private players and says it will not even charge customs duty. It does this because food imports are part of the big plan. We will export high-value services and goods, even through horticulture, floriculture and import what is cheap on the world market. This is efficient. Farmers will adjust.

But other countries have found that this participation in trade comes at a huge cost. The problem with global trade, which our mandarins would like to embrace, is that it is neither fair nor inclusive. This when our stakes are high. We have huge numbers of people — over 660 million — engaged in agriculture. If this economy is destroyed, rural poverty increases and the pressure on urban areas will go up manifold. It is no surprise that 80 per cent of Latin America lives in cities, or sprawling urban slums. It is also no surprise that Africa is seeing staggering rates of migration from rural to urban areas, with implications on services in cities and growing violence and lawlessness.

But I hesitate to say this. I hesitate, because it is easy to dismiss these facts on two counts: one that we are not Latin America or Africa, where growth has exacerbated poverty and inequity. In other words, a highly racist argument cloaked in the shroud of arrogance that we can do it better. Two, the current situation is a mess and is definitely not helping our poor. In the case of agriculture, they will say correctly, that our food procurement agencies are not necessarily farmer-friendly and the internal trading mechanism is strangled by officialdom and petty interests, which is not efficient or fair. It needs reform. The question they don’t ask is what kind of reform will work.

Kenya, for instance, has emerged as a dynamic exporter of fresh vegetables to the European Union. It is a rare case of an African nation moving into value-added markets. This is clearly desirable. But the problem is that this trade has completely marginalised the smaller landowners. In 1997, the bulk of the country’s high-value horticulture exports were supplied by small farmers. Now less than 18 per cent of the trade is in their hands. Instead farms are leased or owned by major exporting companies, which can supposedly guarantee quality for the supermarkets of the rich world. In Brazil, the inability of dairy-owners to meet the rising technical standards of rich supermarkets took away the livelihoods of over 600,000 small farmers, says the undp Human Development Report. Remember, also the consolidation and concentration of power in the global sourcing and supply systems. Wal-Mart, which the Indian government is wooing, accounts for one-third of us food industry sales. In the uk five top supermarkets account for 70 per cent of grocery sales. These are not companies but countries.

So what? These companies will make our farmers more efficient players in the international trade say the anti-contrarians. It will also improve standards of food supply and reduce costs for consumers. But this is begging the question. Who will make whom more efficient? The fact is that global agriculture, against which our government would like to pit our farmers, is certainly not efficient. The fact is that global agriculture survives today because of the huge and senseless subsidies that are poured in by rich governments of the rich world to keep their people happy. The European Union doles out us $51 billion each year to its farmers, to keep them in the market. Sugar farmers — whose produce our government will import this summer — are paid four times the world market price. Then the surplus is dumped on world market, using an additional us $1 billion in export subsidy, which depresses prices.

Take another instance. Between 2002-2003, rice grown in the us at the cost of us $415 per tonne, was exported at us $275 per tonne. How can the efficient farmers of the developing world ever compete?

On the other hand, farmers in our world get peanuts in the name of subsidy. Let us be clear on this count. Fertiliser subsidy is given to companies and not farmers. It adds up to nothing, when you look at the quantum that is needed and the costs of inputs. The bogey of free power is a bogey. Farmers will tell you they pay for diesel to pump water. They will also tell you that they have invested to build their own infrastructure for agriculture. Over 60 per cent of cultivated area is irrigated with private groundwater systems. There is no subsidy. No lunch. Free or otherwise.

We need reform. We need to take risks. But not with others’ money. Or others’ lives.

— Sunita Narain