Indian policymakers should see agriculture as a source of growth, not votes.....
INDIA’S industry is going from strength to strength. Manufacturing grew by 14.3% in the fourth quarter of 2009, compared with the same period in 2008. Politicians celebrate the achievements of “India Inc”, applauding its acquisitions abroad and welcoming the foreign investment it attracts.
They do not show anything like the same confidence in
“Bharat Inc”, which is how
India’s rural economy is sometimes described. Bharat, which means India in Hindi, is a different country. The rural heartland is courted for votes, smothered with regulations, and shielded from the global economy that corporate India is busy conquering. Yet the
government cannot achieve the “inclusive” growth it aspires to without robust progress in agriculture, which still employs about half of India’s workforce.
Agricultural growth cuts poverty twice as fast as other kinds, because the poor are mostly rural and they spend more than half of their household budgets on food.
Indian agriculture can comfortably feed the country, but that remains the sum of its achievement. The rapid increases in productivity achieved during the green revolution have levelled off, with soils responding only grudgingly to the heavy use of fertilisers. And farmers remain at the mercy of the monsoons. Thanks to the worst rains since 1972, agriculture shrank by 2.8% in the year to the fourth quarter. This year, for the first time in the country’s history, India’s factories may contribute more to GDP than its farms, forests and fisheries.
Indian agriculture has performed so
poorly largely because governments have treated it as a source of votes rather than as an engine of growth. The contrast with
China is telling. China’s epochal reforms began on the farms. The growing efficiency of agriculture liberated labour and capital, spawning non-agricultural firms which eventually challenged state-owned enterprises. India freed industry first, and has barely reformed agriculture at all. Its policymakers remain stuck in the mindset of the 1960s, when India relied on food aid from America. They are more anxious to avoid such humiliation than to exploit fresh opportunities: they regard a state warehouse bursting with grain as a sign of success, and imports of wheat as a mark of defeat. Politicians’ outbursts against hoarders and speculators have stymied the
development of storage facilities and commodity markets. And their concern to protect farmers from exploitative merchants has slowed the development of contract farming.
India’s government still fixes prices and subsidises inputs, when public money.........
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For every ailment under the sun, 
THIRTY years ago the bosses of America’s car industry were shocked to learn that Japan had overtaken America to become the world’s leading car producer. They were even more shocked when they visited Japan to find out what was going on. They found that the secret of Japan’s success did not lie in cheap labour or government subsidies (their preferred explanations) but in what was rapidly dubbed “lean manufacturing”. While Detroit slept, Japan had transformed itself from a low-wage economy into a hotbed of business innovation. Soon every factory around the world was lean—or a ruin.
