Fighting yesterday’s war

The land market crisis is actually a labour market crisis. The problem is our inability to create enough non-farm jobs.

Written by Manish Sabharwal | Published:May 1, 2015 12:23 am
labour market crisis, non-farm jobs, famers, labour laws, farm labourers, labourers employment, poverty, agricultural employment, indian Express column, ie column, indian express, Manish Sabharwal column The land market crisis is actually a labour market crisis. The problem is our inability to create enough non-farm jobs.

In 1924, Mahatma Gandhi wrote a letter to Jawaharlal Nehru urging him “to take up remunerative work because you must live by the sweat of your brow even though you must live under your father’s roof”. Indian farmers and children living under their roofs today know that farming is no longer remunerative work, and a modern society values farm sweat lower than non-farm sweat. If Gandhiji and Nehru were around, I’m sure they would agree that our pathetic agricultural productivity — 200 million Indians produced less food than eight million Americans — is the father of our poverty. Since both also said that poverty is the worst form of violence, I’m also sure they would agree that India’s poverty is a child of our pathetic non-farm job creation.

As Alcoholics Anonymous insightfully reminds us, the first stage in solving a problem is facing the facts. India doesn’t face land shortage. Every Indian household could get half an acre and still fit into Rajasthan plus Maharashtra, and only 8 per cent of all land is used for urban and commercial purposes (only 8 per cent of land in Brazil and 18 per cent in the US is cultivated land).

India doesn’t face a food crisis. In fact, becoming the world’s second-largest food producer has been the best possible response to the 1968 call by racist Stanford professor Paul Ehrlich to let Indians die of starvation.

India doesn’t face a suicide crisis. We have 17 per cent of the world’s population and 17 per cent of its suicides. Our suicide rate per one lakh people fell by 10 per cent over the last decade. While every preventable death is a horrible tragedy, the highest estimate of farmers’ suicides is 25,000 of the 2.5 lakh suicides last year. I wish this number for farmers was zero. But I remind myself that the farmer suicide number is half the number of women who died during childbirth in India last year.

Why is there a substantially different political outrage for farmer suicides and women childbirth deaths? The usual explanation of economist Mancur Olson’s brilliant work on vested interests, which detailed how an organised vocal minority can hijack the agenda in a democracy, is unsatisfactory because farmers are neither organised nor a minority. However, our politicians have two vested interests — one that involves the personal finances of some and the other that involves the political imagination of most.

The first vested interest is obvious. Land is the primary source of wealth for many politicians and the agricultural land conversion, title and registration industry has the highest margins of any industry in the country. These margins are a child of regulatory cholesterol, which ensures farmers rarely get the final price paid by the end user of the land. The second vested interest lies in well-intentioned political imagination that is fighting yesterday’s labour market war when we didn’t know how to create non-farm jobs. Since any job is better than no job, farm employment becomes desirable public policy. Besides the double standard — working on the farm is considered desirable by most politicians for other people’s children and not their own — this notion also confuses supporting farmers with supporting farming. The best way to help farmers is to have less of them. And this needs massive non-farm job creation.

Unfortunately, India is a hostile habitat for non-farm job creation because of urbanisation, regulatory cholesterol, infrastructure and labour laws. Urbanisation is a problem because job creation tends to cluster. Two lakh of our six lakh villages have less than 200 people and we need our 50 cities with more than a million people to catch up with China’s 350 such cities. Regulatory cholesterol encourages informality; our 63 million enterprises translate to only one million companies, of which only 10,000 have a paid-up capital of more than Rs 10 crore. Infrastructure murders manufacturing employment that, at 11per cent of the labour force, is the same as post-industrial US. And labour laws that are essentially marriage without divorce breed informality, small firms, capital substitution of labour and corruption. The cumulative impact of small and informal enterprises is substantial; the productivity difference between Indian manufacturing firms in the 90th and 10th percentiles by size is 22 times.

The issues of land for industry and tragic farmer suicides have some tactical responses, like guaranteeing land titles by linking khaathas to land registration (the sub-registrar in Agra has registered the sale of the Taj Mahal more than five times since Independence) to reduce the need for acquisition, recognising suicide as a public health problem with policy solutions, planning cities, etc. But emulating China’s genius of creating 450 million non-farm jobs in three decades needs India to decentralise power to states, build smart cities, implement GST, activate Make in India, Skill India, improve our ease-of-doing-business ranking, persist with labour law changes and build infrastructure. It is clear that India’s non-farm job emergency is not a wicked problem like the cancer of climate change, but a plumbing problem. So there has to be more to the current battle in Delhi than a disagreement on sequencing. At heart, it is the healthy battle of ideas about the relative roles of the state and markets in reducing poverty. But it is unhelpful to frame job creators as villains (suit-boot waale), because being pro-market is not the same as being pro-business, and being pro-farming is not the same as being pro-farmer.

In the 1920s, Russian economist Aleksandr Chayanov made an influential case for small family farm viability based on self-exploitation.
You don’t have to pay market wages to yourself or your family. Most Indian farmers are tired of self-exploitation and would agree with Nehru’s vision that agriculture is only “a temporary expedient of transition rather than a solution”. Economics teaches us that if something cannot go on forever, it will stop. India’s farms employing 50 per cent of India’s workforce must stop. Viewing the current land bill debate through Nehru’s eyes rather than Chayanov’s is a great place to start.
The writer is chairman, Teamlease Services

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