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Does India have a problem of too many farmers?

A banking expert reflects on what's causing the Big Indian Grain Drain and how to stem it

A farmer sprays insecticide on flowers.
A farmer sprays insecticide on flowers. (PTI)

It was a late May late morning and we had driven straight into the fields to meet one of the largest farmers in that area at his farm. We were dreading a very hot start to the day but were pleasantly surprised by large, shady banyan trees with leaves and branches swaying strongly under the lovely breeze that was blowing. After all, our worries were put to rest and this was a perfect start to this rural trip.

The farmer was old with grown-up sons and extended family of brothers living with him, as is common in rural India. His two grown-up sons were standing in the crowd as we sat down to have a chat. One of the topics that came up was shortage of farm hands and the fact that his kids have to help him during busy season. But did he not just tell me that one of his sons was an accountant and the other was a factory worker?

Yes indeed. Both his sons had no interest to continue the farming legacy of the family and had qualified and moved out. It is only recently that due to bad employment conditions, they had returned to the village reluctantly and hence were able to give a helping hand….

Thoughts for the future

There are two main topics to focus on when we speak about the future of the farm. The first is about whether the farm economy will survive in the shape and form it is today given the demographic changes, i.e. will future generations even want to be engaged in farming, and if not, what happens? As demographics change and the younger generation has to take over the farms, it is not a given that they will. In fact, all signs point to the opposite, either because they are educated and have higher ambitions or because their holdings have dwindled to a size where they do not need to be fully occupied in the farm and earnings power is very low. Will the vacuum be filled by corporate entities or a reverse drain of urban folk coming to rural India? The second part, which is sort of connected, given fewer numbers of farm hands, is use of technology in farming; not just mechanisation but information and infra sharing as well. How future technology trends are or can be adopted in the farms, and more importantly will they? There are several areas where new technology can be deployed but may need government support and push but also the right people on the farms to want to do it. We had the chance to dwell into both these issues and their sub-parts so it is worth spending some time on this topic.

Too Many Farmers?

The fact that the younger generation wants to leave farming, or the villages may not be such a bad thing in itself. I have often wondered and now there is an increasing school of thought among private economists and policy think-tanks too that indeed India may have too many farmers. Whatever schemes the government may launch to support their income, however many farm loan waivers they may give and whatever support prices they may announce, the fact that the denominator is too large is not going to change; and my guess is it will eventually not work. India has some one hundred and fifty million farmers who directly own land and use it for farming. This number has to reduce. On the flip side, the big shift from villages to cities that China experienced is being followed by a quick reversal and is not a path India needs to follow, but before jumping on to this aspect, it is worth understanding the reason behind the grain drain, as I call it.

A Wall Street View Of Rural India, Olympia Publishers, 175 pages, Rs500
A Wall Street View Of Rural India, Olympia Publishers, 175 pages, Rs500

The Big Indian Grain Drain

The grain drain has two causes. One is the fact that agriculture has become less profitable and involves more hardship which the younger generation is not willing to do. So even the second generation which is in their mid to late ’30s is looking for jobs outside the farm.

The second reason is the even younger, third generation are leaving because they want to pursue a totally different career path of being a doctor, army, teacher, join the service economy or start a small business and this trend is only going to grow.

We have to look at both of these causes separately as their solutions are also different.

Firstly, dropping profitability: Over the years, farmland parcels have been dropping in size. This is because as younger generations come into the family and they go their separate ways, the family land keeps getting divided and sub-divided between the sons, to a level that even a family owning twenty acres four or five decades ago, would now have seven or eight grandchildren owning just three or four acres each. As per basic economies of scale, such small parcels are not very viable as the usage of modern techniques is less possible and hence the cost to yield dynamics renders them very suboptimal. Hence, given already shrinking land parcels which has rendered farming unviable, even the larger farmers are facing a “grain drain", where the younger generation is not interested in taking up farming. They would rather join a factory, government job, run their fleet of taxis or even join the army if not becoming a teacher or a doctor.

So, the first step is to make the core activity of farming lucrative as a business on a stand-alone basis, in such a way that at least the second or third generation of large farming families are not leaving the activity. For example, in countries like France or the Netherlands, farming activity is still seen as a very lucrative “business" and not an activity of subsistence. To make the business inherently profitable and attractive, the trade has to be free of regulations. The farmer should be free to produce what he wants and to sell it to whom he wants and at whatever best price the market can clear. We have dealt with this topic in section three on the supply chain and other bottlenecks in the value chain, so I will not dwell further into it.

More hardships: Moreover, given the low levels of mechanisation or irrigation, the dependence on the weather and on policy (support prices and mandi restrictions) the profession is seen as one with hardships; toiling in the farms with lot of physical labour involved and no guarantee of a good produce or price. It is soon going to become crucial for the government to put enabling systems in place for land aggregators or contract farming even if it is not corporates but cooperatives.

Secondly, the lack of interest in pursuing farming is so clear and widespread that it is literally a time bomb ticking and I don’t say that to be alarmist. I don’t think enough thought has gone into this and what it means. It is only a matter of another ten to fifteen years and this current younger generation (which is in primary school now) in their early teens gets to employment age. It will be apparent that they have no intention of joining the farm economy. By then the current second generation will be in their 60s and already out of the farms.

So, the fact that the system just has ten to fifteen years to figure out a solution is quite scary actually. Who will man the farms?

Edited and excerpted from A Wall Street View Of Rural India: A Banker's Diary Of A Decade Of Road Trips with permission from Olympia Publishers.

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