Will India Miss The Bus To Success?

miss the bus

Let’s not kid ourselves. India has squandered away its time like a carefree youngster in his 20s. While other Asian nations like China, Japan and South Korea were busy ramping up its manufacturing sector, we were too busy in wars, emergencies and communalism. Our policies were ad hoc in nature. Governments came and went, merrily mismanaging the public funds and trying hard to stay in power while fulfilling coalition pressures. As India was on the threshold of bankruptcy, Narsimha Rao and Manmohan Singh appeared like the knights in shining armor to rescue the nation. More than twenty years later, the Modi government is realizing that what was done in the Rao-Singh era was too little, too late. Manufacturing never really took off as the other Asian giants had already capitalized on that front. Finally some sense prevailed as Vajpayee-era reforms ushered in the growth of the service sector.

BPOs sprang up in Indian metros and suddenly India became the world’s call center. Today, the service sector is the largest contributor to India’s GDP despite employing only a quarter of our workforce. Agriculture on the other hand employs more than half of India’s work-age population, all the while contributing a meagre 14-15% to the GDP. This gloomy statistic shows us that India’s agricultural workforce is highly inefficient and our demographic dividend has indeed become a liability. All this while, the manufacturing sector has languished due to India’s stubborn bureaucracy. It is this red-tapism that Modi wishes to target as he promotes his Make in India campaign to give a much needed boost to India’s manufacturing sector. However, as manufacturing becomes much more capital-intensive, tough questions arise regarding employment opportunities in this sector.

The focus is now on India’s agriculture sector. The insufferable correlation between the employment generation in the primary sector and its contribution to GDP clearly suggests that India has many more farmers than it needs. This here is a clear case of disguised unemployment wherein additional labour joins the primary sector due to its inability to find suitable employment in the other two sectors. As many studies cite, several of India’s farmers don’t own the land they till. They work as labourers on farms and would gladly take up employment elsewhere if given the opportunity to do so. A major portion of land owners have such small land holdings that they can barely make a living out of what they produce. These farmers usually take huge loans via the unorganized banking sector at preposterous interest rates. Add to this the uncertain weather phenomena leading to crop destruction and you get suicidal farmers. The primary sector now faces a demand and supply problem. There are too many farmers and they fail to get a remunerative price for their produce.

So the government is forced to raise minimum support prices (MSPs) every time there’s a crop surplus. When there’s a crop failure, the government must compensate these farmers by introducing various subsidies to prevent farmer suicides. As weather isn’t something we have been able to control, such situations occur every other year. Basically, India’s government has been throwing money at the farm sector since time immemorial and nothing positive has come out of it ever since the green revolution. Like Albert Einstein said,

“The definition of insanity is doing the same thing over and over again, but expecting different results”

Maybe, the time has come to try a different approach. This is why the Land Acquisition Bill holds the key to India’s success or failure (assuming India hasn’t already missed the bus). With the majority that Modi has received, if he isn’t able to pass this bill, democracy in India has failed. Now the land bill is significant for two reasons. Firstly, it gives much needed impetus to industry and will certainly be the first step in transferring the excess workforce in agriculture to industries. Therefore, while being pro-industry, this bill is NOT anti-farmer. The reason the government is being pressurized to withdraw this bill is that India has too many stakeholders who rarely know the salient points of any step the government takes. Profits have dried up in the farming sector and the Indian farmer cannot sustain a family based on subsidies and MSPs during crop failures and bumper crops, respectively. Therefore, resources must be transferred ASAP from the primary to the secondary sector of the economy. Also to emphasize, the current wave of farmer suicides has nothing to do with the land acquisition bill but has everything to do with crop failure. The Land Acquisition Bill will allow surplus workforce to exit the industry and also get remunerative price for their land like farmers in Gujarat (areas near Sanand) got under Modi. The opposition must, for once think about the nation’s welfare rather than play petty politics by scoring brownie points with Indian farmers. (However, the situation Congress finds itself in is pitiable and of course projecting Rahul Gandhi as the savior of Indian farmers is more important than actually saving the Indian farmer).

The second reason why the passage of the land bill is necessary is much more symbolic in nature in the greater scheme of things. As the government reaches its one year anniversary, it has precious little to show in its report card. While I personally believe that the government needs greater time to make a significant impact, India is not in any position to wait. Industry leaders are already shifting nervously in their seats as much needed policy improvements are stalled. The populace is growing impatient each day, largely due to the tall and exaggerated claims by Modi himself. Now in this scenario, if the government has to withdraw the land bill it will cause widespread disillusionment among industry leaders. The development agenda and Make in India will take a major hit, probably never to recover. After a long time, the people of India were given a glimmer of hope and they delivered by giving Modi the majority he deserved but if Modi can’t find something useful to do with his majority thanks to the Sangh’s minority bashing and an unpatriotic opposition, democracy will have failed India. Which is why, the land bill is the key not only to India’s economy but also the idea of the nation.