Gujarat Agriculture

Make the market and prices work!!

Munish Alagh-Associate Professor ICSSR Research Project on Social Enterprise of
Chileas in Gujarat.
Gujarat Agriculture is the flavour of the day, if one was to read the newspapers
recently with Gulati, Alagh et.all giving different views. Identifying strengths and
weaknesses, with increased speed of economic policy reforms in the post 199192 period, Gujarat improved in its growth performance remarkably. In fact as
Ravindra Dholakia in his articles often states, If growth acceleration in the post
1991-92 period is attributed to economic policy reforms at the national level, it is
obvious that Gujarat has benefited from such reforms much more than other
states. However as any Masters student of Modern Growth Theory will tell you,
innovation and ideas are more important than just investment or technology in
the nuanced paradigm of development thinking nowadays.
Emphasis on development of commercial crops in the state had not resulted in
higher incomes in the agricultural sector. The share of the primary sector in state
GDP had fallen to 19% by 1999-2000 and this low proportion continued
thereafter. This is a result of a decline in the absolute level of real agricultural
output in the years following 1999-2000 and a simultaneous increase in output in
the secondary and tertiary sectors. Prices have moved in favor of the agricultural
sector. However, per capita income in the primary sector has always been the
lowest of all three sectors. The agricultural sector has served to fuel economic
growth in other sectors, but that economic growth has not fed into the sector
itself.
Ravindra Dholakia, Ashok Gulati, Samar Datta and Tushaar Shah among others
have praised Gujarat agriculture for efficiency in public investment, supporting
irrigation etc. Niti Mehta, Anita Dixit, Amita Shah et al have raised distributive
concerns. The price factor specifically, rising agricultural price ratio is not given
sufficient emphasis but instead is simply used as a limitation in the context of
inequality when linked with declining per worker income level. But, there is more
to be learnt from Price Responsiveness as I have brought out in my work.
Sebastian Morris in a recent critique of my book (Journal of Quantitative
Economics, January and July, 2013) talks about an agricultural development
model which is relevant in this context, he mentions that if in a particular area
(like Gujarat for instance) the agricultural economy is dominated by peasant
farms who maximise value added minus purchased inputs, and there is little or
no disguised unemployment and the market wages are too high to support
agriculture at the national level prices (so that the farmer needs a sufficient
working agriculture market and a price responsive agriculture to have incentive
to till the land on his own and invest in a lot of agricultural machinery.) Now in
such an area in the presence of capitalist farms, and also in the context of an
open economy imports can affect output. The Indian Policy Makers stock
response to such a situation is for supply side interventions, including Krushi
mahotsavs et al to help shore up the farmer, which purports to increase his

efficiency but he needs substantive price support. The stock in trade issues
raised by economists working on Gujarat- efficiency in public investment, seeds
and fertilisers and irrigation, or even distributive concerns are largely supply side
issues and only go only so far. You need an efficient Government working within
the context of and supporting a well functioning market.
A lot of publicity is given and academic writing is there for instance about the
impact of Sardar Sarovar in Gujarat. Large farmers having electric tubewells in
Kheda and Baroda falling in catchment areas have become more prosperous and
their situation has also improved due to excess flood waters and catchment area
of Mahi Canal in these two districts, as far as the rest is concerned, for instance
Saurashtra and Rocky areas of Panchmahals, Narmada impact is not yet felt so
we can say actual impact of Narmada project right now is limited to a few areas.
The counterfactual to an approach focussing mainly on public investment is
there in the field: a Patel Wheat farmer in Kheda District in Gujarat; a farmer
who has a large number of his family living in the United States, operates his
large plot with three huge mechanised tractors and migrant labour IF it is
available at an affordable rate which it increasingly is not. He is not going to
develop with doles. He needs a functioning agricultural market, a Government
supported marketing machinery, created and working say on PPP or
Cooperative/Producer Company models which buys up his large production at
remunerative prices. Until his stock is sold off at a remunerative rate, he does
not get much benefit from farming through the year or even by remaining in
India in contrast to the rest of his family. Meanwhile unless the Government
supported Marketing and Storing facilities are performing efficiently and the
stocks are being purchased sold and then being utilised efficiently for domestic
consumption as well as exports, he will not get a good rate the next year. No
doubt a good monsoon does affect price support but a marketing mechanism, a
stocking mechanism and a storing mechanism that supports the farmer is the
need of the hour. For this the requirement is to keep the farmer at the forefront
of Farming Policies followed by the Government. Capitalist farms and
unsystematic imports in a completely non nuanced Liberal Capitalist model does
not serve the needs of either the Gujarati farmer or the Indian farmer. The farmer
of 2014 is price responsive, but if you treat him using borrowed Trickle Down
models without understanding the nuances of the Indian market you will harm
him much more than the UPA has harmed him.