The unkindest cut

Issue 13 - Apr 2008

Salil Tripathi
There was a time when Manmohan Singh was an economist. He understood the basic rules economics imposes: that there is no such thing as a free lunch; that lenders of last resort can create a moral hazard; that even if there are unlimited wants, as there always are, the means are always limited; that societies must make choices between different wants, and in that process must give up something in order to get something else. And, that you cannot throw good money after bad.

The Rs 600 billion waiver of farmers’ debts is flawed because it views India in stasis. It fails to address the central problem of Indian farming: that there are too many people pretending to be farmers, who are in what economists can only call disguised unemployment, who try to eke out a living on ever-dwindling plots of land, which are poorly irrigated, if at all, and remain dependent on the vagaries of the monsoon.

The loan write-off is designed to keep farmers where they are: on small land-holdings, where often their only source of regular income is labour at the farm of a bigger farmer with a larger land-holding. Such waged labour is often a better guarantor of income than the farmer’s own plot. And the reason for that is not far to seek: the plot is too small to be economically viable, and it is simply not productive enough to yield crop that can provide the wealth that can allow the farmer to invest in better fertilisers, technology, or irrigation on his plot. You can empower that farmer by giving him a mobile phone and access to the latest prices from the mandi—but to sell his product at the right price, he needs labour, transport, roads, and access to the market, and the small marginal farmer has no such access. Every farmer is probably hard-working, but every farmer is not, and cannot be, an entrepreneur or speculator. And yet, Indian agriculture requires him to become one. And he ends up being an object of pity and charity.

In the name of supporting “sustainable livelihoods” on a small scale, activists, leftists, and certain NGOs glorify the small farmer, insisting that his life must not be changed, and large corporations be kept out. How inhuman that solution can get!

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