India-China: Plagued by the peasants'
plight By Jayanthi Iyengar
PUNE - India and China share many commonalities,
but the most important challenge facing the two
countries today lies in moving their 700 million to 800
million people out of the less productive - and in many
cases impoverished - agricultural sector into the
better-paying industrial and services sectors.
The Middle Kingdom managed to do this once in
the early 1980s when it opened its economy and was able
to reduce sharply the dependence of its population on
the agricultural sector, from 70% to 50%. However, the
road to progress for its farmers has not been so easy
since then and, time and again, there are reports of the
Chinese government facing, or at least fearing, the
prospect of a rebellion from its dissatisfied
agricultural class. This group, the peasants who once
led the Chinese revolution, today have largely been left
outside the phenomenal growth witnessed by those
relatively few who are dependent on industry and
services. China's rural population is now close to 900
million, according to some estimates, in a nation of 1.3
billion, with the wealth concentrated in major cities
and along the coast. The Beijing government recently
launched a major initiative to slash rural taxes and
fees, increase incentives and upgrade living standards
and productivity in the countryside.
Though
India has been nowhere near replicating the Chinese
agricultural miracle of the 1980s, it notched modest
gains in the 1960s by becoming self-sufficient in food
through its Green Revolution. Yet today, it too stands
at the same crossroads as China. Like Charles Dickens'
Oliver Twist, they insist on having more, and the Indian
government has been forced to factor their aspirations
into the growth process via the recent budget for
2004-05. This budget is broadly expected to create rural
growth centers and put purchasing power in the hands of
the rural public, which in turn is expected to spur
demand, investment and growth in industry, which has
been the laggard sector.
The question is whether
India can do it. Besides, what about China? Having
pulled the trick once, can it elevate the lives of its
agricultural classes yet again through policy
intervention? To analyze these issues, one needs to
understand the steps taken by the Indian government, the
enabling factors that made the Chinese industrial
transformation possible in the 1980s and whether it
could be replicated in some form by both countries.
Professor Scott Rozelle, a well-known China scholar and
professor of agricultural and resource economics at the
University of California at Davis told Asia Times
Online, "Except for the early 1980s, China has not grown
through agriculture per se. All increase in income,
almost, has been due to off-farm work."
India
takes steps to improve rural livelihood From the
Indian perspective, the government has very broadly
taken the following steps through its recent budget:
Higher agricultural-sector investments.
Measures to build agricultural infrastructure in the
form of waterworks and irrigation projects.
Attempts to create rural growth centers through
agri-industry such as horticulture.
Creation of rural employment and income by promising
100 days of work each year to one person in each family.
A leg-up to backward areas, districts and states
through additional budgetary support.
The phasing out of even the minor taxes on
agricultural incomes, thereby making agricultural
incomes totally tax-exempt.
If one looks at the
Chinese agricultural miracle of the early 1980s, it was
built on certain enabling factors. China was a closed
economy. When it shifted gears and embraced
liberalization, it was able abruptly to change the rules
of the game without facing opposition from its people.
"Changing the rules of game in agriculture from communes
to [a] household responsibility system and raising the
procurement prices of major crops significantly
triggered the untapped potential of Chinese agriculture,
and that resulted in sharp declines in poverty during
the 1980s," Professor Ashok Gulati, agricultural
economist and director of markets,trade and institutions
at the Washington, DC-based International Food Policy
Research Institute (IFPRI), told Asia Times Online.
This enabling factor - in essence the
non-democratic dictatorship of the central government -
does not exist in India. Given its democratic
background, changing the rules of the game is not easy
in India. Land policies are inadequate. Landholdings are
small. Agricultural marketing has not been launched.
Movement of farm produce is controlled. Food-grain
procurement prices have been revised regularly upward,
at times unrealistically, leading to a greater divide
between the rural rich and poor. The public distribution
system is in a mess and subsidies, intended for the
poorest of the poor, remain poorly targeted.
Budget 2004-05 has made a small start by
announcing a pilot project for evaluating the
appropriateness of food stamps for retargeting food
subsidizes. Yet even the reading of the measure by
Indian Finance Minister P Chidambaram in parliament was
enough to draw boos from both the governing coalition
and opposition benches, since those in power hardly want
to disturb the existing corrupt and inefficient public
distribution system, which benefits many, except for
those whose livelihood it is intended to improve.
Change, thus, is difficult for India. However,
the callousness that could go with an autocratic
state-dictated system also does not exist for India. Dr
Gulati said, "Remember the Great Leap Forward [a huge
intended leap in industrialization and agricultural
production] in which 20 [million] to 30 million Chinese
died of hunger? This large-scale starvation cannot
happen in India. So India should recognize its
strengths, but also its weaknesses, and try to learn
some good things from China."
China abolished
communes, few Indian farmers own land The next
issue is land ownership. When China moved from a
socialist to a free-market system, it was able to
transfer land ownership from the state-owned communes to
the households. Today, all farm households in China own
the land they till. Rozelle said, "Agriculture has been
an important stability-enhancing activity, since all
farm households in China have land." In India, however,
landholding is fragmented, while ownership is unclear
and uncertain, wherever land ownership exists. Besides,
the bulk of the farmers are landless. They form a
substantial part of the 25% of India's 1 billion who
live below the poverty line, broadly defined as those
who do not earn even a subsistence living. Thus, today,
while Chinese farmers may be impoverished, unemployed
and restive, and some may migrate to cities as laborers
- a potentially destabilizing population but not yet a
critical mass angered at being left out of the growth
process - their lot is still not comparable with that of
the average Indian farmer, who does not even own the
land he tills.
The next most important factor
for the Chinese agricultural resurgence of the 1980s was
the approach. Professor M S Swaminathan, the father of
the "Indian Green Revolution", chairman of the
Chennai-based M S Sawminathan Research Foundation and a
guiding light of India's pro-farmer budget this year,
told Asia Times Online, "China launched its
economic-reform process in the agricultural and rural
sector. The two-pronged strategy involved concurrent
attention to on-farm and non-farm employment. In the
non-farm sector, Rural Township Enterprises were
promoted. Unfortunately, we did not take such a holistic
view of rural employment and agricultural development.
The Integrated Rural Development Program (IRDP) made an
attempt to achieve convergence and synergy among all
ongoing programs in villages. However, the fragmentation
of our administration made this
difficult."
Savings rates and infrastructure were
also major factors contributing to the Chinese
agricultural miracle of the early 1980s. The Chinese
wrought their agricultural miracle - it took the United
States and Japan 50 years to do what the Chinese did in
converting their economies from essentially agricultural
to industrial - backed by a savings rate in the range of
37% in those days. Besides, China had also laid the
foundation for the transformation before it actually
happened. It had built rural infrastructure, which
helped the integration of the rural growth centers with
the rest of the economy, and this in turn further
spurred growth in the industrial sector. Gulati said,
"Not only were the savings rates in China higher, but
they had invested far more in rural roads, primary
education and health than India has done so far. So the
initial conditions on which markets reforms could build
for success were already there."
Rozelle told
Asia Times Online: "It [socialism] hurt China because of
lack of incentives and rigid planning, but it also had
some long-run benefits. All farmers now have land and
all land is collective. Lots of irrigation projects were
implemented by collective labor."
It is this
kind of rural infrastructure and rural growth centers
that India lacks at this critical point when it is
trying to spur industrial demand by investing in
agriculture. India's savings rate of about 24% is also
nowhere near China's of that era, yet for this day and
age, this is considered to be a reasonably high level of
savings, comparable with that of the Southeast Asian
Tigers at their peak. "A savings rate of 24% is very
high internationally," Rozelle said.
Can
China pull off another rural miracle? So lack of
savings itself may not be an issue, yet it raises the
question as to whether India would be able to pull off
another Chinese miracle. And what about China itself?
Having pulled off the trick once, could it replicate it
all over again, considering that it too has set goals
for pulling up its now lagging agricultural economy by
the bootstraps, as it were, by 2010? For China, the
answers are simple. Rozelle noted, "Most of China's
future growth will come from the off-farm sector.
Agriculture will only play a stabilizing role. For
China, the trick lies in moving its 700-odd million
people off the farm. That is a staggering challenge."
For India too, the numbers are the same, with
70% of its 1 billion still dependent on agriculture. Yet
the answers are not that simple. Gulati said, "India can
learn certain lessons from China, although I don't think
it can replicate the same story. Every country has its
own socio-politic and economic environment to operate
[in]. China could do this miracle through land and price
policies, but India is severely constrained on land
policies. Also, India has ... not invested in primary
education and health care."
Swaminathan added:
We can repeat China's example of rural development and
job-led economic growth, provided the we use the
Panchayati Raj Institutions [local governments] as
instruments for providing the horizontal dimension to
numerous vertically structured programs."
It is
not clear at this stage whether this will actually
happen, but the Indian government is looking at
disbursing budgetary support directly to the local
governments, circumventing the state and district-level
authorities.
Jayanthi Iyengar is a
senior business journalist from India who writes on a
range of subjects for several publications in Asia,
Britain and the United States. She may be contacted
atjayanthiiyengar1@hotmail.com.
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