Microfinance initiatives in India are being seen as the next big thing in terms of inclusive growth. In terms of inclusive growth, any microfinance organization aims to provide financial services to rural poor (part of the informal economy) in a way that they can afford it and pay for it. Theoretically, the rural poor are being made to participate in the economy and partake of it.
The biggest challenge to microfinance initiatives, like any other enterprise, is to get return on investment. Typically such an initiative would function in many ways similar to a bank. However, the biggest challenge comes from pushing the poor to have enough savings and assets to repay their loans. The cost of financial transactions incurred can be recovered if the net savings go up. In the event that the net savings are low, any asset that the poor have is placed as collateral so that they can repay these loans. As is the case in India, rural poor save by funding their own enterprises or selling their produce to retailers/middlemen. Typically such savings go on to repay their loans over a long period of time. Yet, it seems to me that the business model is such that microfinance initiatives would stand to make a lot more profit if land/property rights were granted across states in India.
Around 28% of India's population lives below a common denomination called the poverty line. Around 60% of India engages in agriculture which only contributes 28% to the GDP. Land use is inefficient and often land ownership is ambiguous because of title disputes and a feudal history.
Amidst all this, one wonders that if the rural poor got land ownership rights and title deeds, such land could well be used for other purposes or even as secure collateral. This is certainly no pipe dream, considering initiatives of this kind have succeeded in a couple of states across India, particularly Gujarat. In this enlightening article, Swaminathan Iyer(of Swaminomics fame) writes :
"Yet, in one state, SEZs are coming up rapidly, with no agitations, no disputes - and hence no newspaper headlines! This is Gujarat. It already has five functioning SEZs, with 12 more ready to start in 2008.
The Gulf of Kutch is the only coastal area in India with low rainfall. Farming is tough, so farmers are willing to sell their land. The state government itself owns vast wastelands, mud flats and marshes along the coast. It has been selling these to developers (like Gautam Adani at Mundra), without displacing farmers.
Even in central Gujarat, where land quality is high, farmers have proved willing to sell. The pharmaceutical SEZ of Zydus Cadila has acquired 110 hectares, paying around Rs 10 lakh/acre. In other states, industrialists say they cannot get contiguous land through voluntary purchases: a few farmers will refuse to sell. The experience in Gujarat is that even farmers who say no initially will say yes if offered a sufficiently high price. Developers should pay this very high price to a few farmers and get on with the job. Why look to the state government for acquisition, which takes two years or more? Time saved is money saved."
As Iyer mentions, Gujarat's experience cannot be faithfully replicated in other states - say Bengal, Orissa. However, ownership of land allows a rural farmer bargaining power. The land could be sold, mortgaged or used in any way fit to push up one's credit. Land that remains in agriculture then needs to be efficiently used to push up yield - India's yield being only 30% of the average highest world yield.
As India's GDP grows, people inevitably move from the primary sectors (Agriculture, mining or foresting typically) to secondary (manufacturing) and tertiary (services) sectors. Accordingly the contribution of the primary sector to the GDP goes lower as a country's economy grows. As economics plays itself out, land ownership rights will be quintessential to allow the rural poor to move into other sectors and partake of a bigger piece of the pie.
I'll hopefully follow up with the kind of initiatives that could be taken to resolve land ownership disputes in the Indian context.
13 comments:
I guess the crux of the problem lies in "livelihood". since farmers know only farming and they dont have any other skills, hence they are not willing to give up their land, and their means to earn their livelihood. Secondly, there is a feeling amongst the farmers that they are selling land at x price and the developers are going to make crores out of that.
The solution might lie in
1) giving a small stake in the SEZ to the farmers
2) imparting certain skills to the farmers, so that they can take up alternative professions
3) we should not setup SEZs on fertile land, come what may. Because India can not afford to depend on imports to feed its population
There has been an instance in Pune, where a group of farmers have come together and set up a SEZ.
I think setting up SEZ with ownership lying with farmers( not 100%) is a better way of enabling them. I think its important to make them a part of routine earning rather than paying out a lump sum to a semi educated person, who might be consuming it till it ends and he returns back to poverty. It should almost like AMUL structure with a little bit of variation. Its very very important that people in the bottom of pyramid rise above and sustain at that level. Pune is a classic example of many such industrious unions. They have even started co operative farms which they open up for rural tourism. The influx and visit of people has enabled them in many ways. I think the most important factor about rural mentality is their comfort factor with life and their lack of exposure. Its important to break the ice and make them more and more aware of progress and ways of earning better livelihood. They pick well and work better than lots.
The idea that these schemes work would be contingent on farmers gaining ownership and possession of their lands in the form of title deeds. Much of this is ambiguous in many states across India.
true.... land reforms need to be undertaken.. i am not aware of the laws that govern the ownership... but i am sure, they will be complex ... and since Land is a state subject, hence the laws are bound to vary from state to state...
and I would like to add one more point to what garima said... "farmers need investment advise and counselling, coz they get a huge amount of money and they have no idea where to invest that..." unless we ensure and assure the future of the farmers, land acquisitions will be mired in controversies and police firings...
In short, if we take away the land even after paying the fortunes, we are promoting capitalism. :) We are setting roots for distrust and deep rooted poverty. The farmers have a lot to give away and growth is taking away a lot from them. However, to sustain and enable, we should not take away, we should keep their holdings with them, generate more value from the holding and share the profit to fulfil selfish interests of all. Unfortunately, its more of exploitation. It will only add to unrest and economic gap in future.
In short, if we take away the land even after paying the fortunes, we are promoting capitalism
Eh? I don't understand. Capitalism is not so much of an evil thing as we are conditioned to believe in India. In fact, India suffered eonomically in the first 30 yrs post-independence purely because of Fabian socialist policies AND a neglect of innovation in the agri-techonlogical sector- stuff we learnt lessons from and hence opened our economy.
We are setting roots for distrust and deep rooted poverty. The farmers have a lot to give away and growth is taking away a lot from them
I'd say a lot of farmers would willingly move to other sectors, if given the opportunity to sell their lands(for which ownership is necessary). In fact, the same area of land gets distributed between sons in future generations and this is a major cause for yield reduction in the agri sector.
Again, agriculture is important and fertile lands should be reserved for agricultural growth. But demand-supply economics ensures that a farmer who's land yields enough returns on agricultural produce will not sell his land, while another will find a better business opportunity in lieu of selling this land. In effect, free will and self-interest - both of which define market theories should be allowed to take precedence.
It will only add to unrest and economic gap in future.
Look deeper. Much of the unrest is a consequence of many rights issues - right to education, right to land ownership and human rights.
Hmmm...
I guess, time for a great argument :D
Gud gud!! (Between meetings this seems to be my only job and i like it. )
Here you go-
a) If we do not ensure that farmers do not sell away their land(read rights), rather they own it partially, we will increase the number of HAVE NOTS. This will increase unrest and will eventually increase poverty in time to come. Innovation should be owned and governed by farmers with a sound support, reaping benefit out of value generated from it. Enable not diable. Its easy to lure people at lower level with a few thousands and create an empire out of it, but the concept that will finally work is mass enablement. What did not work after independence had more factors than just socialism. We as a nation could not have afforded to look at hi tech farming when economy as a whole was crippled.
b)While farmers will be more than willing to sell their lands and move on, this is exactly what big cities can not support anymore. We need to enable more and more vilagers in their own land. Cottage industries, efficient farming, efficient supply chain. They should not be devoid of their holdings. They should rather keep the holdings, increase and improve in their settings. The whole problem of our economic growth is neglect of uniformity.
c) Education, human rights come to mind when you are not hungry. I chose to work for economic upliftment because i really feel that with hunger on mind, education and human rights have no place. I have been to villages, their lands have been curbed, they have blown away few thousands, they drive trucks and they have no hope. And i think with land something passed on to generations, with a broken truck even that hope is gone. :)
If we do not ensure that farmers do not sell away their land(read rights), rather they own it partially, we will increase the number of HAVE NOTS
Hang on here. Not every farmer is selling his land. The point is farmers should be free to do what they want with their land. Innovations in the agricultural sector need to encourage productivity which makes agriculture an economically viable option. The govt. and NGOs here are enablers but not people who ought to force a decision in either direction.
Its easy to lure people..but the concept that will finally work is mass enablement.
Once size does not fit all. Many farmers may find selling off their land, engaging trucks or even getting into retail. Mass enablement is restricted to the idea of showing people -look here are your options. Not telling them this is your only option.
We as a nation could not have afforded to look at hi tech farming when economy as a whole was crippled.
Strongly disagree. Check out Nehru's policies for 30 yrs post independence. Funds were not an issue then. He diverted funds into industrial sectors. Only when agriculture suffered did we think of solutions like the Green Revolution post 1967. More info here. Stuff like this started pretty late.
They should not be devoid of their holdings. They should rather keep the holdings, increase and improve in their settings. The whole problem of our economic growth is neglect of uniformity.
Agree here about the part where a portion of rural populace should be encouraged to stick to cottage industries and agriculture. With education, urban migration is a fact that cannot be shielded by lack of urban infrastructure. The point is cities also grow and consequently infrastructure grows to support growing cities.
The point about land rights is people will be free to do what they want with their land. This right should be granted uncompromisingly - whether you believe in capitalism or not. Making rural economies viable is a different ballpark. Hope the distinction is clear.
Still not clear, i think we are talking of granting land rights( both of us). Then i agree that farmers can do what they like to do, just like you and me can, but i was just saying what is better to do. I can not refute the fact that some people love to drive truck(infact many), i am just saying that its good if they drive truck and also have a home (read right on land.)
And regarding rural development post independence, there are millions of things which the writing does not analyze. Industrialization was critical to an extent, i agree that agriculture remained neglected, but to start with industrialization was not a fault, its the neglect in long term that was fault. Read the policies that Charan Singh govt suggested, they are the best formed till date for lessening rural urban divide, but unfortunately it did not take off.
AND urban infrastructure is not an issue, but it has a limit. The issue is to distribute the load uniformly. Please read your own blog on rural urban migration, you will relate better.
I will rest my case here. :)
Land rights *should* be granted uncompromisingly. What people choose to do with the land is an economic issue. Eventually, they can use it as collateral, farm on it, sell it off for trucks or use the money and move to a city. So, looks like we agree on this right.
Secondly, it is a fact agricultural innovations stood neglected for 30 years. Reasons could be many --- but the facts are Nehru created dams, issued sops to industrial orgs(note Birla,Tatas taking off) with public funds and loans. India's agri-sector took off only in 1970s. None of this is debatable - it's history and the economic policies just did not focus on agriculture. Probably useless speculation but our govts. just did not choose to focus then!
urban infrastructure is not an issue, but it has a limit. The issue is to distribute the load uniformly. Please read your own blog on rural urban migration, you will relate better.
Okay! Here's my point again, rephrased:
I'm not 'pimping' for limitless urban migration here:). The point is give people the options. Rural economies are weak and need to be encouraged SO there is less stress on urban infra. Agree on that.
However, free market forces should be allowed to function. And if you want the rural poor to be a greater participant in the economy subject to market forces, land ownership rights should be resolved unambiguously.
I'll rest for a while:)..we can continue when my fingers are sufficiently rested:)
is it over???? or u guys are stocking up on ammunition?
:D, i have given up, Navin?
We committed some 4-5 grave fallacies while debating there. both of us put together that is.
Siginificantly neither of us committed the ad hominem (personal affront) fallacy of attacking the person instead of the point.
Need to work on our logic.
Am done btw, until next time, that is!
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