Tag: agriculture

The Course of China’s Rural Reform

Consider this blog post your periodic reminder to read an essay called “The Course of China’s Rural Reform”, by Dun Runsheng.

Who was Du Runsheng?

Du Runsheng (Chinese: 杜润生; pinyin: Dù Rùnshēng; July 18, 1913 – October 9, 2015) was a Chinese military officer, revolutionary leader, politician, and economist. He has been hailed as “China’s father of rural reform”. From 1982 to 1986, he drew up the annual “Document No.1 of the Central Government” about rural reform, which promoted the development of rural areas.

https://en.wikipedia.org/wiki/Du_Runsheng

And what was he famous for?

Well, a lot of things, but this is relevant for us today:

Du Runsheng held the post of secretary general, Rural Work Department, in the Chinese Communist Party (CCP) Central Committee at the time the nation was founded. Concurrently he was deputy director of the Agriculture and Forestry Department of the State Council. After the Third Plenum of the 11th Central Committee of the CCP (1978), he held the post of director, Rural Policy of the CCP Central Committee, and director of the Rural Department, Research Center for Rural Development (RCRD), State Council, where he was mainly responsible for China’s rural economic reforms and development policy research. Du was often asked by the leadership to draft rural-related policy documents for the Central Committee of the CCP and the State Council. He worked in particular on the drafting of “No. 1 Documents,” which were issued continuously for five years by the CCP Central Committee, and which made outstanding theoretical and practical contributions, deepening rural economic reform and setting up the rural household contract responsibility system that advanced the market reform of the rural economy.

https://ebrary.ifpri.org/utils/getfile/collection/p15738coll2/id/125214/filename/125215.pdf

So how did China do it’s rural reforms? Please read the whole document to get a sense of how they went about it, but to me, the key words are “gradual”, “incremental” and “choice”.

Here is what he says about overcoming resistance to the proposals (all three are direct quotes from the document, please note):

  1. First, the reform would not initially call for abandoning the people’s communes, but rather would implement a production responsibility system within them. This approach enabled many who would have opposed the change to accept it.
  2. Second, the responsibility system could take a number of forms, among which the populace could choose. One did not impose one’s own subjective preference on the populace but respected its choice.
  3. Third, the reform began in a limited region, where it received popular support, and then widened step by step.

We economists are very good at saying that Farm Reforms Must Be Implemented. And the political parties will be in complete agreement about the importance of these reforms depending on whether they are in power or otherwise. Learn to take both of these things as a given.

But as with any good idea, it is not its inherent quality alone that matters. It is also the manner of its implementation.

I am not for a moment suggesting that we copy what China did for its land reforms.

But I am very much suggesting that learning more about how China did it (and other nations besides) might help us.

Without a successful implementation of agricultural reforms, we don’t develop. Our problem is that we are all focussed on the phrase “agricultural reforms”. Not enough of us are focussed on the phrase “successful implementation”.

Are There Too Many Farms in the World?

I have shamelessly copied the title of today’s blogpost.

And the answer to the question is, obviously: yes!

I enjoy being provocative in my Principles of Economics classes, making seemingly outrageous statements to try and provoke my students into heated (and therefore enjoyable) debate. One such statement is this: the best way to help farmers in India is by helping many of them leave agriculture.

It never fails, that statement, and what follows is always a fun debate about the importance of agriculture and how best to help it flourish in India. Which is why I enjoyed reading this brief write-up from the Yale Economic Growth Center:

A new study uses data from India to connect the dots between these two phenomena, showing that farm productivity follows a U-shaped curve with farm size, and that substantial gains in output and income would result if farms in developing countries were significantly larger. The analysis suggests that agricultural consolidation – though a challenging policy prospect – could lead to significant economic growth and poverty reduction.

https://egc.yale.edu/research/rosenzweig-2022

If you are an Indian reading this, I (hopefully) don’t need to explain to you what a typical Indian farm looks like. But if you’re looking for a point of contrast, try going through this fantastic photo essay to understand the difference in terms of scale.

So what’s going on?

Explained in simple terms: on a very small farm, family members work the land, participate in wage work on other farms, and operate their farm efficiently. As farm size increases, the family members increase their level of on-farm work until they are unable to spend any more time working (this point of complete self-sufficiency is known as autarky). Because hiring additional labor comes with additional transaction costs (finding workers and travel costs) and thus lowers net income, the family continues to work the land as farm size increases (decreasing labor to land ratio, or productivity) until such point that the benefit of hiring additional workers outweighs the cost, and productivity starts to increase – which is where we observe the bottom of the curve. After this point, productivity rises with farm size, as larger farms can take advantage of machines that have higher capacity at larger scales and lower labor use – mirroring the economies of scale that are well-observed in developed countries.

https://egc.yale.edu/research/rosenzweig-2022
https://egc.yale.edu/research/rosenzweig-2022

Foster and Rosenzweig, the authors of the paper behind this write-up run the numbers and come up with the following conclusion:

The authors illustrate this point using their model to show that the minimum farm size in India that would maximize return on land using only locally- available machinery is 24.5 acres – over 7 times the mean farm size in India today. If all farms were this size, the number of farms in India would decrease by 82%, total output would increase by 42% and income per farm worker would increase by 68%. However, there would only be a 16% decline in the total agricultural workforce, owing to the under-utilization of labor in most small-scale farms.

https://egc.yale.edu/research/rosenzweig-2022

This isn’t an easy topic to think about, by any means. But for those interested, I have three recommendations:

  1. Small Holdings in India and Their Remedies, by Dr. Ambedkar (written over a hundred years ago!)
  2. The first part of How Asia Works, by Joe Studwell (reading this one might confuse you, for the advice will be at odds with what we’ve been discussing here, but it is a very instructive read nonetheless)
  3. The very first episode of TSATU.

Were The Farm Laws a “1991 Moment”?

As with everything that happens in the world today, so also with the farm laws: a lot of heat, and hardly any light. Reams have been written about how the farm laws were good (or bad), about their introduction being a much needed thing (or not), and their withdrawal being a disaster for take-your-pick-from-Modi-BJP-India (or not).

I have neither the desire nor the energy to get into any of these debates. Here’s my simple take as a student of economics: markets almost always work. Where they don’t work, identify the reasons why they don’t work, and either correct those causal factors, or have the government step in until (and only until) those factors are corrected.

Things get tricky when you begin to ask pesky questions along these lines:

  • How do you define markets not working? Bench-marked against what standard? Who decides?
  • How do you correct these causal factors? How do you judge that they have been corrected? Are you sure they won’t return? On what basis?
  • To what extent should government step in? How are you sure this will make things better in all markets at all points of time? Using what framework?

But that is precisely what makes the study of India’s political economy so very interesting! And this is true of agriculture as well, not just in India, but in other places too.

For the moment, let’s take as a given the fact that government had to be present in agricultural markets in India these past decades. That may or may not be true, but for the purposes of this blog post, let us assume that there was a confluence of factors in India’s agricultural markets that necessitated the active presence of the government as a participant, not just as a regulator.

Now, if markets almost always work, and if government was present in agriculture, then we have to figure out a way for government to eventually not be present in agriculture. (Note, again, that your opinion may be different from mine. But play along with me for the moment, please.)

Yamini Aiyar and Mekhala Krishnamurthy argue in an HT article that in the case of the three farm laws, what the government missed out on was the word “eventually”. They argue that it was the suddenness of the move that was problematic, not the move itself.

There’s a political angle to the sudden withdrawal, and the authors refer to it in their piece. There’s a regulatory angle to the sudden withdrawal, and that is also covered by the authors. But there also is an institutional (and therefore economic) angle to it, and that is what I would like to focus on:

Consider this. The protesting farmers from Punjab, Haryana and western Uttar Pradesh are locked into a system where State intervention, driven by the logic of Minimum Support Prices (MSP) and the Agricultural Produce Marketing Committee (APMC) mandis, dominates. The State is not a benign actor. It has created and sustained local elites with vested interests – traders, middlemen and moneylenders, each of whom extracts to control market power. This undermines competition and compromises farmer interests in different ways. But farmers have learnt to negotiate these relationships of extraction. And the state through MSP and mandis has served as insurance that gives them bargaining power. Any attempt to break this system will inevitably, as the protests amply demonstrate, unleash anxieties.
In this context, the move towards genuine competition will not be viable without the State demonstrating its willingness to protect farmers interests and gain their trust.

https://twitter.com/AiyarYamini/status/1464452741325996032/photo/1

What is the point? The point is that the current system isn’t perfect, and it isn’t sustainable. As the authors point out, the farming sector isn’t competitive.

In theory, that should mean, to a student of economics, that they are not efficient. That, in turn, means that we should expect that producers aren’t producing as much as they could have, and whatever they produce is being produced at a higher cost than would otherwise have been the case. We should expect that procurement, storage and distribution are also potentially riddled with inefficiencies. We should expect divergent quality of produce, and we should expect consumers to be paying higher prices, potentially for a lower variety of goods.

We should also anticipate a whole host of things due to the fact that the farming sector isn’t competitive: prices aren’t transparently determined, there isn’t free entry and exit, certain sellers are likely to get a better deal, transaction and search costs are high, and on and on and on. This is microeconomics 101 in practice.

(A quick note to students of economics: ask yourself if you’re able to relate what you’re learning in your microeconomics courses to the two paragraphs above. If you disagree with my assessment, ask yourself what is it that is causing you to disagree. Can you frame your disagreement in the context of microeconomic theory? Secondly, irrespective of whether you agree or not, can you think of what data points you might need to empirically verify or disprove my arguments? Where might these data points be available? What models (economic and econometric) can we use to settle this debate? Finally, why stop at agricultural markets – which other markets can you analyze this way?)

And for all of these reasons and more, reform is needed. It cannot possibly be anybody’s argument that the status quo in India’s agriculture must persist forever.

Which then, in turn, gives rise to two separate questions:

  1. If reforms are to be introduced, how?
  2. However they are to be introduced, how fast should we proceed with their implementation?

Again, the question isn’t one of the desirability of reforms, or their appropriateness. Rather, the question is about whether the reforms should be a top-down, one-size-fits-all initiative, or a more locally driven approach. And second, should reforms be introduced all at once, or slowly and gradually, one step at a time.

And I would like to argue that at least in this one regard, we should be looking at China. Not for the specifics of their reform and a CTRL-C CTRL-V hit job. But for their approach, beginning in the late 1970’s.

When I first proposed the household responsibility system (HRS), I was criticized as follows: Chairman Mao had been dead only a few years. Supporting the HRS, a system he opposed, meant forsaking his principles. This was the severe environment that reform faced at first. Our support of the HRS, of institutional innovation, and of transformation of the agents of the rural microeconomy would inevitably involve adjusting a number of interests. To avoid risk, it was necessary to carry out trials first. Also, the HRS could not move ahead on its own. It had do so in connection with other institutions and be realized in the course of reforming the institutional environment as a whole. But this institutional reform is not something that could be accomplished in one fell swoop. To carry out reform, a strategy of gradual advance was unavoidable.

http://ebrary.ifpri.org/utils/getfile/collection/p15738coll2/id/125214/filename/125215.pdf (Emphasis added)

That’s Du Runsheng, the author of a short publication called The Course of China’s Rural Reform. He did, um, some other things besides.

In the publication that I have excerpted from above, there are some points that I am going to summarize that I think help me make my point better:

  1. Resistance to the introduction of market based reforms was anticipated in China back then, and was in some sense inevitable. Three measures were conceived of to reduce this resistance:
    1. “First, the reform would not initially call for abandoning the people’s communes, but rather would implement a production responsibility system within them. This approach enabled many who would have opposed the change to accept it.”
    2. “Second, the responsibility system could take a number of forms, among which the populace could choose. One did not impose one’s own subjective preference on the populace but respected its choice.”
    3. “Third, the reform began in a limited region, where it received popular support, and then widened step by step.” (Emphasis added)
  2. “In 1980, after the central leadership was reorganized on a collective basis, the top central leaders, including Deng Xiaoping and Hu Yaobang, consistently supported allowing different areas to adopt different forms of the agricultural production responsibility system. It was then proposed to divide them into three types of areas: impoverished areas would carry out the HRS; advanced ones would adopt specialized contracts with wages linked to output; and intermediate regions could freely choose.”
  3. Or, as Ajay Shah and Vijay Kelkar put it in their book:
    “The heterogeneity of economic and social development, across the regions of India, generates heterogeneity in the public policy pathways desired by different groups of people. A policy position that is well liked in Uttar Pradesh may not be liked in Kerala, and vice versa. This creates conflict in a centralized public policy process.”
    Kelkar, Vijay; Shah, Ajay. In Service of the Republic . Penguin Random House India Private Limited. Kindle Edition.
  4. Finally, there’s a lot to pick at and think about here when we get down to the specifics. I’m not suggesting that China in the late 1970’s had the exact same problems that India does today. Nor am I suggesting that India do today exactly what China did back then. I am making three points:
    1. I agree with Yamini Aiyar and Mekhala Krishnamurthy when they say that one of the problems was the suddenness of the proposed reforms, both in terms of their scope, and in terms of their geographical spread. I also agree with them when they say that the introduction of the reforms ignored the ground realities of the both the sociology of agricultural markets, and their institutional complexity (note that I am paraphrasing here, these are not their words).
    2. But having read their article, one must ask: if not the pathway that we have now left behind us, what else? That is, for better or for worse, the three farm laws now stand withdrawn. Is the status quo desirable? Should we seek to perpetuate it, or change it for “the better”? (Inverted quotes because better means different things to different people.) My opinion is that we should seek to change it for the better, and maybe yours is the same.
    3. But that gives rise to the next question: how? And that is where Du Runsheng and his write-up is of limited help. Learning how other nations did it is a good place to start if you are a student of economics, India or public policy, and post-Mao China holds some valuable lessons for us.

Agri-Exports in India in 2021

Ashok Gulati and Ritika Juneja had an excellent write-up in the Indian Express last week, and if you are a student of Indian agriculture, it is an absolute must read.

  1. “Agri-exports touched $41.8 billion in FY 2020-21, registering a growth of 18 per cent over the previous year.”
    ..
    ..
    Here’s a fun((I use the term in a very, very loose sense)) exercise. Figure out where the authors got the data from?
    There’s a very good reason I ask this question. We don’t (yet) have something like FRED available in India. When you read an article such as the one we’re going through today, it is one thing to take a look at the statistics and think about them – and quite another to try and dig out the data yourself. It is a skill that most of us pick up out of necessity when we start work – you’d do well to start practicing right now.
    You’ve won if you can see this on your screen:
Source: An Excel file NOT from DGCIS

2. We need to grow exports, and we need to increase agricultural production. These are, even at an introductory level, obvious statements((ought to be, at any rate)). But as the article points out, we therefore need to dig deeper into the data to be able to answer this question in its entirety. Which products can we export more of? Why? At what cost?
Think of it this way: in what ways can the Indian cricket team get better? That’s like asking which specific Indian players can get better, in a way. So if we say that the team will get better if Kohli bats better and Bumrah bats better, is that a correct answer or just lazy thinking? Because they’re already pretty good, no?((Yes, yes, I know. My point is to ask if we should be focusing on the star performers, generally speaking, or the relative laggards. And yes, I agree that both were not at peak performance in the WTC final)).

3. As the article points out, rice accounts for about 21% of the $41 billion. Note that the statistics split this out by basmati and non-basmati rice, we’re adding these up. After that it is marine products (14.46%), spices (9.66%), buffalo meat (7.69%) and sugar (6.77%). That is, the top five categories together account for about 60% of all our agricultural exports. (Get familiar with the power law, if you aren’t already)

4. The rest of the article focusses on rice and sugar, and points out that exporting these two crops is akin to exporting water – and it is not as if we have a lot of it to go around.

India is a water-stressed country with per capita water availability of 1,544 cubic metres in 2011, down from 5,178 cubic metres in 1951. This is likely to go down further to 1,140 cubic metres by 2050. It is well known that a kg of sugar has a virtual water intake of about 2,000 litres. In 2020-21, India exported 7.5 million tonnes of sugar, implying that at least 15 billion cubic metres of water was exported through sugar alone. Another water guzzler, rice, needs around 3,000 to 5,000 litres of water for irrigating a kg, depending upon topography. Taking an average of about 4,000 litres of water per kg of rice, and assuming that half of this gets recycled back to groundwater, exporting 17.7 million tonnes of rice means that India has virtually exported 35.4 billion cubic metres of water just through rice.

https://indianexpress.com/article/opinion/columns/how-green-are-indias-agri-exports-7368002/

5. Related to that last point, here is an old EFE link fest about water and India.

6. “Moreover, the export subsidy given by the government to clear excessive domestic stocks of sugar has led many other sugar-exporting countries like Australia, Brazil and Thailand to register a case against India at the WTO, which India may find difficult to defend.”
..
..
As a student, here are the questions you should be asking (in my opinion). Where can I find details about this case? How do these things work? They have a whole course about it, and you really should sign up for it. If you even think about asking if you get a certificate for this course, you end up killing a little kitten. Yes, really.

7. “Farming practices such as alternate wetting drying (AWD), direct-seeded rice (DSR) and micro-irrigation will have to be taken up on a war footing.”
..
..
What is AWD? What is DSR? What is micro-irrigation? Better questions: which countries do this extensively? To what effect? What stops India from doing this? What can be done about it? I haven’t hyperlinked to the last five questions, and that is deliberate. Try searching for the answers yourself, and tell us what you learnt! 🙂

8. “Closer evaluation of non-basmati exports exposes another interesting fact: These exports are actually sourced not only below-MSP but also below the average domestic mandi prices prevailing in the country after one adjusts for freight from mandi to port and loading charges at the port. How does that happen? One possibility is that a substantial part of supplies through the PDS and the PM Garib Kalyan Yojana are leaking out and swelling rice exports.”
..
..
This really takes us into the weeds of agricultural economics, but here’s an article to get you started.

9. And finally, the authors’ proposed solutions:

“It is high time that policymakers revisit the entire gamut of rice and sugar systems from their MSP/FRP to their production in an environmentally sustainable manner. We must ensure that we produce more from every drop of water. Also, at least in the case of rice, procurement will have to be limited to the needs of PDS, and within PDS, it is high time to introduce the option of direct cash transfers. All these will go a long way to promote better diversification of our agri-systems and better use of our scarce water supplies and lesser GHG emissions. We could save on the unproductive use of financial resources locked up in burgeoning grains stocks with the FCI. These savings can be used for doubling investments in agri R&D to improve productivity on a sustainable basis and improve farming practices for minimising carbon emissions. An export-led strategy also needs to minimise logistics costs by investing in better infrastructure and logistics. Only then one can ensure sharing the returns of these investments with farmers to give them a better deal in terms of higher and more stable incomes.”

I’ve been writing posts like these for a while now. Here’s one about fiscal policy in India, here’s one about footwear in India, here’s one about a Marques Brownlee interview, and if you dig through the archives, you’ll find plenty more. The reason I bring this up is that I think there is genuine value to taking notes as you read anything, and publishing these notes online. Plus, as a student, there is genuine merit in asking a simple question repeatedly: where did the authors get the data from? Especially in India, the answers often aren’t simple, and the exercise is therefore worth your time.

Another reason I bring this up is that if you do this long enough, you end up making a very helpful mental map of whatever it is that you’re studying. And trust me, over time, learning compounds.

So I hope that this helped you learn a little bit more about agriculture in India, but I also hope that you learnt how simple, and powerful, it is to take notes regularly. Please do! 🙂

Notes on being Aatmanirbhar in Agriculture

The full title of the article is “Aatmanirbhar in agriculture will require incentives for export of high-value agri-produce” and it has been written by Ashok Gulati.

One may ask: What does Aatma Nirbhar Bharat mean? Is it self-reliance or self-sufficiency in all essential items?

https://indianexpress.com/article/opinion/columns/atma-nirbhar-bharat-scheme-agriculture-narendra-modi-govt-covid-19-6491672/

If you are confused about the difference between self-reliance and self-sufficiency, here is Swaminathan Aiyar in ET:

Self-reliance means making your own economy strong and strong does not mean giving it crutches like protectionism. That is the wrong way. Self-reliance means we say, look I am uncompetitive because I have relatively high cost of land or labour, high interest rates, high electricity rates and high freight rates. If I get all these down, I become more competitive. So if you are going in that direction, India will become strong and competitive. It will be able to trade in the world and we will not have a trade deficit problem. So the correct self-sufficiency means you strengthen your economy by making it more productive and more low cost. It does not mean you make it high cost by putting up tariffs. Therefore, protecting your least productive industry is the wrong direction.

https://economictimes.indiatimes.com/markets/expert-view/govt-needs-to-understand-the-difference-between-self-sufficiency-and-self-reliance-swaminathan-aiyar/articleshow/76710928.cms?from=mdr

The consensus among economists seems to be that we should be targeting self-reliance rather than self-sufficiency, but I would say that it is one thing to debate which to aim for without being explicit and crystal clear about what each of these terms mean.

You might want to read this Wikipedia article about the issue. Also, a request: if any of you have articles about the distinction, and any clear articulation about India’s policy stance in this regard, I would love to read it.

It is presumed that for a large country like India, with a population of 1.37 billion, much of the food has to be produced at home. We don’t want to be in a “ship to mouth” situation, as we were in the mid-1960s.

https://indianexpress.com/article/opinion/columns/atma-nirbhar-bharat-scheme-agriculture-narendra-modi-govt-covid-19-6491672/

You might want to read about the following if you are unfamiliar with our “ship to mouth” situation: the sorry saga of the PL480 scheme and India (two separate links)

In the mid-1960s, if India had spent all its foreign currency reserves — the country had about $400 million — just on wheat imports, it could have imported about seven million tonnes (mt) of wheat. Today, India has foreign exchange reserves of more than $500 billion.

ibid

A question that is rarely asked – or at least, not asked as often as I would like it to be asked – is how did we get to a stage where we have more than $500 billion in reserves? We must have earned it, we obviously can’t print dollars. Which begs the question, how did we earn it? Two things: we depreciated our exchange rate, and we exported a helluva lot more post 1991. Self-sufficiency, in other words, tends to not work well!

Chart from the IE article

Agri-exports have been subdued for the last six years or so, and we have yet to recover the peak of the ear 2013-2014. As Ashok Gulati mentions in his article, that year’s performance has not been bettered since.

What do our exports look like currently?

Marine products with $6.7 billion exports top the list, followed by rice at $6.4 billion (basmati at $4.6 billion and common rice at $2.0 billion), spices at $3.6 billion, buffalo meat at $3.2 billion, sugar at $2.0 billion, tea and coffee at $1.5 billion, fresh fruits and vegetables at $1.4 billion, and cotton at $1 billion.

ibid

Of which, Prof. Gulati picks rice and sugar for analysis – $8.4 billion worth of exports in total. Now, here is where all of what you may have learnt in microeconomics starts to make sense.

Think of a farm producing rice. The production function will tell you that you produce rice by combining inputs to produce output. What inputs? Labor, land – but also water and fertilisers. And the problem with fertilisers and water is that it is heavily, heavily subsidised in India.

Again, microecon 101: whatever isn’t priced tends to be overused, and that too indiscriminately. So what happens when you export more rice and more sugar every year? Well, to export more you have to produce more, and to produce more you have to use more inputs, and when you use inputs inefficiently, you end up exporting that input in larger quantities than is optimal.

Or, the simple version: we are exporting a lot of our water when we export sugar and rice. We’re also polluting our rivers and our soil, but that’s a story for another day.

But more importantly, it is leading to the virtual export of water as one kg of rice requires 3,500-5,000 litres of water for irrigation, and one kg of sugar consumes about 2,000 litres of water. So, in a sense, the two crops are leading to a faster depletion of groundwater in states such as Punjab, Haryana (due to rice) and Maharashtra (due to sugar). Thus, quite a bit of the “revealed comparative advantage” in rice and sugar is hidden in input subsidies. This leads to increased pressure on scarce water and a highly inefficient use of fertilisers.

ibid

What about the other side of the story – which is the big ticket item when it comes to imports of agricultural goods?

On the agri-imports front, the biggest item is edible oils — worth about $10 billion (more than 15 mt). This is where there is a need to create “aatma nirbharta”, not by levying high import duties, but by creating a competitive advantage through augmenting productivity and increasing the recovery ratio of oil from oilseeds and in case of palm oil, from fresh fruit bunches.

ibid

And within oils, Prof. Gulati recommends increasing our productivity in oil palm:

This is the only plant that can give about four tonnes of oil on a per hectare basis. India has about 2 million hectares that are suitable for oil palm cultivation — this can yield 8 mt of palm oil. But it needs a long term vision and strategy. If the Modi government wants “aatma nirbharta” in agriculture, oil palm is a crop to work on.

ibid

And on a related note, you may want to read this article from Scroll, an excerpt from which is below:

It is now clear that, in the face of rising demand, domestic production will remain way under 10% in the years to come. That essentially means that India will continue to import palm oil in various forms. However, the dynamics of imports is not just dictated by demand but also geopolitics. For instance, diplomatic tensions with Malaysia led the Indian government to discourage imports of refined palm oil from the Southeast Asian nation, resulting in a precipitous fall in recent months.
Domestic palm oil processors, such as millers and refiners, also routinely demand restrictions on imports so they can protect their margins. The Solvent Extractors’ Association of India recently presented the government with a list of demands that would favour local processors. This puts further price pressures in Malaysia and Indonesia, making it more difficult to green the palm oil supply chain.

https://scroll.in/article/967186/as-worlds-largest-importer-of-palm-oil-india-has-a-duty-to-push-for-ethical-production-practices

Agriculture in England and India, Immigration, Water and Healthcare

Five articles I enjoyed reading this week – and hopefully you will as well

The change that is coming over farming can be summarised in simple economic terms. Intensive agriculture prioritises a bumper harvest – the annual dividend – while the new approach emphasises the preservation of the initial capital – the land itself. For a glimpse of how this new investment priority will affect British farming, it suffices to visit those progressives who have already, to varying degrees, made it their own.

The Guardian Long Read on agriculture (in England). Horizons (one out of choices, horizons, incentives and costs) remain underrated in economics classes, as this article points out. But there is much more to read here: recommended!

It developed an app-based platform that registers orders directly from buyers, analyses category-wise demand, fixes dynamic prices depending on daily demand, and transfers the orders to its network of 1,000+ farmers. Farmpal’s price comparison feature ensures that farmers can sell their produce at rates higher by 20 to 30 percent than what they would normally get in the mandis.
“This is one of our main promises to the farming community. We are able to offer them premium prices because technology eliminates at least four to seven middlemen from farm to fork,” the founder explains.

While on the topic of agriculture, this from Maharashtra, India: Farmpal.

Caplan’s case isn’t entirely about economics: he also makes a moral appeal. Consider the case of “Starving Marvin,” who needs food and is prepared to purchase it legally. On his way to the market, he is turned away by an armed guard. If Marvin subsequently dies of starvation, Caplan asks, is the guard guilty of murder? The philosopher Michael Huemer, who first introduced this hypothetical, in 2012, concluded that the answer was yes. He writes, “If a person is starving, and you refuse to give him food, then you allow him to starve, but if you take the extra step of coercively interfering with his obtaining food from someone else, then you do not merely allow him to starve; you starve him.” Caplan doesn’t go that far, but he does argue that the guard is wrong to prevent Marvin from feeding himself.

Read the paper, read the book, read this profile of Bryan Caplan, and his quixotic quest to get all of us to accept a world without borders.

Geologists and hydrologists, who worked on implementing the project, shared similar views and hailed Jalyukta Shivar. This was mainly due to the interventions undertaken in the existing water reserves, planned de-silting activities, among many others. However, experts agreed that the scheme was not appropriately implemented. Now with Jalyukta Shivar no longer in existence, focused efforts of the past five years, in most likelihood, will go down the drain unless a similar scheme is introduced. With rainfall variations getting more pronounced, in addition to depleting groundwater reserves, the state will need concrete interventions to tackle future water requirements, experts recommended.

As Tyler Cowen is fond of saying, solve for the equilibrium. On the politics of water conservation in Maharashtra.

America’s mediocre health outcomes can be explained by rapidly diminishing returns to spending and behavioral (lifestyle) risk factors, especially obesity, car accidents, homicide, and (most recently) drug overdose deaths. [Please read this post for the full explanation]

The diminishing returns are evident in cross-sectional analysis. Higher-income countries like Norway and Luxembourg spend twice as much as the likes of Spain and Italy and probably experience worse average outcomes.

Via the excellent Navin Kabra, a very, very long article on healthcare in America. Excellent if you are a student of America, healthcare or microeconomics. At the intersection of the three, it becomes mandatory reading. Pair up with Baumol’s Cost Disease (although the name is misleading, it is the most popular way to this phenomenon is referenced)

 

India: Links for 16th December, 2019

  1. “Farmers cultivating perishable crops suffer more in times like these. The harvest is destroyed quickly due to unseasonal rains, and what survives has to be sold off without any delay. like fenugreek, that cost Rs 8, Rs 7 and Rs 13 respectively at Nashik market cost about Rs 30, Rs 15 and Rs 30 respectively at the typical vendor’s stall in Matunga. Cabbage goes up to Rs 70 per kilo from Rs 8 per kilo in a span of 300 km. Eggplant, following a similar trajectory, is pegged at Rs 80 per kilo in Mumbai, while even at Vashi, it is sold at Rs 15 per kilo.”
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    I wish it had been written (and edited) better, but that being said, it is still an interesting, informative read about the supply chain in agriculture.
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  2. “if the Assembly had been elected on the basis of universal suffrage it would not necessarily have “possess[ed] greater wisdom…”. Indeed, “It might easily have been worse…I am quite frank enough to say that this House, such as it is, has probably a greater modicum and quantum of knowledge and information than the future Parliament is likely to have.” Despite being an ardent backer of universal franchise and (limited) reservations, Ambedkar expressed unease throughout the life of the Constituent Assembly about what would happen to the quality of the country’s democratic institutions once all Indians were allowed to participate.”
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    This might be behind a paywall, and if so, my apologies. But even the excerpt above is worth spending some time over. Dr. Ambedkar on the Constitution of India. That is from an essay in the Caravan magazine.
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  3. I find myself unable to excerpt form this article, I am not quite sure why – but the entire thing is worth a read, particularly if you are not familiar with the politics of CAB in the North-East.
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  4. “Much of the decline in the overall LFPR is because of a steep fall in the female LFPR, from 43 per cent in 2004-05 to a pathetic 23 per cent in 2017-18. This compares poorly with female LFPRs (in 2018) of 61 per cent in China, 52 per cent in Indonesia and 36 per cent in Bangladesh. Nor can this precipitous decline in female LFPR be explained away by higher rates of female enrolment in education, since the 20 percentage point drop in LFPR is observed among both the 30+ age group (down from 46 per cent to 27 per cent) and female youth (down from 37 per cent to a heartbreakingly low 16 per cent). The current and future implications for overall female economic and social empowerment are deeply saddening.”
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    Two articles by Shankar Acharya in the Business Standard next. One on the employment crisis in India…
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  5. “The chart shows that between 2011 and 2018, India’s goods exports increased by only 8 per cent. In sharp contrast, Vietnam’s exports grew by 154 per cent, Cambodia’s by 114 per cent, Myanmar’s by 82 per cent, Bangladesh’s by 61 per cent, the Philippines’ by 40 per cent, and China’s by 31 per cent. Rapid export growth is all about increasing market share. Between 2011 and 2018, our share of world exports stagnated at 1.7 per cent, while Vietnam’s share more than doubled, Myanmar’s increased by 80 per cent, Bangladesh’s by more than 50 per cent, the Philippines’ by 27 per cent, and even giant China’s by over 20 per cent despite trade wars. China’s share of world exports increased by 2.4 percentage points over the seven years, which is 60 per cent more than India’s total share in 2018!”
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    And the second, in which he debunks the notion that the slowdown in India is because of the slowdown in global trade.

India: Links for 1st July, 2019

The usual five articles today, and as usual, about India. But there is a common theme that runs through them: that not just of agriculture, but also a tribute of sorts to a man about whom many more people should know.

 

  1. “It was time for a satyagraha — and not just in Gujarat. The late Sharad Joshi, leader of the Shetkari Sanghatana in Maharashtra, took around 10,000 farmers to Gujarat to stand with their fellows there. They sat in the fields of Bt cotton and basically said, ‘Over our dead bodies.’ Joshi’s point was simple: all other citizens of India have acesss to the latest technology from all over. They are all empowered with choice. Why should Indian farmers be held back?”
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    Today’s series is inspired by Amit Varma’s article yesterday in the Times of India, in which he speaks about farmers in India not getting access to technology, but also speaks about Sharad Joshi…
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  2. “Joshi’s insights in the late 1970 was that this was caused not by the greed of middlemen but the interference of the Indian state. The state had set forth rules that the farmer could not sell his produce in an open market, responding to supply and demand, but only to a government appointed body called the Agricultural Produce Market Committee (APMC). Because the farmers are not allowed to sell to anyone else, they are forced to take the price offered to them. And because all produce comes through the APMC, buyers also have no bargaining power.”
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    …about whom he has written earlier as well.
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  3. “Sharad Anantrao Joshi (3 September 1935 – 12 December 2015) was an Indian politician who founded the Swatantra Bharat Paksh party and Shetkari Sanghatana (farmers’ Organisation), He was also a Member of the Parliament of India representing Maharashtra in the Rajya Sabha, the upper house of the Indian Parliament during the period 5 July 2004 till 4 July 2010. On 9 January 2010 he was the sole MP in Rajya Sabha to vote against the bill providing 33% reservation for women in Indian parliament and assemblies.Sharad Anantrao Joshi was a member of Advisory Board of the World Agricultural Forum (WAF), the foremost global agricultural platform that initiates dialogue between those who can impact agriculture. He is also founder of Shetkari Sanghatana, an organisation for farmers. Shetakari Sanghatana is a non-political union of Farmers formed with the aim to “Freedom of access to markets and to Technology”
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    Who exactly was Sharad Joshi: the Wikipedia version
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  4. “In his massive rallies, Joshi would often speak of farmers as entrepreneurs who were shackled by statism. He campaigned for higher prices because he believed these were being kept artificially low by the government, but he insisted that what was really needed was to liberate Indian farmers from a web of state controls.He believed the solution was free markets. Joshi was perhaps a soulmate of another liberal leader of the farming community, N.G. Ranga, one of the founders of the Swatantra Party in 1959. It is perhaps not a coincidence that both Ranga and Joshi were economists by training.”
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    And to finish off today’s list, two articles that were written in his honor after he passed away four years ago. One from Livemint…
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  5. “However, unlike many other farmer leaders who often ask for more subsidies and higher Minimum Support Prices (MSP) from the government, Sharad Joshi’s main instrument to better farm incomes was to seek economic freedom for farmers – freedom to obtain best farm technologies from anywhere in the world and the freedom to sell their produce anwhere across time and space and time. This he gathered from his early experience in farming.”
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    … and the other from TOI, written by Ashok Gulati.

Links for 20th May, 2019

  1. “The debate could have been depoliticized if the CSO was more sensitive to criticisms, and had made proactive disclosures on the error estimates of different sub-sectors of GDP, with explanations for why output estimates for some sectors were more reliable than that of others. In fact, the first national account estimates presented by Mahalanobis after India’s independence carefully noted the data gaps and limitations of the estimates, as well as the error margins associated with each sectoral estimate. Providing such error estimates would also have drawn wider attention to data gaps, and could have helped MoSPI garner the requisite resources to fill those gaps.”
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    An article entirely worth reading if you are interested in India’s statistical organizations – from independence until today, the tale has been one of slow and painful deterioration.
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  2. “In short, Indian agriculture has undergone a phenomenal change over the last decade that it is no more dependent on just foodgrain or one sector. In fact, it has emerged as a versatile sector that still provides employment to over 50 per cent of the country’s population (per 2011 census) and keeps the economy ticking in rural areas despite the vagaries of weather.”
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    A useful place to get a good summary of Indian agriculture over the last decade or so. But I would argue that the key point is that there are far too many people employed in this sector – and that is the real problem.
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  3. “The four main factors they identify are as follows. First, there are historical institutions such as slavery and colonial rule. Second, the impact of cultural norms linked to religion, trust, family ties and beliefs. Third, there are geographical factors such as the terrain, temperature shocks and the frequency of floods. Fourth, historical accidents, such as the way national boundaries are drawn, also have an impact. These four factors together play an important role in the development trajectory of a country through time. The question is, what can be done to overcome these constraints in case they are a barrier to development? Can anything be done at all?”
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    Using cricket to learn about development economics. Or is it the other way around? Exactly the kind of article the world sees far too little of!
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  4. “The state legislators who are passing these bills know they will be challenged in court. They also know they will probably lose. But their sights appear to be set higher than their state jurisdictions: With a solidly conservative majority on the Supreme Court, anti-abortion advocates are eager to seed the challenge that could one day take down Roe v. Wade, the 1973 opinion that legalized abortion up to the point of fetal viability. At the very least, they hope the Supreme Court will undercut Roe and subsequent decisions that reaffirmed abortion rights, the idea being that each legal challenge makes it a little harder to obtain an abortion in the United States.”
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    Have you heard of Roe vs. Wade? Might you be curious to learn about what exactly culture has to do with economics, as we discussed in the link above? A useful, if unfortunate example is this article.
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  5. “What concerns health practitioners is the high transmissibility of the bug. “We studied the fungus in January, 2017, when we found it had colonized the skin of a patient who was referred to the Trauma Care ICU from another hospital. But within four days, it (bug) had spread to all the other patients admitted in the unit. All nine of them,” said professor Arunaloke Chakrabarti from Post Graduate Institute of Medical Education and Research (PGIMER), Chandigarh.”
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    Just in case your Monday wasn’t depressing enough. Be afraid – be very afraid.

Links for 8th May, 2019

  1. “The god question is not easy to answer conclusively because god’s existence is a matter of faith, not science. There is no mathematical proof. God is a construct of belief. The great Austrian-American mathematician Kurt Gödel once attempted to prove the existence of god. His ontological proof of god, by definition, is more axiomatic and derived from semantic logic than from real mathematics. It was not long before it was discredited and the axioms questioned. Undeterred, a group of mathematicians from around the world is using open-source documentation to formalise Gödel’s proof to a level where it can be proven by computer programs. We will wait.”
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    Sachin Kalbag, a guy worth following on Twitter, writes about a near death experience he had some years ago, and asks questions about god, faith, belief and logic.
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  2. “You guys are so angry and militant, you’re going to cause havoc,” he recalls being told, delivering his anecdote with a comic’s timing. “You are not getting any arms. You are not ready to fight. You are raaaaw,” he says, disintegrating into laughter. Instead of war, the 21-year-old studied economics, ending up at the University of East Anglia in England. “When all this fighting is over,” he was told, “there will be a country to run.”
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    A short interview with Tito Mboweni – my only criticism is that it is too short, but then again, that’s the style of the Lunch with FT series. By the way, you might want to try Googling the series. Some extremely interesting interviews.
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  3. “The first two factory acts, one in 1881 and the other in 1891, neglected to shorten working hours. When the 1890 Factory Commission gathered workers’ voices, both male and female workers overwhelmingly demanded a shorter working day. Doorpathee told the commission: ‘It will be better if the hours are shortened.’ The 1891 Factory Act declared Sunday a holiday, limited the work day to 11 hours for female workers and seven hours for child workers (aged between nine and 14). But it left out adult males from the ambit of a shorter work day, and men continued to work between 13 to 16 hours per day.”
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    A truly lovely read about Bombay workers, their living conditions, and about the night schools that started in Bombay at that point of time.
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  4. “In short, strange as it may seem, industrialisation of India is the soundest remedy for the agricultural problems of India. The cumulative effects of industrialisation, namely a lessening pressure (of surplus labour) and an increasing amount of capital and capital goods will forcibly create the economic necessity of enlarging the holding. Not only this, but industrialisation, by destroying the premium on land, will give rise to few occasions for its sub-division and fragmentation. Industrialisation is a natural and powerful remedy…”
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    1918. Dr. Ambedkar wrote the essay from which this excerpt is taken in the year 1918. 101 years later, we still retain policies that keep people tethered to agriculture. Also worth reading is the rest of the article – and indeed, therefore the writings of Dr. B.R. Ambedkar.
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  5. “Sloman and Fernbach cite a survey conducted in 2014, not long after Russia annexed the Ukrainian territory of Crimea. Respondents were asked how they thought the U.S. should react, and also whether they could identify Ukraine on a map. The farther off base they were about the geography, the more likely they were to favor military intervention. (Respondents were so unsure of Ukraine’s location that the median guess was wrong by eighteen hundred miles, roughly the distance from Kiev to Madrid.)”
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    Never be too confident of anything, least of all about whatever it is that you think you know, is my key takeaway from this article – but implementing this is easier said than done!