Punjab a fit case for farm-centric industrialisation

AGRICULTURE is the lifeline of the people in Punjab. This sector has made the state prosperous and also helped the country become self-sufficient in foodgrain. In the absence of an agricultural policy, the prosperity ushered in by the Green Revolution is withering away, resulting in an agrarian crisis.

According to economists, the agriculture sector experiences disguised unemployment — a situation in which a large number of persons seem to be employed but their contribution to the output is zero. Thus, even if a large proportion of the workers is withdrawn from the farm sector, the output is not adversely affected. The withdrawal of surplus labour from agriculture can be utilised for industrialisation. Disguised unemployment is widely prevalent in Punjab, specially with the mechanisation of farm operations.

The long-drawn farmers’ agitation against the three farm laws and their frequent dharnas, including blocking of roads, toll plazas, railway tracks and government offices, are the manifestations of rural distress. In order to address the problems, Punjab immediately needs a well thought out agro-industry policy aiming to channelise farmers’ resources, experiences, and energy for productive purposes by engaging them decisively in non-farm ventures, including industrialisation. Farmers’ ownership in industrialisation assumes added significance in the light of their fierce opposition to an industrial park and the Zira liquor factory.

The idea to make agriculture a source for industrialisation in Punjab needs serious deliberations. At this juncture, no doubt, the idea is at its infancy stage, but considering the favourable conditions and the advantages it can offer, it has the potential to ease farm distress and recast the state’s development story.

To harness agriculture’s potential for industrialisation, Punjab can draw inspiration from models developed by Ragnar Nurkse, W Arthur Lewis, G Ranis and John Fei. According to these economists, the agriculture sector experiences disguised unemployment — a situation in which a large number of persons seem to be employed but their contribution to output is zero. That means even if a large proportion of workers is withdrawn from the agriculture sector, the output is not adversely affected. The withdrawal of surplus labour from agriculture can fruitfully be utilised for industrialisation. These models have been found valid in countries like China, Japan, Taiwan, South Korea, South Africa, etc. Disguised unemployment is widely prevalent in Punjab which has become more pronounced with mechanisation of farm operations. Punjab needs to shift a large number of people from agriculture to the non-agriculture sector. This shift will not only make agriculture a viable occupation, but also, due to productivity gains, open new frontiers of development.

Punjab is a fit case for agriculture-centric industrialisation on other accounts also. Punjab, in terms of monthly income per agricultural household (Rs 26,701), is second only to Meghalaya (Rs 29,348). This is the average income, suggesting that many farm households in Punjab have resources for investment provided they have viable economic avenues at their doorstep.

Lewis had argued that if domestic savings were not used for investment, the entrepreneurs could borrow from banks. Here also, Punjab has a favourable position. The bank advance-deposit ratio is very low in Punjab. It was 54.38 per cent on March 31, 2021. It means that the commercial banks invested only Rs 54.38 out of Rs 100 collected from Punjab. This ratio is as high as 128.72 per cent, 101.5 per cent and 94.83 per cent for Andhra Pradesh, Tamil Nadu and Maharashtra, respectively. The prescribed norm of 70 per cent suggests a huge potential for bank credit in Punjab.

The National Bank for Agriculture and Rural Development (NABARD) finances food processing units, warehouses and cold storage infrastructure, besides extending credit facilities to marketing federations and supporting producers’ organisations.

Punjab has the highest productivity of wheat and paddy. Most of the agricultural produce in raw form is exported to other states either in the form of the Central pool or otherwise. Thus, Punjab has a huge potential for the food processing industry.

Punjab has well-organised networks of 32 farmers’ organisations. Their members, especially the young educated ones, have exemplary organisational skills. A number of progressive farmers are already in businesses other than agriculture. For example, nearly 30 per cent of the total commission agents are farmers. Most of them are also in the money-lending business.

Similarly, around 20 per cent rice mills are owned by the farmers. Ownership of farmers in warehouse logistics, petrol pumps, agricultural inputs like seeds, fertilisers and pesticides, cattle feed, transport, real estate and construction material is also noticeable. The progressive farmers have youth clubs across the state. They are also well versed with information technologies and social media. Farmers’ global networking with the Punjabi diaspora strengthens their social capital. Punjab also has enabling facilities for agro-industrial development, particularly in the form of well-developed infrastructure.

It follows from the above that Punjab is at the threshold of agriculture-driven industrialisation in terms of entrepreneurship, capital, organisational skills, institutional funding, agriculture raw material, experiences in other businesses and diasporic networking. Despite having fertile ground for agricultural-driven industrialisation, the mindset of the farmers is not tuned to venture into industry. Here comes the strategic role of the government on various fronts. First, constituting a broad-based consultative group comprising experts, farm organisations, artisans, women, youth, farmers in allied businesses, rural entrepreneurs and bankers to formulate a policy for agriculture-based industrialisation. The policy should clearly delineate the objectives, policy instruments, including financial incentives, types of industry to be promoted, regional distribution based on locational advantages, startups, institutional arrangements for funding and marketing, including exports.

Secondly, launching a structured campaign for educating farmers — particularly who are also commission agents or money lenders or own rice mills, warehouse logistics, petrol pumps and businesses — about the benefits of industrialisation, including additional income, employment generation and mitigating agrarian crisis. Thirdly, introducing entrepreneurship development programmes for training and capacity-building of farmers to start industry. For such programmes, resource persons from industry, startups, banks, marketing, finance and technology may be invited. Practicum should be an integral part of the programme. Fourthly, evolving an institutional mechanism for taking optimal advantage of national programmes relating to rural industrialisation, food-processing industries, and micro, small and medium enterprises.

In brief, Punjab needs a policy discourse for engaging farmers and landless labour in the development agenda. One of the top-ranking fields is industrialisation grounded in agriculture. To implement the agenda in the policy regime, the farmers may be assigned a commanding position. This paradigm shift in the development process would pave the way for shifting the population from agriculture to industry. This would certainly help in increasing the income of farm families and would also thus mitigate the agrarian distress.