A Wall Street View of Rural India – Sujit Sahgal

A Wall Street View of Rural India by Sujit Sahgal – Olympia Publishers

A culmination of more than a dozen rural trips in the company of Foreign Institutional Investors, and manifold interviews, Sujit Sahgal’s short albeit undoubtedly compelling book “A Wall Street View of Rural India”, gauges the pulse of India’s rural economy in addition to tracing its trajectories. Written in a smooth and simplistic manner, the book is easy on the eye and conveys to the layman a clear and unambiguous perspective of both the leaps made by the rural economy as well as the travails, which a farmer is forced to stare at unblinkingly.

As Mr. Sahgal – currently the head of institutional equities for HSBC India – informs his readers, the current Indian per capital rural income is a measly Rs.6500 per month. The Government is steadfast in its resolve to double this figure by March 2022. However, as Mr. Sahgal illustrates, it is extremely imperative to grasp the various circumstances under which a farmer’s income fluctuates before concrete reforms may be ushered in. The need of the hour is for a structured set of structural reforms rather than a raft of subsidies and incentives. Over the years, one of the most tried and tested tactics of the Government has been to adjust the Minimum Support Price (“MSP”). This represents the floor price at which the Government will procure certain cereals, pulses and grains etc. from the farmer. Further, in order to bolster the prospects of the rural household, the Government has also instituted the NREGA scheme, an income guarantee programme under which an income of Rs.100 per day for 100 days is guaranteed to every household. Completing the troika of packages is the burgeoning sums of loan waivers, which have almost become annual rituals.

As Mr. Sahgal lucidly illustrates, more lasting and longer-term solutions need to appear on the horizon. These include crop and health protection by way of insurance schemes, extending the MSP to cover a variety of crops and permitting world class process to be employed in cultivation. The latter include size, inputs, mechanization and irrigation techniques. Mr. Sahgal then goes on to illustrate the perils faced by a farmer as well as by the Government. A primary issue ailing the farmer is the acreage holding. A farmer in India on an average has a holding of just under three acres, a meagre number when compared with similar land holding statistics across the globe. While a farmer in the European Union holds around 40 acres on average, his counterpart in the United States manages a humongous spread of more than 100 acres! This problem is further exacerbated when the acreage is split as inheritance amongst generations. An innate phenomenon of trust deficit also puts paid to the hopes of innovative mechanisms such as contract farming and aggregation of land.

At times, a scheme which has a noble intent at its inception might turn out to be an Achilles Heel in so far as its implementation is concerned. As Mr. Sahjal highlights, a classic case in point is the Kisan Credit Card. Touted as a  mechanism to provide cheaper credit to farmers for their working capital and capital expenditure needs this became a tool which was misused by the farmer as it was difficult to monitor its end use and led to over-consumption and delayed payments. “Where the KCC scheme brought the credit culture to the farmer and the progressive easing of norms embedded that in the farmers, the processes made it easy to misuse it — farm loan waivers spoilt the credit culture to a very large extent.”

One of the most interesting aspects of the book deals with the way the farmer goes about selling his produce once the same has been harvested. She can either sell her produce to the Government at the MSP alluded to in the preceding paragraphs or she can sell her stock at the nearest “Mandi”  to an agent who, after grading the produce will decide the compensation before buying the same and in turn on selling it to the retail buyers. “Currently there are about eight thousand mandis and sub-mandis all over the country and twenty-two thousand rural haats (Graams — grameen agricultural markets). The farmer has the option currently of selling at the main mandi, or the sub mandi or go to the rural haat (rural periodic markets) and lastly to give it at the farm gate to an aggregator.” The rigid nature of the Agricultural Produce Market Committee (APMC) Act has made the existence of middlemen in agriculture inevitable, thereby depriving farmers off their right on their produce. An absence of a direct link with the consumers ensured that the farmers are at the mercy of the middlemen occupying the space between the production and the ultimate sale of the produce. This makes middlemen very powerful and the farmers often find themselves at a disadvantage despite being the producers. However, as Mr. Sahjal illustrates, “Recently in 2014, the government took a further step of having one national electronic market to unify prices and make price discovery more efficient. An electronic national market (e-NAM) was proposed to bring fair and transparent market access to the farmer and better prices by removing the middleman.”

The book induces a degree of optimism and a sense of belief when it dwells on the educational prospects of children and women in India’s rural belt. The process of electrification of villages, coupled with the advancements in telecommunications and fibre optic technology has suffused a surge of passion amongst the parents, especially the mothers towards educating their children. Consumer spending also reveals this attitude as illustrated by Mr. Sahjal. Any savings made by a rural household is primarily with an intention to bestow upon the children, an appreciable quality of education. At the time of this writing, Prime Minister Narendra Modi, as part of his Independence Day Speech, delivered from the ramparts of the Red Fort unveiled an ultra-ambitious cyber security policy which promises optical fibre connectivity to all six lakh villages in 1,000 days. If this materializes it would provide a tremendous boost to the economic prospects of rural India.

Mr. Sahjal ends his utterly enlivening book by providing three key takeaways. “Firstly, facilitate the aggregation of land by other farmers or corporates. World class farming practices can and will then be deployed, increase yields and hence make the business very attractive. It will stop the “grain drain” from rural India into the cities, keep the next generation fully engaged at the family farm and decisively release the rest to seek full time careers in urban India rather than hiding behind “disguised unemployment” as they do currently. Secondly, allow the farmer to sell directly to the end customer. This will increase significantly the profit the farmer makes from his produce. This will tackle also the risk of inflation by hiking prices and will also not put any burden on the fiscal to procure and store tons of farm produce. Thirdly, government should only involve itself through insurance schemes, for crop failure or pest attacks and health insurance to prevent loss of savings. This safety net will drive consumption up and make it less cyclical.”

“A Wall Street View of Rural India” – an invigorating insight into an India that for the most part, remains unseen.

2 thoughts on “A Wall Street View of Rural India – Sujit Sahgal

  1. Thanks Venkatraman for the review. The government has addressed many of the issues I raised in May. Flexibility in marketing as well as allowing contract farming but awareness is the most under appreciated solution and educating the farmer and implementing will now be key.

    Liked by 1 person

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