The year 2019-20 saw India’s agriculture sector grow by 11.3 per cent at current prices, more than the overall annual GDP increase of 7.9 per cent. According to NITI Aayog member Ramesh Chand, this is the first time since 1980-81 when farm sector growth has exceeded that of non-farm by such a wide margin. But that’s not all.
(Current Prices measures GDP/ inflation/asset prices using the actual prices we notice in the economy. Current prices make no adjustment for inflation.
Constant prices adjust for the effects of inflation. Using constant prices enables us to measure the actual change in output (and not just an increase due to the effects of inflation)
The current fiscal — the April-June quarter, definitely — could see agricultural growth surpassing that of non-agriculture even at constant prices. Simply put, agriculture is back to being the economy’s mainstay and, indeed, the only sector growing amid a nationwide lockdown.
One indicator is wheat procurement(obtaining from farmers). As on May 1, government agencies had bought 14.3 million tonnes (mt) of the new crop, equivalent to a minimum support price value of over Rs 27,500 crore, with another 20 mt likely to be procured by month-end.
Farming activity being relatively unaffected is also captured by retail fertiliser sales rising 45 per cent year-on-year in April. And if the monsoon turns out normal as forecasted(predicted), things aren’t looking that bleak(weak) for agriculture; contrast this with the zero domestic car sales last month.
AGRICULTURE IN GOOD SHAPE:
Agriculture doing well is important both from the standpoint of inflation control (adequate supply of food, feed and fibre, along with low oil prices, makes it easier for the Reserve Bank of India to pursue an accommodative monetary policy) and reviving spending (farmers and rural labourers have higher marginal propensity to consume). But it is also a fact that the farm sector cannot support economic growth beyond a point.
(An accommodative monetary policy is a strategy implemented by a central bank (e.g., the Federal Reserve) in order to stimulate and encourage economic growth by lowering short term interest rates. This in turn, makes money less expensive for consumers and businesses to borrow)
INCOME FROM NON-AGRICULTURE:
A NABARD survey for 2016-17 showed that only 43 per cent of the average monthly income of even the country’s estimated 10 crore-plus agricultural households came from cultivation and livestock rearing(domesticating animals). The growth of non-agriculture is, in other words, important for farming families themselves, many of which have members deriving incomes from manufacturing and service sector jobs.
Many of the migrant labourers either stranded(trapped) or returning from industrial centres and cities post-lockdown belong to rural farming communities. Given that not everyone can be gainfully employed in farms, it is a matter of time before they head back to work away from their homes.
NEED OF THE HOUR:
That said, the need of the hour is to maximise the possibilities in a sector which has demonstrated its utility and resilience(capacity to recover quickly from difficulties) in trying circumstances.
The focus should be on the coming kharif cropping season, especially ensuring timely availability of seeds, fertilisers, pesticides, credit(cash) and other inputs. The latter(0ther inputs) includes labour and machines, whose movement was rightly exempted from lockdown restrictions.
The government should seriously consider starting at the earliest special trains for labourers engaged in paddy transplantation and other agriculture-related operations.
This is also the time to free farm produce trade by lifting all restrictions on stocking, domestic movement and exports. Let Indian farmers feed the world, not just India.
On May 1, the Union home ministry extended the nationwide lockdown — scheduled to end on May 3 — by two weeks. The third phase of the lockdown will, however, be less stringent(strict) than that experienced by the country in the past 40 days.
In 603 of the 733 districts, designated green and orange zones, markets other than malls can re-open, factories and industrial units can resume operations, self-employed people such as domestic helps and barbers(one who cuts hair) can go back to work, and e-commerce in non-essential items can recommence(restart).
GROUSE FROM STATES:
But the fine print of the relaxation measures has left several states dissatisfied. Their grouse(complaint) largely pertains to the red zones, the 130 districts which have been deemed as COVID-19 hotspots. These places have been placed under the maximum restrictions stipulated(stated) in the home ministry’s directive.
Punjab Chief Minister, Amarinder Singh, for instance, has contended(asserted) that several areas that have no COVID-19 cases, Nabha for example, have found themselves ineligible for relaxations because they happen to be located in red zone districts.
The West Bengal government has also termed the Centre’s assessment of such zones in the state as “erroneous(wrong)”.
And Delhi Chief Minister Arvind Kejriwal has argued against designating entire districts as red zones — only the containment zones, areas with a high caseload in hot spot districts, should be subject to strident(strict) restrictions, he said.
SUCCESS OF THE LOCKDOWN:
That 319 districts, more than half the districts in the country — green zones — have not had a single COVID-19 case in three weeks does testify to the success of the lockdown from a healthcare standpoint. A further 284 districts do not have a high caseload, the orange zones.
However, epidemiologists have consistently emphasised that lockdowns do not frame the endgame in the battle against the virus. Hotspots can change, the infection can recede(get back) from some areas and spread to new ones.
Kejriwal, too, underscored(emphasized) the need to view the pandemic from such a dynamic perspective when he said that “what is a green zone today can turn red”.
The Centre does allow states to re-designate green zones as orange and red zones. It also allows them the freedom to classify red areas as orange zones. But it does not give them the flexibility to relax the lockdown in areas within the hotspot(any area of grave danger or problem) districts.
The Delhi CM underlined the limitations of this approach when he asked: “If a district has 50 villages and 40 cases emerge in one, why should the entire district be declared a red zone?”
States and local authorities dealing with the infection at ground level are the best placed to understand its spatial vagaries(unexpected and inexplicable change in a situation). It’s, therefore, imperative(needed) that they have a say in drawing the boundaries of the areas that have to be opened up.
The details of the red, orange, green zone scheme need constant review and revision from such a perspective.
In 1920, John Maynard Keynes, perhaps the most influential economist of the first half of the 20th century, wrote a famous passage, which could well have been written for our times. Worth citing at length, Keynes was speaking of how the First World War ended what we now call Globalisation 1.0 that lasted nearly a century till then(till 1918 because WW1 ended).
LIFE DURING WW1-
“What an extraordinary episode in the economic progress of mankind, which came to an end in August 1914?”
“The inhabitant(one who resides) of London could order by telephone, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep. He could at the same moment and by the same means adventure(exploit) his wealth in the natural resources and new enterprises(business) of any quarter of the world, and share, without trouble, in their prospective fruits and advantages. He could secure forthwith(at once), if he wished it, cheap and comfortable means of transit to any country or climate… But, most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant(departing from an accepted standard) and avoidable”
No World War is likely anymore, as scholars of international relations continually remind us, thanks to nuclear weapons. But can COVID-19, instead, bring an end to what scholars call Globalisation 2.0, which began in the early 1980s and has lasted for four decades, an era when human beings, of a certain class, “could order by (the internet)… products of the whole earth… adventure(exploit) wealth in any quarter of the world”, and regard “this state of affairs as normal, certain and permanent”?
In strictly economic terms, globalisation is about the free movement of capital, goods and labour across national borders. Labour flows were never as free as the movements of capital and goods. Capital and goods are disembodied(separated from or existing without the body); one does not necessarily see who produced them.
Migrants are embodied, as it were. One can directly observe how ethnically, racially, religiously different from the mainstream they might be. Hence labour flows, if large, have nearly always triggered right-wing politics of nativism(policy of protecting the interests of native-born or established inhabitants against those of immigrants) in a way that the movements of goods and capital rarely have.
CRITIQUE OF GLOBALISATION:
Donald Trump’s unrelenting(ungiving) critique of globalisation predates(before) COVID-19. He made non-white immigrants, especially Hispanics(Spanish-speaking person, especially one of Latin American descent, living in the US) and Muslims, a special object of his political ire(anger).
He was also vigorously(strongly) against free trade as well as critical of businessmen who, in search of lower costs, had made China the destination of their accumulated investments, transferring jobs away from America’s industrial heartland.
He levied(charged) higher tariffs to curtail(limit) freer trade, and exhorted(urged) American corporations to bring capital back to the US. In Europe, a similar politics has been led by the UK, though less vociferously.
What will the pandemic do to this political thrust that had already become a reality in several major economies? In any realistic political sense, this question cannot be answered unless we pay special attention to how Globalisation 2.0 has benefitted China.
One might, of course, first wish to note that China was among the biggest sufferers of Globalisation 1.0 (1815-1914). In 1800, an estimated 33 per cent of the world’s manufactures were produced in China. Defeats in two Opium Wars later, this share had gone down to 6 per cent by 1900.
(TRIVIA- Opium Wars, two armed conflicts in China in the mid-19th century between the forces of Western countries and of the Qing dynasty, which ruled China from 1644 to 1911/12. The first Opium War (1839–42) was fought between China and Britain, and the second Opium War (1856–60), also known as the Arrow War or the Anglo-French War in China, was fought by Britain and France against China. In each case the foreign powers were victorious and gained commercial privileges and legal and territorial concessions in China. The conflicts marked the start of the era of unequal treaties and other inroads on Qing sovereignty that helped weaken and ultimately topple the dynasty in favour of republican China in the early 20th century)
More significantly for now, China was far behind other economies in the early years of Globalisation 2.0. In 1980, it was the 48th largest economy in the world. In 1982, with GDPs at roughly $200 billion, Indian and Chinese economies were similar in size.
RISE OF CHINA:
In 2018, the last year for which we have systematic data, China, with a GDP of $13.6 trillion, was the second largest economy in the world, behind the US ($20.5 trillion), but far ahead of Japan ($4.9 trillion), Germany ($4.0 trillion), Britain ($2.8 trillion), France ($2.8 trillion) and India ($2.7 trillion).
In 2018, China was also the largest trading nation in the world. Its exports were worth $2.5 trillion, substantially ahead of the US ($1.6 trillion). And in 2018, China attracted over $203 billion worth of net foreign direct investment (FDI), much more than Germany, Japan, UK, France as well as India ($42 billion), and second only to the US ($258 billion), showing how monumental foreign investment in China had become.
Given the current pandemic, even more revealing are the data on medical equipment. For 50-80 per cent of its supplies, the US was dependent on China for protective surgical garments, plastic face shields, textile face masks and thermometers. Only for ventilators and hand sanitisers was the dependence less than 20 per cent.
No matter how much businessmen and economists argue that these trends are purely economic, only demonstrating how easy it is to manufacture at scale in China, the political leaders of the world, not simply in the West, can only view it with great concern and, if China threatens supply disruptions for critical materials, even as a national security issue.
(The above paragraph explains that leaders from all over the world are now concerned about the manufacturing heft China has become because they feel China can threatened the global supply chains and that can become a national issue)
IMPACT ON THE ECONOMICS OF GLOBALISATION:
The political winds are now independent of President Trump, who is clearly trying to scapegoat(victimise) China to cover up his own bungling(misgovernance). Given all the doubts, right or wrong, about how China handled the information about the origins of the virus in Wuhan, the anger against China in world capitals is very palpable(noticeable). Born of sudden and enormous suffering, such anger cannot but have an impact on the economics of globalisation.
We should not only expect that labour flows will now be more strictly regulated than before. But also more than ever before in recent decades, Western investors will also have to factor in political risks in their investment decision-making.
Instead of chasing lower labour costs, they will either bring capital back to domestic shores(areas), or geographically restructure their supply chains. For a whole range of goods, the global supply chains for all practical purposes became Chinese supply chains. That level of economic concentration is no longer politically sustainable.
For the foreseeable future, economic efficiency, the cornerstone of market-based systems, will have to go into a lower gear.
Politics will drive new economic policies, not market-based rationality. Globalisation will not end, but it will be pushed into greater retreat(take a back seat). We are entering a new phase of capitalism.