Devangshu Datta: Water woes

BEATING THE STREET

Over the last two weeks it's become apparent that the monsoon isn't going to perform to schedule. A wide swathe of central India was rain-deficient at a key period. Even if the monsoon revives, agricultural performance in 2004-05 will dip.

Lower agricultural projections have induced a marking down of GDP projections. Rurally-driven industries like tractors, two-wheelers and low-end FMCGs are going to struggle.

The lack of rainwater will exacerbate tensions between states sharing river-waters - Punjab and Haryana have already fired salvoes. This one issue has caused more inter-state bad blood than anything else. Confrontations like Punjab-Haryana, Karnataka-Tamil Nadu and Haryana-Delhi could escalate into "mini-wars" if they're not dealt with effectively.

It isn't only inequitable sharing; water isn't stored efficiently when and where it's available. Water harvesting has barely started catching on and national irrigation acreage has not increased since the mid-1990s.

Grandiose schemes like river-linkages sound wonderful but these would take decades to implement and be of doubtful value. What is required is a decentralised effort where each village and urban block works out its own storage methods. This is likely to fetch results quicker for much smaller investments.

Agriculture has always been and will always be volatile "" adequate water won't completely smooth output. Agriculture produce is a necessary good "" demand remains relatively constant. Production is discontinuous. A small dip in output causes disaster. A rise in output can also cause disaster "" prices drop and crops become unremunerative.

In the millennia before the industrial revolution, agriculture was the main source of sustenance. It's no surprise that global GDP growth was practically zero over thousands of years. Agriculture is too volatile to drive GDP growth on its own.

But in a post-industrial economy, agricultural performance provides impetus for consumerism. Good harvests do wonders for consumer confidence.

The thumb-rule is that two good monsoons in a row create near-perfect growth conditions. Even in urban areas, Indians are sensitive to food prices "" the grocery bill is a big component in the urban cost of living.

This will remain the case, until and unless, there's a quantum jump in productivity. There's room for that "" Indian agricultural productivity is very low "" yield per acre in many crops is a tenth or less of global average yields. There's a host of reasons for that.

Let's say for argument's sake that agricultural production was doubled by the induction of modern methods. Farmers don't stand to benefit! Offtake won't rise enough to consume the extra produce and prices would fall unless supported by subsidies. Yet, surpluses mean lower subsidies. So, the farmer receives less cash for more goods.

Europe and USA have "solved" this by doling out massive subsidies over generations even as labour moved off the land into industry or service sectors and acreages under cultivation gradually decreased. Both the EU and the US utilises extra food for aid programs, which put a compassionate face to diplomatic muscle.

An attempt to shorten the timeframes by rapidly ramping up productivity could lead to unpredictable social changes. You might have lakhs of farmers driven into penury while surplus labour fails to find work in other sectors. History suggests that there are no quick-fixes to this one.