RURAL BENGAL’S PUZZLE - Villages consume very little although they are producing more

OMKAR GOSWAMI

The Telegraph, 10 August 2004

There is a long-standing belief in West Bengal that agrarian reforms — which began with Operation Barga in the late Seventies — have raised agricultural productivity and rural incomes. The political adjunct of this economic tenet is that so long as agrarian Bengal does well, the Communist Party of India (Marxist) will continue to sweep the rural constituencies one election after the other.

That there has been a statistically significant increase in agricultural productivity between the Seventies and the Nineties is well established. A recent example is the work of Abhijit Banerji of the Massachussetts Institute of Technology and his co-authors. They not only demonstrate that agricultural productivity in West Bengal has increased more than in agronomically similar tracts of land in neighbouring Bangladesh, but also show that the differential has much to do with agrarian reforms.

Broad macroeconomic evidence also suggests a steady increase in income from agriculture. In 1993-94, West Bengal’s GDP from agriculture at constant prices was Rs 14,816 crore. By 2000-01, it was up to Rs 18,177 crore — an impressive growth of 23 per cent in six years.

These numbers are corroborated by evidence on how the state has become a cereal and vegetable granary of India. For instance, in 2001-02, West Bengal accounted for almost 8 per cent of India’s total foodgrain production — something that would have been impossible to imagine two decades ago.

In a milieu of such impressive growth in agricultural productivity and farm incomes, one would ordinarily expect an equally remarkable increase in rural consumption. This is where one gets totally perplexed, and let me explain why.

Every year, the National Sample Survey conducts extensive field surveys on consumer expenditure of rural and urban households throughout all states and Union territories. We, at CERG Advisory, have the entire data-set from the beginning of reforms up to 2001-02. And the evidence indicates that rural consumption in West Bengal ranks among some of the worst-off states in the country.

As the graphic shows, rural West Bengal was not wealthy by any stretch of imagination in 1991: the average consumption of rural households was 5.3 per cent less than the all-India figure. If agricultural productivity and rural income grew faster in West Bengal in the Nineties than the national average, then it stands to reason that rural household consumption in the state would have been closer to, or higher than, the all-India mean.

Unfortunately, that is not the case. As the NSS survey for 2001-02 shows, rural household consumption in West Bengal was 9.6 per cent worse than the national average. That’s a significantly poorer performance than in 1991. Therefore, despite the alleged growth in agricultural productivity and output, rural households in West Bengal seem to be relatively worse off than before.

The story is similar when rural consumption is broken down to its constituent elements. The following is such an account for 2001-02.
Consumption of food items as a whole — households in rural West Bengal were 4.1 per cent below the national average.

Consumption of milk, eggs, meat, fish, vegetables and fruits (a sign of transition to greater prosperity) — 2.5 per cent below the all-India average.

Clothing — 10.1 per cent less.
Medical expenditure — 6.8 per cent less.
For non-food items in the aggregate — 20.7 per cent less than the all-India mean.

The only silver lining is expenditure on education. In 2001-02, the average rural family in West Bengal spent 4.5 per cent more on educating its children than the all-India mean. However, at less than Rs 83 per year, that does not translate to much.

The NSS evidence suggests a couple of things that the chief minister, Buddhadeb Bhattacharjee, might wish to consider. First, it shouldn’t be a sign of consolation that household consumption in interior West Bengal is marginally higher than rural Andhra Pradesh or Tamil Nadu. For one, these two southern states, while worse than West Bengal, have improved their relative position over the decade. In contrast, West Bengal’s position has worsened. For another, it doesn’t speak well of a state that lays claim to agrarian dynamism where its rural households consume only 4.3 per cent more than the average rural family in Bihar, 4.6 per cent above Madhya Pradesh and 8.8 per cent more than that abysmally poor state called Orissa. Being clustered with the poor is not something to be proud of.

Therefore, it is worth checking why the growth in agricultural productivity is not translating to proportionately higher rural consumption expenditure. It can’t be explained away by claiming that West Bengal enjoys significantly lower prices of goods and services compared to other states. Clearly, there is a disjunction somewhere, and it needs to be carefully investigated.

I have a tentative hypothesis. While Bengal agriculture has certainly done well, the same cannot be said about the growth of rural, non-agricultural industries. And since almost half the rural population earn their livelihood outside agriculture, the increase in agricultural output hasn’t translated to similar overall consumption growth.

Second, and this is my perennial theme about West Bengal, the government has to do everything in its powers to bring in significant private investment in food processing. It is a shame that a state so blessed with vegetable and foodgrain cultivation should have so little investment in rural-based food processing units. To me, that is investment priority number one. For there may lie the salvation of rural Bengal.

The author is the founder of CERG Advisory, a company specializing in corporate and economic advisory services.He can be reached at omkar.goswami@cergindia.com