## Access to Farms is the north star
The aim I am striving for is explaining agriculture system in India and how land markets are a key to unlocking its potential.
All agriculture market problems are a function of access. Making farms accessible to sellers on the input side and buyers who in turn sell to consumers on the output side addresses the challenge.
![[Primary Farm Ecosystem_illustration.png]]
Between supply and demand, the later is more easily forecasted since the relative growth of consumption based on population is much more linear in nature compared to cyclic nature of supply. On the supply front, climate risk and cultivation challenges add more uncertainty.
Our goal should be to bring demand where production happens to partake in risk and price it in.
If you consider the entire supply chain of produce(or agriculture commodities), we only have leverage to change the system in the first transaction during post harvest. When cultivation suddenly flips into a distribution challenge.
In India, entrepreneurs consider production and post harvest as two separate functions without acknowledging that both are interdependent and the ultimate feedback to production is from consumption. The price of produce is the next best proxy. Yet price to farmer is not the proxy of demand since there are many intermediaries [[Don’t feel sorry for farmers|plugging]] the access gap.
Our approach should be to develop a protocol of engagement so that without collaborating 1 on 1, many entities can collaborate together in affecting the whole supply chain. And, no, it’s not Agri-stack or the numerous digital public goods protocols.
Countless cycles of capital have been spent ineffectively in agriculture where the focus on making the system efficient ends up diluted to sustenance of the startups above all.
![[Chart 8 - Investment Trends in Indian Ag-Tech.jpeg]]
Source : [RBI Article](https://m.rbi.org.in//Scripts/BS_ViewBulletin.aspx?Id=22998)
It's not intention of the entrepreneurs looking to impart change that I question, it's the naive approach with which we think change could be imparted within supply chain of agriculture.
![[Chat 9- Sectors within Agri-tech startup Founded and funded.jpeg]]
Source : [RBI Article](https://m.rbi.org.in//Scripts/BS_ViewBulletin.aspx?Id=22998)
"Are you serious?" is often my internal thought process when reading and evaluating newer ventures launching similar solutions from the past.
[Rohit Shinde](https://x.com/rohitshinde121) wrote a piece called [India’s Agriculture : Theory of everything](https://rshinde.substack.com/p/indias-agriculture-theory-of-everything) where he highlights the 3 pillars as to why agriculture in India is limited to its current state. I agree with the diagnosis outlined in the post.
> A number of India’s problems can be traced back to treating agriculture as a holy cow. I sketch the various ways that this mentality introduces massive distortions in the economy. Reforming agriculture is essential to reach high-income status by 2047.
I encourage you to go read the [post](https://rshinde.substack.com/p/indias-agriculture-theory-of-everything) because he captures all the pain points on why agriculture markets are failing even when we are a food surplus country.
He highlights farm fragmentation, subsidies on fertiliser and electricity and default classification of all land into agriculture few pillars constraining agriculture.
## Land is form of wealth probable for all
Labour plays a crucial role in development of any nation and a common stated frame of viewing our economy, we are still reliant on agriculture for employment while the contribution of it in overall economy (GVA) is not proportional.
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There are many more interesting charts in this article, [The move away from agriculture]( https://www.dataforindia.com/agriculture-shift/) by Abhishek Waghmare, Data For India (March 2024).
##### Statement 1.3:Percentage distribution of agricultural and non-agricultural households by size class of land possessed (ha.) for the agricultural year July 2018 – June 2019
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In all forms of wealth, Ownership of land is available for many in different proportions. Owning land unifies our people across political affliations and demographics. It is also marked as a true sign of prosperity in our society^[I do want to address about inheritance but that would be a tangent too wide. It is a problem because the thin markets of lands coupled with much more fragmentation of land turns into a nightmare situation].
Farms are not economical in India due to their fragmentation. This is not new information to us. In 1918 dissertation of Babasaheb Ambedkar, he wrote how land consolidation is the way to make farms economical.
> For his dessirtation, Ambedkar wrote about the issue of [Small Land Holdings](https://www.mea.gov.in/Images/CPV/Volume1.pdf) . And like all good papers I read. He spends a considerable time defining the word “agriculture economics” and context surrounding it.
> …
>
> > These small and scattered holdings have given a real cause for anxiety regarding our great national industry. Comparative Statistics go to swell this feeling by laying bare two very noteworthy but equally sad facts regarding economic life in India; (1) that it is largely an agricultural country ;* and (2) that its agricultural productivity is the lowest†—
> >
> Ambedkar takes a shot at the report published which address consolidation without outlining the enlargement of land holding.
>
> A more serious criticism against these projects of consolidation consists in the fact they have failed to recognize that a consolidated holding must be an enlarged holding as well. If it is said that Indian agriculture suffers from small and scattered holdings we must not only consolidate, but also enlarge them. It must be borne in mind that consolidation may obviate the evils of scattered holdings, but it will not obviate the evils of small holdings unless the consolidated holding is an economic, i.e. an enlarged holding.
>
> *[[Making agriculture economical|Excerpts from “Making agriculture economical”]]*
Since then, land distribution since independence has led to more fragmentation.
> The thing to be highlighted over here is that farm lands are getting even smaller when it comes to small and marginal farmers whereas the landholding of medium and large farmers are decreasing.
>
> Excerpt from the report(emphasis is mine).
>
> > The number of operational holdings (OH) has more than doubled over the last ten AC period, from **704.9 lakh in 1970-71 to 1464.54 lakh in 2015-16** (Figure 1). This general trend could not have been the case across all size groups as these changes in the number of OH represent the redistribution of holdings from larger size groups to smaller size groups through the effects of fragmentation. Thus, the number of OH went up by **2.8 times from 356.8 lakh in 1970-71 to 1002.51 lakh in 2015-16 in marginal size group, 1.9 times from 134.3 lakh to 258.09 lakh in small size group, and 1.3 times from 106.8 lakh to 139.93 lakh in semi-medium size group.** In sharp contrast, the number of OH has steadily gone down from 79.3 lakh in 1970-71 to 55.61 lakh in 2015-16 in medium size group and from 27.7 lakh in 1970-71 to 8.38 lakh in 2015-16 in large size group. Thus, the sharp rise in the total number of OHs is an outcome of the vast increase in the numbers of marginal and small holdings; this, in turn, reflects increased **fragmentation** of land holdings.
> **[Link to the report](https://www.nabard.org/auth/writereaddata/tender/1402233351nabard-research-chronicle-final.pdf)**
Land is a resource in agriculture and in my opinion the highest order one^[I am only mentioning land and not the other resources that are much more precious in the short term like water and soil. We waste both of them plentiful and many have attempted to solve this with better training GAAP practices to farmers. I believe these are all still downstream to land].
The issue of land is framed by Rohit in his [post](https://rshinde.substack.com/p/indias-agriculture-theory-of-everything) very succinctly.
> Most Indian states classify land as agricultural by default. Conversion to industrial, commercial or residential requires going through a byzantine bureaucratic process that’s laden with discretions. The surface area for bribes and rent seeking is way too high.
>
> Unless you’re a brand-name industrialist like Apple or Tata, there will be an artificial scarcity of land that is converted to industrial use. Even though physical land is quite abundant.
Fixing land markets would do 10x more benefit than fixing all other challenges in agriculture.
## Challenge in talking about enlargement of land^[What follows may not be thoroughly researched and substantiated but more of a personal point of view]
The entire political class’s informal job is to be an aggregator of land in the name of development. Be it for laying a new road, building housing or setting up industries.
They all are sympathetic to the plight of the farmers and provide lip service to the farmers without fixing the root cause, lack of functioning and free land market.^[TRS or BRS party when in power provided universal basic income to land owners who had agricultural land without any income qualification. Yet they still lost the rural vote, one of the contributing factors being not all farmers are land owners. An important point to remeber when thinking about land markets.]
FPOs, Co-ops and collectives are partially effective. They are working on organising people into groups rather than pooling the resource with the most leverage, land.
> There are three underserved components in agriculture:
> 1. Farm Land - The artifically locked resource
> 2. Women Farmers - The backbone of Indian agriculture
> 3. Collectives - Community centred self- governance
>
> ![[Setup.png]]
> *From [[If not suppy chain, which other problem in agriculture value chain would you consider solving for and why?]]*
In a different post I wrote about 3 components of agriculture that are worth addressing. One of which is formalised leasing model to enlarge farm lands under a collective. Now, I have moved to the more extreme version, transfer of titles is a pre-requisite. The moral challenges of ownership vs leasing disputes always favour ownership.
Collective organisation are only focusing on governance aspect without addressing the biggest constraint land selling and buying market.
When land is unlocked, these organisations like municipalities in Urban areas could regulate land transactions locally.^[I will be writing a subsequent post by citing all necessary research studies to substantiate this frame]
Misaligned incentives of the political class is the biggest roadblock to allowing a functioning land market. This requires political entrepreneurship and manoeuvring similar to [1991 reforms](https://the1991project.com/).
Hence, no matter how much we focus on labour, subsidy and agriculture markets, they end up falling short and impact is not preserved for the long term.
One potential positive is that land is a state list topic under the Indian constitution. This allows states to be more experimental by declaring a version of Special Economic zones, albeit for agriculture .^[I am throwing a lot of stuff on the wall at the moment. We need to remix ideas from different strands to form the experiment and then execute it. Punjab and Maharashtra, where farming is looked at as an opportunity, could be potential states that could experiment with such zones where the rules can be tweaked and land markets can function]
****
## My plea
While I encourage the hustle of all the folks working in this space and also the academicians who are studying this space.
It comes down to collectively isolating the highest order issue which needs addressing, free transacting land markets.
I am not saying fixing it is a silver bullet which solves all our problems in Indian agriculture. But, addressing it would allow the capital we invest in improving the agriculture supply chain to progress in the overall system. Unlike today, where most capital investment is ephemeral in nature.
To close it out, my feelings towards Ag in India ebb and flow between the two extremes when I visit some of the places where we operated as a startup. The extremes get triggered based on the topics I stumble into as part of the social media platforms^[This all started from a post that Venky from Krishi.system wrote about [private mandis’](https://www.krishidotsystem.com/p/a-case-for-private-mandi)].
But, on most days it is “ayy lmao” for me to keep existing in this world.
![[Ayy lmao tweet.jpeg]]
****
`Tags` : #agriculture #economics #primary-farm-ecosystem
`Published`: originally posted as[ Twitter thread](https://x.com/vsvivek93/status/2084900213207216569) on `04-08-26`
`Source`: #Brewing