A study of the economic ways of getting a living will ever remain important. These ways generally take the form of industries or services. Confining ourselves to industries, they may be divided into primary and secondary. The primary industries are concerned with extracting useful material from the earth, the soil or water and take the form of hunting, fishing, stock raising, lumbering and mining. These primary or extractive industries are fundamental in two ways: (1) they extract from the physical world useful materials which become the original sources of man’s subsistence. (2) They provide raw materials for the secondary or manufacturing industries, for, manufactures, in the language of Dr. Franklin, are simply, “substance metamorphosed”. From a national point of view as well, the importance of primary industries is beyond question. But important as are the primary industries, farming is by far the most important of them all. It is most ancient and abiding of all industries, primary or secondary: while the fact that it is concerned with the production of food is enough to make its problems demand our most serious thought. But when a country, like India, depends almost wholly upon farming its importance cannot be exaggerated. The problems of agricultural economy dealing directly with agricultural production are what to produce, the proper proportion of the factors of production, the size of holdings, the tenures of land etc. In this paper it is attempted to deal only with the problem of the size of holdings as it affects the productivity of agriculture.
It may be said that some countries are predominantly countries of small holdings while in others it is the large holdings that prevail. According Adam Smith it is the adoption of the law of primogeniture chiefly due to the exigencies of a military life that leads to the creation and preservation of large holdings. While it is the adoption of the law of equal sub-division necessitated by the comparatively peaceful career of a nation that gives rise to small holdings.
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.
Both these truths are painful enough to have startled many people into inquiring the causes of this low productivity. As a result, attention has now been concentrated on the excessive sub-division and fragmentation of agricultural holdings. Enlarge and consolidate the holdings, it is confidently argued, and the increase in agricultural productivity will follow in its wake!
Consolidation of holdings is a practical problem while the enlargement of them is a theoretical one, demanding a discussion of the principle which can be said to govern their size. Postponing the consideration of the theoretical question of enlargement, we find that the problem of consolidation raises the following two issues :—(1) how to unite such small and scattered holdings as the existing ones, and (2) once consolidated how to perpetuate them at that size.
The evils of fragmentation are very great and must be met by a comprehensive scheme of consolidation. It is, therefore, advocated* that if two-thirds of the Khiatedars, dealing more than half of mthe village lands, apply, Government, should undertake compulsorily to restrip the scattered fields of the village. This compulsory restripping is to be executed on two principles, (1) of “Economic Unit” and (2) of “Original Ownership”. Regarding the merits of these two principles the Baroda Committee observes. “In the first the value of each holding is ascertained, then the original boundaries are removed, roads are marked out, lands required for public purposes are set apart, and the rest of the land is parcelled out into new plots. Each of these new plots must be of such a size as, having regard to the local conditions of soil, tillage etc. to form an economic field, i.e., a parcel of land necessary to keep fully engaged and support one family. These new plots may be sold by auction among the old occupants, restriction being placed on purchase so as to prevent a large number of cultivators from being ousted. The purchase, money may then be divided in a certain proportion among the original owners of pieces, a portion being reserved for expenses, in which Government would also contribute a share. Another mode would be to acquire all the land of the village then to sell it in newly constituted plots by auction as is done by City Improvement Trusts or by Government when laying out new roads in Cities or when extending a town. But we do not recommend its adoption in the improvement of agricultural land. It may result in land speculation and the small holders may be ousted in such numbers as to cause a real hardship.’’ “According to the second method when the restripping has been decided, a list of Khatedars and their holdings is made and the latter are valued at their market price by Panchas. Then the land is redistributed and each Khatedar is given new land in proportion to his original holding and as far as possible of the same value, difference to be adjusted by cash payment. In this method no Khatedar is deprived of his land. Each is accommodated and in the place of his original small and scattered fields gets one plot of almost their aggregate size. It is only a few people whose holding may be very small and whom it would not be expedient to keep on as farmers that may have to lose their small pieces. But they too would benefit as they would get their full value in money.”
Granted that enlargement of holdings is as important as their consolidation we will now turn to the discussion of regulating their size. It is desired by all interested in our agriculture that our holdings should be economic holdings. We would have been more thankful to the inventors of this new, precise and scientific terminology had they given us a precise and scientific definition of an economic holding. On the other hand, it is believed that a large holding is somehow an economic holding.
According to the Hon. Mr. Keatinge an economic holding is: — “a holding which allows a man chance of producing sufficient to support himself and his family in reasonable comfort, after paying his necessary expenses.”
In this lies their error; for consumption is not the correct standard by which to judge the economic character of a holding. It would be perverse accounting to condemn a farm as not paying because its total output does not support the family of the farmer though as a pro-rata return for each of his investments it is the highest. The family of a farmer can only be looked upon in the light of so much labour corps at his disposal. It may well be that some portion of this labour corps is superfluous, though it has to be supported merely in obedience to social custom as is the case in India. But if our social custom compels a farmer to support some of his family members even when he cannot effectively make any use of them on his farm we must be careful not to find fault with the produce of the farm because it does not suffice to provide for the workers as well as the dependents that may happen to compose the family. The adoption of such an accounting system will declare many enterprises as failures when they will be the most successful. There can be no true economic relation between the family of the entrepreneur and the total out-turn of his farm or industry. True economic relation can subsist only between the total out-turn and the investments. If the total out-turn pays for all the investments no producer in his senses will ever contemplate closing his industry because the total out-turn does not support his family. This is evident; for though production is for the purpose of consumption it is for the consumption only of those who help to produce. It follows, then, that if the relation between out-turn and investments is a true economic relation, we can only speak of a farm as economic, i.e., paying in the sense of production and not in the sense of consumption. Any definition, therefore, that leans on consumption mistakes the nature of an economic holding which is essentially an enterprise in production.
An economic holding, therefore, if it is not to be a hollow concept, consists in a combination of land, capital and labour, etc., in a proportion such that the pro rata contribution of each in conjunction with the rest is the highest. In other words to create an economic holding it will not do for a farmer solely to manipulate his piece of land. He must also have the other instruments of production required for the efficient cultivation of his holding and must maintain a due proportion of all the factors for, without it, there can be no efficient production. If his equipment shrinks, his holding must also shrink. If his equipment augments, his holding must also augment. The point is that his equipment and his holding must not be out of proportion to each other. They must be in proportion and must vary, if need be, in proportion. For an economic holding is not a matter of the size of land alone but is a matter of the adjustment of a piece of land to the necessary equipment for its efficient cultivation.
CRITIQUE OF THE REMEDIES
The proposal to enlarge the existing holdings which is brought forward as a cure to the ills of our agriculture can be entertained only if it is shown that farms have diminished in size while the agricultural stock has increased in amount. Facts regarding the size of farms have already been recorded. It only remains to see if the agricultural stock has increased-
Consequently the remedy for the ills of agriculture in India does not lie primarily in the matter of enlarging holdings but in the matter of increasing capital and capital goods. That capital arises from saving and that saving is possible where there is surplus is a commonplace of political economy
For we most strongly hold that the evil of small holdings in India is not fundamental but is derived from the parent evil of the mal-adjustment in her social economy. Consequently if we wish to effect a permanent cure we must go to the parent malady. But before doing that we will show how we suffer by a bad social economy. It has become a tried statement that India is largely an agricultural country.
Now, what does this extraordinary phenomenon mean? A large agricultural population with the lowest proportion of land in actual cultivation means that a large part of the agricultural population is superfluous and idle
India, the Land and the People, Such high pressure of population on land is probably unknown in any other part of the world. The effect of it is, of course, obvious. Notwithstanding what others have said, this enormous pressure is the chief cause of the subdivision of land. It is the failure to grasp the working of this pressure on land that makes the law of inheritance such a great grievance. To say that the law of inheritance causes sub-division of land is to give a false view by inverting the real situation. The mere existence of the law cannot be complained of as a grievance. The grievance consists in the fact that it is invoked. But why is it invoked even when it is injurious? Simply because it is profitable. There is nothing strange in this. When farming is the only occupation, to get a small piece of land is better than to have none. Thus the grievance lies in the circumstances which put a premium on these small pieces of land. The premium, is no doubt, due to the large population depending solely on agriculture to eke out its living. Naturally a population that has little else to prefer to agriculture will try to invoke every possible cause to get a piece of land however small. It is not therefore the law of inheritance that is the evil, but it is the high pressure on land which brings it into operation.
The Impression that Prof. Jevons leaves on his readers is that agriculture suffers in India because of the low standard of living. That a higher standard of life once established will necessitate a large holding because people with a high standard of life will prefer to migrate rather than accept a small holding. As his argument that holdings and standard of life are related is likely to mislead his less thoughtful readers, a word of comment is necessary. A standard of living is merely a level of consumption fixed in habit. But what determines the depth of a particular level of consumption? Undoubtedly the level of production. We may grant the truth of the statement that a rise in the standard of living works as a stimulus to higher production but it is foolish to expect mere wish to be father to the deed. It is actual production alone that can support rise in the standard and not wish, generated though it be either by “travel or education”. If Prof. Jevons means that an opportunity for increased production, leading to a higher standard of life, will disfavour small holdings we are one with him. But he can make himself more intelligible by dropping standard of living and only arguing for increased production; that increased production leads to a rise in standard will be granted by all; but the reverse cannot be maintained Prof. Jevons seems to do, for it may lead to production or predation. To speak of raising the standard of life without speaking of increased production is to give expression to a pious wish, if it does not lead to mischief.
In spite of the vehement struggle that our agricultural population maintains in trying to engage itself productively as cultivators of a farm however small, it is true that judged by the standard of Sir James Caird a large portion of it is bound to remain idle. Idle labour and idle capital differ in a very important particular. Capital exists, but labour lives. That is to say capital when idle does not earn, but does not also consume much to keep itself. But labour, earning or not consumes in order to live. Idle Labour is, therefore, a calamity ; for if it cannot live by production as it should, it will live by predation as it must. This idle labour has been the canker of India gnawing at its vitals. Instead of contributing to our national dividend it is eating up what little there is of it. Thus the depression of our national dividend is another important effect of this idle labour. The income of a society as of an individual proceeds (1) from the efforts made, and (2) from possessions used. It may be safely asserted that the aggregate income of any individual or society must be derived either from the proceeds of the current labour or from productive possession already acquired. All that society can have today it must acquire today or must take out of its past product. Judging by this criterion a large portion of our society makes very little current effort; nor does it have any very extensive possessions from which to derive its sustenance. No doubt then that our economic organization is conspicuous by want of capital. Capital is but crystallized surplus; and surplus depends upon the proceeds of effort. But where there is no effort there is no earning, no surplus, and no capital. We have thus shown how our bad social economy is responsible for the ills of our agriculture. We have also proved how our entire dependence on agriculture leads to small and scattered farms. How a large portion of our population which our agriculture cannot productively employ is obliged to remain idle has been made clear. We have also shown how the existence of this idle labour makes ours a country without capital. This being our analysis of the problem, it will be easy to see why the remedies for consolidation and enlargement under the existing social economy are bound to fail. Those who look on small holdings as the fundamental evil naturally advocate their enlargement. This, however, is a faulty political economy and as Thomas Arnold once said “a faulty political economy is the fruitful parent of crime”. Apart from the fact that merely to enlarge the holding is not to make it economic, this project of artificial enlargement is fraught with many social ills. The future in the shape of an army of landless and dispossessed men that it is bound to give rise to is neither cheerful from the individual, nor agreeable from the national, point of view. But even if we enlarged the existing holdings and procured enough capital and capital goods to make them economic, we will not only be not advocating the proper remedy but will end in aggravating the evils by adding to our stock of idle labour; for capitalistic agriculture will not need as many hands as are now required by our present day methods of cultivation. But if enlargement is not possible, can we not have consolidation? It can be shown that under the existing social economy even consolidation is not possible
Effect of Industrialization on Agricultural
If we succeed in sponging off this labour in non-agricultural channels of production we will at one stroke lessen the pressure and destroy the premium that at present weighs heavily on land in India. Besides, this labour when productively employed will cease to live by predation as it does to-day, and will not only earn its keep but will give us surplus; and more surplus is more capital. In short, strange though it may seem, industrialization of India is the soundest remedy for the agricultural problems of India. The cumulative effects of industrialization, namely, a lessening pressure and an increasing amount of capital and capital goods will forcibly create the economic necessity of enlarging the holding. Not only will this, but industrialization by destroying the premium on land give rise to few occasions for its sub-division and fragmentation. Industrialization is a natural and powerful remedy and is to be preferred to such ill-conceived projects as we have considered above. By legislation we will get a sham economic holding at the cost of many social ills. But by industrialization a large economic holding will force itself upon us as a pure gain.
We prefer to cure agriculture by the reflex effects of industrialization. Lest this might be deemed visionary we proceed to give evidence in support of our view. How agriculture improves by the reflex effects of industrialization has been studied in the United States in the year 1883. We shall quote in extenso the summary given by the London Times: “The statistician of the Agricultural Department of the United States has shown in a recent report that the value of farm lands decreases in exact proportion as the ratio of agriculture to other industries increases. That is, where all the labour is devoted to agriculture, the land is worth less than where only half of the people are farm laborers ; and where only a quarter of them are so engaged the farms and their product are still more valuable. It is, in fact, proved by statistics that diversified industries are of the greatest value to a Stale, and that the presence of a manufactory near a farm increases the value of the farm and its crops. It is further established that, dividing the United States into four sections or classes, with reference to the ratio of agricultural workers to the whole population, and putting those States having less than 30 per cent of agriculture and of agricultural labourers in the first class, all having over 30 and less than 50 in the second, those between 50 and 70 in the third, and those having 70 or more in the fourth, the value of farms is in inverse ratio to the agricultural population, and that where as in the purely agricultural section, the fourth class, the value of farms per acre is only $ 5.28, in the next class it is $ 13.03, in the third $ 22.21, and in manufacturing districts $ 40.91. This shows an enormous advantage for a mixed district. Yet not only is the land more valuable the production per acre is greater, and the wages paid to farm hands larger. Manufactures and varied industries thus not only benefit the manufacturers, but are of equal benefit and advantage to the farmers as well.”
This will show that ours is a proven remedy. It can be laid down without fear of challenge that industrialization will foster the enlargement of holdings and that it will be the most effective barrier against sub-division and fragmentation. Agreeing in this, it may be observed that industrialization will not be a sufficient remedy for consolidation. That it will require direct remedies may be true. But it is also true that industrialization, though it may not bring about consolidation, will facilitate consolidation. It is an incontrovertible truth that so long as there is the premium on land consolidation will not be easy, no matter on how equitable principles it is proposed to be carried out. Is it a small service if industrialization lessens the premium as it inevitably must? Certainly not. Consideration of another aspect of consolidation as well points to the same conclusion: It should never be forgotten that unless we have constructed an effective barrier against the future subdivision and fragmentation of a consolidated holding it is idle to lay out plans for consolidation. Such a barrier can only be found in industrialization; for it alone can reduce the extreme pressure which, as we have shown, causes subdivision of land. Thus, if small and scattered holdings are the ills from which our agriculture is suffering to cure it of them is undeniably to industrialize. But just where does India stand as an industrial country?
While other countries like the U.S.A. starting as agricultural are progressively becoming industrial, India has been gradually undergoing the woeful process of de-urbanization and swelling the volume of her rural population beyond all needs. The earlier we stem this ominous tide, the better. For notwithstanding what interested persons might say no truer and more wholesome words of caution were ever uttered regarding our national economy than those by Sir Henry Cotton when he said “There is danger of too much agriculture in India.
This impressive paper on the economy of small agricultural land holdings in India was published in the Volume 1 of 1918 of ‘Journal Of The Indian Economic Society’. Dr. B.R.Ambedkar was just 27 year old then
Source : Summary extracted from DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES Vol 1. Refer complete thesis for detail understanding.