Looming Danger


Recently West Bengal has been in news reports for problems associated with land acquisition in Singur and Nandigram. The principal opposition leader, Ms. Mamata Banerjee, has been extremely active with her shrill denunciation, hunger strike, her encouragement of ultra-left and Islamic forces and her adamant opposition to the use of farm land for industrial use. I will in this article argue that her adamant opposition to the use of farm land for non-agricultural land is misplaced and that her encouragement of Islamic forces is a looming danger. I understand her anger against CPI(M) but her tactics is incorrect. I will discuss the reasons why industrialization is a must and that some farm land will have to be used for industrialization and urban use. I will point out the dangers of using Islamic forces to score points against CPI(M) and the correct strategy.
Structural problem of Indian economy

Let me start with a Recent BRIC report of Merryl Lynch whch made the following points:

1. In India, labor is nearly 4 times more productive in industry and 6 times more productive in services than in agriculture, where there is a surplus of labor. Economic theory tells us that as labor moves from low-productivity sectors such as agriculture to high productivity sectors such as industry or services, overall output must improve.

2. Given that the movement from agriculture to other sectors (which in India’s case is roughly equivalent to the move from rural to urban areas) is still in its initial phase, the expectation is that the gains will continue to increase for several decades. Indeed, agriculture still employs close to 60 % of the labor force with negative marginal productivity.

3. The 21st century is set to become India’s ‘urban century’ with more people living in cities and towns than in the countryside. India has 10 of the 30 fastest-growing cities in the world and is witnessing rapid urbanization. The growth is happening not in the large cities, but in small and mid-sized towns. In 1991, India had 23 cities with a million or more people. A decade later, it had 35.

4. The projections show that another 140 million rural dwellers will move to urban areas by 2020, while a massive 700 million people will urbanize by 2050. This is because India’s urbanization rate of 29% is still very low compared with 81% for South Korea, 67% for Malaysia, and 43% for China.

5. The implications of urbanization for productivity growth are significant. Movement of labor across sectors, primarily from agriculture to manufacturing and services, adds 0.9% to GDP growth a year. Demand for urban housing and infrastructure such as electricity, health care, sanitation, and education is set to jump several folds. Policy will, however, need to address basic infrastructure shortfalls in order to take advantage of the ‘urbanization bonus’.

The BRIC report shows that urbanization is already taking place in India. A staggering number of people, 700 million, are expected to migrate to urban areas by 2050. Why will they migrate? To understand the reason for migration we need to look at the employment structure in India.


Economy  Sector Population in millions GDP sectoral Contribution in billion $s GDP per capita
   in nominal $s
Agriculture 600 200 333
Industry 50 200 4000
Services 350 400 1142


A look at the above table shows in a flash the misery endured by people dependent on agriculture. People working in the industry and the services sector are earning significantly larger income than those in agriculture. There is another way to look at the structural problem in the Indian economy.  The average per capita income is nominally $ 800 or if you prefer $ 3500 (purchasing power parity) PPP. The problem is that the money is not distributed evenly. I give below a table that gives approximately the distribution.


Population in millions Per Capita income in nominal $s Per capita income PPP $s
300 $1600 $7000
450 $600 $2600
250 $300 $1300

The great Indian poverty arises because 700 million people are below the  average per capita income of $ 800 with 250 million landless agricultural labourers essentially destitute. No strategy that ignores the lack of income of these quarter of a billion agricultural landless labourers will succeed in lifting India out of poverty. It is this 700 million people (which will balloon to 1000 million by 2050) who will migrate to urban areas by 2050.

Rationale for use of farm land for industrial use

Any one can see what will happen if there is a blanket ban on the conversion of farm land to urban use. The entire urban infrastructure in India will collapse as 700 million additional people move to our cities. We have no way out but to convert farm land to urban and industrial use. Since we have no choice in the matter, the state should adopt policies that encourage new towns with superb infrastructure. A look at Tables 1 and 2 will convince the reader that urbanization and creation of jobs in industrial and services sectors will lift the incomes of hundreds of millions of people and will empower the bottom most 250 million people.

Answers to some objections raised against such conversion

Ms. Mamata B and her supporters are opposed to such conversion on the ground that this will reduce farm land and affect food security. It is in fact the exact opposite. Food security will never be attained by letting our most scarce resource, land, lie in the hands of 600 million subsistence farmers. We have to reduce the number of farmers to 20-30 million highly educated farmers so that these people can bring to bear advanced scientific techniques to agriculture production. Our current food security is illusory since it is being attained by forcing malnutrition on the bottom 250 million people.

The issue of dignity of farmers have also been raised. It has been argued by some that farmers in India will lose their dignity if they are moved to industry and services sector. I am frankly puzzled by this claim to dignity. How can people who are without education and health care facilities, who earn less than $2 a day have dignity?

Another objection raised by Ms. Mamata and her supporters is why new industries should not be set up on currently unused 56,000 acres of land occupied by sick industries in West Bengal. The answer to that objection is that even with such a strategy, there is still a requirement of converting farm land to urban use because we will have to accommodate an additional 60 million people (1 billion people in India as a whole) in urban areas of West Bengal by 2050.

One other objection raised by Ms. Mamata and her supporters is that West Bengal Government is ignoring the problems of Jute and tea industries while talking of industrialization. They are correct but as I will now show it is not possible to generate high paying employment from jute and tea industries.

Let us take a look at the jute industry, for example. The jute industry in West Bengal employs 300,000 workers and buys jute from 5 million farmers. Its total income is of the order of 1 billion $s. As you can see the per capita income of a jute worker or farmer is of the order of $ 200. This shows again that agricultural activity can not generate enough income to remove poverty. We have to move people to industry and services sector and that will require moving people to urban areas. Hence conversion of farm land to urban use is unstoppable.

Questionable Tactics

Ms. Mamata is playing with fire when she is going along with questionable people like Mr. Saiqul Choudhury of Jamiat ulema i Hind. She should realize that the muslim population of West Bengal has gone up from 19 % in 1975 to 25 % today and will go up to 30 % in 2025. Any encouragement of muslim communal politics will endanger the entire state specially since we are neighbours of an Islamic state like Bangladesh. I hope Ms. Mamata stops taking support from people like Mr. Choudhury.

Proper Tactics

Ms. Mamata, instead of blindly opposing CPI(M) policies, should raise public consciousness on the need for proper compensation to farmers whose lands have been taken for industrial use. She should raise public consciousness on the need to reign in the murderous cadres of the CPI(M) party. She should raise the consciousness of the public on the issue of systematic politicization of the police, teachers, and other public servants.

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