Five Conditions for Free Enterprises

Professor Raghuram Rajan, the Governor of Reserve Bank of India, delivered the fourth Odisha Knowledge Hub Lecture at the Secretariat Conference Hall, Bhubaneswar on 21 May 2016. His talk was titled in a generic sense India - Prospects and Challenges. The focus of the lecture was on facilitating free enterprise (particularly, the small and medium ones). Governor Rajan laid out the need for five conditions.

• Ease of entry and exit
• Access to input and output markets
• Predictability in earnings (security of property rights and transparency guarantees)
• Facilities to enhance capabilities and competencies
• Safety-nets to safeguard against vulnerability for the entrepreneur as also the worker (bankruptcy, old age, sickness, social exclusion and unemployment among others)

Rajan's concern for the small seems to find resonance in some of his earlier work including A Hundred Small Steps. I appreciate this take. Nevertheless, I have the following concerns.

First, facilitating small enterprises and allowing them to grow is necessary to induce growth. While agreeing to this requirement, I would like to point out that in a logical sense this can be a catch-22 scenario. In other words, if one extends this argument ad infinitum, which many do, then it would mean that few big players (who might have started small) end up dominating the economy. This is somewhat paradoxical because the argument has been used to create a level playing field for the small players. There is nothing wrong in becoming big and one should appreciate their achievement. But then these entities have created a space for themselves and they do not need any additional support. Besides, we should also guard against the possibility where entities become too big to fail.

Second, Governor Rajan's suggestion that norms and institutions that have become dated and out of context and impede progress need to be done away will pave the path where informal entities become formal entities. In other words, the state should create an environment where business entities have more to gain in being a formal entity than in continuing to remain informal that facilitates rent-seeking behaviour. This will be a good thing for the economy and will also add to the state's revenue. The problem with this articulation is an excessive concern on the economic entity. It misses out the fact that when it comes to employment, more than 90 per cent of the workers are informal workers and this informalisation of the workforce is increasing even in entities that are themselves formal (both in the private and public sectors including the government). The state of the informal workers and their rights to organise themselves, to do away with forced labour (not only in the form of slavery but also its manifestation in modern forms), to do away with exploitation of children (including trafficking), and to avoid discrimination (not only in wages, but also in opportunities).

Third, Professor Rajan's emphasis on enhancing capabilities and provisioning for safety-nets may give the impression that it resonates with what Professor Amartya Sen et al have been articulating. But, this is not the case. Governor Rajan's concerns is more for the enterprises. The concern for individuals emanate from the fact that they are instrumental in facilitating the enterprises. In the Amartya Sen et al human development and capability framework it is intrinsic to focus on enhancing capabilities and provision for safety nets because humans are ends in themselves. 

From a lay perspective, it would seem irrelevant whether the focus on human ends is because they are instrumental in facilitating something else; or, it is intrinsic to facilitate their beings and in doing that their instrumental advantages will automatically emerge. However, from an academic perspective, the focus on the enterprises, as in Governor Rajan's talk, may have an excessive reliance on a money-metric measure, as a proxy for the Utilitarian notion of happiness; while the focus on ends (may go beyond humans) could have multiple perspectives, a reasonably plural Rawlsian world.

A fourth concern, independent from Professor Rajan's talk, is that the Government of Odisha should look at some of the success stories from East Asian economies (particularly Taiwan and Japan; see the video and presentation slides of a talk on Rising India that refers to lessons from Taiwan). They have some lessons in facilitating free enterprises for the micro and small entities.

Despite these concerns, the suggestions by Governor Rajan are worthwhile. It would help the Government of Odisha or for that matter any other state government as also the central government to address some of the concerns raised in articulating a case for facilitating free enterprises through the above-mentioned five conditions, but where the intrinsic relevance of the people-centric aspects is acknowledged.

An open letter from an ordinary citizen

The general elections have been concluded in India. It is a foregone conclusion that her next Prime Minister will be the Bharatiya Janata Party's (BJP's) Mr Narendra MODI. Much has been said and there are two broad possibilities that one foresees. The best-case scenario is the 'Making Of Democratic Institutions', an euphemism that I use for development, governance and all that the supporters are enthused about. As against this, the worst-case scenario is that it would 'Mar (nay, M...) Our Democracy Inevitably', an euphemism that I use for crony capitalism and divisiveness among others that many others fear. For both these scenarios, the acronyms match with the last name of our Prime Minister.

In this MODI vs MODI diatribe, the development vis-a-vis crony capitalism discussion will continue to remain a matter of interpretation and ideological moorings and the debate will be difficult to conclude. There will also be differences of opinion from withing the ruling party and its affiliates and one has to see which direction it takes. The so-called Gujarat-model or the trumpeted Kerala-model. Well, one has to take the best of both worlds and make Jagdish Bhagwati and Amartya Sen come to an agreement.

The contentious part will be juxtaposing governance and divisiveness. Ideally speaking, any polarization leading to divisiveness anywhere should be considered as a failure of governance. However, from a practical consideration it is possible that the government reaches out to a larger section while ignoring a smaller section. What is more, the principle of exclusion could be based on caste, class, gender, religion and other such identities. If these fears are addressed they will definitely not exorcise the ghosts of the past, but they will bode well for the country's future. Where will we head to? Only time will tell.

In reality, the actual path will be somewhere in between. Politically, if extreme adversities do not come in the way, the future looks like advantage BJP. It is hear that I am concerned as an ordinary citizen because for an effective democracy we need a credible and responsible opposition, which is missing. True, the drubbing of 2014 will lead to soul-searching by all parties, but it is difficult to know what would emerge.

The Congress still seems to have a proportion of population voting for them. Perhaps they identify them with the freedom movement or because of their loyalty to the family. However, if the party has to come-back then it has to go beyond these loyal voters and for that it needs to get out of dynastic politics and develop its grassroots organisation - a tall order indeed.

This is also true for the multitude of regional parties that have lost. They need to get back to their drawing board and re-invent themselves. Those who have withstood the change will end up supporting the ruling alliance because of the dynamics of centre-state relationships, but also because of their personal vested interests. 

Today, the only party that seems to be articulating against vested interest in word and deed is the Aam Aadmi Party (AAP). But then some of their elected representatives from Delhi seem to have developed cold-feet with the prospect of loosing a fresh election and are clamouring for a fresh go at government-formation. If hastily resigning was a sign of immaturity then their trying to get back to power again when they do not have the strength and after the recent drubbing will be identified with opportunism. This is a catch-22 situation for them.

AAP may try their old style referendum to know what people in Delhi want, but even if people want they cannot form a government because either BJP or Congress has to agree to that arrangement. In any case, BJP fresh with a victory may now like to go for a fresh election and this time AAP will have a tough time.

Yes, AAP did increase its vote share in Delhi, but it has also lost some supporters and the BJP has increased its share by a larger proportion. Will AAP be able to get back those votes that moved away from it if there is a fresh election? Will it be able to add votes from those who did not vote for them or BJP? Will it be able to counter the new BJP campaign that will also have their government at the centre? Will it have resources and volunteers to campaign for it if there is a fresh election? 

At the national level, obtaining resources and volunteers will be essential for building up a strong organisational structure. Where are they going to get this from in the next five years? How does it plan to address vested interests within their organisational structure? Does it plan to build alliances or at least seat sharing or not putting up candidates if another party seems to have a reasonable candidate who may have disagreements with them but subscribes to some people-centric principles and is not corrupt?

What are the plans that they have for the four constituencies that they have won in Punjab. In principle they are against use of MP and MLA funds. This will be an ideal set-up if the government is also theirs. However, with the conventional governance structure it would be better if the candidates for these four constituencies use the funds in a meaningful way. 

As an outside lay citizen, the advantage of AAP is that it has taken into its fold people with different views and ideologies. This would give space for internal deliberations and space for multiple views. This itself makes it like the Congress party of yore and it should take advantage of this.

Idealism is good and people respect AAP for that. However, practical considerations are also important. For instance, emphasis need not be on legislation always and that too when one does not have a majority, but rather focusing on governance and achieving many other things that could be possible without legislation.

To sum up, the future seems to be advantage BJP. Congress and the multitude of regional satraps need soul-searching. AAP that once provided hope and aspirations to some will have a lot of questions to answer. It is a churning between the Congress, the regional satraps and AAP that could perhaps give a reasonable opposition. Let us wait and see.

My other recent election related musings are:

A tall order there for pluralism to resurface

ABC of Indian Elections 2014

Rawlsian veil, Smithian impartiality and Indian Elections of 2014

Poverty as Unfreedom: Is it a State of Mind?

The renowned philosopher J. Krishnamurti in his Freedom from the Known (Chapter 8) said “Freedom is a state of mind - not freedom from something, but a sense of freedom...” From this perspective, an individual’s attachment to either physical or mental aspects would be a hindrance to freedom, or, rather, to a sense of freedom.

From a different perspective, Amartya Sen would suggest that doing away with hindrances that would improve physical or mental well-being will improve freedom. This is more in line with freedom from something and it is in this sense that poverty is an ‘unfreedom’.  We will focus on this latter interpretation and try to understand the notion of poverty, as a state of mind with the help of two stories.

One story is about a landlord who was envious of his peasant neighbour, as the latter was content and never agreed to work for the landlord.  One day the landlord left a bag of 99 gold coins at the peasant's house and when asked also denied that the bag was his. As there were no other neighbours, the peasant was happy to have got this bag of gold coins. But, this happiness was short-lived. Counting the coins led to a search for the 100th coin that was not found and the peasant took a decision to work hard and save so that she could add that 100th coin to the bag. She was now willing to work for the landlord and sacrifice small pleasures of life like spending time with her family. This change of lifestyle in pursuit of that elusive 100th gold coin also did away with her mental state of being content.

The other story is about a ruler who had difficulty in managing the affairs of the state. This left her worried and with many a sleepless nights. A well-meaning adviser suggested that if she were to stay for one day in the house of a person who had no worries then her worries would vanish. A search was initiated and with much difficulty a person who did not have any worries was identified, but to the ruler’s dismay, the person did not have a house. Of course, the person to take another term from Sen, did suffer from ‘physical condition neglect’, but this did not affect the person’s mental state of being worry-free. Over the years, the ruler learnt to be calm and as a consequence gave more time to improve the well-being of the people, which among other things included shelter for the homeless.

It is possible that a person who is homeless or jobless or sick or suffers from some other deprivations is content and happy about her situation. This, according to Sen, is an adaptive preference. However, this will not prevent the homeless person from valuing, and hence, desiring the possession of a house. In fact, a reliance on the mental state alone would lead to this ‘valuational neglect’ along with the earlier mentioned ‘physical condition neglect’. A welfare-state should address these neglects.

An aspect that is increasingly accepted in a discourse on poverty is that it is multidimensional. The multidimensional poverty index (MPI) computed for India by the Oxford Poverty and Human Development Initiative (OPHI) indicates that between 1999 and 2006 the headcount ratio declined from 56.8 per cent to 48.5 per cent. Though the reductions are impressive, yet the levels remain higher than the neighbouring countries of Bangladesh and Nepal that have relatively lower per capita incomes. The Global Hunger Index 2013 ranks India at 66 among 78 countries and considers the situation to be alarming. An estimate for 2010 used in the Human Development Report 2013 shows that less than two-fifths of the 25+ population have completed their secondary education. Thus, the material/physical condition neglects in India are serious.

One of the livelihood interventions in India, to address some of the deprivations, has been through the formation of female self-help groups. At the national level, this is being spearheaded by the Ministry of Rural Development (MoRD) through Aajeevika - livelihood mission. Similar state level interventions exist in Andhra Pradesh (Indira Kranti Patham), Bihar (Jeevika) and Kerala (Kudumbashree) among others.  There have also been initiatives by non-governmental organizations in different parts of the country. In fact, in August 2013, MoRD entered into an agreement with PRADAN (Professional Assistance for Development Action) that already works in more than 40 of the poorest districts largely located in the Naxal affected areas of the country to facilitate this. A recent impact evaluation of PRADAN that this author was part of indicates that their livelihood intervention enables capabilities of individuals to manage themselves, organises them into producers’ companies/cooperatives and facilitates forward/backward linkages. For instance, they have promoted the tasar silk product now branded as Eco Tasar that is being sold in Fab India and other outlets.

To sum up, being content, worry-free, and happy are essential aspects of mental well-being, but these will not help us identify the poor. It is the civic, economic and other deprivations (being without food or home or job or health care or social dignity or rights among others) that should be the basis for identifying the poor. Organizing the poor and enabling their capabilities, which could include their mental strength and self-confidence, should be important aspects of implementation, but only after the poor are identified and the interventions focus on their deprivations. We end by referring to Mahatma Gandhi’s talisman – “whenever in doubt think of the poorest person and you will find your doubts melt away.”

Rawlsian Veil, Smithian Impartiality and Indian Elections of 2014

I have decided to come out of my blog hibernation with the  General Election 2014 in India having traversed two-thirds of its path. Six phases of elections are over and another three phases are left and the results would be known to us in another 20 days time by 16 May 2014. 

The immediate reason for my writing is my being at the International Conference on Global Justice and the Global South where I presented a paper on "A Possible Defence of Rawls" where one of the points was to show that Rawls' original position under a veil of ignorance would give the same outcome as that of the Smithian impartial spectator that Amartya Sen invokes. To explain this, I used an old example that I have been discussing in a related context.

There are three candidates contesting to represent the citizens of a democratic polity. The citizens have to elect one person to represent them. Whom should each citizen elect. The details of the three candidates is as follows.

• X has moved up the political ladder, is with experience and seems to have the support base among some important sections.
• Y belongs to a family that has sacrificed for the upkeep of democratic values and institutions in the country and has been groomed to be a leader.
• Z works for the people sincerely and makes genuine efforts to be inclusive and can be identified with an ordinary citizen.

Both the thought experiments take out the personal slant or vested interest associated with it and the conclusion with both the thought experiments will be the same. The three candidates in the above example have an uncanny resemblance to some candidates in the ongoing elections.

X may be identified with the Prime Ministerial candidate of the Bharatiya Janata Party (BJP) and its alliances. Y seems to resemble a prominent leader from a prominent family of the Indian National Congress (INC). Z could be identified with the leader from the Aam Aadmi Party (AAP) who was the Chief Minister of Delhi for 49 days. These resemblances, if any, are coincidental as I have been discussing this example in my classes and lectures for at least the last five years and much before AAP was formed or BJP declared its Prime Ministerial candidate. It is true that dynastic politics had already taken roots in India by then, but then, it is not limited to the INC alone.

While discussing with people over the years there are many who have tried to go under a veil or be impartial and they invariably come out with arguments in support of Z. But, now, it is election time and with the blitzkrieg marketing paraphernalia that some parties have at their disposal it is difficult for people to be under a veil or be impartial. It is this that may not augur well for a democracy.

Why should coming out of a veil be a problem in a democracy where citizens ought to vote for themselves. True, citizens should come out of their veil when it comes to information - their decision ought to be an informed choice and being under a veil of ignorance does not prevent that. The veil of ignorance is about caste, class, religion and other such identities that could be detrimental for a democratic polity.

I must say that I have had long discussions on the current elections with many and while most of them think that I am a member of a particular party, I must make it clear that I am not. It is, however, quite possible that my thoughts, arrived at independently under a Rawlsian veil or Smithian impartiality or Gandhiji's Talisman, would be closer to one particular party over the others.

Daughters are Precious: First Episode of Satyamev Jayate

The much awaited Satyamev Jayate being produced and hosted by Aamir Khan aired its first episode Daughters are precious. This did remind one of Amartya Sen's paper on 'Missing Women - revisited' (BMJ, 2003). The show brought into focus a relevant social problem of female foeticide and declining sex ratio in India (see Figure 1 below). For this as also other information given here we rely on the Gender Composition of the Population, Census of of India.

Figure 1: Sex Ratio (0-6 Years) for India.
Source: Statement 16, Gender Composition of the Population

Further, as seen from the Distribution of States/Union Territories by Sex Ratio for 0-6 Years in 2001 and 2011 given in Table 1, this decline in 0-6 Years, is across the board.

Table 1: Distribution of States/Union Territories by Sex Ratio for 0-6 Years in 2001 and 2011.
Source: Statement 17, Gender Composition of the Population

The Sex Ratio for 0-6 years across states for 2001 and 2011 are also indicated in Maps 1a and 1b below. In the Maps, red colour indicates lower sex ratio and as one moves from red to light brown to light yellow to light green to dark green one has higher sex ratios. The colours seem to have shifted towards red depicting lower child sex ratios in 2011.

Map 1: Child Sex Ratio across States, 2001 (left) and 2011 (right).
Source: Maps 12 and 13, Gender Composition of the Population

Some of the facts (going against some popular myths) that the show unraveled is that:

• Such incidences are higher in urban not rural
• Such incidences are higher among wealthier rather than the poor
• Such incidences are higher among the educated rather than the illiterate 

The show also pointed out the implication of a world without girls. In particular, how the unmarried men are a nuisance for others adversely affecting safety and security of the population in general and the girls in particular. It ended with a positive note by pointing out a success story within the country of how the district of Nawanshahr in Punjab turned the tied.

Most importantly, the show called for an appeal to people like you and me to take a call on whether the Government of Rajasthan should come up with a fast track court to try all cases spread across the state that were exposed in a single sting operation. If you agree then SMS Y for Yes or N for No to 5782711. Now, it is for you and me to take up this Satyamev Jayate.

Those interested may have a peek at my related blog on Why Girls Grow Up With Girls? True, this needs further probing, which I will take up soon.

8 May 2012:

For an alternative interpretation see, Does the truth prevail in Aamir Khan’s Satyameva Jayate? by Satyen K. Bordoloi.

For an inspired take from this blog see, Should Aamir Khan promote rice, or water? by Pramit Bhattacharya. Also see, Inspiration, not copying by KV Lakshmana for the controversy around the programme's theme song.

For one of its first impacts see, Licenses of 64 nursing homes suspended.

For a forceful article based on National Family Health Survey data of 1999-99 see, Sex-selective abortions in India by F. Arnold, S. Kishor and T. K. Roy in December 2002 issue of Population and Development Review.

For an article based on Census 2001 see, The Missing Girl Child, by  Mahendra K Premi in 26 May 2001 issue of the Economic and Political Weekly.

Also see, Missing Women - Revisited (4 December 2003) and Missing Women (7 March 1992) by Amartya Sen in BMJ (earlier known as British Medical Journal).

In search of a paradigm

Debates and discussions in the academic, media and public policy circles with regard to socio-economic issues have a tendency to identify positions as either Right or Left. The questioning mind thinks whether Right is right and  Left is to be left or is it the other way round where Right is to be left and Left is right. One talks of the virtues of the market a la Adam Smith and the other the virtues of a classless society a la Karl Marx.

Daniel Mackie, Thinkers, Adam Smith and Karl Marx

Among lay persons the discussions at times can point to the right-hand use among people being the norm whereas the left-hand use being an aberration by the supporters of Right, which is countered by stating that left-hand users are smarter and intelligent by the supporters of Left. There are others who want to broker peace and point out that there are advantages in both the hands while conceding that there can be situations where we are more attuned to the right and some others where we are more attuned to the left. But then a middle position leaves an unanswered question with regard to the appropriate paradigm. Are we both Right and Left? Or, are we neither Right nor Left? These questions put us in a catch-22 situation.

Getting back, the virtues of the market as also that of classless society have their own merit. The market gives the freedom to individuals to exchange their goods and services and because of the existence of large number of buyers and sellers none of them can determine the prices and it is this that can do away with any vested interest. A classless society does away with any kind of hierarchy and with it any power relationships that can lead to vested interest are also done away with. Both these are ideal situations that do away with some form of vested interest.

The doing away of vested interests is also articulated through the impartial spectator in Adam Smith's Moral Sentiments and the need is conveyed by the corruption of our moral sentiments, which is occasioned by the disposition to admire the rich and the great, and to despise or neglect persons of poor and mean condition. The role of the impartial spectator is taken forward in recent times by Amartya Sen in The Idea of Justice.

Another idea of doing away with vested interest is John Rawls' 'original position'. Here the individuals enter into an agreement by remaining under a veil of ignorance where they do not know their identities, as articulated in A Theory of Justice.

A very powerful call to our moral power is invoked when Mahatma Gandhi gave us a talisman. This talisman suggests that whenever in doubt an individual should recall the face of the most vulnerable person and contemplate whether the action to be taken will be of any help to that person and provide them with swaraj and it is this that will lead to one's doubt as also one's self melting away.  There will be no vested interest.

Steve Jobs in his commencement address (also see video below) to students at Stanford University refers to three stories from his life. The third one states that since he was 17 years old he has been starting his day every day by contemplating that it could be his last and it is this invoking of death that does away with all redundant things - external expectations, pride, fear, embarrassment or failure; only truly important things remain.  This reminds us about John Donne's Death be not proud, but more importantly it is also a very powerful moral power that does away with vested interest. 

Speaking about the contemporary political scenario in India one cannot but agree about the public perception of honesty and integrity by its Prime Minister Dr Manmohan Singh. At least with regard to financial propriety at a personal level and without going into ideological differences and some other acts of omission and commission, one can also name half-a-dozen  Chief Ministers from different states cutting across political parties such as Mamata Banerjee of West Bengal, Manik Sarkar of Tripura, Narendra Modi of Gujarat, Naveen Patnaik of Odisha, Nitish Kumar of Bihar and Prithviraj Chavan of Maharashtra among others who are also known to satisfy the acid test of public probity in some sense. This is a good thing and a necessary condition to root out vested interests leading to corruption, but it is neither a sufficient condition nor the only test required for good governance.

For instance, being personally honest does not mean that we can assume that everyone around us is also honest. The assumption of trust is a positive thing, but this cannot be the basis of a statecraft to allow markets to rule the roost. Similarly, espousing a classless society through different process does not necessarily mean the absence of hierarchies and vested interests, as the recent experiences in the umpteen years of Left rule in West Bengal or the fall of the erstwhile Soviet Union suggest.

Markets or a classless setup are means to do away with some forms of vested interest so that people live in a fair society.  Thus, as a deeper reading of Adam Smith, Karl Marx and John Rawls would show, it is people with plural concerns who should be at the centre of focus - the ends. As Amartya Sen would say, it is the enhancing of capabilities of people so that they can be and do what they have reason to value is what matters. These have been articulated in numerous ways in the Human Development Reports of the last two decades.

So, to sum up, the question of either Right or Left, or, neither Right nor Left are not the appropriate ones. One can use, markets as also classless set-up or any other means or none of them to help people depending on the context. One should take advantage of these as also other means and tools when required, but should also be on the guard for adverse implication that can come out of the usage of these. But, most importantly one should never loose sight of the people-centric approach, our end. It is this that takes us in our search for a paradigm to one called 'human development'.

An interesting note, tangentially related is Karl Marx and Adam Smith Drop In On Occupy Wall Street. This link and the link to some of the photographs have been put up on 25 April 2012.

Size-class and returns to cultivation in India

'Size-class and returns to cultivation in India: a cold case reopened' is the title of a recent working paper from IGIDR that Sarthak Gaurav and I have co-authored. This revives the age-old debate on farm size and productivity that started in the early sixties  by Amartya Sen. Some excerpts from the abstract, introduction and conclusions of the working paper are given below. An abstract of its revised version published in Oxford Development Studies is also given below.

Abstract

This paper investigates the relationship between returns to cultivation per hectare and size-class of land cultivated in India, using unit level data from the 59th round National Sample Survey, 2003. The analysis is done separately for ‘kharif’ and ‘rabi’ − for total value of cultivation from all crops at the all India level. The empirical evidence rejects the null hypothesis of no relationship and points to the existence of an inverse association. We argue that the efficiency of the small-holders has to be taken with a pinch of salt because their low absolute returns brings into focus the question of their livelihood sustainability which is further aggravated on account of higher unit costs. Being the first exercise in a series of proposed explorations into disaggregated analyses across states, and for specific crops, it opens up the classic debate on farm size and productivity in the 21st century.

Introduction

In recent years, Indian agriculture has been reeling under a crisis and one of the concomitant outcomes is poor returns to cultivation which has rendered farming as an unsustainable livelihood option – particularly for the marginal and small holders.2 This also raises the long debated question of inverse relationship between size-class and productivity, that is, whether marginal and small farmers are relatively efficient vis-à-vis larger size-class farmers? The current paper explores this aspect of Indian agriculture using unit level data from the Situation Assessment Survey of Farmers, administered in the 59th round of the National Sample Survey (NSS).This survey was conducted during 2003 and collected information for the agricultural year 2002-03.This is the latest (and the largest) nationally representative data set for analyzing the state of farming in India. By conducting the analysis at the unit level, to the best of our knowledge, we provide the first baseline for the 21st century. An attempt has been made to assesses the relationship between size-class and returns to cultivation; and in doing so, it expects to contribute and open-up the long drawn out, and till recently dormant debate.

...

Conclusions

An analysis of size-class and returns to cultivation using nationally representative data from the Situation Assessment Survey of Farmers (SAS) of the 59th Round of the National Sample Survey, for the period 2002-03 opens up the classic debate on the efficiency of the small holder. Our empirical results, computed separately for kharif and rabi, at an aggregate all India level as also for each size-class reject the null of absence of any relationship between size-class and productivity and indicate the existence of an inverse relationship. While the small holder seems efficient the low absolute returns raises questions on livelihood sustainability. This is also important from the perspective of the risk bearing capacity of the small-holders given the fact of their per hectare costs being higher.

To the best of our knowledge, these are the first estimates for the 21st century and at the pan-Indian level; and could be used as a baseline for comparative analyses in the future. Our empirical evidence can be considered as an important contribution to the literature on size-class and productivity relationship. While opening up this cold case we are aware that one needs to go down to further details and control for other factors that may affect returns to cultivation. It would be equally important to analyse the variation across states, social groups as also the crop-specific patterns. We plan to do some of these in a series of future exercises.

In spite of the limitations of our study, it is a first attempt at a fundamental problem in Indian agricultural using a nationally representative sample. Given the relevance of our findings in corroborating the story of a crisis in Indian agriculture on one hand, and with the promise to reopen the classic debate on farm size and productivity on the other, we argue for the need for further inquiries, and if feasible, a future round of the SAS as it is almost a decade since the first (and only) survey.

Those interested in the full paper can click, 'Size-class and returns to cultivation in India: a cold case reopened'.

A revised version of the paper is now available as 'Farm size and returns to cultivation in India: revisiting an old debate' Oxford Development Studies, Published online 21 Nov 2014.

The abstract of the revised version is as follows. This paper revisits the long-debated question of the relationship between farm size and productivity by studying the relationship between area cultivated and net returns to cultivation in India using a nationally representative data-set. The analysis is carried out separately for the two major agricultural seasons, kharif and rabi, and for both the seasons pooled together. Our findings suggest the existence of an inverse relationship, even when we control for a number of household and farm characteristics and even when we treat factors such as household type (occupation), social group (caste), agro-climatic zone (region) and agricultural season as fixed effects. The result is also robust to correction for selection bias. However, the efficiency of the smallholder as a result of this greater productivity has to be treated with some caution as it ignores the low absolute levels of their returns, which raise questions about the sustainability of their livelihoods. This is further aggravated by the fact that they pay relatively higher unit costs and because of their greater dependence on purchased inputs.