I do not need to provide a comprehensive evidence to the claim that Indian farmer remains one of the poorest in the world. Every now and then we hear rich people showing sympathy to poor Indian farmers. But we need to investigage why Indian farmers are poor in first place. 

What is poverty ?

Poverty is lack of wealth. But what is wealth ? Contract to what one might think, money is not wealth. Money is merely how we measure wealth. Wealth is always something that a society needs. Most common form of wealth historically is food, clothing and shelter. The more of this your produced the wealthier you were. But then each human being needs only so much food, clothing and shelter. After that humans invented more things and luxuries, cars, planes, mobile phones, air conditioners, health treatments and so on. Other than food, clothing and shelter society also wants these in great amount. If you have figured out how to create wealth, you have figured out what society needs and how to produce it. 

It is not simple of produce wealth. Some people are good at it and some people are not so good at it. Some people thrive on it, some people dont. In fact most of the busiensses around us fail pretty soon telling us that it is incredibly hard to produce wealth. 

Indian farmers are poor because they are not producing enough wealth.

It is irrelevant how hard you work.Irrespective of how hard you work you might still fail to produce any wealth. The fact that you work in hot sun or with your own hands is completely irrelevant to the wealth you create. Only thing that matters is whether other people want your services or not. The reason why Indian farmers are poor is because they are unable to produce in large quantities anything that the rest of the society wants. 

This boils down to following two problems:

  1. Indian farmers are not producing enough food to be wealthy. 
  2. Indian farmers are not producing food that other people want. 

Both of these problems can very easily be verified. 

A rich rice farmer in the world produces around 3 tonnes of rice per hectar. Indian farmer produces less than 1 tonne per hectar. These numbers are same of every other crop. The only agricultural item where India is leading the world is milk of buffalo. We will see in detail why Indian farmer remains in efficient. This is not the fault of any individual farmer but the years of government's soviet styled planning that has resulted into this mess. 

What this means is even if everything else is same, Indian farmer is 3 times less poor than a rice farmer in Australia. 

The second problem is that Indian farmer by law is not allowed to produce what peopl want. Indian government has made it illegal for farmer to market its own produce and hence Indian farmers never get the real world market signals to understand what the should be growing and hence they end up growing what their forefathers grew. 

Imagine colegate was never allowed to market its toothpastes, it was not allowed to advertise, set its dealerships and relationship with retailers. Imagine a world where colegate was allowed to sell its toothpaste only to government or government's agents who would then distrubute the toothpaste to people. Unilever would have simply shut down the colegate plant and would have moved to making something else instead. 

In the next chapter I will describe why Indian farmer remains inefficient. 


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