Why is what economists call farm/ non-farm transition so important for this government? Because the question of generating more non-farm employment is coming to a head.

SEZs were UPA-I’s headline making policy response. They got caught by both activist politics and a change in the business cycle. Some of the biggest planned SEZs are in trouble. The land acquisition law is to be amended. A certain triumphalism has grown about the politics of resisting industrialisation. These represent a complex set of challenges that UPA-II will not be able to ignore. It can try and duck the question or it can try and answer it. Either way, it will mark UPA-II’s term, politically and policy-wise.

A crucial variable will be how UPA-II handles the political debate. This will mostly be determined by how the old chestnuts are disposed of. The contours of the debate will have to change. Once that happens, policy will follow, sooner or, more likely given this is India, later.

Chestnut number 1: more land for industry means India can’t feed itself. Simple answer: India’s agriculture productivity is so low that producing enough food for its population is not a question of keeping land in farmers’ hand but changing how capital is deployed.

Chestnut number 2: urbanisation is so chaotic and ugly that people getting out of villages represent an even bigger problem than their staying in it. Simple answer: this is a problem of urban policy, not an argument against modernisation. The big cities, mostly badly governed, are the host to most migration. Tier II urban centres need to be made attractive. The pace of urbanisation in India is actually terribly slow. By 2030, just over a third of India will be urbanised, if current rates of progress don’t change.

Chestnut number 3: how can a significant majority of the two-thirds or so Indians living in rural

India ever be accommodated in factory employment? Simple answer: all of rural India doesn’t work in farms. Look at data of how much rural India contributes to India’s GDP (more than half) and how much agriculture does (less than a quarter). The difference is explained by the fact that there are significant non-farm activities in rural

India. The scale of the problem is big, but the problem is not intractable. Of a rural workforce of around 300 million, a little over 70 per cent are employed in farming. That’s around 210 million people. And obviously not all of them will work in factories; farming will continue to employ people.

Chestnut number 4: farmers are deeply attached to their land. Factory employment doesn’t make up for loss of this ownership. Simple answer: there’s precious little land for most farmers to get attached to. The average landholding size is 1.3 hectares, less than it is in Pakistan. Less than 5 per cent of households in villages own 10 acre-plus landholdings. Almost a third of farmers cultivate landholdings less than 2 acres. The “attachment” comes from desperation, not some deeply mystical reason. Rural non-farm income has grown much faster than rural farm income. Farmers know this, even if it is missed by city types who argue they should be delighted with tiny cultivable plots.

Chestnut number 5: the urban-rural income gap is so huge in

India that direct income transfer schemes and various state support programmes are a priority, not a big drive towards industrialisation. Simple answer: actually, the urban-rural income gap in India is narrower than in China, our usual point of reference. Of course, the farm/ non-farm transition is a long process — some economists say the full potential will take two decades to be realised — and in some cases state help will be necessary. But there’s no contradiction between aiming for higher factory employment and temporary income support schemes.

Chestnut number 6: big increase in factory employment requires labour reforms that allow hiring flexibility, and that’s politically not possible now, therefore all talk of farm/ non-farm transition will just remain talk. Simple answer: there are things a government can do to speed up the transition even before considering labour reform. Good roads are a huge boost. If the highway building programme and the rural road building programme (Pradhan Mantri Gram Sadak Yojana, PMGSY) were as successful as they should have been, rural-urban connectivity (feeder roads linking to highways) would have dramatically changed and so would have the matrix of income opportunities for rural India. As for labour reforms, if physical infrastructure encourages substantial non-farm employment but old labour laws persist, more of the same depressing story will happen. The market solution would be unorganised factory employment, which is of course anti-worker.

Indeed, the political pressure for reforming labour law might come when the farm/ non-farm transition acquires a critical momentum.

The unifying theme of all these arguments is that they are simple. They can be simply made. They are backed by simple data. Simplicity is the first requirement of political debating. If UPA-II decides to seriously engage with the industrialisation debate, its key ministers will have this advantage.

This advantage was of course always there. None of these arguments was born with UPA-II’s election victory. But apart from SEZs, and in part because of them, UPA-I’s politics was reactive on industrialisation. Will UPA-II be proactive? That’s the key question for the next five years.

saubhik.chakrabarti@expressindia.com