“Qu’ils mangent de la brioche” is a French phrase which means “let them eat cake” in English.
It is often attributed to the French Queen Marie Antoinette. She had apparently said this to peasants when she came to know that they had no bread to eat. There is no record that Marie Antoinette, wife of Louis XVI, ever uttered these words. But the myth has held even after all these years. And the story does make a broader point about the rich often having no idea about the state of the poor in their country.
A good example of this is Adi Godrej, the current president of the Confederation of Indian Industry (CII), who recently had his Marie Antoinette moment. In a recent interview to the Tehelka magazine, Godrej suggested that the Indian farmers should sell their land and invest the money they get in stocks and mutual funds.
“If India has to become a developed country, you cannot have the livelihood of hundreds of millions of people depending on agriculture. They have to move on. They have to move into industry, into services. That’s how you develop a country. That has happened in every country,” Godrej said.
He further went on to add that the money that the farmers get by selling their land should be invested in stocks, so that it does not run out soon. “Why should it run out soon? It can be invested. It can be made into a much bigger value than land. Land has the lowest appreciation of all assets. The best investments are in stocks. Somebody should advise them to invest it in mutual funds so their wealth will rise faster,” Godrej said.
Let’s try and examine these statements in a little more detail. Agriculture contributes around 14% of India’s gross domestic product (GDP). This has fallen dramatically since 2004-2005, when it used to contribute around 19% of India’s GDP. At the same time it employs around 58.4% of India’s population.
So 58.4% of India’s population contributes around 14% of India’s GDP. It need not be said that this is a terribly inefficient way of working. Ruchir Sharma of Morgan Stanley calls this “a disturbing tendency of the farmer to stay on the farm” in his book Breakout Nations.
The contribution of agriculture to the overall GDP is expected to continue falling in the years to come. A calculation carried out by the Planning Commission shows that the contribution of agriculture to the total GDP would fall to as low as 7% by 2025-2026. This calculation assumes a fairly optimistic growth of 4% per year in agriculture GDP. At a growth rate of 2%, agriculture’s contribution to overall GDP by 2025-2026 is expected to be at 5.2%.
In making these calculations the Planning Commission assumes that the overall GDP will keep increasing by 8% every year, which is a very optimistic assumption to make given the current state of affairs.
But even assuming a 4% growth rate for agriculture and just 6% for overall GDP, the contribution of agriculture to the overall GDP can be expected to fall to around 9.8% (This is my calculation and not of the Planning Commission), from the current 14%. So theoretically the contribution of agriculture to GDP will fall in the coming years. This can be said with utmost certainty. This means that other sectors of the economy like services and industry will grow at a much faster rate. Hence, it makes sense for farmers to sell their land, move on from farming to other sectors of the economy.