Vol. 1 · pages 481–485

466 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES According to the Hon. Mr. Keatinge an economic holding is :— “a holding which allows a man chance of producing sufficient to support himself and his family in reasonable comfort, after paying his necessary expenses.”16 His definition of an economic holding will be accepted, we may expect, by the Baroda Committee; for, it does not differ from its own, given above as third in order. Assuming they agree, we may now proceed to see how far tenable this definition is. It is plain that these definitions including that of Professor Jevons view an economic holding from the stand-point of consumption rather than of production. In this lies their error; for consumption is not the correct standard by which to judge the economic character of a holding. It would be perverse accounting to condemn a farm as not paying because its total output does not support the family of the farmer though as a pro-rata return for each of his investments it is the highest. The family of a farmer can only be looked upon in the light of so much labour corps at his disposal. It may well be that some portion of this labour corps is superfluous, though it has to be supported merely in obedience to social custom as is the case in India. But if our social custom compels a farmer to support some of his family members even when he cannot effectively make any use of them on his farm we must be careful not to find fault with the produce of the farm because it does not suffice to provide for the workers as well as the dependants that may happen to compose the family. The adoption of such an accounting system will declare many enterprises as failures when they will be the most successful. There can be no true economic relation between the family of the entrepreneur and the total out-turn of his farm or industry. True economic relation can subsist only between the total out-turn and the investments. If the total out-turn pays for all the investments no producer in his senses will ever contemplate closing his industry because the total out-turn does not support his family. This is evident; for though production is for the purpose of consumption it is for the consumption only of those who help to produce. It follows, then, that if the relation between out-turn and investments is a true economic relation, we can only speak of a farm as economic, i.e., paying in the sense of production and not in the sense of consumption. Any definition, therefore, that leans on consumption mistakes the nature of an economic holding which is essentially an enterprise in production. Before going further, we must clear the ground by a few preliminary remarks to facilitate the understanding of an economic holding from the standpoint of production. 16. Rural Economy in the Bombay Deccan, p. 51.

SMALL HOLDINGS IN INDIA AND THEIR REMEDIES 467 It must be premised at the outset that in a competitive society the daily transactions of its members, as consumers or producers, are controlled by a price regime. It is production, then, in a price regime that we have to analyse here for our purpose. In the main the modern process of production is captained by the entrepreneur, is guided and supervised by him and is worked out through him. All employers of labour or hirers of instrumental goods are entrepreneurs. His computations run, as they must, in a pecuniary society, in terms of price-outlay as over against price-product, no matter whether the prospective product is offered for sale or not. The entrepreneur, in producing for gain, apportions his outlays in varieties of investments. These investments, the same as factors of production or costs to the entrepreneur, have by tradition been confined to wages (labour) profits, rent (land) and interest (capital). Industrial facts do not support this classification. There are many other factors, it is contended, which as they share in the distributive process must have functioned in the productive process, in some way immediate or remote. But it is immaterial how many factors there are and whether they differ in kind or degree. What is important for the purpose of production is the process of combining them. This combination of necessary factors of production is governed by a law called the law of proportion. It lays down that disadvantage is bound to attend upon a wrong proportion among the various factors of production employed in a concern. Enlarged, the principle means that as a certain volume of one factor has the capacity to work only with a certain volume of another to give maximum efficiency to both, an excess or defect in the volume of one in comparison with those of the others will tell on the total output by curtailing the efficiency of all. Having regard then to this interdependence of factors, an economically efficient combination of them compels the producer if he were to vary the one to vary the rest correspondingly. Neither can it be otherwise. For, the chief object of an efficient production consists in making every factor in the concern contribute its highest; and it can do that only when it can co-operate with its fellow of the required capacity. Thus, there is an ideal of proportions that ought to subsist among the various factors combined, though the ideal will vary with the changes in the proportions. 17 These proportions it must be acknowledged are affected by the principle of substitution chiefly brought into play owing to variations in the prices of the factors. But this principle of substitution is too limited in its application to invalidate the law of proportion which is the law governing all 17. This description of the process of production is pieced together from the remarks of Prof. H. J. Davenport in his masterly treatise “The Economics of Enterprize” New York. Macmilian, 1913, In this connection see also the able paper by Prof. Henry C. Taylor on “Two Dimensions of Productivity” read before the 29th Annual Meeting of the American Economic Association held in December 1916 and the remarks on the same by Prof. A. A. Young. Both these will be found in the American Economic Review for March 1917.

468 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES economic production and which no producer can hope to ignore with impunity.18 Bringing to bear the above remarks regarding production on the definition of an economic holding, we can postulate that if agriculture is to be treated as an economic enterprise, then, by itself, there could be no such thing as a large or a small holding. To a farmer a holding is too small or too large for the other factors of production at his disposal necessary for carrying on the cultivation of his holding as an economic enterprise. Mere size of land is empty of all economic connotation. Consequently, it cannot possibly be the language of economic science to say that a large holding is economic while a small holding is uneconomic. It is the right or wrong proportion of other factors of production to a unit of land that renders the latter economic or uneconomic. Thus a small farm may be economic as well as a large farm ; for, economic or uneconomic does not depend upon the size of land but upon the due proportion among all the factors including land. An economic holding, therefore, if it is not to be a hollow concept, consists in a combination of land, capital and labour, etc., in a proportion such that the pro rata contribution of each in conjunction with the rest is the highest. In other words to create an economic holding it will not do for a farmer solely to manipulate his piece of land. He must also have the other instruments of production required for the efficient cultivation of his holding and must maintain a due proportion of all the factors for, without it, there can be no efficient production. If his equipment shrinks, his holding must also shrink. If his equipment augments, his holding must also augment. The point is that his equipment and his holding must not be out of proportion to each other. They must be in proportion and must vary, if need be, in proportion. The line of argument followed above is not without support from actual practice. It is happy from an economist’s point of view, to find it recognized and adopted in India itself by the fathers of the Survey and Settlement System in the Bombay Presidency. The famous Joint Report (1840) contains an illuminating discussion of the problem. The question before the officers deputed to introduce the Survey System in the Deccan was how to levy the assessment. Was it to be a field assessment or an assessment to be placed on the whole lands of the village or on the entire holdings of individuals or co-parceners, whether proprietors or occupants. That after 18. Some economists who hold that it is the law of Diminishing Returns that governs agricultural production will demur to the universal applicability that is claimed for the Law of Proportion. Briefly stated the Law of Dininishing Returns asserts that additional ‘doses’ of capital and labour administered to a given piece of land will be responded to by a less and less yield. This means that if only the non-land expense of production is doubled there results less than a doubled product. But if this is the fact that is intended to be generallised by the Law of Diminishing Returns then there is nothing in it that is peculiar to agricultural production. If’ the expense to the land be doubled but the land not doubled it is certain that the extra return will fall short of the increased expense. This is simply another way of saying that if the returns are to grow all the factors must be increased in proportion. But so stated is not the Law of Diminishing Returns a confused version of the Law of Proportion?

SMALL HOLDINGS IN INDIA AND THEIR REMEDIES 469 much deliberation the system of field assessment was finally adopted is known to many. But as the reasons that led to its adoption are known only to a few the following explanatory parts from the Joint report will be found to be both interesting and instructive: “Para 6. That one manifest advantage of breaking up the assessment of a village into portions so minute [as indicated by a survey number] is the facility it affords to the cultivators of contracting or enlarging his farm from year to year, according to the fluctuating amount of agricultural capital at their disposal which is of incalculable importance to farmers possessed of so limited resources as those of the cultivating classes throughout India. “Para 7. The loss of a few bullocks by disease or other causes may quite incapacitate a ryot from cultivating profitably the extent of land he had previously in village and, without the privilege of contracting his farm, and consequent liabilities on occassion of such loss, his ruin would be very shortly consummated.” 19 Judging in the light of this conclusion the proposal to regulate the size of holdings appears ill-considered and futile. For as Prof. Richard T. Ely observes 20 : “Obviously no simple answer can be given to the question [as to what should be the size of a farm]. The value of land or the rent it will bring is perhaps the most important factor…………………In addition to the factor of rent the amount of capital that he can command, the kind of fanning in which he is most skilled, the character of the labour he can secure, the proximity of markets, and the adequacy of transportation facilities, all must be taken into account by the farmer in determining how large a farm he will attempt to manage and how intensively he will farm it. “This question is primarily one of private profit which the individual must decide for himself, but the legislator and the scientific student can be of some assistance in helping to develope that most difficult branch of commercial science—farm accounting—and in keeping the farmer alive to those charges in prices, wages, and transportation charges to which the farm organization must adjust itself.” To those who have the temerity to fix the size of a holding Prof. Ely’s well-considered opinion will bring home that in spite of good intentions their vicarious mission will end in disaster; for none but the cultivator can decide what should be the size of his holding. They would do well to remember that the size of his holdings will vary in time. Consequent to 19. Survey Settlement Manual Bombay Presidency, 1882. p. 3. 20. Outlines of Economics, pp. 531-32 (Italics ours).

470 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES the changes in his equipment with which he has to adjust the size of his farm, at one point in time he will decide in favour of a small, as at another he will decide in favour of a large holding. He would therefore be a poor economist who would legally fix the size of the holding which in the interest of economic production must be left to vary when variation is demanded. By fixing the size of a holding he can only make it a large holding but not an economic holding. For an economic holding is not a matter of the size of land alone but is a matter of the adjustment of a piece of land to the necessary equipment for its efficient cultivation. V CRITIQUE OF THE REMEDIES The proposal to enlarge the existing holdings which is brought forward as a cure to the ills of our agriculture can be entertained only if it is shown that farms have diminshed in size while the agricultural stock has increased in amount. Facts regarding the size of farms have already been recorded. It only remains to see if the agricultural stock has increased- Mr. K. L. Datta in his exhaustive survey says 21 : “178. Most of the Indian witnesses, whom we examined, appeared to be under the belief that there has been a decrease in the supply of agricultural products, owing to the inefficient tillage of land. It was said that land is not now cultivated as carefully and efficiently as before, owing to the scarcity and dearness of plough, cattle and labour. In order to effect, a saving in the cost of cultivation, cultivators do not also plough their lands as often as they did before, and manuring and weeding, as also the amount of irrigating where wells are used for the purpose, have all been reduced.” “179. As regards the scarcity of plough cattle………… (the) figures bear testimony to the deplorable effects of famine, the inevitable result of which has always been to reduce the number of cattle, though the deficiency is generally made good in a few years if otherwise favourable. The number of plough cattle in the latest year (1908-09) included in the statement was lower than in the commencement (1893-94), in some of the circles namely Assam, Bundelkhund. Agra Provinces—North and West, Gujarat, Deccan, Berar, Madras-North and Madras-West. Although great reliance cannot be placed on these statistics, they can be accepted as showing that in some areas at any rate there has been a dearth of plough cattle.” Regarding the existence of capital Mr. Elliot James says : “The ryots have a keen eye to the results of a good system of farming as exhibited on model farms, but they cannot derive much good from 21. Report on the Enquiry into the Rise of Prices in India, 1914, Vol. 1, pp. 66-67, (Italics ours).