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Mainstream, Vol XLVI, No 13

Agrarian Crisis in India is a Creation of the Policy of Globalisation

Sunday 16 March 2008, by Mathew Aerthayil


The people’s protest against Special Economic Zones in various parts of the country, including at Nandigram in West Bengal, stagnation in agriculture, import of foodgrains, widespread suicide of farmers—all these are systems of simmering discontent in the agricultural sector. What is highlighted today in the national scene is the image of “incredible India” and “shining India”. We hear often about India as a country with a very high economic growth, a country with the highest numbers of billionaires in Asia, and a country of world renowned information technology. But we do not hear enough about the serious problems in agriculture. Those who govern us do not seem to be concerned about this problem; probably they do not want to. But we cannot easily ignore this problem any longer.

It was with the Structural Adjustment Programme (SAP) in 1991 that the policy of globalisation was concretely introduced in India. Based on this policy and the directives of the World Bank, International Monetary Fund and World Trade Organisation, the Indian economy was substantially overhauled. The Export-Import policy was liberalised; the import and customs duties of many products were drastically lowered or totally dropped so that they could be imported without any restriction. The government started reducing its investment in agriculture and the industrial sector allowing the private sector to take over. The restructuring of the public distribution system really affected the availability of foodgrains to the poor at subsidised rates. All such measures had implications for the farm sector. This article analyses how the policy of globalisation has affected agriculture in India.

Problems of Agrarian Sector and their Consequences

FIFTEEN years of economic liberalisation have adversely affected Indian agriculture. The most prominent manifestation of this is in the drastic decline in the growth rate of foodgrains. The rate of growth of agricultural output was gradually increasing in 1950-1990, and it was more than the rate of growth of the population. In the 1980s the agricultural output grew at about four per cent per annum. Thus India became self-sufficient in food and started exporting wheat and rice. But during the 10-year period after the start of liberalisation, the rate of growth declined to two per cent. According to the Mid-term Appraisal of the Tenth Five Year Plan (2002-07), the rate of growth of the GDP in agriculture and allied sectors was just one per cent per annum during the year 2002-05. As a result, per capita availability of foodgrains decreased; the growth rate of population became higher than that of foodgrains, and India started to import foodgrains at a much higher price than that in the domestic market.

Secondly, unemployment in the agricultural sector increased during the reform period as agriculture was not profitable due to the fall in the price of farm products. As a result, the number of people who are employed in the primary sector and the area under cultivation decreased, which in turn caused a decline in rural employment. According to the National Sample Survey, the annual rate of growth of the employment in the rural areas was 2.07 per cent in 1987-1984, while it declined to a mere 0.66 per cent in 1993-2000, which corresponds to the period of liberalisation. It is not only the farmers but also the Dalits and tribals, who heavily depend on agriculture, became unemployed.

The suicide of farmers is the third fall-out of stagnation in agriculture. When agriculture was not yielding remunerative income, the life of the farmers became very desperate. Many of them committed suicide as a last resort. As revealed by Sharad Pawar, the Union Agricultural Minister, in the Lok Sabha in 2004, over one lakh farmers committed suicide in India after the economic reform started. According to the National Crime Records Bureau, 17,060 farmers committed suicide in the country in 2006 with Maharashtra having the highest number of (4453) suicide deaths. Punjab is the latest in the list of States having farmers’ suicide. This is a record in the agricultural history of India. It points to the acute nature of the problem which has affected the vast majority of the population, and which has created a real crisis. But unfortunately, the government and the people do not consider it a crisis; their lack of seriousness and lukewarm response to the problem points to this reality.

Reasons for the Agrarian Crisis

THERE is a need for analysing the reasons for the crisis to see whether there is any connection with globalisation and, if so, what measures could be adopted to face this challenge.

1. Liberal Import of Agricultural Products

The main reason for the crash of prices of agricultural products, especially of cash crops, in India was removal of all restrictions to import these products. As, for example, when the Government of India reduced the import duty on tea and coffee from Sri Lanka and Malaysia, their prices in the domestic market got reduced drastically. Thus cultivation of such products became unprofitable and so their production was fully or partly stopped. Since the removal of quantitative restrictions and lowering of import duties were according to the restrictions of the World Trade Organisations (WTO), the crash in the prices of agricultural products is directly related to the liberalisation policy of the government.

2. Cutback in Agricultural Subsidies

In the post-reform period the government reduced different types of subsidies to agriculture, and this has increased the production cost of cultivation. According to Ramesh Chand, an economist, cutback in subsidy and control of fertilisers over the last few years has adversely affected the agricultural sector. It has increased the input cost and made agriculture less profitable. Since the decrease in subsidy to agriculture is part of the regulations of the WTO, it is related to the policy of globalisation.

3. Lack of Easy and Low-cost Loan to Agriculture

After 1991 the lending pattern of commercial banks, including nationalised banks, to agriculture drastically changed with the result that loan was not easily available and the interest was not affordable. This has forced the farmers to rely on moneylenders and thus pushed up the expenditure on agriculture. The National Commission for Agriculture, headed by Dr M.S. Swaminathan, also pointed out that removal of the lending facilities and concessions of banks during the post-reform period have accelerated the crisis in agriculture. When the farmers were not able to pay back loan with high interest, they fell into the debt trap. Studies show that most of the farmers’ suicides was due to the debt trap. It is part of the policy of privatisation that banks, even nationalised banks, look for profit over their social responsibilities to the people.

4. Decline in Government Investment in the Agricultural Sector

Studies show that after the economic reforms started, the government’s expenditure and investment in the agricultural sector have been drastically reduced. This is based on the policy of minimum intervention by the government enunciated by the policy of globalisation. The expenditure of the government in rural development, including agriculture, irrigation, flood control, village industry, energy and transport, declined from an average of 14.5 per cent in 1986-1990 to six per cent in 1995-2000. When the economic reforms started, the annual rate of growth of irrigated land was 2.62 per cent; later it got reduced to 0.5 per cent in the post-reform period. The consequences were many. The rate of capital formation in agriculture came down, and the agricultural growth rate was also reduced. This has affected the purchasing power of the rural people and subsequently their standard of living.

5. Restructuring of the Public Distribution System (PDS)

As part of the neo-liberal policy, the government restructured the PDS by creating two groups—Below Poverty Line (BPL) and Above Poverty Line (APL)—and continuously increased the prices of foodgrains distributed through ration shops. As a result, even the poor people did not buy the subsidised foodgrains and it got accumulated in godowns to be spoiled or sold in the open market. As the in-take from PDS was less it has affected the food security of the poor, especially in the rural areas, and this has indirectly affected the market and the farmers.

6. Special Economic Zones

As part of the economic reforms, the system of taking over land by the government for commercial and industrial purposes was introduced in the country. As per the Special Economic Zones Act of 2005, the government has so far notified about 400 such zones in the country. Very often it is fertile land which has been acquired. According to Khasanoki, a writer, the government has acquired five million hectares of land for purposes other than agriculture between 1991 and 2003. This is almost half of what was acquired during the last 40 years. It was in the news that the government decided to acquire 10,120 hectares of land near Mumbai (almost one-third area of Mumbai) for the Reliance Company and reduced it to 5000 hectors due to public pressure. Since the SEZ deprives the farmers of their land and livelihood, it is harmful to agriculture. In order to promote export and industrial growth in line with globalisation the SEZ was introduced in many countries.

Towards a Solution

THE agricultural crisis is affecting a majority of the people in India. The farmers who produce food materials for the country are in deep distress. The marginalised people like the Dalits and tribals, who depend on agriculture, are getting unemployed and struggling for their livelihood. The ordinary people, especially the poor, have lost their food security. The crisis in agriculture is a crisis of the country as a whole and so needs urgent attention. Some of the suggestions are being listed here.

1. Quantitative restrictions should be imposed on import of agricultural products. Since the import policy was the major reason for the crash in prices of many agricultural products, there should be restrictions on the quantity and customs duty of such products. Necessary import duty and quantitative restrictions should be imposed on imported goods to protect our farmers who should be given priority to the discipline of the WTO.

2. Subsidy and concessions given to agriculture but removed in the post-reform period should be restored. This is a must to make agriculture remunerative. One of the main disputes in the Doha Round of talks at the WTO is the high subsidy given by the United States and European Union to their farmers in spite of the WTO regulation. India should assert its right to give sufficient subsidy to its farmers to offset the rising cost of cultivation and protect their livelihood.

3. Bank loans should be easily made available to the farmers, especially since the input cost of agriculture has gone up. The government should seriously think of restoring the low rate of interest to farmers given by banks and other financial institutions as it had done before the reform period. In fact, the M.S. Swaminathan Commission for Agriculture has recommended a low rate of four per cent interest for the farmers.

4. The government should augment its investment and expenditure in the farm sector. One reason for the agricultural stagnation is low government expenditure. Investment in agriculture and its allied sectors, including irrigation, transport, communication and farm research, should be drastically increased, and the government should aim at integrated development of the rural areas. Effecting Implementation of National Rural Employment Guarantee Scheme can also become a means of revival of the rural economy.

5. There is a need for periodic revision of the procurement prices for farm produce making those remunerative. This will help the farmers to meet the increasing expenses for farm inputs and ensure at least remunerative income. According to the Swaminathan Commission, unless agriculture is made a profitable enterprise, its present crisis cannot be solved. The Commission has suggested 50 per cent more of the total production cost as supportive price for foodgrains.

6. The government should revise the policy on Special Economic Zones as it goes against the interest of farmers and the agricultural sector. It should not acquire fertile agricultural land for SEZs. When it does take over land for essential public utilities, it should give just compensation and initiate comprehensive rehabilitation measures. The recommendations of the Swamina-than Commission not to acquire land suitable for agriculture for non-agricultural purposes, to give adequate compensation for the acquired land and to distribute surplus land to the landless farmers should be seriously taken into account when the policy of SEZs is reframed. Over and above the policy of SEZs, there is a need for constitutional structures and mechanisms which will mandate the government, both Central and States, to implement the policy of relief and rehabilitation of people displaced due to SEZs and other developmental projects.

7. Bold steps should be taken to implement land reforms which were not implemented in most States. Feudal structures and landlordism based on large holdings of land by high caste and class people even now tend to keep a majority of the people, especially Dalits and backward castes, in the rural areas under their control and domination. Neo-liberal policies with privatisation will only reinforce and strengthen these unjust and exploitative structures. Therefore, there is a need for conscious efforts and positive steps from the government side to implement land reforms. Surplus land acquired thus should be distributed to the Dalit and adivasi farmers. According to Amartya Sen, the Nobel Laureate, though the economic growth rate of India is impressive, India cannot play a significant role in the global economic scenario unless it completes land reforms.

8. The rural economy, particularly agriculture, will be greatly benefit if programmes meant for economically backward sections, including the Integrated Child Development Schemes, mid-day meals for schoolchilden and the National Rural Employment Guarantee Scheme, are effectively implemented. Food security of the poor will be ensured if the public distribution system is efficiently run. All these programmes will increase the purchasing power of the rural people and indirectly help agriculture itself.

The agricultural sector in India is facing a crisis today. The globalisation process, which started in the 1990s, is the main reason for this crisis. The solution of the problem is not in a few “packages” but in drastic changes in the present economic policies related to agriculture. For this, the government should be ready to take bold steps. Farmers, agricultural labourers and people’s organisations in civil society should work collectively to assist and persuade the government to make the necessary changes. It is high time that the government and the people realised that India can become a real “superpower” only when the vast majority of the people, especially the farmers in the rural areas, become prosperous and are really empowered. The words of Dr M.S. Swaminathan are relevant here: “In a country where 60 per cent of people depend on agriculture for their livelihood, it is better to become an agricultural force based on food security rather than a nuclear force.”

Dr Mathew Aerthayil is the Director of the Indian Social Institute, Bangalore.

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