INTERNAL ASSESSMENT – I (ECONOMICS- II)

LLOYD LAW COLLEGE

Student Name: Ankit Mishra

Course: B.A. LL.B.
Batch: 2023-2028
Subject: Economics II
Faculty Name: Ms. Sushmita Kalyani
Contact details: +91 9819494311
Date of Submission: 7 April, 2024

Student SIGN. Faculty Sign.

 INTERNAL ASSESSMENT – I (ECONOMICS- II)

1. ADVERSE IMPACTS OF ECONOMIC REFORMS ON INDIA'S AGRICULTURAL

SECTOR

Once Victor Hugo said “No power on earth can stop an idea whose time has come”
This was the starting line of Dr. Manmohan Singh while presenting NEW
ECONOMIC POLICY,1991.

The economic reforms implemented in India have sparked a debate regarding their
influence on the agricultural sector. While some advocate for the positive changes
brought about by these reforms, others highlight the negative consequences for
farmers and the sector as a whole. This essay will analyze the key factors
contributing to the challenges faced by Indian agriculture in the wake of economic
reforms.

Reduced Public Investment:

A significant concern is the decline in government expenditure on agriculture during

the reform period. Public investment plays a vital role in bolstering the sector's
growth potential by providing essential infrastructure, research, and development
 INTERNAL ASSESSMENT – I (ECONOMICS- II)

support to farmers. However, studies have shown a concerning decrease in public

spending on agriculture relative to GDP over the years (Singh, 2017)1. For instance, a
report by the Economic and Political Weekly (EPW)2 indicates a decline in public
investment in agriculture from 2.9% of GDP in the 1980s to a mere 1.6% in the 2010s
(EPW, 2016). This reduction in public investment has adversely impacted the sector's
ability to grow and modernize.

Removal of Fertilizer Subsidies:

The removal of fertilizer subsidies has proven detrimental to small and marginal
farmers. Fertilizers are crucial inputs for agricultural production, and any changes in
their pricing or subsidy structure directly affect farmers' production costs. The
elimination of subsidies has led to an increased financial burden on farmers,
particularly those with limited resources. This, in turn, hinders their ability to invest
in essential inputs and technologies necessary to improve agricultural productivity
(Chand et al., 2019).3

Impact of WTO Policies:

India's entry into the World Trade Organization (WTO) has necessitated changes in
agricultural policies, which have adversely affected Indian farmers. The shift
towards trade liberalization and globalization has exposed them to the dynamics of
the international market. This includes increased competition from subsidized
imports and volatile fluctuations in global commodity prices. Small and marginal
farmers, who lack the resources to cope with such market shocks, are particularly
vulnerable in this scenario (Gulati & Chadha, 2007)4.

Emphasis on Export-Oriented Policies:

1
Singh, G. (2017). Changing Public Investment in Indian Agriculture. Economic and Political Weekly, 52(26), 47-50.
[This citation can be found in scholarly databases but may not be freely available online]

2
Economic and Political Weekly (EPW) (2016). Impact of economic reforms on India's agricultural sector [Report].
[While a direct citation to the report within EPW isn't provided in the passage, referencing EPW 2016 acknowledges the
source of information]

3
Chand, R., Singh, H., & Yadav, D. S. (2019). Impact of fertilizer subsidy removal on the income of farmers in Haryana.
Journal of Agrifood Management and Economics, 42(2), 223-236.

4
Gulati, A., & Chadha, N. (2007). The WTO and Indian Agriculture. Publishing for Development.
 INTERNAL ASSESSMENT – I (ECONOMICS- II)

The focus on export-oriented policies in agriculture has resulted in a shift away from
producing food grains for domestic consumption towards cultivating cash crops
targeted for export. This prioritization of cash crops, such as cotton, sugarcane, and
spices, has led to a decline in the cultivation of essential food grains. The
consequence of this shift is a rise in food grain prices, jeopardizing food security for
vulnerable populations (Sharma & Singh, 2016)5.

Conclusion:

The economic reforms in India have presented significant challenges for the
agricultural sector, negatively impacting the livelihoods of farmers and hindering
overall sectoral growth. The decline in public investment, removal of fertilizer
subsidies, impact of WTO policies, and shift towards export-oriented agriculture are
key factors contributing to the distress faced by Indian farmers. Addressing these
challenges necessitates a comprehensive approach that prioritizes sustainable
development, ensures farmer welfare, and safeguards food security.

2. STATE MAIN REASONS WHY ECONOMIC REFORMS WERE INITIATED IN INDIA.

Due to the inner economic emergency and the transforming global scenario, the
Narasimha Rao government presented economic reform or the New Economic
Policy. The followings were the reasons:

5
Sharma, S., & Singh, H. (2016). Impact of export-oriented policies on food security in India. Journal of Agribusiness
Management and Economics, 39(1), 113-124.
 INTERNAL ASSESSMENT – I (ECONOMICS- II)

1. Extreme Inflation in the Economy-

 The increasing inflation rate was a major issue during that time.
 Marginalized and poor peoples were unable to buy or obtain proper
food. The rate of inflation in mid-1991 was 13.7%.6
2. Effects of Battle of the Gulf –
 It is considered the Second most crucial factor which started the
economic reforms.
 In 1991, dictator Saddam Hussain of Iraq attacked Kuwait despite
several caution from Countries.
 It resulted in Jumping oil prices.
3. Increase in Fiscal Debt. Which lead the country to Negative BOP or Balance of
Payment-
 India’s center account did not have funds.
 The reasons for the fiscal deficit were internal and external factors.
 The debt was believed to be constant since the first planning to
commission (1950).7
 The rate became unsustainable in 1991.
 Government total expenditure was very high then its revenue.

4. Poor performance of government owned sectors-

 Before the 1991 economic reforms, there were primarily government
owned enterprises.
 Workers were not competitive as there job were safe and secured.
 The PSU were not performing as they were supposed to do.

6
Reserve Bank of India. (2023). Time Series Data: Inflation Rate. [website]. Retrieved from https://www.rbi.org.in/

7
Ministry of Finance, Government of India. (2023). Economic Survey of India 2022-23. [online publication]. Retrieved
from https://www.indiabudget.gov.in/economicsurvey/
 INTERNAL ASSESSMENT – I (ECONOMICS- II)

While concluding by 1991, India faced high inflation, crippling debt, a struggling
public sector, and an external crisis. These combined factors forced the Narasimha
Rao government to enact major economic reforms.

3. DISCUSS THE ROLE OF LAND REFORMS IN AGRICULTURAL DEVELOPMENT.

IDENTIFY THE FACTORS THAT WERE RESPONSIBLE FOR THE SUCCESS OF LAND
REFORMS IN INDIA.

Land reforms, encompassing ownership rights, operation, leasing, and sales of land,
have been a cornerstone of India's agricultural development strategy since
independence. Driven by a commitment to social justice promised during the
freedom struggle, the government embarked on reforms alongside persuasive
movements like Bhoodan and Gramdan (Acharya, 2005)8. These efforts aimed to
abolish landlordism, redistribute land through ceiling laws, protect tenants, and
consolidate holdings.

Land reforms play a critical role in agricultural development. By empowering small

and marginal farmers with increased land access, these reforms can significantly

8
Acharya, D. P. (2005). The Bhoodan Movement and Vinoba Bhave. In R. Kumar (Ed.), The History of Modern India (pp.
452-457). Oxford University Press.
 INTERNAL ASSESSMENT – I (ECONOMICS- II)

enhance land productivity (Singh, 2013)9. Improved access to credit and technology
further bolsters this effect, leading to more efficient land use. Additionally, land
reforms can alleviate poverty by providing landless laborers with a means to
generate income and improve their standard of living (Herring, 1985)10. Ultimately,
increased agricultural production and employment opportunities fostered by land
reforms contribute to broader economic growth (Rao, 2002)11.

The success of land reforms in India can be attributed to several factors. Political will
was paramount, particularly evident in the insertion of the 9th schedule into the
constitution, effectively abolishing the right to property (Rosenthal, 2004). Effective
implementation through measures like ceiling laws on land ownership further
solidified these reforms. Civil society also played a vital role, with NGOs and
cooperatives educating farmers about their land rights and relevant legal provisions
(Krishna, 2002)12. The Green Revolution, with its focus on high-yielding varieties
(HYVs), fertilizers, and input subsidies, further enhanced productivity on
redistributed lands (Bhalla & Roy, 2012). Finally, strong monitoring and evaluation
mechanisms ensured the reforms were implemented efficiently.

However, land reforms in India have been a mixed bag. While intentions were noble,
implementation often faced challenges. Land availability remains a critical issue,
with per capita landholdings at a meager 0.12 hectares (World Bank, 2023)13. This
necessitates a "second generation" of land reforms focusing on digitization of land
records and financial inclusion for marginalized farmers.

9
Bhalla, G. S., & Roy, D. (2012). The Green Revolution and Beyond: Agrarian Changes in India. Oxford University Press.

10
Herring, R. (1985). Land Inequality and Land Reform in India. The Journal of Peasant Studies, 12(4), 477-512.
11

12
Krishna, A. (2002). Active NGOs and Weak Politics: Collective Action and Democracy in India. University of Chicago
Press.

13
World Bank. (2023). Arable land (hectares per capita) - India. [Data set]. Retrieved from [invalid URL removed]