Some Aspects of the Evolution of the Agrarian

Economy in India since Independence

Venkatesh Athreya
December 28, 2018
 Agriculture in the Indian Economy

• Share of Agriculture in Indian Economy

Share of population in agriculture and allied activities(2011) 54.6 %
Share of Agriculture in Gross Value Added in 2017-18 17.4%

• % GVA of Agriculture and Allied Sectors to Total GVA

YEAR 2013-14 2014-15 2015-16 2016-17
Percent to total GVA 18.6 18.0 17.5 17.4

• Growth Rate of GVA in Agriculture

Year 2013-14 2014-15 2015-16 2016-17
Gr.Rate 5.6 -0.2 0.7 4.9
Output and Yield of Major Foodgrains, India 2016-17
Crop Output Yield
( Million Tonnes) (Kg/Hectare)
Rice 110.95 2550

Wheat 98.38 3216

Coarse Cereals 44.19 1784

Pulses 22.95 779

All Foodgrains 275.68 2153

 India’s agrarian economy circa 1950
•Extremely backward agriculture at independence
following the devastation wrought by two centuries of
colonial exploitation

•Food grain output per capita around 1950 less than 150
kilograms per annum

•Less than one sixth of cultivated area irrigated

•Significant presence of pre-capitalist relations of

production, with absentee landlordism, zamindari,
worst forms of tenancy, bonded labour and so on
 India’s agrarian economy 1950-1990

• Limited land reforms in the 1950s and 1960s, including

abolition of absentee landlordism and zamindari, and
some tenurial reforms
• However, land ceiling legislations largely ineffective in
breaking land monopoly and concentration of land
ownership
• Significant break with the stagnation of the colonial
period, with food grain output growing at an annual
compound rate of over 3 % per annum from 1950 to mid
1960s, primarily through increase in area cultivated
 India’s agrarian economy 1950-1990

• The food grain crisis of the mid 1960s: “Ship to

mouth” existence

• The New Agricultural Strategy or ‘Green Revolution’-

Key role of the State

• Agricultural and food grain growth sustained at about

3 % per annum during the period from mid 60s to end
70s, with considerable fluctuations

• Green Revolution: Strengths and Weaknesses

 India’s agrarian economy 1950-1990

• Rapid growth in the 1980s at 4 % per annum, mainly on

account of expansion of the green revolution

• Significant expansion of government spending on the

rural economy, enhancing rural demand and
employment

• However, as investment in agriculture declined, growth

prospects came under pressure

• Terms of trade began to move against agriculture

 The Agrarian Economy since 1991: Impact of Neoliberal
Policies
• The focus on reducing the fiscal deficit primarily by expenditure
reduction meant that input subsidies – on fertilizers, pesticides, energy -
were cut, leading to sharp rise in input costs. The practice of periodically
hiking fertilizer and energy prices has been a feature of the neoliberal
regime.

• The removal of quantitative restrictions on imports of agricultural

products and the maintenance of import duties on such goods at well
below the bound rates that India had specified in the WTO resulted in a
sharp rise in agricultural imports, especially from the late1990s. This,
together with the importing of the global deflation in commodity prices
led to a crash in output prices in the late 1990s/early 2000s, followed by
sharp price volatility.
 Impact of Neoliberal Policies on the Agrarian Economy

• Financial liberalization led to significant reduction in the rate of expansion of

institutional credit and a sharp rise in real interest rates at which institutional
credit could be accessed through most of the nineties and the first half of the
decade of 2000-2010.
• There has since then been some increase in the flow of credit to agriculture,
much of it grabbed by large players, including agro-commercial capital. For
instance, in 2016-17, 651 large borrowers accounted for 600 billion rupees of
credit provided for agriculture, an average of nearly 1 billion rupees per such a
borrower .

• The dependence of the poor and middle peasantry on moneylenders and other
non-institutional sources of credit has increased considerably over the period
of neoliberal reforms.

• Reduction in rural development expenditure in relative terms as part of the

drive to reduce fiscal deficit even while providing major tax breaks to the
 Impact of Neoliberal Policies on the Agrarian Economy
• Cutback in public investment as part of neoliberal reforms has led to
significant weakening of infrastructure support, farm extension services
and the national agricultural research system.

• Simultaneously, deregulation in the seed sector, weakening of

certification processes and entry of multinational agribusiness giants
such as Monsanto and Cargill have allowed MNCs to penetrate the
agrarian and rural economy to a significant extent.

• The neoliberal reforms unleashed a serious assault on the PDS. This,

too, was a feature of the severe agrarian/rural distress that resulted in a
great deal of avoidable deprivation.

• The most tragic manifestation of severe agrarian distress: the massive

number of peasant suicides, exceeding 300,000 between 1997 and 2015.
 Impact not uniform across time
• 1991 - 1997: Early days of LPG, limited impact: The full rigours of the WTO
regime were yet to be imposed, with removal of quantitative restrictions on imports
some two years away. The full impact of financial liberalization had not yet been felt.
Global commodity prices had not yet begun to nosedive. Between 1991 and 1997,
gross irrigated area (GIA) grew at an annual rate of 2.6 %, electricity consumption in
agriculture by 9.4 % and cropping intensity by 0.4%.
• 1997 - 2004: Severe Impact. Between 1997 and 2006, GIA did not increase at all while
electricity consumption in agriculture fell by 0.5 % per annum. Cropping intensity grew
at just 0.1 % per annum. The tragic phenomenon of suicides of large numbers of farmers is also a
feature of this period.
• 2005 – 2014: Partial recovery. Average annual rates of growth of output and yield of
food grain were 1.29% and 0.59% in the tenth plan period from 2002 to 2007, but rose
to 3.80% and 3.55% during the eleventh plan period from 2007 to 2012.

• 2014 - 2018: A deepening crisis with austerity policies; Promises of doubling

farmers’ incomes lacking credibility; farmers’ upsurge 2016-18.
 Impact Differentiated across Classes

• A section of the agrarian population –capitalist landlords, new big

capitalist farmers and rich peasants –accumulated land and productive
assets
• The ratio of gross capital formation to GDP in agriculture and allied
sectors averaged 13.9 % during the tenth plan from 2002 to 2007, but
rose to 18.8 % between 2007 and 2011.
• Pace of accumulation was very modest between 1997 and 2005, and
distinctly higher between 2005 and 2012
• Accumulation in real terms, through generation and reinvestment of
surplus, and not merely through dispossession, has been going on even
through the most severe phase of agricultural stagnation
 Agrarian Crisis
• The agrarian distress of the neoliberal period does imply a serious
interruption in the process of reproduction of the farm economy for a
large proportion of cultivating households, as has been convincingly
demonstrated by several field studies. Thus, there is an agrarian crisis
of great severity for the majority of the agrarian population.
• However, it does not seem to have implied an interruption – in any
event, not a prolonged interruption – in the reproduction of capital for
the big capitalist farmers and the capitalist landlords.
• There have been periods, regions and crops that have shown significant
growth of production and productivity even through the period of
severe agrarian distress. The last two decades have also seen
intensification of input use and rise in capital intensity of Indian
agriculture.
• Yields of most crops have been rising, though at rates much slower than
before the acceleration of neoliberal reforms. There is considerable rise
in the sale and use of agricultural machinery.
 Agrarian Crisis
• While there has been dispossession, operations of the land and real estate
mafia, corporate land grab and so on, not all the accumulation is by
dispossession alone. There has been growth of productive forces and
enrichment of a small section of the agrarian population as well.

• The dominance of finance capital and the consequent obsession with reduction
of fiscal deficits primarily through expenditure reduction does impede productive
investment by the State and, with its demand implications, the private sector as
well. Nevertheless, productive, real accumulation has taken place in Indian
agriculture through the period of reforms. This is reflected in the process of farm
mechanization and the rise in real assets of the landlords and big capitalist
farmers.
 The Agrarian Question
• The basic contradiction in the Indian countryside between landlordism on
the one hand, and the mass of the peasantry and agricultural/rural labourers
on the other, is intact and is very far from being resolved. Land monopoly
and concentration of productive assets in the hands of landlords and
capitalist farmers as well sections of the rich peasantry continue to define the
countryside in large measure.

• Apart from the objectively important reality of extreme levels of

concentration of land and productive assets, there is also the evidence from field
surveys of the political and social power of landlords in village after village.
Oppression against dalits, adivasis and women remains an important and
persistent feature of the rural economy and society.
 The Agrarian Question
• Landlordism is an obstacle to the growth of productive forces and of
democracy on the countryside. It is also, however, important to remember
that landlordism is in turn constrained to an extent by the fact of the state
being led by big capital while continuing to protect landlord interests.

• One way to formulate the agrarian question is to ask what the way
forward to democracy and well- being for the mass of the agrarian
population is; and to ask what in the prevailing order holds back the
pursuit of this path. It is here that the reality of control over productive
forces in the countryside by a class of landlords including the big
capitalist farmers becomes important.
 The Agrarian Question
• There is a crisis of peasant production. Large masses of the peasantry,
particularly the poor peasantry, are faced with high input costs and
fluctuating output prices, resulting often in income losses. The question
of the viability of small scale production is thus an important one, and
is also an integral component of the agrarian question.

• In fact, the crisis of small scale production illustrates the point about
landlordism being a fetter on the growth and spread of productive
forces. If farm research, extension services, infrastructural
improvements and benefits from public investments in agriculture must
either first accrue to the landed gentry or be mediated through them in
the rural economy, this has clear implications for the spread of
productive forces and the growth of the agrarian economy.
 Results From A Recent NABARD Survey
• Rural households have access to banking and have savings but
investment levels and pension and insurance coverage remain
very low, a financial inclusion survey conducted by the
National Bank for Agriculture and Rural Development
(Nabard) showed.

• At the same time, levels of indebtedness were high and

nearly equalled annual incomes,

• The first-of-its-kind survey showed that among rural

households, agri households earned more than non-
agricultural ones. The annual income of rural households was
₹96,708. Of this, while average annual income of agricultural
households was ₹107,172, that of non-agricultural
households was ₹87,228.
 Results From A Recent NABARD Survey

• The majority of the agricultural households were

also indebted with the amount of loans nearly
equalling annual incomes.

• More than one in two agricultural households

surveyed were indebted.

• The average outstanding debt for these

households was ₹1.04 lakh but most borrowed
from financial institutions rather than money
lenders.