What Lies at the Foundation of the Prolonged Agrarian Crisis in India?

It has been more than five months since farmers from different parts of the country began protesting in Delhi. They have been unflinching when it comes to their demands – repeal the three Farm Laws and the Electricity Amendment Bill and make minimum support price (MSP) a legal right. Assured prices for their produce has been a longstanding demand of farmers in India over many years. This was also a crucial demand made by farmers’ movements that culminated into long marches to Mumbai and Delhi in 2017 and 2018.

Today, a vast majority of the peasantry in India finds itself in a crisis in which they are not even receiving a minimum price for their produce which would cover the cost of cultivation and human labour. At the same time the input costs of fertilisers, seeds, pesticides and electricity have been increasing. In a survey conducted with farmers from Madhya Pradesh, Newsclick found that the actual costs incurred by farmers are far greater than the government’s estimates, as projected by the Central Government’s Commission of Agricultural Costs and Prices (CACP). Hardly able to meet their costs of cultivation, they are forced to borrow at every step. Low returns for their produce have been forcing farmers into economic crises and perpetual indebtedness. Agriculture has been unviable as a source of livelihood for the farmers of the country over the last two decades.

Between the 1980s and early 2000s, agricultural yields (productivity per hectare) stagnated. Growth within the agricultural sector has been low and volatile. According to the Planning Commission’s ‘Agricultural Strategy for the Eleventh Plan’, agricultural GDP growth declined from 3.62% during 1984-85 and 1995-96 to 1.85% between 1995-96 and 2004-05. In the last two decades, agricultural growth has dwindled from 8.6% in 2010-11 to -0.2% in 2014-15 and 0.8% in 2015-16. The contribution of agricultural sector to GDP has decreased from 54% in 1950-51 to 15.4% in 2015-16. Paradoxically, the agricultural sector was the only sector retaining a growth rate of 3.4% in 2020-21, while all other sectors collapsed as a result of the prolonged lockdown by the Indian government in response to COVID-19 pandemic.

Despite stagnation and unviability, agriculture continues to engage a large chunk of the population in India. According to the Economic Survey 2020-21, about 54.6% of the total workforce in the country is still engaged in agricultural and allied sector activities which accounted for approximately 17.8% of India’s Gross Value Added (GVA) for the year 2019-20. Even as the contribution of the industrial and service sector increased in GDP, these sectors failed to absorb the surplus labour engaged in agriculture. This hints at the phenomena of ‘jobless growth’ within the two sectors, which did not translate into real per capita income growth for the bulk of the workforce employed in agriculture.

Over the years, increasing fragmentation of agricultural landholdings has contributed to decreasing viability of agriculture for the majority of small and marginal farmers in the country. Since the first Agricultural Census in 1971, the number of landholdings in India has more than doubled – from 71 million in 1970-71 to 145 million in 2015-16. The number of marginal landholdings (less than one hectare) have increased from 36 million in 1971 to 93 million in 2011. As the number of landholdings increased, the average landholding size has more than halved, from 2.28 hectares to 1.08 hectares, between 1970-72 and 2015-16. At the same time, the number of landless agricultural labourers has increased from 106.8 million in 2001 to 144.3 million in 2011 as opposed to a decrease in number of cultivators, from 127.3 million in 2001 to 118.8 million in 2011. For the first time, the number of agricultural labourers has exceeded that of farmers, in the absence of availability of alternative employment.

Declining profitability, increasing input costs, lack of alternative opportunities, stagnating productivity and declining growth rate are, however, merely symptoms of an agrarian crisis which is much older and deeper than these contemporary and mainstream points of discussion. The agrarian crisis is a result of a history of compromised and negligent policies by successive governments in India.

At the foundation of the present crisis in India is the skewed nature of capitalist development undertaken in India immediately after Independence and the failure of land reforms in most Indian states, except in the states of Jammu & Kashmir, Kerala, West Bengal and Tripura. In most of states land reforms ended up being an agenda on paper which never turned into a reality.

The laws enacted to effect land reforms provided for payment of exorbitant compensation to the landlord classes, and at the same time allowed them to retain vast tracts of land. Even the land in surplus of ceilings was, in most states, not taken over by the state. The ceiling surplus land that was usurped by the state, remained undistributed. Effectively, the rich landlord class continued to maintain their hold on their landholdings and enjoy the perks of the developmental policies introduced by the government. The interests of the landless peasantry and small and marginal tenants were not protected. Millions of tenants found themselves evicted.

Partial agricultural reforms, brought about in nexus with the rural, landed elite meant that the inequalities and exploitation prevailing within the previous structure continued in post-independent India. Deeply inegalitarian and caste-based land relations were allowed to prevail. Upon the foundation of pre-capitalist land relations was built a new structure of capitalist development of agriculture. Successive governments at the Centre and most of the states relied on big landlords and other affluent sections to make investments for agricultural growth.

In the years after Independence, the government brought about some improvement in agricultural production through state-led capitalism. During this period, the government made investments in expansion of irrigation, power, science and technology, transport, communication, storage and credit facilities etc. These helped in increasing productivity and production. The government also introduced subsidies for agricultural inputs and a public procurement system ensuring MSP to protect the interests of farmers. The Public Distribution System (first introduced in 1939) was also expanded to ensure supply of food grains at affordable prices.

The benefits of state-led development of agriculture were reaped by big landlords and rich farmers. These developmental efforts did not alter the reality of rural poverty and unemployment. The results were widening class and caste inequalities alongside agricultural growth and increasing productivity. Widening inequalities were also a feature of the Green Revolution, under which the ownership of land, resources and accessibility of agricultural credit, enabled the rich and landed rural peasantry to reap disproportionate gains. This trajectory of inequitable development resulted in mass poverty, unemployment and a decline in purchasing power in the hands of the rural peasantry. This, in turn, led to lagging growth within the internal market for mass consumption of goods and dampened the progress of industrialisation.

By the early 90s, India found itself in the midst of a full-blown balance of payments crisis. The Indian government responded to the crisis by implementing the neoliberal economic reforms and structural adjustment programmes, liberalising trade and finance and privatising public enterprises. This decision of the government was endorsed by both domestic and foreign capital. Having benefitted from state-led development until now, the Indian bourgeoise saw this as an opportunity to expand.

Within the agricultural sector, these reforms translated into deflationary fiscal policies, reduction in public investment on agriculture, including rural infrastructure, irrigation, agricultural subsidies and agricultural research. A decline in rural and agricultural spending also adversely affected employment generation in rural areas, further dampening rural markets. Cuts on subsidies on fertiliser, fuel and power sent agricultural input costs spiralling. Unfortunately, opening up of international trade coincided with a fall in international prices of non-food grain crops like cotton and oilseeds.

At the same time, the protection provided by the government to the peasantry, in the form of agricultural subsidies, and MSP, weakened. Bank credit to crop lending went down and the number of rural bank branches also reduced. Small and marginal farmers in particular, have been pushed towards private money-lenders in the absence of institutional sources of credit, forcing them into perpetual indebtedness. Overall, a shift in ‘terms of trade’ away from agriculture was introduced, and the resultant neglect of the agricultural sector and rural peasantry translated into a spiralling crisis.

The neoliberal model of liberalising land and agricultural markets has proved to be ineffective in resolving the crisis in agriculture over the last three decades. The new policy regime advocated by domestic and international proponents of neoliberalism has been vociferously pushing for a reversal of land reform, liberalising tenancies, easing corporate take-over of land, a further slashing of agricultural subsidies, cutting back on public investment in agriculture, privatisation of public infrastructure for storage and marketing of agricultural products and dismantling of the public distribution system.

Our own experiments with liberalisation of the agricultural sector after the reforms the 90s has landed the peasantry into a state of wretchedness. By resisting the three farm laws, the farmers are demanding a change in this state of affairs. However, the deeper rot in the agrarian situation of the country can be overcome through more far-reaching reforms, starting from an overhaul of pre-capitalist land relations and relations of production that continue to act as fetters to productivity and are at the root of aggravating poverty, unemployment and inequality in rural India.

(The writer is an author and a Research Associate with Newsclick. The views are personal. She can be reached on Twitter @ShinzaniJain.)