No.s 66-67, May 2017
No.s 66-67 (May 2017)
VI. Ruinous Drive to Throw Agriculture to ‘Market Forces’
A central tenet of neoliberalism is that ‘free’ markets, unencumbered by organised social intervention (whether by the State, trade unions, or other popular organisations), efficiently allocate resources. Accordingly, the neoliberal prescription for resolution of virtually all economic problems is further free-market ‘reform’, requiring the withdrawal of the State from public investment and regulation of the economy.1 This prescription is ruinous for all sectors of the economy, and so too for agriculture.
In the following, we briefly sketch the following: why public sector investment and intervention in agriculture has taken place in the past in India; the present neoliberal drive to further withdraw the remnants of such investment and intervention; the ruinous effects already experienced over the entire liberalisation period; the significance of public sector investment even for private investment by the peasantry; and the particular importance of public sector investment and institutions in the face of impending climate change.
Market forces are hardly alien to India’s agriculture. Millions of small producers sell a part or the whole of their output to private traders, who then sell most of it to petty retailers, who in turn sell it to consumers. Hardly a day passes without the newspapers informing us of either a crash in the prices peasants receive for one crop or the other, or a steep rise in the prices consumers pay for vegetables or pulses. Moreover, domestic market forces are integrated with global ones: With the opening up of India’s agricultural markets post-WTO, agricultural prices on the world market directly influence the prices received by Indian producers.
State intervention: a response to peasant struggle
This policy began under colonial rule itself. In the wake of the Deccan Revolt of 1875, which was precipitated by the alienation of peasant land by moneylenders, the British thought it prudent to place legal curbs on usury and land alienation, as reflected in the Deccan Agriculturists’ Relief Act of 1879, the Punjab Alienation Act of 1900, the Usurious Loans Act of 1918, the Punjab Regulation of Accounts Bill of 1930, the Debt Conciliation Act (of the Central Provinces) of 1933, the Madras Agriculturists’ Relief Act of 1938, and so on. It is a separate matter that the peasantry ultimately gained little benefit from these legislations; the point is that even a colonial State thought it necessary to take such steps.
Modern India has witnessed three great waves of peasant struggle: the movements against land rent and taxes triggered by the Great Depression of the 1930s (which drove agricultural prices down and devastated the peasantry); the great anti-feudal struggles of the period immediately after World War II period (Telangana, Tebhaga, the Warli revolt, Kishangarh); and the agrarian upsurge of the late 1960s-early 1970s (Naxalbari, Srikakulam, Midnapore, Muzaffarpur, etc). It was in response to these struggles that the post-1947 Indian State placed ceilings on landholdings, abolished intermediaries and passed laws protecting tenants from eviction and excessive rents. Further, it required that traders purchase the peasants’ crop at APMC market yards, to prevent the cheating of the peasant that took place when the crop was purchased at the farmgate.
There were many other significant peasant and broad popular struggles in particular states, such as the food movements of 1959 and 1966 in West Bengal. Under pressure from such struggles, the rulers in the past deemed it necessary to take certain steps to prevent the recurrence of peasant militancy. These legislations did not resolve the basic problem thrown up by these struggles, namely, land relations, but they did place some legal curbs on the extent of depredation, or provided some measure of relief.
After 1949, the Indian rulers and American advisers were in particular haunted by the revolution in China. In the 1960s, the rulers explicitly expressed the fear that the peasant upsurge of the time would become a “Red Revolution”, and once more took steps to prevent such a development.2 In an interview, Benoy Konar, a senior peasant leader of West Bengal, recalled the context of the mid-1960s:
Land ceilings were lowered, and the Government made a show of taking up the land question once more. In the wake of the Srikakulam Girijan (tribal) armed struggle, Andhra Pradesh passed the Land Transfer Regulation Act 1 of 1970, preventing the transfer of tribals’ land to non-tribals.
It was around this time that the Government set up the Agricultural Prices Commission to recommend procurement prices for crops. It also set up the Food Corporation of India to procure grain from peasants, store it, and distribute it to consumers at controlled prices. In July 1969 Indira Gandhi dramatically nationalised 14 commercial banks; one effect of this was to increase bank lending to agriculture at lower interest rates. These measures also helped promote agricultural production and improve food distribution, thereby alleviating a major source of political unrest.
There are more recent instances, too, of this policy of legislative pacification of the peasantry. In 2002-03, the mass evictions of tribals from their forest plots (following the Supreme Court order in the Godavarman case) led to militant tribal peasant upsurges in different regions. The Common Minimum Programme of the UPA government formed in 2004 stated:
The Forest Rights Act of 20064 was thus not some spontaneous act of benevolence on the part of the UPA, but a response to tribal peasant struggle. Identical is the case of the Land Acquisition Act of 20135: According to one report, more than 250 conflicts arose over land acquisition cases between 2013 and 2014 in 165 of India’s 664 districts.6
Resistance to land acquisition had become so widespread that the UPA government had no option but to find a way to pacify the resisters.
We could provide additional examples, but the point is clear: the various State interventions in agriculture did not spring from the heads of Central planners, but were responses aimed at “quelling discontent in the countryside”.
Nevertheless, multinational and domestic agribusinesses have chafed at these protective measures. And so neoliberal economists, keenly aware of which side of their bread is buttered, have been aggressively calling for their scrapping. By an ingenious sleight of hand, these economists portray all these State interventions as shackles on ‘farmers’: If only they were removed, they claim, efficient farmers would be able to thrive, inefficient farmers would lease their land to more efficient ones (and thereby receive rent even as they pursue livelihoods elsewhere), production would grow, prices would be kept low, and so on. These economists deftly cover up the fact that almost all of the above measures are explicitly in order to protect the peasantry from exploitation and ruination at the hands of landlords, moneylenders, traders, and foreign and domestic big capital. The present crisis arises from the fact that these measures are paltry and utterly inadequate, not that these meagre protections too should be snatched away. The call for the dismantling of such limited protections is a call for the dismantling of the peasantry.
Official policy: More neoliberal ‘reform’ as remedy
A December 2015 paper of the Niti Aayog7 (the official policy-making body which has replaced the erstwhile Planning Commission) spells out what it considers the major problems confronting Indian agriculture, and the steps required to address them. The Economic Survey 2015-16 similarly lists the problems and the measures it believes are needed to bring about a “transformation” in agriculture. Strikingly, while both list a host of problems which are in fact the direct result of inadequate public expenditure and public sector intervention, this failure is at best passingly mentioned.8 It is certainly not identified as a crucial problem. Rather, both stress neoliberal market-based ‘reforms’ to agriculture as the key.
The Survey thus highlights, among other things:
– the “adoption of appropriate technologies for efficient utilisation of water through suitable pricing”;
The Niti Aayog recommends
(i) greater emphasis on technology, including agricultural machinery and seeds (it stresses “the potential of GM technology in giving a major boost to productivity in agriculture”).
(ii) greater private sector role in agricultural research and technology development (“Public sector alone cannot meet future challenges and requirements of agriculture. There is a need to create favourable environment for private sector participation in agricultural research and technology development”).
(iii) replacement of subsidised fertiliser with cash payments and sale at the import price, implying at some point the closure of some public sector fertiliser units. (“If imports are available at prices below the cost of these domestic plants, the wisdom of such revival [of domestic plants] is not clear. The fundamental principle of international trade is that we must specialize in what we can produce cheaply, let other nations specialize in what they produce cheaply, and then trade.”)
(iv) replacement of the agricultural market committees with direct corporate procurement from the farmer, contract farming (“the corporate sector [is] keen on investing in agribusiness”),and the development of the food processing industry(the paper recommends “Turning food-processing industry into a major export industry”).
(v) replacement of public procurement at the announced Minimum Support Price (MSP) with “Price Deficiency Payments”. A cash subsidy would be provided in case the price of a specific agricultural produce fell below a certain floor price, which “may be the average of the market price in the preceding three or four years”. “If the market price then fell below the floor price, the farmer would be entitled to the difference up to a maximum of, say, 10 per cent of the assured price that could be paid via direct benefit transfer into an Aadhar linked bank account. This system would keep the quantum of the subsidy in some check and also meet the restrictions on the subsidy imposed by the World Trade Organization (WTO).”
(vi) a liberalised land-leasing law. (“The biggest advantage of liberalised and secure land lease market will be that it will ease the exit of those farmers who find farming unattractive or non-viable...”)In essence, both the Survey and the Niti Aayog paper argue that the problems in agriculture are because free markets have not been allowed to do their job.9 The solution is to end subsidies and let liberated prices do their magic of efficient allocation of resources, including by separating ‘unviable’ peasants from their land.
Ruinous results of ‘reform’
Take Andhra Pradesh, considered the laboratory of neoliberal ‘reforms’ between 1995 and 2004, under the chief ministership of Chandrababu Naidu. These resulted in a wave of peasant discontent, culminating in Naidu’s defeatin the 2004 elections, to the dismay of international capital and the media. The new Congress government in the state set up a Commission on Farmers’ Welfare. The Report of this Commission began its report (in September 2004) by declaring that
Far from unshackling peasants, then, what neoliberal‘reforms’ did was to plunge them into profound distress and shackle them with usurious debt. It appears that the wave of suicides of indebted peasants began in Andhra Pradesh in 1997, but Naidu proceeded with his ‘reforms’ undeterred, to the applause of international capital. That phenomenon proceeded to spread to many other states, for the measures inflicted on the peasants of A.P. were replicated to one extent or another throughout the country during the period 1995-2004.
At the national level, the picture was similarly grim.The 11th Plan document (2008) observed a “loss of dynamism in agriculture and allied sectors after the mid-1990s.... Growth of agricultural GDP decelerated from over 3.5 per cent per year during 1981-82 and 1996-97 to only around 2 per cent during 1997-98 and 2004-05. This deceleration, although most marked in rainfed areas, occurred in almost all states and covered almost all major sub-sectors...” It noted the following trends:
–Slowdown in growth.
Indeed, in the first three years of the Tenth Plan, 2002-03 to 2004-05, growth of agricultural GDP plummeted to below 1 per cent per annum, that is, below the rate of population growth. Such were the fruits of neoliberal ‘reform’.
Partial, tactical retreat of neoliberal ‘reform’
However, the partial retreat of neoliberal policy was merely a short-term tactic; there was no fundamental shift. In its second term, under pressure from international capital to cut the fiscal deficit, the UPA government reverted to the very policies which had doomed the NDA, and in turn met the same fate as its predecessor. When the Modi-led NDA returned to power in 2014, it did not attempt to restore public expenditure on agriculture, but indeed accelerated the cutbacks. Even in the face of two consecutive years of drought, the 2016-17 Budget has made only cosmetic increases, as we have seen. Thus, with the reversal in public investment post-2011, acute agrarian distress has returned to the fore.
Falling share of public investment in total agricultural investment
Within total agricultural investment, the share of public investment has been falling, from 42 per cent in the 1980s to 24 per cent in the 1990s and 15 per cent in 2011-12 (see Table 6); this has led to the share of total agricultural investment in GDP falling further and further. By 2011-12 public investment in agriculture (by the Centre and state governments) amounted to an abysmal 0.4 per cent of GDP – for a sector that employs half the workforce and feeds the country.10
Significance of public investment
It is important in this context to point to certain well-established relationships,11 which have been observed by even ‘mainstream’ development economists:
(i) Public investment and private investment in agriculture (even more than elsewhere) are not substitutes; they are complementary. Public investment induces private investment which might otherwise not take place. For example, major and medium irrigation, rural electrification, agricultural research and development, agricultural extension services, vaccination and veterinary services, public sector seed agencies, rural bank branches, rural roads, procurement and storage12 all make it worthwhile for peasants to invest in developing their land. On the other hand, individual peasants cannot overcome the lack of such public infrastructure simply by increasing their private investment (which is concentrated in minor irrigation, farm machinery and land development). In recent years the immediate reason for the deceleration in investment in agriculture, as a percentage of GDP and as a percentage of total investment, is the fall in public investment.
(ii) To state the obvious, investment in agriculture leads to an acceleration of agricultural output growth and an increase in land and labour productivity. Much of the poor productivity in agriculture in India is because its peasants are starved of physical capital to work with (which in turn is because of the concentration of assets, as well as mechanisms that drain surplus from the toiling peasantry).
(iii) In reducing poverty, the sectoral pattern of growth matters. In countries like India, agricultural growth is most effective in reducing poverty (compared to growth in the industrial or services sectors); it also in turn spurs growth in non-farm rural economic activity, by generating markets for both consumption and investment goods. Bisaliah and Dev point out: “Growth efforts are to be directed to areas where the poor people live, sectors in which poor people work, to the factors of production they possess and to the products they consume. Because the majority of the poor live and work in the rural areas, have little education, provide unskilled labour and consume mostly basic necessities such as food, emphasis on agricultural/rural growth becomes the nodal strategy.”
It is small and marginal peasants, and those farming in rain-fed agriculture, that particularly need public investment. Moreover, the paucity of public investment accentuates regional imbalances: poverty is particularly concentrated in the rural areas of eastern India, where the capital stock is particularly low. However, corporate investment in agriculture, which necessarily is oriented to its own profits, and that too in the short/medium term, tends to go to already developed regions.
Climate change and the particular need for public investment
Climate change is a new development; the State itself is not yet equipped to deal with it, let alone individual, unorganised, poor peasants who are barely keeping their heads above water, and lack surpluses for normal investment. Quite apart from efforts at mitigation (i.e., bringing down carbon emissions), adaptation to the changes that are on the cards would require an extraordinary effort by the State in collaboration with the peasants.
Certain crucial facts need to be noted in this context:
A change in the timing and quantity of rainfall is of enormous significance to cultivators in rain-fed agriculture. There will likely be changes in soil moisture. The coastal regions of western India face a threat of flooding and salinisation. There is a threat of increased pests and weeds in the changed conditions. A rise in temperatures, and changes in the timing of periods of cold and heat, are predicted to have very severe consequences for a number of crops such as wheat and bajra. Unusual weather events are likely to become more common. Forest ecosystems face the prospect of irreversible damage.
Climate change will have a differentiated impact on different classes in agriculture. As we saw in the third instalment of this series, while those with larger landholdings are able to garner sizeable surpluses, for almost 70 per cent of farmer households (with holdings below 2 hectares), total income from all sources (cultivation, farming of animals, non-farm business and wages) was less than consumption expenditure. Farm income alone (from cultivation and farming of animals) was less than consumption expenditure in the case of 87 per cent of farmer households. This vast majority, who are struggling to make ends meet even now, would be unable to withstand the shocks dealt by climate change-related events.
Sizeable investments are thus required: to address new water-related issues, to develop systems and institutions to cope with emergencies, to improve weather prediction and communicating it to peasants, to develop new crop varieties and methods which can resist the new conditions, and (for all of this) to revive the severely depleted agricultural extension system. Indeed the latter would have to be expanded greatly both in order to gather information from, and disseminate guidance to, peasants. It would be lunacy to imagine this can be done without giving primacy to the public sector. (Indeed, the phenomenon of climate change is the most terrible example of how institutions based on the profit drive are both guilty of causing global catastrophe and incapable of addressing it.)
The Economic Survey cites preliminary estimates that $2.5 trillion at 2015 prices, i.e., a sum larger than India’s present GDP, will be required in order to meet India’s climate change action under the INDC between now and 2030; this includes both mitigation (i.e., reduction of carbon emissions) and adaptation. However, it does not make clear where this money is going to come from. The Survey says “international finance is a critical enabler for the scaled up climate action plans”, but the same chapter provides ample evidence that even the meagre sums pledged by the developed world have not been forthcoming. Such funding as might come would be restricted to mitigation efforts, which the developed world is keen to ensure in the underdeveloped world, in order to take the pressure off themselves. Funding will not come for adaptation, which directly affects only the Indian people. (For example, India has received $325 million in Global Environment Facility funds for mitigation efforts – itself a paltry sum – but only $10 million for adaptation efforts.)
One has to hunt to find a mention in either the Economic Survey or the Budget of the question of adaptation to climate change, which is of vital importance for our hundreds of millions of peasants, and necessary not at some future date, but today. The budgetary allocations for adaptation are not even paltry; they are derisory. A National Adaptation Fund for Climate Change has been established “to support concrete activities that reduce the adverse effects of climate change”; the sum budgeted for 2016-17 is Rs 100 crore. There is an allocation for the National Mission on Sustainable Agriculture – Rainfed Area Development and Climate Change, of Rs 225 crore; and an allocation for “Climate Resilient Agriculture”, of Rs 110 crore. Does the Government imagine that the problem of adaptation to climate change can be left to the magic of market forces? Or does it perhaps believe that the related upheaval will solve the problem of agriculture by dismantling the peasantry?
An organised peasantry, under a democratic and progressive State, would be in a better position to confront the challenges of adaptation. We face the contrary situation today. The High Level Panel of the U.N. Food and Agriculture Organisation indicated the role that could be played by small farmers in adaptation, as well as the greater difficulties they face:
We know too little about how crops and livestock (are) grown and management practices change with scale to identify global patterns consistently, but it is commonly assumed that small-scale farms are more likely to engage in diversified crop and livestock agriculture, which might be more resilient to climate change. On the other hand, smallscale operations are less likely to have access to extension services, markets for new inputs and seeds, and loans to finance operations. Gaining a better understanding of the differences in farm activities, and vulnerabilities to climate change is critical, both to finding ways to improve food security and to deal with the challenges which climate change poses to agricultural productivity and stability.14
The question of adaptation, then, is not merely a technological problem, but a class and political one as well. The present stance (and indeed nature) of the Indian State bodes ill for the overwhelming majority of India’s vast peasantry in the face of climate change.
1. However, neoliberal economists do not want the State to withdraw from its role as the instrument of ‘law and order’, for example, suppressing ‘illegal’ strikes by workers, forcibly acquiring peasants’ land, and like activities. In fact, under the neoliberal regime, the State is called upon to intensify these activities. Thus in Chile, perhaps the first laboratory of neoliberalism following the 1973 coup there, a military dictatorship suppressed all popular organisations in order to implement free-market policies. In India today, the area under the rule of the police and paramilitary forces has greatly increased under the reign of neoliberal policies. (back)
2. At a conference of chief ministers convened in 1971 by Indira Gandhi to address the problem of growing agrarian unrest in different places in India, the then Home Minister Y.B. Chavan famously remarked that the Government of India “would not allow the Green Revolution to become a Red Revolution”. (back)
3 Aparajita Bakshi, “Contextualising Land Reform in West Bengal: An Interview with Benoy Konar”, Review of Agrarian Studies, July-December 2014.. (back)
4. Full title: The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006. (back)
5 .Full title: The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. (back)
6. Nitin Sethi, “250 conflicts over land acquisition recorded in 2013 and 2014”, Business Standard, 31/12/2014. (back)
7. “Raising Agricultural Productivity and Making Farming Remunerative for Farmers”, Occasional Paper, NITI Aayog, Government of India, December 2015. (back)
8. The Economic Survey 2015-16 does provide some useful data on agriculture, and makes a few correct observations. It does call for increased public spending on certain heads such as agricultural research and micro irrigation. It suggests using Minimum Support Prices more actively to promote the production of pulses. But these are exceptions. In the main, it reposes faith in the market. (back)
9. In this respect, the Survey is a bit more circumspect, acknowledging the need for public investment in some areas, but its thrust is in the same direction as the Niti Aayog. (back)
10. Government expenditure on agriculture is higher than 0.4 per cent, since it includes not only investment, but recurring expenditures as well, such as wages of employees. (back)
11. Here we summarise arguments made in S. Bisaliah and S. Mahendra Dev: “Private Capital Formation In Indian Agriculture: An Analysis of Farm Level Data”, FAO, Rome, 2010; Bisaliah and Dev, “Private Investments in Indian Agriculture: Farm Level Evidences and Policy Directions”, India International Centre workshop, 2011. (back)
12. Some of these are not classified as investment in agriculture as such; however, they play an important role in promoting agricultural growth, and can be considered more broadly investment for agriculture. (back)
13. Where Have All the Seasons Gone? Current Impacts of Climate Change in Gujarat, a report by Delhi Platform, Gujarat Agricultural Labour Union, and International Union of Foodworkers, May 2011. (back)
14. Climate change and food security: A report by the High Level Panel of Experts on Food Security and Nutrition of the Committee on World Food Security, Food and Agriculture Organisation (FAO), 2012, cited in T. Jayaraman and Kamal Murari, “Climate Change and Agriculture: Current and Future Trends, and Implications for India”, Review of Agrarian Studies, vol. 4, no. 1, February-June 2014. (back)
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