(2) In addition however, and this is the irony of it, the foreign exchange earnings of the country are unlikely to increase much as a consequence of these exports, especially of rice. The total volume of world trade in rice currently stands at a meagre 17 million tonnes. Even if India exports only 2 million tonnes to start with, which is the figure being talked about, this would mean a 12 percent increase in supply in the world market. This is bound to lower the international rice price so that the actual foreign exchange earned would be only a fraction of what appears at first sight on the basis of calculations at prevailing prices, and small in absolute terms.
 
(3) The foregoing discussion was based on the assumption that the current exchange rate continues. What crops are profitable to export and what are profitable to import depends upon the exchange rate, and as the exchange rate depreciates the range of exportables expands. While at the moment the foreign exchange reserves appear comfortable this is clearly illusory. First of all, there is a complete industrial stagnation in the country, and any revival, even a moderate one, would boost the import bill. Secondly, nearly $10 billion of exceptional financing has been resorted to in the last two years, the repayment obligations on which should be falling due shortly. Thirdly, there is a sharp increase in the fiscal deficit in the current year which is likely to have its impact on the balance of payments soon. And finally, there is pressure mounting for a liberalisation of consumer goods imports: a recent report submitted to the Finance Ministry by two NRI economists of the Fund-Bank circuit who had been recruited by it to "advise" on the reform process made a strong plea for import liberalisation in consumption goods. For all these reasons pressures on our balance of payments are bound to increase once again in the very near future. And this would inevitably mean a further downward slide in the exchange rate, which would bring more of our agricultural goods, especially the other major cereal wheat, into the ambit of exportables.
 
Once this happens the pressure on domestic foodgrain prices would be all the greater, and the squeeze on the living standards of the poor, including the rural poor, would be generalised to the country as a whole. In the case of wheat where world trade is much larger, about 80 million tonnes, the export drive may not be accompanied by any adverse terms of trade movements. But even if this were so, all it would mean is that the people would be getting squeezed in order to generate foreign exchange so that the rich can import consumer goods of their choice. And of course since other countries under Fund-Bank conditionalities are also being pressurised to depreciate their exchange rates and push out more agricultural goods exports, the presumption on the basis of the existing state of affairs that we would actually get substantial additional foreign exchange through agricultural exports supported by exchange rate depreciation, still appears unconvincing.
 
(4) The usual argument advanced by the supporters of economic liberalisation against the above scenario is that agricultural supplies are responsive to prices. As a result, if the domestic prices rise owing to agricultural exports, agricultural output too would increase. This, over a period of time, may even bring down domestic prices, so that any hardships for the poor would only be a transitory one. The flaw with this argument however is that any increase in agricultural output depends crucially upon investment, especially public investment on infrastructure such as irrigation, power, extension, and of course research. To be sure, provision of public investment alone is not always sufficient, since complementary private investment has also got to be undertaken, and for this agriculture has got to be sufficiently remunerative. But in the absence of this public investment, no matter how high the prices alone are pushed up, they scarcely have any effect upon output expansion; and once this public investment is forthcoming in a particular region, and agriculture is sufficiently remunerative to elicit an adequate response, then pushing up this remunerativeness even further has again no effect upon output expansion. In short even though an adequate level of remunerativeness is a necessary condition for growth and not the only necessary condition at that (since the extant agrarian relations of the region are also crucial), it operates only when the basic conditions are created for growth through public investment.
 
This is so obvious a proposition that it comes as a surprise that anyone could overlook it. After all, agricultural prices are more or less equally high all over the country; then how is it that it is only the north-west of the country that has experienced rapid agricultural growth in recent years? Obviously, high prices as such do not elicit growth; it is not the case that there would always be a notable supply response to high prices irrespective of the context.
 
(5) It is worth noting in this context that during the 1980s real public investment in irrigation had shown an absolute decline: the rate of growth between 1980-81 and 1990-91 was -1.73 per cent per annum. This reflected itself in the fact that the average annual addition to irrigated area through major and medium irrigation came down sharply in the quinquennium 1985-6 to 1990-91:
 
1970-71 to 1975-76 0.56 (m.hectares)
1975-76 to 1980-81 0.52
1980-81 to 1985-86 0.62
1985-86 to 1990-91 0.04
 
True, the average annual addition to irrigated area from minor irrigation increased over this period, the corresponding figures being: 0.90, 1.24, 1.04, and 1.64. But investment in minor irrigation, which is undertaken in the private sector, depends crucially on the availability of electricity (this being cheaper than diesel), and hence is also bound up with public investment in rural electrification and the supply situation of electricity; seepage from canals is another important factor. To imagine therefore that expansion of minor irrigation can continue irrespective of what happens to public investment is untenable.
 
There is another important consideration: the figures for total irrigated area in 1990-91 from major and medium irrigation were 26m. hectares and from minor irrigation 44.8m. hectares giving a total of 70.8m. hectares. The Planning Commission estimates that the remaining irrigation potential to be exploited is about 34.4m. hectares, 26m. from major and medium irrigation and 8.4 from minor irrigation. There is reason to believe that the potential for minor irrigation is an underestimate. But even if this were so, the fact remains that at the current rate of exploitation, the remaining potential would be exhausted in a short time (the 8.4m. of course would be exhausted by 1995-96). Stepping up public investment becomes additionally necessary for this reason to maintain the growth-rate. To be sure, there are serious objections, on ecological and other grounds, to major irrigation projects, so that the country has to turn to a variety of other ways, such as simple rain-harvesting methods, in the future for the water requirements of agriculture. But whatever be the optimal means of meeting this water requirement, the point being made here is a different one, namely that the government cannot evade its responsibility for undertaking appropriate investments for the purpose. Public investment of course can to an extent be substituted by, and complemented by, local initiative from elected bodies like the Panchayats, but the government has to make investments. And this is precisely what it has not been doing through the eighties.
 
Under the current dispensation since the IMF has stipulated targets for the fiscal deficit, and since investment cuts are the main instrument which the government has chosen to achieve these targets, the growth rates hitherto achieved in agriculture are going to be difficult to sustain in the future no matter how high agricultural prices rise as a result of the export drive. This would undoubtedly mean a decline in per capita agricultural output, and in particular in per capita foodgrain output. If in addition a part of this output is exported, then the spectre of famine which had been kept at bay all these years is going to haunt us once again.
 
In fact, the analogy between the new food policy regime and that of the colonial period is almost complete: the colonial government had believed in balancing the budget, and had used a strict rate of return criterion in deciding its investment expenditure, which had kept investment in irrigation and other infrastructure low (except in Punjab). The present government is bound by IMF conditionalities to keep its fiscal deficit within a low limit and since it cannot rely on direct taxes (which would damage capitalists'"incentives", so crucial for the new regime), finds itself without resources to undertake investment; in addition, it too is now constrained to rely on a narrow rate of return criterion since Fund-Bank thinking runs along those lines. Like in the colonial period then agricultural growth rate becomes a casualty. Again like in the colonial period exports are to be freely undertaken from agriculture, starving the domestic population. Exports were undertaken then to finance the "drain" from India; exports are to be undertaken now to meet the import-bill for luxury consumption and to service the debt which was incurred in the past for meeting this import bill. And, again like in the colonial times, the burden of the reduced per capita domestic availability of foodgrains is not to be evenly shared by having a public distribution system; the ordinary people are to be the principal victims by being left to the mercy of the free market.
 
The colonial government did not have any rationing until after the Bengal Famine, by which time it was too late. Its faith in the free market was touching. Collectors of famine-stricken districts who saw thousands perish and did nothing about it were congratulated by the government for their exemplary courage in resisting the temptation to intervene in the laws of the market, which "Mr.Adam Smith has shown should never be interfered with". The current faith in the virtues of the free market is equally touching and can have equally disastrous consequences.