Themes > Economic Briefs
What was the Nature of the Agrarian
Transition in Post- Independence India?
What are the Implications of the New
Policies for Indian agriculture?
The essence of the agrarian transition in post-Independence
India has been the development of a socially narrowly-based agrarian
capitalism. While there has been some change in the composition of the
top land-owning stratum (with the decline of the erstwhile zamindars
and the moving up of a section of the rich peasantry), land concentration,
as measured for instance by the proportion of land owned by the top
15 percent of the landowners, has shown no decline. This relatively
more homogeneous class of top landowners has been provided with a plethora
of incentives to convert itself into a class of capitalist farmers.
We thus have a combination of capitalist and pre-capitalist forms of
exploitation in the countryside which is particularly oppressive for
the rural poor and which also restricts the sweep of capitalist development.
Nonetheless, as we discuss below, it has brought about a certain measure
of output expansion in agriculture in contrast to the absolute stagnation
in output that prevailed over the last half-century of colonial rule.
The "liberalisation"-cum-"structural adjustment" programme has a component which directly and specifically affects the Indian agrarian economy, apart from its general effects via investment- cuts etc. This consists of: (i) the removal over time of input subsidies such as on fertilisers, irrigation, electricity and credit (together with priority sector lending targets); (ii) the removal of trade restrictions on agricultural commodities so that domestic prices are not out of line with world prices; (iii) a unification of prices so that the current system of dual markets in foodgrains and other agricultural commodities disappears; (iv) a drastic curtailment of food subsidy by confining the Public Distribution System only to the "deserving poor", and even replacing it over time with an Employment Guarantee Scheme of strictly limited scope; (v) the removal of all restrictions on the choice of what to produce, where to sell etc.; and (vi) freedom of operation for agri-business, and for this purpose the elimination of land-ceilings. Not all these of course are going to be adopted immediately; they constitute the basic set of objectives for "economic reforms" in agriculture. It is important therefore to understand what the implications of this total package will be for the Indian economy in general and the agrarian economy in particular.
To see matters in a proper perspective, a very brief historical discussion is necessary. Trade in agricultural goods was not always subject to restrictions. On the contrary during the colonial period, not only was the economy as a whole subject to more or less free trade (until the inter-war years when a limited number of industries received tariff protection), but agriculture in particular remained totally free of any restrictions throughout (so much so that during the very years of the Great Bengal Famine, rice was being exported out of Bengal). As a result of this freedom, cash-crop production for exports expanded, and since very little investment in irrigation took place to increase gross cropped area (except in the canal colonies of Punjab), this expansion was at the expense of acreage under food crops. Since yields in agriculture were not rising (on the contrary they were declining in the absence of any changes in the methods of production), this meant a sharp decline in per capita foodgrain output. The total foodgrain output during the period 1893-1947 increased at an annual rate of 0.11 per cent while non-foodgrains increased at the rate of 1.31 per cent; per capita incomes remained virtually stagnant and, since the decline in per capita foodgrain production was not made up for by any imports, per capita foodgrain availability declined sharply. In Bengal during the inter-war period it declined by 38 percent; even in the most prosperous state, Punjab, it declined by as much as 20 percent. It is this decline, which increased poverty and pushed people to the brink of starvation, that formed the backdrop to the Bengal famine. In a situation where the people's survival ability had been severely eroded, the additional burden of war expenditure literally proved to be the last straw.
The food policy of the government in the post-independence period emerged out of this experience. While no radical land reforms were carried out, and hence the productive potential of Indian agriculture was not fully realised (in contrast for example to China where despite a far more adverse land-man ratio, per capita food output rose faster than in India), a plethora of measures ranging from public investment in irrigation to the spread of extension services and the provision of cheap credit and inputs ensured that agricultural production, especially foodgrain production, kept fractionally ahead of population growth. At the same time, starting from the mid-sixties which witnessed acute food-shortage, an elaborate system of food procurement-cum- distribution was set up. True, the growth in production was undertaken on the basis of an emerging tendency towards capitalist production, superimposed on an unreformed and exploitative agrarian structure; true also that the public food management system had only a limited presence in rural areas, except in states like Kerala and West Bengal, and, in the absence of any complementary programme of income generation through comprehensive employment guarantee schemes (again except in some states), did not make any dent in the massive poverty existing in the Indian countryside. Nonetheless, the terrible famines which had characterised British India were done away with. The decline in per capita food availability which had characterised the last half-century of colonial rule was arrested and even marginally reversed. With all its limitations this has been an important achievement. In a country with such vast poverty where even a marginal disturbance in the food economy can cause havoc, there has been a more or less successful avoidance of disaster, even in the darkest times of terrorism and violence; and this has been achieved not by leaving things to the market but precisely by purposive State intervention in the food economy.
What the "liberalisation" package involves is an undoing of even this achievement, a putting back of the clock to the food regime that prevailed in the colonial times. Let us examine its implications systematically.
(1) At the prevailing exchange rate of the rupee, a comparison of the domestic with the international prices indicates that domestic prices of rice and cotton are distinctly lower than those prevailing internationally, and of sugar and oilseeds distinctly higher. The domestic wheat prices are such that if we take account of transport costs wheat would be neither an exportable nor an importable. Opening up Indian agriculture to international trade therefore would have an immediate impact on the price of rice. Rice would cost more to consumers, but it is not only the urban consumers who would be hit by it; the vast bulk of the agricultural labourers and the poor peasantry in the East and the South of the country are net buyers of rice in the market and they would be equally hard-hit by any rise in rice prices. In fact the urban and the rural poor would be even harder-hit in the rice-consuming regions than the others for the following reason: the public distribution system in rice is supported largely by the surplus from the North-West. Rice is grown there as an additional crop but is not locally consumed so that almost the entire crop is available for procurement. Rice exports would take the form essentially of diverting this part of the country's output to the international market, thereby starving the public distribution system. The primary victims of any drive to export rice therefore would be those who rely on the public distribution system, namely the urban and the rural poor. Ironically, the reach of the public distribution system in the rural areas is greater precisely in the southern and the eastern states than in the rest of the country, in Kerala and West Bengal of course, but also to an extent in Tamil Nadu and Andhra. This very fact however implies that the primary effect of any starvation of the public distribution system would be upon the poor in these states.
The argument often advanced in official circles that the rice-growing states are going to benefit from rice exports is therefore fallacious for two reasons: first, much of the rice surplus available for immediate export is not located in the main rice-growing states but is located in the north-west where it currently feeds the PDS; and secondly, while the general rise in rice price which would accompany the withdrawal of PDS rice would benefit the landlords and the rich farmers who control the marketed surplus in the rice-growing states the bulk of the peasantry would be hit by it, including that section of the peasantry which sells immediately after the harvest to buy its consumption requirements later.
Exports of cotton would raise the cost of domestic textile production, while lowering that of textile production in some of the competing countries. This would not only threaten our domestic cotton textile industry which is the largest employer in the country, but would also raise the price of cloth. Even if imports come in at the expense of domestic production, some increase in cloth price is inevitable. The two most elementary necessities of the people over much of the country, namely food and cloth, therefore would both cost more as result of liberalising agricultural exports. Now, even if oilseeds and sugar cost less (on which more later), that would scarcely alter the fact that the living standards of the poor would be put to a squeeze.
(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.
The "liberalisation"-cum-"structural adjustment" programme has a component which directly and specifically affects the Indian agrarian economy, apart from its general effects via investment- cuts etc. This consists of: (i) the removal over time of input subsidies such as on fertilisers, irrigation, electricity and credit (together with priority sector lending targets); (ii) the removal of trade restrictions on agricultural commodities so that domestic prices are not out of line with world prices; (iii) a unification of prices so that the current system of dual markets in foodgrains and other agricultural commodities disappears; (iv) a drastic curtailment of food subsidy by confining the Public Distribution System only to the "deserving poor", and even replacing it over time with an Employment Guarantee Scheme of strictly limited scope; (v) the removal of all restrictions on the choice of what to produce, where to sell etc.; and (vi) freedom of operation for agri-business, and for this purpose the elimination of land-ceilings. Not all these of course are going to be adopted immediately; they constitute the basic set of objectives for "economic reforms" in agriculture. It is important therefore to understand what the implications of this total package will be for the Indian economy in general and the agrarian economy in particular.
To see matters in a proper perspective, a very brief historical discussion is necessary. Trade in agricultural goods was not always subject to restrictions. On the contrary during the colonial period, not only was the economy as a whole subject to more or less free trade (until the inter-war years when a limited number of industries received tariff protection), but agriculture in particular remained totally free of any restrictions throughout (so much so that during the very years of the Great Bengal Famine, rice was being exported out of Bengal). As a result of this freedom, cash-crop production for exports expanded, and since very little investment in irrigation took place to increase gross cropped area (except in the canal colonies of Punjab), this expansion was at the expense of acreage under food crops. Since yields in agriculture were not rising (on the contrary they were declining in the absence of any changes in the methods of production), this meant a sharp decline in per capita foodgrain output. The total foodgrain output during the period 1893-1947 increased at an annual rate of 0.11 per cent while non-foodgrains increased at the rate of 1.31 per cent; per capita incomes remained virtually stagnant and, since the decline in per capita foodgrain production was not made up for by any imports, per capita foodgrain availability declined sharply. In Bengal during the inter-war period it declined by 38 percent; even in the most prosperous state, Punjab, it declined by as much as 20 percent. It is this decline, which increased poverty and pushed people to the brink of starvation, that formed the backdrop to the Bengal famine. In a situation where the people's survival ability had been severely eroded, the additional burden of war expenditure literally proved to be the last straw.
The food policy of the government in the post-independence period emerged out of this experience. While no radical land reforms were carried out, and hence the productive potential of Indian agriculture was not fully realised (in contrast for example to China where despite a far more adverse land-man ratio, per capita food output rose faster than in India), a plethora of measures ranging from public investment in irrigation to the spread of extension services and the provision of cheap credit and inputs ensured that agricultural production, especially foodgrain production, kept fractionally ahead of population growth. At the same time, starting from the mid-sixties which witnessed acute food-shortage, an elaborate system of food procurement-cum- distribution was set up. True, the growth in production was undertaken on the basis of an emerging tendency towards capitalist production, superimposed on an unreformed and exploitative agrarian structure; true also that the public food management system had only a limited presence in rural areas, except in states like Kerala and West Bengal, and, in the absence of any complementary programme of income generation through comprehensive employment guarantee schemes (again except in some states), did not make any dent in the massive poverty existing in the Indian countryside. Nonetheless, the terrible famines which had characterised British India were done away with. The decline in per capita food availability which had characterised the last half-century of colonial rule was arrested and even marginally reversed. With all its limitations this has been an important achievement. In a country with such vast poverty where even a marginal disturbance in the food economy can cause havoc, there has been a more or less successful avoidance of disaster, even in the darkest times of terrorism and violence; and this has been achieved not by leaving things to the market but precisely by purposive State intervention in the food economy.
What the "liberalisation" package involves is an undoing of even this achievement, a putting back of the clock to the food regime that prevailed in the colonial times. Let us examine its implications systematically.
(1) At the prevailing exchange rate of the rupee, a comparison of the domestic with the international prices indicates that domestic prices of rice and cotton are distinctly lower than those prevailing internationally, and of sugar and oilseeds distinctly higher. The domestic wheat prices are such that if we take account of transport costs wheat would be neither an exportable nor an importable. Opening up Indian agriculture to international trade therefore would have an immediate impact on the price of rice. Rice would cost more to consumers, but it is not only the urban consumers who would be hit by it; the vast bulk of the agricultural labourers and the poor peasantry in the East and the South of the country are net buyers of rice in the market and they would be equally hard-hit by any rise in rice prices. In fact the urban and the rural poor would be even harder-hit in the rice-consuming regions than the others for the following reason: the public distribution system in rice is supported largely by the surplus from the North-West. Rice is grown there as an additional crop but is not locally consumed so that almost the entire crop is available for procurement. Rice exports would take the form essentially of diverting this part of the country's output to the international market, thereby starving the public distribution system. The primary victims of any drive to export rice therefore would be those who rely on the public distribution system, namely the urban and the rural poor. Ironically, the reach of the public distribution system in the rural areas is greater precisely in the southern and the eastern states than in the rest of the country, in Kerala and West Bengal of course, but also to an extent in Tamil Nadu and Andhra. This very fact however implies that the primary effect of any starvation of the public distribution system would be upon the poor in these states.
The argument often advanced in official circles that the rice-growing states are going to benefit from rice exports is therefore fallacious for two reasons: first, much of the rice surplus available for immediate export is not located in the main rice-growing states but is located in the north-west where it currently feeds the PDS; and secondly, while the general rise in rice price which would accompany the withdrawal of PDS rice would benefit the landlords and the rich farmers who control the marketed surplus in the rice-growing states the bulk of the peasantry would be hit by it, including that section of the peasantry which sells immediately after the harvest to buy its consumption requirements later.
Exports of cotton would raise the cost of domestic textile production, while lowering that of textile production in some of the competing countries. This would not only threaten our domestic cotton textile industry which is the largest employer in the country, but would also raise the price of cloth. Even if imports come in at the expense of domestic production, some increase in cloth price is inevitable. The two most elementary necessities of the people over much of the country, namely food and cloth, therefore would both cost more as result of liberalising agricultural exports. Now, even if oilseeds and sugar cost less (on which more later), that would scarcely alter the fact that the living standards of the poor would be put to a squeeze.
(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.
© MACROSCAN 2002