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.

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For the last two weeks, the media have been obsessed with two pieces of news: the exit of the Reserve Bank governor, Raghuram Rajan (‘Rexit’), and the exit of Britain from the European Union (‘Brexit’). Today, the media present any such event from the angle of how it will affect speculative flows of foreign capital in and out of India. Indeed, the extent of attention given to these two events, Rexit and Brexit, seemingly far removed from the lives and livelihoods of most Indians, is itself testimony to the integration of the Indian economy with global financial flows.

In what is now a set pattern, Narendra Modi delayed discussing the actions of his partymen (here, Subramanian Swamy) until they achieved their aims (here, the removal of Rajan). Only after this did Modi break his silence, as usual uttering some stern platitudes and distancing himself from the actions of unnamed persons. It is possible that the Prime Minister and the BJP leadership now wish to rein in Swamy’s antics; but it no secret that Modi had problems with the RBI governor. Under the preceding government, Rajan had headed an official committee which ranked Gujarat as a “less developed state”, much to the annoyance of then chief minister Modi. After Modi came to power at the Centre, Rajan made a number of remarks which indirectly disparaged or undermined the BJP government: for example, on the Prime Minister’s ‘Make in India’ slogan, or on the Finance Minister’s claim that India had the fastest rate of growth. Perhaps Rajan believed his status as darling of foreign investors protected him from removal.

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By Manali Chakrabarti (manalichakrabarti[at]

According to the World Bank, India’s nominal GDP crossed the $ 2 trillion mark in 2014[1], and is slated to grow at close to 8 per cent annually in 2016 and 2017[2]. To put this in perspective: In 1991, the year the Indian economy was opened up and we embraced neoliberal policies, the Indian GDP was about $275 billion, which by the turn of the century had doubled to $481 billion. But the really rapid growth of the Indian economy has been in the last 15 years, which saw GDP increase by almost four-and-a-half times. One needs to remember that these include years which saw the greatest global recession since the 1930s. Thus, for the economy as a whole the promised ‘achche din’ seem to be happening and there are numbers to prove it. The policymakers who have been rooting for further opening up and freeing of the economy have been justifiably sporting a smug expression with this quantitative endorsement of their position.

However, one vexing question for them is that some people continue to claim that all this growth has not translated into alleviation of poverty–the ‘poor’ have been stubbornly impervious to this stunning growth of the economy. And this is disturbing, particularly given that the officials have not even been able to decide how many poor people exist and, more importantly, how to identify them.

The ‘Poverty Line’ and a Brief History of Poverty Level Calculation
While definitions of poverty in India have a long history, the last decade has witnessed a flurry of activity among academics and policymakers in trying to determine what constitutes poverty, and where to draw the line below which people can be termed ‘officially’ poor. Popular media and academic journals have produced a plethora of articles on the various definitions of poverty and poverty lines. Continue Reading »

Insuring the Government against the Peasantry

Before the Union Budget, the Government announced a new crop insurance scheme, the Pradhan Mantri Fasal Bima Yojana (PMFBY). This has been touted as a flagship programme of the Modi government in the agricultural sector, a ‘game-changer’, a solution to the problem of peasant suicides, part of a broader shift to ‘pro-farmer’ policies, and so on.

The rationale for insuring peasants can hardly be questioned. Peasants face enormous insecurity in eking out a livelihood. Since they engage, even more than other sections of the workforce, with natural processes, they are particularly affected by the uncertainties inherent in such processes. Since they are very small operators in the market, they are at the receiving end of market fluctuations, and are unable to affect it by their actions. As shown both by the National Sample Survey data for 2012-13, the majority of peasants struggle to make ends meet, particularly in the absence of off-farm income. Without doubt, they need protection against all sorts of natural and manmade calamities. The question is, how. Continue Reading »

Fairy Tales about Foreign Investment

During the past two years, the prices received by peasants for various agricultural products, such as potatoes, rubber, cotton, basmati rice, guar, eggs, and milk, have experienced sudden, even catastrophic, declines, in many cases to levels below the cost of production. In some cases, a steep rise in retail prices has been followed by a crash in mandi prices at the time when the peasant brings the crop to the market.

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Peasantry in Fetters

Peasant households in deficit
Even as we note the positive effect of earlier spells of increased public expenditure, we also need to note certain underlying negative features of India’s agrarian scene, which appear resilient even to periodic bouts of higher growth.

It is striking that even in the earlier period (2004-12), when terms of trade for agriculture were improving and growth rates were higher, this improvement appears to have had only a limited impact on the vast mass of peasantry. Data from the 70th Round of the National Sample Survey (2012-13) show that average farmer household income from all sources was Rs 6,426 per month, of which Rs 2,071 came from wages, and Rs 512 from non-farm business; the rest came from cultivation and farming of animals. For almost 70 per cent of farmer households, total income from all sources (cultivation, farming of animals, non-farm business and wages) was less than consumption expenditure. That is, these households were running a deficit.

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Post-2004 Spell of Growth Over

Deeper crisis
The drought has brought out starkly the precarious state of Indian agriculture; but the crisis is deeper than the drought. Its most extreme and well-known manifestation is the over three lakh peasant suicides that have taken place since 1998. The crisis has many visible or quantifiable indicators: rising costs of production; falling incomes; rising indebtedness; falling investment; spurious, scarce or blackmarketed inputs; sharp fluctuations in farmgate prices; paucity of alternative livelihoods; increasingly unpredictable climatic conditions; and environmental degradation. Its social dimensions are not visible to the naked eye, but these relations undergird the entire structure.

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