Nos. 44-46, April 2008

Nos. 44 - 46
(April 2008):


India’s Runaway ‘Growth’: Distortion, Disarticulation, and Exclusion
IV. (5) The Agrarian Impasse and Its Implications1

We need to consider the state of agriculture most carefully for several reasons. First, the most severe effects of the distortion in the current pattern of development are visible in agriculture, which has slowed as the other sectors have soared. Secondly, agriculture is the sector that ‘employs’ the bulk of the workforce, and so directly concerns the maximum number of India’s people. Finally, the agrarian economy is the base on which the entire distorted structure of the economy and society is constructed; and so in its transformation lies the key to changing that structure. This is elaborated below.

Agricultural slowdown

The growth of agricultural GDP has plunged, from 3.3 per cent in 1980-95 to just 2 per cent 1995-96 to 2004-05.2 That is, the slowdown came in the wake of domestic liberalisation and the establishment of the World Trade Organisation. More telling than the slowdown in agricultural GDP growth is the much sharper slowdown in crop production. (GDP refers to value added, namely, the value of output minus the value of inputs; crop production refers to physical output. GDP calculations are more subject to statistical jugglery, especially in sectors where the data are dubious.)  We see a fall in physical output per head during 1996-7 to 2003-4. Indeed, if we leave out horticulture (for which at any rate the data base is acknowledged to be very poor) the growth rate is negative in absolute terms, that is, there was an actual fall in crop output during this period.3

Chart One

The growth in yields of all crops has plummeted (see Chart 1 above)4, and in some cases has turned negative. The slowdown not only spans all crop sectors – cereals, coarse cereals, pulses, oilseeds, sugarcane, fruits and vegetables; it even extends to livestock and fishery, which experienced lower growth. Despite the very varied conditions across India, the deceleration was witnessed for almost every state individually, although the pattern varied from region to region. This is the longest deceleration in agricultural growth in the post-colonial period.

Declining food security, deteriorating nutritional condition
The agricultural crisis has grave implications for the country’s ability to feed itself. In order to maintain the per capita production level of 2001-2, foodgrains production should reach 240 million tonnes in 2010. Given that foodgrains production was only 219.3 million tonnes in 2007-8, this is highly unlikely.

In the present ‘globalisation’ era, questions about food security have been greeted with the glib response that the country can import its requirements of food. This is of course a disastrous policy given that India’s requirements are very large and world grain trade is narrow: any major import sends the price of grain soaring. We have seen the results of this during the last two years: Between May and September 2007 international wheat prices rose from $200 per tonne to $400, and the cost of India’s imports doubled. Moreover, international grain stockpiles are low (dropping by 53 million tonnes in 2007), and supplies will remain under pressure for three reasons.5

The first, and long-term, reason is the neo-liberal slashing of public investment in agriculture in countries like India. In India, the share of agricultural investment in GDP has slid over the last 25 years, and is now just 1.9 per cent. This has depressed production to the point where prices are rising despite the meagre purchasing power of the masses. Growing meat consumption worldwide too has taken a larger share of grain, since it takes 8 kg of grain to produce one kg of beef. But the immediate reason for the crisis is the massive diversion of grain to subsidized bio-fuel by the developed countries. One-third of U.S. maize production is now going to bio-fuel (rising from 15 million tonnes in 2000 to 85 million tonnes in 2007); not surprisingly, international food prices have jumped 75 per cent since 2005.6

The slowdown in India’s agriculture has been accompanied by a decline in food consumption per head (as described in the earlier chapter). Per capita net availability of foodgrains (a rough measure of consumption) in 2004-2006 was 7.8 per cent lower than in 1994-1996. Indeed it was lower than in 1954-1956, when Indian agriculture had just begun to recover from British rule.7

The crisis in cereals production has a direct impact on total calorie consumption: 68 per cent of calorie intake in the rural areas and 56 per cent in the urban areas comes from cereals. Moreover, it has an equally large impact on protein consumption: 66 per cent of protein intake in the rural areas and 56 per cent in the urban areas comes from cereals. Another 9 and 11 per cent of protein intake in the rural and urban areas respectively come from pulses, production of which has also declined8 Any improvement in nutrition would require a large increase in foodgrains production.

Deteriorating productive base
The poor performance of agriculture points to a deterioration in agriculture’s productive base itself: in the quantity of agricultural land and its productivity. In recent years, according to Ministry of Agriculture data, the net sown area9 has actually fallen, from 143 million hectares in 1990-91 to 140.9 million hectares in 2003-04. One reason for this may be the increasing encroachment by non-agricultural interests (such as urban real estate) on agricultural land.

There is even a decline in the net irrigated area, from 57.1 million hectares in 1999-2000 to 55.1 million hectares in 2003-04.10 As a result, the cropping intensity has stopped growing, at around 1.35 (i.e., 35 per cent of the area is cropped more than once). This in a country in which other conditions permit most of the sown area to be cropped three times. Among the reasons for the decline in sown area and irrigated area are the mindless over-exploitation of groundwater (leading to a fall in the water table), and, again, the diversion of irrigated farmland to real estate.

In the post-WTO period, the terms of trade for agriculture have worsened. That is, agricultural prices relative to non-agriculture prices have fallen by 1.7 per cent a year between 1996-97 and 2003-04.11 With the prices of inputs rising steeply and those of output stagnating, peasants have tried to cut costs, and the growth of input use has slowed.

Nevertheless, as a result of the worsening condition of the soil, the soil’s response to inputs has been decreasing too. Thus, at the same time that input growth is slowing, the capital-intensity of output is growing (i.e., more and more capital is required for a unit of output). The combination of these two trends implies stagnation of output.

The decreasing response to inputs points to the degradation of the land itself as a result of the decline of organic carbon and microbial activities. The present pattern of agriculture is taking an enormous toll of the natural resource base: nearly two-thirds of India’s agricultural land is degraded or sick.1 Moreover, the over-exploitation of groundwater, integral to the present pattern of agriculture, has pushed the water table down in 264 of the country’s 596 districts. As the water table falls, cultivators invest larger sums in boring deeper wells (and this expenditure is duly reflected in national income statistics as ‘agricultural investment’!). Indian agriculture is speeding toward environmental disaster.Despite the stagnation of output, the workforce in agriculture continues to grow; so the growth of value-added per worker in agriculture has ground to a near-halt (0.28 per cent per year during the decade 1993-94 to 2003-4).13 Indeed, value-added per worker in 2004-5 was lower than in 1999-2000.14 The income of agricultural labourers also remained stagnant between 2000 and 2005: what little growth took place in wages was cancelled out by the reduction in days of employment.15

Is the solution new technology?
The rulers respond that what is needed is new technology and bulky investments – the technology to be provided, no doubt, by firms such as Monsanto, and the investments to be made by the corporate sector through contract farming. But it has been demonstrated by public sector agricultural bodies that their agricultural technology, already demonstrated on Indian fields, could raise crop yields by huge margins in the major producing states for most crops. For example, in U.P., which has the largest area under wheat, yields could be increased by 50 per cent; in Bihar, by over 100 per cent. Similarly, rice yields in Chhattisgarh could be raised 150 per cent on unirrigated land and 169 per cent on irrigated land.16 However, these available technological improvements are not being implemented because of (i) the backward and isolated conditions in which cultivation is actually taking place, (ii) the gross inadequacy and dismantling of public sector extension services, and (iii) the deliberate policy of the Government to leave the field open for the private sector.  

Even accepting that new technology may give improved yields, and even acknowledging that large investments are required in agriculture, the question remains, what kind of technology and what kind of investment? That will depend on for whom, and for what objectives we want the technology and investment.

The current orthodoxy (the establishment) view treats all cultivators as essentially homogenous participants in a single market, differentiated only by the size of their land. They are all driven by the same drive, and they act in a similar way, with similar effects. According to this view, all the participants in the market respond to price signals by determining how to maximise their profits and minimise their outlays, shifting from one crop to another, and increasing/decreasing their output or their use of labour with the aim of maximising profit.

However, as we shall see, to understand the real processes taking place, we have to abandon the notion of all cultivators being profit-maximising operators. We need to take note of the different classes actually existing in agriculture, and the relations they enter into for the purpose of production, in order to understand what drives the actions of each class. We need to look at the process by which these class relations are reproduced, and further place this within the overall relations in the Indian economy as part of the world economy.

Without such an approach, we would find it difficult to understand various social phenomena. For example, we would find it difficult to follow why peasants are driven to suicide – why they do not abandon agriculture and take up other employment. In the absence of the broader frame we would be driven to some sort of banal psychological explanations, as the rulers are wont to trot out. A full picture of India’s agrarian relations is beyond our scope here, but our points are made keeping in mind the need for such a broader frame.

The land
In line with their theory that the existing social relations pose no hurdles to agricultural growth, and that all that is required is new technology, the rulers give the impression that extensive growth in agriculture is no longer possible, and that only intensive growth (raising the productivity of the existing net sown area) is possible. While the need for intensive growth is beyond doubt, the claim that extensive growth is not possible is not borne out by land utilisation statistics, which show large fallows (26 million hectares), as well as substantial culturable waste land (13 million hectares). Of course, the fallows and waste land are also in use in many places as grazing lands for livestock, so in that sense they are in some use; but nevertheless it would appear there is considerable scope for increasing the net sown area in the country.

What prevents this from taking place? It is notable that the fallows are especially high in regions where agriculture is backward (in Jharkhand the fallows are larger than the net sown area) and low where there is irrigation, infrastructure, and a historical background which has favoured a measure of accumulation within agriculture. Indeed the reasons for the existence of such large fallows are neither the scientific practice of regenerating the soil, nor the impossibility of cultivating it. They lie elsewhere: the non-availability of irrigation, the poverty of the cultivator alongside of his/her lack of access to working capital, the unremunerative prices of output, the decision of landowners not to cultivate their land (whether because of the unremunerative nature of cultivation, or social turmoil), the lack of organisation among poor peasants to take over uncultivated land, and so on. In other words, there are social reasons for failure to extend cultivation, or even to prevent the reduction of sown area.

The enormous inequality in land ownership in India has not diminished in the last five decades. Even according the National Sample Survey (NSS, which, as an official survey, is unable to capture the reality fully) the top 5.2 per cent of rural households today own 42.8 per cent of the area, and the top 9.5 per cent own 56.6 per cent of the area. The remaining 90.5 per cent of households owned just 43.4 per cent of the area.17 Among these are the 41.6 per cent of rural households who own no land other than their homestead (10 per cent do not own even homestead land).18

Since small and landless peasants in parts of India operate land rented from landowning sections, the inequality of operational holdings has been less than that of ownership holdings. (In fact much of such tenancy does not get recorded, since landowners do not want to create tenancy rights; and even tenants do not reveal the facts to official surveyors, since they fear the landowners will evict them if they learn of it. Studies of states such as Bihar, Orissa and A.P. reveal the incidence of such tenancy to be 2 to 4 times the rate reflected in NSS data.19) On the other hand, in certain regions such as Haryana and Punjab those with large holdings are adding to their holdings by leasing-in the land of small peasants; thus the concentration of operational holdings too is on the rise, with 7.4 per cent of the holdings operating 42 per cent of the area. The percentage of rural households with nil operated land rose from 22 per cent in 1991 to 28 per cent in 2003, indicating that the economic processes of the intervening years has deprived large numbers of their holdings.20

A further dimension to the land question is that of common property land resources (CPLR), from which nearly half the households in the country collect materials, and common property water resources (CPWR), from which two-thirds of the households which use irrigation draw water. According to land utilisation statistics, 22 per cent of the country’s geographical area consists of de facto CPLRs. While 62 per cent of the households in the rural areas use fuelwood, more than half of this fuelwood – half a tonne a year per household – comes from CPLRs. More than half the households in the rural areas own livestock, and perhaps more than half of these households use CPLRs as a source of fodder. All these ratios are higher in hilly regions, many of which are also home to the tribals. The dependence on common property resources rises with the backwardness of the village and the poverty of the household. The NSS21 finds that even taking a narrow, de jure, definition of CPLRs, there has been a definite reduction in these resources over the preceding five years, as private interests have encroached on them.

More importantly, the bulk of the de facto CPLRs are forests in which villagers do not enjoy legal rights, and hence are more easily subject to the arbitrary actions and extortions of officialdom. These extractions by officialdom amount to a peculiar form of extraction of land rent.

According to the 2001 Census, Scheduled Tribes (STs, or Adivasis) number 84.3 million, or 8.2 per cent of the country’s population. Almost nine out of 10 Adivasis depend on agriculture for their livelihood; this is more than any other social section. However, not only is the quality of their land poor, but part of it is suspended in a legal limbo, rendering them vulnerable to various types of exploitation. Driven to moneylenders for consumption loans in order to survive, they frequently are forced to part with their lands: In the words of the draft National Tribal Policy (NTP), “Land is the most important source of livelihood for STs. However, and in spite of State enactments to prevent alienation of tribal land, wrongful alienation of tribal land is the single most important cause of pauperization of tribals....” Further, they are prevented from exercising their traditional rights over the forests, even as the forests have been opened up to all sorts of plunder and destruction by the process of so-called development. According to one calculation, more than 500,000 hectares of forests were destroyed between 2001 and 2006 for ‘developmental’ projects, more than during the previous 20 years together.22 Suggesting that the “deep sense of exclusion and alienation” among tribals was responsible for unrest in certain tribal areas, the NTP states candidly: “A situation is thus developing where the STs view the state as their exploiter and enemy, and the preachers of violent actions as their protector and friend. Tribal people tend to support these violent movements as they feel that it would help them get their rights, protect them from exploitation and redress their grievances.” The Prime Minister has declared “Left-wing extremism” to be the country’s “single biggest security challenge”; it is this security challenge alone that has forced the rulers to pay attention to the condition of the tribals. The recent draft National Tribal Policy and the Scheduled Tribes Act are evidence of this anxiety among the ruling circles.

Increase in agricultural workforce despite falling incomes: peasants tied to the land
Over the last four decades, the net sown area has remained virtually the same, while the number of holdings has steadily risen; thus the average size of holding has halved since the 1960s, falling from 2.63 hectares in 1961-62 to 1.34 hectares in 1991-92. What is most significant is that, despite the retrogression in agriculture, 57 per cent of the workforce continues to be ‘employed’ in this sector. Indeed the total workforce in agriculture has continued to grow even during this period, rising from 191 million in 1993-94 to 257 million in 2004-5.

The income per worker in agriculture depends on the land per worker, the productivity of the land, and the price the output fetches (in relation to the prices of commodities purchased by those engaged in agriculture). In recent years the land per worker in agriculture has fallen, the per hectare yields have stagnated, and the terms of trade have deteriorated. This situation translates into falling incomes.

Why do more and more workers crowd into agriculture, in the face of falling incomes? The answer lies in the absence of employment opportunities outside agriculture. This in turn is the outcome of the particular historical process of India’s industrial development (which we have described elsewhere), and its continuation today in capital-intensive growth. Such capital-intensive growth maximises profit per unit of investment for big capital. Within the existing frame of class relations in India, and the consequent character of India’s relations with the world economy, this pattern of growth of industry will not change, and hence the overcrowding of agriculture will continue.

As mentioned earlier, multifarious petty economic activities barely yielding a subsistence (if that) do not really constitute an escape from agriculture. Much of the growth of ‘employment’ in these sectors merely reflects the desperation of the unemployed to eke out a living (eg. in petty retail); and this in effect merely redistributes a small portion of the value generated in the agricultural and industrial sectors. Neither is the income attractive in such employment, nor can it keep expanding endlessly.

Thus peasants are tied to, trapped on, the land for lack of alternative employment. This helpless situation is what enables various parasitic forces (landlords, usurers, officials, traders in inputs and produce, and the private corporate sector) to feed on them, even to the point of driving them to suicide. Despite the very great disparity of conditions in India, this trapped condition is a common feature throughout.

Remittances from outside agriculture to the peasants – whether from family members working in urban areas or abroad, or even engaged seasonally as agricultural labour in regions of relatively commercialised agriculture – merely help prevent the small peasantry from going under, but do not fund investment. Small peasant agriculture is thus in continuous crisis but refuses to die out. Indeed, between the latest two NSS employment surveys, the share of wage labourers in the agricultural workforce has declined, and that of cultivators has increased; the share of cultivators, at 64.2 per cent, is higher now than in 1983. The likely reason for the increasing share of cultivators is that, as the terms of trade turned against agriculture, cultivators have attempted to reduce costs by substituting family labour for hired labour.

This widespread persistence, indeed dominance, of small peasant agriculture, despite the extensive penetration of commercialisation, stands in striking contrast to the process we described earlier in the classical form of capitalist development. It underlines the need to distinguish between the form of commercialisation and the capitalist mode of production.23

Backward, stagnant, isolated

The enormous media hype about the share market should not distract us from the reality brought out by the All-India Debt and Investment Surveys, namely, that land remains the dominant asset of households in rural India (63 per cent); housing runs a distant second (24 per cent). These two together account for 87 per cent of rural assets. In this respect there is hardly any difference over the last three or four decades. The shares of livestock and poultry and agricultural machinery are small, and have declined over the decades.24

The Situation Assessment Survey of Farmers (SASF)25 was an unprecedented survey by the NSS, conducted at the request of the Agriculture Ministry. It has brought out the situation of backwardness and isolation in which the majority of cultivators are surviving: the non-availability of agricultural inputs and veterinary services at the village level; their poor literacy and education levels; their ignorance of the very existence of the statutory Minimum Support Prices in most of India, let alone their being able to obtain them; their ignorance of (and lack of access to) insurance; and, most strikingly, their lack of access to information on improved agricultural technology. The SASF revealed that only 40 per cent of “farmers” had obtained information on improved technology in the previous year, and of these, most had turned to either “other progressive farmers” or “traders in inputs or output”; a negligible number had turned to public sector extension workers. (Little wonder, since India is said to have only one village or block level agricultural extension worker for every 2,200 holdings;26 and even this seems an overestimate.)

The term “farmer” used by the SASF is misleading, because it encompasses very diverse classes, from landless peasant households with minuscule farms to landlord households with large ones; but in so far as we are merely reporting the SASF findings, we have retained the term.

Earnings from cultivation fail to meet consumption expenditure
The SASF brings out another very important finding: cultivators’ earnings from agriculture were insufficient even to meet their consumption expenditure. For average “farmer households”27, net receipts from cultivation28 covered only about 35 per cent of their consumption expenditure. If we were to add to the “expenses on cultivation” a provision for the depreciation of equipment and buildings (which the SASF fails to do), the net receipts from cultivation would be even lower. The SASF gives a figure for expenditure on productive assets used for farm business, but this figure (Rs 1920 per year) is so low that it would not cover even depreciation, let alone net investment.

The farmer household also engages in other economic activities – agricultural labour, other labour, care of livestock, and small businesses. However, even these prove insufficient to meet the household’s consumption expenditures. The sum of the average farmer household’s earnings from cultivation, wages, farming of animals, and non-farm business (Rs 2115) is still less than the consumption expenditure of the household (Rs 2770). That consumption expenditure, it should be noted, is very low: Rs 503 per capita per month, or less than Rs 17 a day.  

It is true that 2002-03 was a poor agricultural year. Let us assume an average year’s income on all heads (net receipts from cultivation, receipts from farming of animals, wages, and non-farm business) to be 20 per cent higher than the figure reported in the SASF.29 Even this higher figure for total income does not meet the consumption expenditure of the average farmer household; rather, it would still run a deficit of about Rs 232 a month, or nearly Rs 2800 a year. Presumably this gap is met either (i) by taking loans, (ii) by sale of assets, or (iii) from remittances sent by family members working outside the rural areas. To the extent it is met by (i) or (ii), the income of the household would further deteriorate in future.

The figures we have given for farmers’ incomes are averages: there are households which are much deeper in deficit, households which manage to meet their consumption expenditure from their earnings, and those which have an income in excess of their expenditure. At the all-India level, the deficit farmer households are those with holdings below 2 hectares, accounting for 88 per cent of the farmer households surveyed. The households with 2 to 4 hectares ‘break even’; and those with over 4 hectares have an income in excess of consumption expenditure. (Of course the size class of cultivators which breaks even varies from state to state.) It should be noted that income from rent and interest, which accrues in general to those with larger holdings, is not included in the sources of income of farmers in the SASF. If included, it would further bring out the gap between the small and marginal households and the well-off ones.

Furthermore, the consumption expenditure varies widely: from Rs 2297 per month per household in the lowest size class (possessing less than 0.01 hectares) to Rs 6418 in the highest size class (over 10 hectares). Hence looking only at the ‘income minus the consumption expenditure’ understates the gap between the different size classes. For example, a rich person not only saves more than a poor person, but also consumes a number of luxuries; the gap between the two is reflected not only in the rich person’s savings, but also in that part of his/her consumption expenditure beyond subsistence requirements.

Finally, we must remember that as in other NSS consumption expenditure surveys, it is difficult to imagine that the top section of agrarian society would tolerate detailed and time-consuming interviews by NSS surveyors. And so the surpluses of the landowning elite may not be reflected in this survey. However, data are provided for households operating 10 or more hectares, i.e., relatively wealthy households. Such respondents may have provided answers, but not wholly truthful ones: For example, the monthly consumption expenditure of farmer households operating 10 or more hectares is said to be Rs 6418. This modest consumption level hardly accords with one’s casual observation of the lifestyles of large landholders.

Marxist approach
The Marxist approach provides a deeper insight into the entire process. It divides the value of the product into the ‘means of production’, the ‘means of subsistence’ of the producers, and the ‘surplus’. Expenditure on the means of production includes not only inputs (seed, fertiliser, pesticides, irrigation, energy) but also an allowance for the depreciation of the means of production. As these wear out, an amount must be set aside for replacing/renewing them, without which the conditions of labour would not be reproduced. 

The ‘means of subsistence’ in industry are the wages of the workers; in agriculture, we can take the means of subsistence  to be the consumption expenditure of the poor peasant/agricultural labourer household, which also broadly amounts to its income. Without this income, the labour force would be unable to reproduce itself; it would starve to death.30 Hence the means of subsistence are as necessary to production as the means of production.31

These two costs – the means of subsistence and means of production – must both be met from the value of the product in order for production to take place, again, at the same level, i.e., what is called ‘simple reproduction’.

The remaining value of the product after subtracting these two is called the surplus. It includes the rent paid on land, the interest paid on loans, and the profit of the direct producer or the merchant. The surplus may go toward consumption expenditure or be re-invested in expanding production. In contrast to industry, where the worker is separated from the means of production and receives only wages and no part of the surplus, in India’s agriculture, not only landlords but different classes of peasants possessing land too obtain some part of the surplus. Thus there is scope for a section of peasants to re-deploy part of the surplus in order to expand production. As we saw in the earlier chapter on the rise of capitalism, the peasants of feudal Europe waged many struggles against their feudal lords in order to retain some share of the surplus for themselves. In the process, a few of them were able to accumulate some capital within the petty mode of production itself, and develop into relatively properous peasants, who are elements of agricultural capitalism.  

As accumulation takes place, whether by the landlord or the peasant, more land is brought under cultivation with more workers, or the productivity of the existing cultivated land increases as a result of investment; in either case the surplus increases. A greater portion of this larger surplus is available to deploy once again in cultivating more land or improving productivity. We saw earlier that when production merely covers the means of subsistence and replaces the used up means of production, what occurs is ‘simple reproduction’; correspondingly, when it generates a surplus, and that surplus is re-deployed in increasing productive forces, what occurs is a cycle of expanded reproduction

With the limited and general information we have from the SASF, we cannot properly calculate the figures for the three Marxist categories, means of subsistence, means of production, and surplus, for which a different type of inquiry would be necessary. However, it is useful to look at certain figures even as we keep this qualification in mind.

We can take, as an approximation of means of subsistence of a peasant family, the consumption expenditure of the smallest size class of farmers, namely, those with less than 0.01 hectares of land. This section earns only a negligible sum from cultivation and the bulk of its income comes from wages, with non-farm business a distant second. In other words, these are landless peasants who survive principally on agricultural labour. The monthly consumption expenditure of this section is Rs 2297 per household. Let us treat peasant households’ consumption expenditure above this level as consumption from the surplus.32 (It could be argued that the consumption expenditure of this section is below subsistence level, and that a higher level should be taken as the means of subsistence; but this would only strengthen further the point that we make below.)At an all-India level, the households able to meet the means of subsistence out of their net receipts from cultivation are those possessing 2 to 4 hectares of land. Their net receipts from cultivation are Rs 2,685 per month. Those below this level constitute 86 per cent of ‘farmer’ households as defined by the SASF.33 As mentioned earlier, in calculating the net receipts from cultivation, the SASF does not make any provision for depreciation; if we made such provision, the net receipts would be somewhat lower, eliminating the difference between the net receipts of even this size class and the means of subsistence. Hence even the households possessing 2 to 4 hectares, at an all-India level, merely break even (of course, some portion would be above the break-even level, and some below it, but our aim is to get a broad picture). Let us term these households the ‘break-even’ households.

If we make provision for the survey year being a bad agricultural year, and adjust income of all households up by 20 per cent to reflect the ‘normal’ situation, the picture does not change much. It remains the case that households possessing less than 2 hectares cannot meet the means of subsistence from their net receipts from cultivation. No doubt, the 2 to 4 hectares size class now has a little more surplus in hand. However, it is unlikely to be a sum substantial enough to re-deploy in agriculture, and it may merely result in slightly increased consumption. In fact, we find that the actual monthly consumption expenditure of a break-even household is Rs 3685, which is less than its (adjusted) net receipts from agriculture of Rs 3222. This picture varies from state to state, as both the level of subsistence and the net receipts from cultivation vary.34

While this indicates that the level of surplus in Indian agriculture as a whole is low, it does not mean that there is no surplus, even from holdings in the lower size classes; the forms may not be evident in the SASF data. As mentioned earlier, it is difficult to use the data from such a survey for the purpose of a Marxist analysis. For example, the price received by the peasant for agricultural output is depressed by the grip of usurer-traders and the entire system of agricultural marketing; in other words, a portion or the whole of the surplus may be drained off in this process from the hands of the direct producers to those of parasitic classes.35

The broad facts, then, are that (i) the overwhelming majority of the ‘farmers’, operating over one-third of the area, are able to meet only a portion of the means of subsistence (i.e. the minimum consumption expenditure for a peasant family) from cultivation, while another small section, operating about one-fourth of the area, are barely able to meet it; and, (ii) even after taking into account earnings from other sources and making adjustments for the poor agricultural year, the overwhelming majority of the ‘farmers’ are unable to meet their actual consumption expenditures from their income from all sources. It is evident that these ‘farmers’, that is, the peasantry, do not have surplus in their hands for accumulation, and are thus unable to carry out expanded reproduction.

Surplus-appropriating sections
The section of ‘farmers’ with income in excess of expenditure would not be uniform. There would be a section with sizeable lands, keenly seeking ways to maximise profit (including by getting the most work out of labour), responding to market stimuli, and changing cropping patterns in response to changes in prices; yet unhappy with the terms imposed on them in markets for credit, inputs, and output. This section often takes the lead in agitations for higher prices for agricultural commodities.

Then there are the large or dominant land holders who exercise the clout to set the terms in the various markets (land, labour, credit, produce). They have the holding power to wait for prices to rise before selling their crop. They are able to get loans at subsidized rates from the formal sector, and to get them written off periodically. Their gains are greatest from their interlocked operations in more than one market: for example, by extending loans to labourers or by renting land to peasants, they are able to hire their labour at depressed rates: thus the real interest rate or rent they charge is higher than the nominal one.

Those with large landholdings would rely wholly on hired labour for cultivation. Since they own the means of production, and the labourers have no means of production of their own, the large landholders are able to extract surplus labour from their labourers. That is, after setting aside an amount for the costs of raw materials and for the wear and tear of the means of production, and another amount for the subsistence of the labourer (the wages), the remainder is the surplus, which goes to the employer. We can imagine the working day of the labourer as being divided into two parts: first, the part in which she/he reproduces the value that is paid as the wage, and second, the part in which she/he works for the owner of the means of production. The ratio between the hours spent working for the owner of the means of production and those spent working to reproduce the wage is called the ‘rate of surplus value’.

As we mentioned, the SASF is not designed for calculations in Marxist terms. Nevertheless, the following calculation gives us an idea of the proportions: According to SASF figures the surplus accruing to those who possess over 10 hectares was Rs 84,600; the total wages paid to agricultural labour by such households was Rs 16,800; thus the rate of surplus would have been around 5. A labourer working for, say, 10 hours would have earned her/his wage in only 1 hour 40 minutes. The remaining 8 hours and 20 minutes would be to create surplus for the landowner; this the latter is able to extract by virtue of his ownership of the means of production. Of course the rate of surplus value varies widely from region to region, with the rate rising in more prosperous regions: thus, by a similar method the rate would be over 6 in Punjab but much lower in, say, Orissa or Bihar.36 (One should also note that the growth of agricultural wages in Punjab is checked by importing labour from Bihar – thus boosting the rate of surplus value in Punjab.)

Significantly, in the case of households possessing over 10 hectares (all-India), ‘net investment in productive assets’ was only 10.5 per cent of the surplus. That is, the overwhelming bulk of the surplus is not re-deployed in productive assets. The rate is somewhat higher in Punjab (22.3 per cent), but still only a minor portion of the surplus.

Surplus extraction by non-agrarian classes
There is another class which is not engaged in farming, and hence is not covered by the SASF, but whose operations are indirectly visible in its findings. This is the class of usurer-traders, who lend money for inputs or for consumption needs, and purchase the output of the same persons. Again, the same holds regarding their interlocked operations in the credit, input and output markets, namely, that their extractions are much greater than would be possible in any single market. For example, they are able to sell inputs at much higher than market prices to peasants in debt to them, who are unable to freely choose their inputs (this explains why peasants are driven to buy spurious inputs despite long experience of such practices). Usurer-traders can similarly buy produce at much below the market price from those indebted to them, since the latter are not free to sell it to anyone they choose. The real rate of interest, again, is much higher than the nominal rate stated by the usurer; this in turn is much higher than the formal sector (banks, cooperatives) rate of interest.

In the past decade there has been considerable reporting in the press regarding the phenomenon of peasant suicides, in which the suffering of the peasants has been vividly portrayed. In the great majority of such cases it was indebtedness to private usurer-traders, and the resulting harassment, threats, and ignominy, that led to the peasants taking their lives. In other words, the usurers were guilty of abetment to suicide. Yet, remarkably, it is very difficult to find reportage regarding the moneylenders; even their names almost never figure in press reports, let alone a broader description of their activities and wealth. How many peasants from the same village or nearby are indebted to that particular usurer? Has he alienated any peasant land through usury? What are his other businesses, if any? How has his usury business fared over the last decade? How does he enforce payments from bankrupt peasants – for example, does he maintain musclemen? What are his political connections?

A rare instance is the reporting regarding the Sananda family of Khamgaon, in Buldhana district. Congress MLA Dilip Sananda and his family are among Vidarbha’s biggest sahukars (usurers). Dilip’s brother is leader of Congress in Khamgaon Nagar Parishad, and another brother is chairman of Khamgaon Janata Commercial Bank. Over 40 criminal cases have been registered by peasants against the family for illegal moneylending, land-grabbing, kidnapping, manhandling, and torture. It appears to be a common pattern that, despite the borrower having paid back the principal as well as interest twice the size of the loan, the Sanandas refuse to return the land documents, and instead take it over. On May 31, 2006, the Moneylending Prevention Committee (headed by Buldhana District Collector) registered a First Information Report (FIR) against Sananda’s father, after receiving a complaint from a peasant that they had robbed and kidnapped him. Within hours, the Chief Minister’s office intervened to get the FIR withdrawn. There are increasing instances of peasant mobilisation, with the help of politicians currently in the opposition, to re-occupy their illegally alienated land, and in 2006 a demonstration was held outside the Khamgaon tehsil office against the Sanandas. However, the Sanandas continue their reign of terror: In August 2007, a poor vegetable merchant from Khamgaon was killed by Dilip Sananda’s brother and two others over the repayment of a loan.37

Recently, in response to criticism that the Government’s scheme for writing off peasant loans did not address the large peasant debts to the informal sector, the Union Agriculture Minister called upon peasants to repudiate such debts. When one considers the actual situation of humiliation, intimidation and violence, and the lack of organisation among the peasantry, the frivolousness of the Agriculture Minister’s suggestion becomes clear.

It is a telling comment on the socio-economic milieu of rural India, and the money-making opportunities that it throws up, that private micro-finance institutions (MFIs) have operated in a fashion very similar to other usurers. They routinely charge interest rates of 24-36 per cent, which no productive activity can sustain; they also use the sahukar’s weapons of harassment, public humiliation, and threats. In Andhra Pradesh, the bastion of micro-finance, such semi-feudal practices led to an estimated 200 suicides in Krishna, East Godavari, Guntur, and Prakasam districts; the resulting protests forced the Government to intervene and shut down a large number of branches of MFIs.38

Were our ‘free’ press to report not only on rural borrowers, but on lenders as well, a very different picture would emerge, of the social power of the rural elite and their extra-economic coercion.

The need to clear debts helps explain why, as an official report has revealed, virtually all sales by small peasants are distress sales, with cash payments routinely at a 10-15 discount on the market price.39 The Commission on Agricultural Costs and Prices has shown how the prices recorded for a number of crops in a large number of agricultural markets are below the Minimum Support Price (MSP);40 and the prices paid to peasants by their own creditors would certainly be lower than the market prices.  

The trading class is also the interface of the agrarian economy with the other sectors of the economy. It is thus a necessary part of the indirect exploitation of the peasantry by other non-agrarian classes. Industry buys cheap and sells dear to the peasant through the operations of the usurer-trader class.

The patterns of agriculture, and of exploitation, vary a great deal not only from state to state, but even between regions of a single state. However, broadly speaking, in regions of less commercialised agriculture, rent on land and interest on consumption loans play a greater role in extraction of the surplus from the direct producers; in the regions of more commercialised agriculture, usury linked to trade in inputs/produce predominates. There are of course many combinations of these two forms. Whatever be the exact mix of forms, parasitic classes operate to extract surplus from the direct producers. These parasitic classes do not have a stake in expanding productive forces; indeed they may even make greater gains when the direct producer is in distress, such as when the peasant is forced to part with his/her land in order to clear relatively small debts. 

Real scale of agricultural debt and interest payments
The condition of peasants is also brought out by the scale of indebtedness and interest payments. According to the SASF, 49 per cent of farmer households are indebted. The level is particularly high in certain states such as A.P. (82 per cent), Kerala (64 per cent), Punjab (65 per cent) and Tamil Nadu (75 per cent). On the face of it this could be read either way: some might argue that indebtedness reflects access to credit, and is a good thing. However, as we have seen above, the vast majority of the peasantry are in deficit; in which case they would be driven into a vicious circle of debt and loss of assets. 

How large are interest payments on agricultural debt? The SASF puts the average debt per farmer household at Rs 12,585, of which 57.7 per cent was owed to institutional agencies, 30.9 per cent to moneylenders and traders, and the remainder to others. Taking the SASF’s estimate of farmer households, the total ‘farmer’ debt would be thus in the region of Rs 1.12 trillion. The AIDIS reports that interest rates on rural institutional debt in the AIDIS are clustered in the ranges 12-15 and 15-20 per cent; let us put the average at 15 per cent. On non-institutional debt, 40 per cent of the loans bear interest rates of “30 per cent and above”, with no further details given of the break-up within that category; we know from press reports and studies that the interest rates can range upto 150 per cent per annum. We can put the average rate on non-institutional loans at 24 per cent without fear of contradiction. At this rate the interest payments on the farmer debt would be over Rs 200 billion.

However, we know from other sources that the SASF does not reflect the real scale of indebtedness, specifically in relation to the non-institutional sector. It would appear respondents are afraid or ashamed to reveal debts owed to moneylenders, traders, and the like. A number of other studies indicate that debts to the non-institutional sector are at least twice the size of those to the institutional sector.41 Indeed, if the debt were only as large as reported in the SASF or the AIDIS, how cultivators carried on cultivation would be a mystery: for the majority of cultivators, as the SASF shows, are in deficit, and the flow of bank/cooperative credit meets only a fraction of their working capital needs. In the year of the SASF, institutional sector lending amounted to only 15 per cent of the value of inputs in agriculture,42 indicating the size of the gap to be filled by the non-institutional sector.

In this context, it can be seen that the UPA government’s much-trumpeted scheme to write off the bad formal sector loans of cultivators possessing less than two hectares does not address the bulk of the problem – quite aside from the scheme’s other deficiencies. 43 If we take the non-institutional sector to be twice as large as the institutional sector, indebtedness per farmer household comes to around Rs 22,000, and total farmer debt rises to around Rs 1.95 trillion. Interest payments on this figure (at an average interest rate of 21 per cent44) would be around Rs 410 billion. This comes to nearly 10 per cent of agricultural GDP for 2002-03.

Let us compare this figure of interest payments to investment in agriculture. Gross investment in agriculture in 2002-03 was Rs 33,5.08 billion, and net investment (i.e., net of depreciation of assets) was Rs 78.74 billion. Thus the figure of interest payments was larger than gross investment in agriculture, and more than five times net investment. It is clear from this that interest payments constitute a major item of drain preventing accumulation within agriculture. This is an indication of what would be possible when this drain is ended.

What would happen if the average interest rate on total farmer debt (which we have put at Rs 1.95 trillion) were lower, at 8 per cent? In that case the interest payments would be Rs 250 billion lower. If these amounts were directed to investment, gross investment would be 75 per cent higher and net investment would be more than three times higher.

These are very crude calculations; more complete data and a more careful study would reveal our rough calculations to be, if anything, underestimates.45 However, such a study can only be carried out thoroughly by peasant organisations to which the peasants would be willing to reveal details they would not reveal to official agencies. In particular, when the lender also supplies inputs to the borrower, buys his/her output, employs or rents land to him/her, the real interest rate may be much higher than the nominal interest rate; but it is difficult to capture this without a study in depth. The largest gains to the lender arise when the borrower is unable to repay the loan, and is forced to part with his/her land.

As we saw earlier, returns in agriculture as a whole are uncertain or worsening (given the deteriorating terms of trade for agriculture, and the weak demand for agricultural produce due to the low purchasing power of the masses); yet peasants have little choice but to carry on cultivation on any terms. In such a milieu of helplessness, parasitic forces can thrive by grinding the peasant down further and further; thus the returns to usury become much more attractive than on investment in agriculture.

Commercialisation intensifies debt-bondage
In discussions on agriculture in the mainstream media, it is more or less taken for granted that commercialisation is beneficial to peasants. Indeed the Government’s strategy for agriculture explicitly aims to orient agriculture even further towards the market. However, it is striking that the peasant suicides since the late 1990s have been concentrated in the regions of greater commercialisation, and particularly among peasants growing commercial crops such as cotton. From the SASF data we can calculate the share of crop which is sold in different states, which is a measure of commercialisation. We can also obtain the percentage of farmers who are indebted in different states. Significantly, the higher the share of crop sold, the higher the indebtedness. And, as we noted earlier, this indebtedness has grown in the context of peasants’ inability to meet their consumption needs from farm income. In other words, greater market orientation, instead of improving the position of the cultivator and enabling him/her to carry out accumulation, is trapping him/her in debt.

On the other hand, we find there is no correlation between percentage of indebted farmers in different states and the net state domestic product from agriculture. In other words, it is not that indebtedness is the result of a higher or lower development of agriculture; rather it is related to commercialisation, which can exist in relatively prosperous conditions such as Punjab and Haryana, as well as in the backward agriculture of Karnataka and Maharashtra. Revealingly, in most of the states for which the press has reported a large number of peasant suicides – Andhra Pradesh, Karnataka, Maharashtra, Punjab, Kerala and Gujarat – the share of crop sold is relatively high (ranging between 69 and 81 per cent, compared to an average of 57 per cent all-India).

Even assuming all cultivators were in a position to respond to price signals by changing crops and increasing/decreasing production, these signals would be mediated by the existing market, dominated by large traders and, increasingly, the corporate sector. As a result these signals are transmitted in an asymmetric fashion: Increases in farm prices, if any, are completely transmitted to retail level (for example, a rise in the price which peasants receive for wheat leads to an even greater increase in the price for consumers), but increases in retail prices are not fully transmitted to the farm level (the cultivator himself/herself benefits very little from, say, the rise in retail prices which takes place when there is a short onion crop). Moreover, declines in retail prices are more than completely transmitted to the farm level (for example, when cheap imports lead to a fall in edible oil prices, this leads to a collapse in edible oilseeds prices). If there is a crisis the peasant is made to bear the burden of it; but any windfall gain is pocketed by the traders before it reaches the peasant.

This is a pattern we have described earlier in the context of the British Raj: the peasantry is compulsively involved in production for the market, but is neither able to carry out accumulation nor able to exit an over-crowded agriculture. Given this helpless condition of the peasantry, the dominant agrarian classes, with control over land, credit and the market for inputs and produce, are able to extract surplus without re-deploying the surplus to expand productive forces. A cross-country traveler cannot help but observe how this surplus in the hands of the dominant agrarian classes is diverted to luxury consumption, usury, acquisition of land fragments, trading/hoarding/speculation, sundry businesses (for example, construction contracts, labour supply contracts, truck/bus transport, cinema theatres, hotels, engineering/medical colleges, marriage ‘palaces’), criminal activity, and the consolidation of social and economic power through expenditure on elections. Significantly, the surplus from agriculture in the hands of the dominant rural classes fails to get deployed in small-scale industry, which everywhere is visibly starved of funds.

Entry of the corporate sector
It is in this context that there is now a major drive by the corporate sector, domestic and foreign, to enter the agricultural sector. Will it set off a process of accumulation in agriculture? Will it bring about a transformation of agriculture, with rising productivity?

The answer is no. First, as we saw earlier, the surpluses in agriculture are small. On the other hand, the corporate sector’s expectations of profit, set by the standards of its overall operations, are large. Hence it must focus on certain high-profit activities within agriculture, and push the risks and unprofitable activities onto others. For one, it must cater to the better-off segments of the market, largely the urban market (through organised retail) and exports. (To the extent that it broadens its market beyond the elite, it may in fact depress mass consumption, as has happened in Mexico, where the corporate sector now monopolises the marketing and processing of corn, resulting not only in lower farmgate prices for the peasant but also higher consumer prices of corn tortilla, the staple of the Mexican diet.) 

Given the limitations of the market for corporate agriculture, only a portion of cropped land would be devoted to corporate requirements. This has the advantage for the corporate sector of allowing it the option of shifting from region to region, depleting natural resources such as groundwater as it goes, and making it impossible for any set of suppliers of produce to extract better terms from them. The overcrowding of agriculture enables the corporation, like the usurer-trader (indeed, even via the local usurer-trader working on behalf of the corporation), to grind the peasant down to unbelievably low levels. We have ample experience of precisely such practices by jute mills and sugar mills, which for over a century have been carrying on ‘contract farming’ on the basis of semi-feudal conditions.

Of course, the corporate sector will concentrate on those regions which already enjoy superior infrastructure such as irrigation and roads: for example, the biggest investments implemented or announced so far – by Reliance, Bharti (Wal-Mart), Pepsico, and ITC – have been in Punjab. This tendency will only heighten the existing unevenness in agricultural development. No doubt the firms will also invest in infrastructure, but obviously only for their own operations, not for agriculture at large. Strikingly, the state governments are being roped in to make infrastructural investments tailored to firms’ requirements, provide land to the firms free or at depressed rates, and exempt these firms from taxes. Thus another source of surplus for the corporate firms will be State subsidy. Banks are being roped in to provide credit tied to the corporate activity, which no doubt will qualify as priority sector agricultural credit, at lower interest rates. Contrary to the notion that the State is ‘retreating’, it is actively promoting and subsidising the private corporate sector.

Given its dominant position, the corporate buyer can shift the risks entirely onto the cultivator. The tying is effectively one-way; given the vast imbalance of resources and power between the suppliers and the buyers, and the given the withdrawal of even the limited State procurement, no legislation to regulate contract farming can in practice to prevent the buyer setting his terms. The supplier is locked in by contract to a single large buyer, and is legally forbidden from selling the produce to another buyer if, say, market prices rise. On the other hand, the corporate firm maintains all its options. For one, it locks in an excess of suppliers, so that it is free to switch from one to the other. Moreover, it sets (and interprets) standards for the produce it will buy. If the produce does not meet the standards, or even if the firm merely says it does not, it will be rejected, and the peasant has little choice but to dump it at any price on the open market, further depressing rates there. In the case of certain exotic produce for foreign or elite markets, the supplier may not have access to any market if the produce is rejected by the corporate buyer, especially as it requires special transport, cold storage, etc. If the agricultural practices required by corporate firms are input-intensive, and damage the productivity of the soil in the medium term, it will be the cultivator, not the firm, who will be left with a depleted asset. This domination by the corporate buyer is possible precisely because of the fundamental character of the Indian economy, in which there is overcrowding of agriculture and a narrow market. Had the market of the corporate sector been large (requiring supplies from the bulk of the cropped area), or had there not been a vast pool of under-employed, the corporate sector would have found it more difficult to set its terms in this fashion.

The Government and foreign financial investors have been promoting the notion that the development of commodity futures markets will help peasants. Peasants, we are told, will be able to determine what crop to grow on the basis of the price of, say, six-month commodity futures contracts (i.e., a contract to supply a particular commodity six months hence; such contracts are traded on commodities exchanges, just like shares are traded on the share market). In passing, we should note that contract farmers do not stand to benefit, since their prices are locked in by contract with the corporate buyer, and they cannot take advantage of any change in prices. Secondly, even in the U.S. few farmers turn to commodity futures markets to decide their crops; and given what we noted above about the actual conditions of ignorance and helplessness in which peasants actually labour in India, it is extremely far-fetched that the majority can use commodity futures. Thirdly, commodity markets, and the entire structure of warehouse receipts, are based on standardised produce; non-standard produce will obtain a depressed price. India’s agricultural produce is overwhelmingly non-standardised. Standardisation of produce requires more expensive inputs and equipment, as well as certification of sanitary/phytosanitary requirements, especially if the markets are foreign. Even if the provision of inputs and certification are arranged by the corporation, given the present agrarian relations the costs will be borne in one form or the other by the produce supplier. It is evident that larger farms will be more able to bear these burdens.

At any rate, prices are only one of the considerations on which the peasant chooses what to grow. He/she must weigh other considerations, such as knowledge of the crop (including the extent to which it is grown in the vicinity), suitability of local conditions, availability of irrigation, access to seeds, access to markets for the particular crop, the size of investment required, the extent of risk, his/her family’s own subsistence requirements, and finally the stipulations placed by the person supplying credit for inputs or for consumption (who is frequently also a trader in produce).

Devout preachers of the magical powers of communications technology, the media routinely claim that the spread of mobile phone usage to the rural areas would help peasants get better prices. Perhaps an individual producer could find out the prices in different markets via the mobile phone, and take his/her produce to the market in which better prices are offered; but that would not change the total amount paid to producers in all the markets. Assuming competition prevails, and all producers have mobile phones, the prices would merely even out across different markets (when more producers flock to a market in which better prices are offered, prices would fall in that market and rise in other markets).   

Export-oriented agriculture and accumulation
The ruling circles are set on orienting Indian agriculture to exports. The Prime Minister has spoken of India “becoming a new granary of the world”. Along the same lines, Sunil Mittal of Bharti Farm Fresh, which has leased 1,860 hectares of land, declares that “India has become the back office of the world. What we are trying to create here is BPO in the agricultural sector. We will grow for the world.”46

The greater integration of Indian agriculture with international markets may be an opportunity, but for the foreign and domestic corporate sector, not for Indian peasants. Here too, the operation of India’s agricultural markets is asymmetrical: when international prices rise, the supply line created by corporate agriculture draws out produce from India, but corporate firms are able to obtain the lion’s share of the profits; when prices fall, imports drive prices down. Not only is this confirmed by India’s own experience under the British, but the same experience has been taking place ad nauseam to third world exporters in international commodity markets. There are no longer even efforts by third world governments at defending their agricultural producers through large-scale procurement, stabilisation funds and powerful combinations of exporting countries in any particular commodity (eg., cocoa, coffee, sugar, rubber); in the absence of these, exporting countries are in the medium term not able even to maintain existing price levels, let alone reap any benefits. Further, the shift to horticulture, meat, shrimp, other high-value foods demanded by foreign markets and the Indian elite whittles away further the subsistence of peasantry, which depends so critically on foodgrains.

Indeed this process has already been under way for more than a decade, with the opening of India’s agricultural sector after the WTO Agreement on Agriculture via the removal of non-tariff barriers and reduction of tariffs. The effects are plainly visible: it has been in precisely this period that the performance of Indian agriculture sharply deteriorated. With the opening to the import of edible oils and oilseeds, India’s near-self-sufficiency in oilseeds has been demolished, and imports now meet nearly half of domestic demand. The price of highly subsidized U.S. cotton on international markets has been used by the cotton trade as a weapon to drive down domestic cotton prices, leading to the continuing series of cotton-growers’ suicides in Vidarbha. Far from gaining larger markets through exports, the peasants have lost part of their domestic market: Agricultural imports have grown faster than exports, so that the ratio of agricultural exports to imports has fallen to less than half its pre-WTO level.

The neo-liberal (expenditure-cutting) policies of successive governments have been an essential part of integration with the global markets. The Government has been dismantling the Food Corporation of India (FCI). First, the new Targeted Public Distribution System (TPDS) effectively removed the majority of consumers from the rationing system, leading to a decline in calorie consumption. Secondly, giant foodgrain stocks lying with the FCI (for lack of purchasing power with the undernourished masses, particularly in the rural areas) were exported at a massive subsidy between 2000 and 2004, profiting multinational agribusinesses. Thirdly, domestic and foreign private firms have been allowed to procure directly from the peasant and even to set up private agricultural markets. Finally, procurement prices were hardly raised for several years, depressing foodgrains production and driving producers to sell to corporate buyers. All this was against the background of deep cuts in State expenditures on agriculture, as a result of which the spread of irrigation stalled and the agricultural extension system, by official admission, virtually collapsed. The dismantling of the FCI and the cut in State expenditure helped to dismantle Indian agriculture’s remaining defences against the effects of global market forces.

Meanwhile, the production of horticultural crops has increased, but not by increasing per hectare productivity; rather it has done so by grabbing land away from foodgrains. Fruit yields (tonnes/hectare) declined at an annual average rate of 1.6 per cent between 1993 and 2003, and vegetable yields grew at an annual average rate of less than 1 per cent; but area under horticulture grew a massive 7.27 million hectares between 1990 and 2004, at the expense of foodgrains (see Table 1).47 Ironically, despite this low or negative growth of horticulture yields, the diversion of land from low-value foodgrains to high-value horticultural crops is likely to be recorded as ‘growth of agricultural GDP’48 – allowing the rulers to claim success in tackling the agrarian crisis. Quite to the contrary, this shift will only deepen the food security crisis in the country, without guaranteeing a stable income to even those growing horticultural crops.  

Table 1: Change in Cropping Pattern in India, 1990-2004
Crop Gain (million hectares)
Cereals -5.50
Pulses -2.19
Foodgrains -7.68
Horticulture +7.27
Source: See footnote no. 47.

What we have described above indicates that with the further and further entry of corporate investment in agriculture the scope for accumulation by the direct producers, the peasants, will only be further undermined, and the productive forces in agriculture as a whole will be further depleted. It is important to note that the effects of the growth of commercialisation, and of exchange with the international economy, are governed by the character of production relations in Indian agriculture and in the Indian economy as a whole. The frame of the Indian economy is one in which industry provides paltry employment, a vast under-employed labour force is therefore crowded into agriculture, the market is narrow in relation to the potential market, and powerful parasitic forces exercising social and economic power are able to flourish even as productive forces stagnate. In these conditions integration with the international economy, even if superficially it appears to open up foreign markets for domestic producers, does not actually stimulate productive forces as it did in economies where the direct producers were already on the path of accumulation and expanded reproduction (as in the original countries of capitalist development). Rather, integration with the international economy here operates through the parasitic forces, the forces which are preventing accumulation. Operating through such forces allows international capital to grind the peasant down to extraordinarily low levels and to extract rich returns; but it intensifies the drain of the surplus from agriculture and thus suppresses productive forces.


1.This is a greatly abridged version of our original draft. We may later bring out the original version as well, as a handy collection of facts and figures. (back)

2. Report of the Steering Committee on Agriculture and Allied Sectors for Formulation of the 11th Five Year Plan (2007-2012), Planning Commission, April 2007; hereafter “Report of the Steering Committee”. (back)

3. Report of the Steering Committee. (back)

4. Source: Report of the Working Group for the 11th Five-Year Plan on Crop Husbandry, Agricultural Inputs, Demand-Supply Projections and Agricultural Statistics, December 2006. (back)

5. In future, climate change may join the list. (back)

6.“Cheap no more”, Economist, 8/12/07. (back)

7. Economic Survey 2007-08. (back)

8. NSS Report no. 513. (back)

9. Total area sown with crops and orchards, counting area sown more than once in the same year only once. (back)

10. Area irrigated through any source once in a year. (back)

11. Report of the Steering Committee. (back)

12. Department of Land Resources in the Ministry of Rural Development, cited in ibid. (back)

13. Report of the Steering Committee. (back)

14. Taking agricultural employment as 237.5 million and 258.9 million in 1999-2000 and 2004-5 respectively. (back)

15. NCEUS, Report on Conditions of Work and Promotion of Livelihoods in the Unorganised Sector, September 1997. (back)

16. Appendix Tables II.1-9, Report of the Steering Committee. (back)

17. NSS Report no. 491. (back)

18. Vikas Rawal, “Ownership Holdings of Land in Rural India”, EPW, 8/3/08. (back)

19. Study by National Institute for Rural Development, cited in Report of the Working Group on Land Relations for Formulation of the 11th Five Year Plan, Planning Commission, 2006. (back)

20. In the 1991 NSS of operational holdings (Report no. 407) 22 per cent of rural households are shown as without operational holdings, which appears to be an underestimate. The 2003 NSS of operational holdings (Report no. 493) puts the figure at 32 per cent, but as this survey covered only the kharif season, it can be adjusted downward to 28 per cent, as the NSS itself suggests. (back)

21. NSS Report no. 452, January-June 1998. (back)

22. Statement of the Campaign for Survival and Dignity, 2/11/07. (back)

23. Perhaps the most insightful essay on this phenomenon is by Krishna Bharadwaj, “A View on Commercialisation in Indian Agriculture and the Development of Capitalism”, in Accumulation, Exchange and Development: Essays on the Indian Economy, 1994. We have also drawn on its insights elsewhere in this note. (back)

24. NSS Report no. 500, and S. Subramanian and D. Jayaraj, “The Distribution of Household Wealth in India”, World Institute for Development Economics Research, 2006. (back)

25. NSS Reports 495-499. (back)

26. Indira Rajaraman, “Reforming our agriculture”, Economic Times, 2/11/06. (back)

27. The NSS definition of “farmer” is “ a person who operates some land and is engaged in agricultural activities [sometime] in the last 365 days”. The term “farmer” is misleading, because it encompasses very diverse classes, from predominantly agricultural labourer households with tiny farms to landlord households with large ones, but here we are merely reporting the SASF findings, and hence have retained the term. (back)

28. “Net receipts” in the SASF are the value of output minus the expenses on cultivation. The expenses on cultivation are listed as fertiliser, pesticides, seeds, irrigation, hired labour, lease rent, interest payments, and other expenses. -- NSS Report no. 497. (back)

29. We adjusted the value of crop output in the SASF upward to the level of the average output of the five years 2000-05, and further assumed that expenses on cultivation remained the same as in 2002-03; and finally assumed that all other sources of income in the SASF would rise similarly. If anything, this crude adjustment would overstate the income of farmers. (back)

30. What constitutes the means of subsistence is not fixed. While it must allow, at minimum, for the physical reproduction of labour, the exact amount is determined by specific historical circumstances (including cultural factors as well as class struggle), and varies across different societies. (back)

31. Thus the distinction made by official studies between peasant loans taken for ‘productive purposes’ and ‘unproductive purposes’ (i.e., consumption) is irrelevant in the case of the toiling peasantry, since they themselves are the labour force: Their consumption is part of the costs of production. (back)

32. It is true that taking the consumption expenditure per household does not bring out the extent of inequality, since the poorer the household, the more members it has. (back)

33. Data for break-up of operational holdings from NSS Report no. 492. Even if we exclude households which are principally agricultural labour (i.e., for whom wage income is larger than net receipts of cultivation), households possessing less than 2 hectares would constitute roughly three-fourths of the remainder. (back)

34. The size class of the break-even households (after adjusting net receipts up by 20 per cent to adjust for the bad crop year) is 1 to 2 hectares in Assam, Bihar, Jharkhand, Kerala, and West Bengal. It is 2 to 4 hectares in A.P., Chhattisgarh, Gujarat, Haryana, Karnataka, M.P., Maharashtra, Orissa, Punjab, Tamil Nadu, and U.P. (back)

35. Further, the ‘expenses on cultivation’ in the SASF include elements of the surplus, namely, interest payments and rent; however, the amounts reflected are too small, particularly in the case of interest, to be taken seriously. (back)

36. The rate for Orissa works out to just 0.5 per cent. However, production in unirrigated regions would have been particularly low in a bad agricultural year like 2002-03. (back)

37. “Suicide belt’s key moneylender is Congress leader”, Indian Express, 30/6/06; “Rebellion against moneylender” Times of India, 5/7/06; “Trader killed by Congress MLA’s moneylender brother”, Times of India, 8/7/06. Another signal of the intensity of the peasant-usurer conflict is the incident in Pimpalgaon Chambhar, Akola district, in which a moneylender and his henchman slit the abdomen of a peasant trying to re-capture his land; peasants gathered and retaliated, killing the attackers. “The rising in Maha’s Naxalbari”, Times of India, 8/7/06. (back)

38. Sudhirendar Sharma, “Death by microcredit”, Times of India, 16/9/06. (back)

39. Report of the Inter-Ministerial Task Force on Agricultural Marketing Reform, cited in National Commission on Farmers, Report II. (back)

40. The MSP itself is often set very low. A study has shown how the MSP for 12 foodgrain crops is below the full costs of production (which include the imputed costs of family labour and rent of land) for most states. See NCF, Report V. (back)

41. H.S. Shergill report, Rural Credit and Indebtedness in Punjab, Institute for Development and Communication, 1998; Anita Gill, Lakhwinder Singh, “Farmers’ Suicides and Response of Public Policy”, Economic and Political Weekly, 30/6/06; N. Shyam Sundar, “Nature of Rural Credit Markets: An Investigation of Eight Villages in A.P.”, and R.S. Rao and M. Bharathi, “Comprehensive Study on Land and Poverty in Andhra Pradesh: A Preliminary Report”, 2003, cited in Report of the Commission on Farmers’ Welfare, Government of Andhra Pradesh, 2004; Report of the Farmers’ Commission of Experts on Agriculture in Andhra Pradesh, 2002; Rural Finance Access Survey, World Bank and National Council for Applied Economic Research, 2003. (back)

42. Rakesh Mohan, “Economic Growth, Financial Deepening and Financial Inclusion”, RBI Bulletin, November 2006. (back)

43. Its other deficiencies include the fact that in rainfed regions such as Vidarbha cultivators owning more than two hectares are also poor; and that in the absence of any attempt to address the agrarian crisis as a whole, the peasants will soon be back in debt. (back)

44. That is, 15 per cent on the institutional sector loans and 24 per cent on the non-institutional sector loans. (back)

45. It is true that we should separate the debt and interest payments of large landholders from those of peasants, and that within peasants we should separate landless labourers from landed peasants. Nevertheless the crude picture we have sketched will not be far from the truth. (back)

46. International Herald Tribune, reproduced in Business Standard, 31/5/06. (back)

47. Surabhi Mittal, “Can Horticulture Be a Success Story for India?”, ICRIER Working Paper no. 197. (back)

48. It is well-known that the statistical base for horticulture is very weak, leading to a tendency to overestimate horticultural GDP. The greater the shift of land to horticulture, then, the greater would be the impact of this tendency on agricultural GDP as a whole. (back)


V. Unlocking the Productive Potential of the Entire Labour Force


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