Assessing India’s Agrarian Situation: Challenges and Reforms

Indian farmer


The Economic Survey of 2014-15 has highlighted some of the major challenges and reforms in India’s agriculture sector. According to this survey, GDP has declined to 15.2% during the Eleventh Planand further decreased to 13.9% between 2013 and 2014. There is also a significant decline in the number of cultivators from 127.3 million (recorded previously in the Census of 2001) to 118.7 million (recorded in the Census of 2011).

According to the survey, growth rates of productivity in the agriculture sector fell way below the global standards; productivity of rice and wheat fell right after the green revolution of the 1980s. Another pressing issue is rapidly degradation of soil due to excess use of fertilizer. Additionally, the food subsidy has also increased in these couple of years. Food subsidy reached to Rs. 92,000 crores in 2013-14.

Producing around 60% of the food grains and oil seeds in the Kharif season alone, while with just 35 per cent of irrigated area, Agriculture in India still remains heavily dependent upon rainfall. The Indian Meteorological department estimates that the rainfall for the 2016 will be 93% of the LPA, along with a probability of 71% of subnormal or deficit in rainfall. The government has taken place numerous contingency measures in over 500 districts.

Today, India is one of the largest producers of food grains one hand and on the other it is heavily suffering from high food inflation. It will not be wrong to say that the rules and regulations set up by the central government in domestic and international marketing, has actually created more barriers in trade not to forget the repetitive interventions.Removing distortions in market will not only increase competition, but will also promote efficiency and growth.

Let’s have a look at few reforms suggested in the Economic Survey:

  1. Examining the APMC Act, EC Act, Land Tenancy Act, and such legal structures with restrictive provisions create barriers in free trade.
  2. The Survey also recommends rigorously pursuing new marketing initiatives, such as direct marketing and contract farming.
  3. Examining inclusion of agriculture and taxes related to it under the General Goods and Services Tax (GST)
  4. The Survey also recommends establishing stable trade policyon the basis of tariff interventions rather than non-tariff trade barriers.
  5. Developing and initiating competition in agro-processing sector. Providing lucrative incentives in the private sector to scale investments.
  6. In this scenario of bumper production and stocks, a paradigm shift in the role of the government in all aspects of food grain production and distribution is necessary.

Globalization and its Impact on Agriculture in India

The long protests by people (especially those living in rural areas) against Special Economic Zones is not new.One such incident occurred in Nandigram in West Bengal. Issues such as stagnation in agriculture, imports in food grains, widespread suicide of farmers—all perfectly point out the growing discontent in the agriculture sector. What we see today, in the media or in various discussion forums, topics such as “incredible India” and “shining India”.

We are all well aware about the fact that India is a nation with highest economic growth, a nation with highest number of billionaires, and a nation flourishing in the field of information technology. On the contrary, we do not hear the serious issues in the agriculture sector, on which India highly depend upon.

The government implemented the Structural Adjustment Programme (SAP) in 1991 which also laid down initial policy of globalization in India. Based on this policy and some guidelines from the World Bank, the International Monetary Fund and the World Trade Organisation, the Indian Economy was overhauled. Later the year, the Export-Import policy was liberalised; the import and custom duties were very much lowered (completely dropped)and import began without any restriction. The government began reducing its investment in agriculture and pretty soon the industrial sector was taken over corporate entities. The restricting of the public distribution system heavily affected the availability of food grains to the poor. All of these measures had severe impacts on the farms.

Problems in the Agrarian Sector

Fifteen years of economic liberalisation has adversely affected Indian agriculture. The most visible effects are the drastic decline in the growth rate of food grains. The rate of growth of the agriculture output was very much high (between 1950-1990) than the rate of growth of population. Incidentally by the 80s, the agricultural output was 4% per annum. Thus, by 90s, India became self-sufficient in food and began exporting rice and wheat. But almost 10 years after the beginning of liberalization, the rate of growth declined to two percent.

Going through the Mid-term Appraisal of the Tenth Five Year Plan (2002-07), the rate of growth of GDP in the agriculture and its relative sectors were 1% per annum throughout 2002-05. Thus, the per capita availability of food grains decreased rapidly; the rate of growth of population were quite higher than the rate of growth of agriculture (and its output), leaving India no choice but to importfood grains at a much higher price as compared to the domestic market.

Over the year’s unemployment increased rapidly in the agricultural sector as agriculture was not profitable even after the fall in farm products. Thus,the number of people working in the agriculture sectoralong with the area used in the cultivation of land decreased, which created a rapid decline in rural employment, in the history of Indian Agriculture sector. According to a recent report of the National Sample Survey, the annual growth rate of employment was recorded as 2.07 per cent in 1987-1984, while in 1993-2000, it was recorded as 0.66%during the period of liberalisation. Besides farmers, Dalits and tribals were heavily affected, and all those who were predominantly dependent upon agriculture, became unemployed.

The growing rate of suicide among farmers has adversely affected the agriculture sector. When agriculture was unable to generate a feasible amount of income, farmers became desperate.With loans on the heads and failure to provide timely food and shelter to their families, farmers committed suicide. As stated by the then Union Agricultural Minister Sharad Pawar, in the Lok Sabha session of 2004, “over one lakh farmers committed suicide in India after the economic reform started. According to the National Crime Records Bureau, 17,060 farmers committed suicide in the country in 2006 with Maharashtra having the highest number of (4453) suicide deaths.”“Punjab is the latest in the list of States having farmers suicide”, he said. This became a record in the history of India’s once flourishing agricultural sector. It points out the very source of the problem that more than a million people in India suffering from, a real crisis. But unfortunately, neither people nor policy makers declared it a crisis; the lack of seriousness and irresponsible response to the problem which affects the nation even today.

Causes behind Agrarian Downfall

There is absolutely necessary for us to analyse the reasons behind the crisis and identify its relation with the globalization and, if there is, we should work together in finding permanent solution to this challenge.

  1. Downsizing Agricultural Imports

The primary reason behind the fall of prices in the agricultural products, especially cash crops in India was because of removal of restrictions on the imports of these products. To begin with, when the Central government reduced the import duty on tea and coffee from Sri Lanka and Malaysia, their prices declined drastically in the domestic markets. Thus cultivating such crops were no longer profitable and thus their production in the later years stopped.

  1. Reducing Agricultural Subsidies

During the post reform period the government reduced significant subsidies on agricultural products, which further increased the cultivation of crops. Moreover, cutback in subsidy and control of fertilisers in the past few years had adversely affected the farm sector. The input cost significantly increased which made agriculture a less profitable sector. Since the decrease in agriculture subsidy was a part of regulations of the WTO, it comes without a surprise, the policy is related to globalization.

  1. No Ease and Low Cost Loan in Agriculture

After 1991 the loan patterns of Centralised Bank, including the nationalised bank, to agriculture drastically changed and soon the loans were not easily available and interests were out of option. Thus, farmers were then relied on moneylenders and pushed their survival and their agriculture output in the hands of moneylenders. The National Commission for Agriculture, headed by Dr M.S. Swaminathan, also focused on the removal of money lending and concessions of the banks in the post reform period, and termed this as a probable cause for the decline in agriculture sector. When the farmers failed to pay back their loan with interests, they were caught in a debt trap. It is a fact that most of the farmers who commit suicide are victims of debt trap. Thus social responsibilities are not over privatisation of banks, nor their policies, and profit making scenarios, rather than looking over social responsibilities of the people.

  1. Downfall of government investment in Agricultural Sector

It is also important to note that, right after the economic reforms began the government’s expenditure and investment in the agricultural sector reduced drastically. This was based upon the minimum intervention of the government and the policies of globalisation. The government expenditure in rural development, especially agriculture, irrigation, flood control, village industry, energy and transport, rapidly declined from 14.5 per cent in 1986-1990 to six per cent in 1995-2000. The economic reforms had major consequences. Starting with, the rate of capital received from the crops declined immensely,while the agriculture growth in India was recorded lowest in decades. This adversely hit the purchasing power of the people in the rural areas and then it hit their standard of living.

  1. Reforming the Public Distribution System (PDS)

As a part of the neo-liberal policy, the government restructured public distribution system into two levels—Below Poverty Line (BPL) and Above Poverty Line (APL)—and rapidly increased the price of the food grains in ration shops. As a result, the subsidised food grains were very costly and unaffordable for the people living in BPL and it started getting stored in godowns or were sold in the open market. The PDS was completely failure because it could not able to provide food security, especially to the people living in rural India, and this affected the farmers directly, the markets, which so today continues to happen.

  1. Increasing Special Economic Zones

As a part of economic reforms, the system of taking control over land by the government for commercial and industrial purposes was introduced. According to the Special Economic Zones Act of 2005, the government has identified over 400 SEZ’s in the nation. On many occasions the government acquires fertile lands. According to one of the leading economists in India, the government has acquired five million hectares of land for industrial and commercial purposes between 1991 and 2003. This was almost half of what government acquired in the last 40 years. It is very clear that establishing SEZ takes away the only source of livelihood from the farmers, it also harms the land. The SEZ was solely introduced as a means to promote industrial growth in accordance with globalization, however on the account of taking the basic source of livelihood is unacceptable.

Finding a Solution

The agricultural crisis is rapidly affecting people in India. The farmers who produce our daily bread is in extreme stress. The marginalised communities such as the Dalits and tribals, whose entirely livelihood depend upon agriculture, and getting unemployed and are forced to look for other means of earning. The people, especially the poor, have no basic food security. This crisis in agriculture has now become a crisis of the entire nation and thus needs urgent attention.

  1. Restrictions imposed on the agricultural products should be quantitative. As the import policy was one of the primary reason for crash in the prices of food crops, restrictions should be on the quantity and custom duties of the product. Farmers should be given a top priority within the discipline policies of WTO and import duty and quantitative restrictions should be imposed on the imported goods.
  2. The government should restore subsidies and concessions given to agriculture. Agriculture should be made more remunerative. United States and European Union gives high subsidy to their farmers inspite of violating the WTO regulations. India should also support the right to give subsequent higher subsidy to their farmers to protect their cost of cultivation and sustainable future.
  3. Bank loans should be easily available for farmers, especially when their input cost of agriculture has risen. The government should work on restoring low rate of interests to its farmers through rural banks and other financial institutions as it used to do pre-reform period.

Anant Mishra

Anant Mishra is a former Youth Representative to United Nations. He has served in numerous committees including United Nations General Assembly (UNGA) and United Nations Security Council (UNSC).