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By Aseem Shrivastava
The average rural Indian family eats 100 kg less food every year than it did in 1991. The average Indian farmer is lucky to get institutional credit at 17% interest, whereas an urban consumer gets a house or car loan at 9% with ease. That is what 12 years of economic reforms have meant for Indians living in the countryside
"Common sense is, after all, very uncommon."
-- Mark Twain
With the 2004 general election results, the kisans (farmers) of India have tarred the Bharatiya Janata Party's 'India Shining' billboards and declared in visible colours: "we too exist." The farmers have said that they are unable to bask in the reflected glow of the sunshine in which 20% of Indians have been living these past six years.
There has been abundant reflection on the results of the elections. Although most analysts and observers seem to read a variety of political messages in the outcome, the main lesson is actually eminently simple. Read in the long-term perspective of the results of the past half a dozen Indian elections, the writing on the wall is that any government - led by the BJP, the Congress or any other - which fails to enable ordinary people, especially the rural poor, to meet their basic needs, does not stand a chance of keeping its hold on the seat of power in New Delhi.
For all the industrialisation, and the growth in the service economy, it is most unlikely that India will ever be anything in the long run other than a country wherein most people will continue to live by agriculture. While it is true that it has contributed a mere quarter to a third of overall national output, 7 out of 10 Indians still derive their livelihood from agriculture (the figure has diminished but a little since independence). All this is exactly as, practical idealist as he was, Mahatma Gandhi foresaw rather clearly in the 1940s.
When you contemplate the catastrophe that has been brought upon the Indian countryside by the agricultural policies of the BJP government, it is in fact surprising that the electoral verdict was not even more severe. As the journalist P Sainath has noted, only a deluded mass media obsessed with consumerist fantasies could fail to notice the banal realities of the Indian countryside. While city journalists fastened their attention on the fashion parades and the beauty contests, droughts ravaged the villages, growing millions went hungry and across India thousands of farmers drank pesticides and committed suicide in order to draw the attention of the government to their plight in the wake of agricultural policies influenced heavily by a desire to please the World Trade Organisation (WTO).
The new Congress-led UPA government, in its Common Minimum Programme (CMP) speaks of "spreading and deepening rural prosperity." But where is the "rural prosperity" it is promising to spread and deepen? Indian agriculture has recently suffered from willful, cruel neglect and, in the wake of the neo-liberal reforms, has had its most disastrous decade since independence. It has recorded its lowest rates of growth since 1947. The annualised rate of growth in agriculture has slipped from 3.7% to 2.3% within a decade. The Government of India's Economic Survey 2002 reports that capital investment in agriculture (involving key expenditures on areas like irrigation and electrification), as a proportion of GDP, has fallen from an already meagre 1.6% to 1.3% over the first decade after the reforms were introduced. Not surprisingly, as a result, the rate of growth of agricultural productivity has fallen from an annual 3% to a dismal 1.2%. Agriculture used to contribute about a third of the GDP around the time that the BJP alliance took power in 1998. Today it contributes a little under a fourth of the GDP, thanks to the declines that have taken place in rural incomes and the declining prices that agricultural producers have been receiving for their crops. (Even the share of industry in India 's GDP has fallen, thanks to government policies indifferent to small industry. Only the share of the service sector has grown, reflecting growth in the financial sector, tourism, vanity services in the cities and so on.)
The BJP, in its 'India Shining'/Feel Good electoral campaign was claiming that national foodgrain production had never done better, growing at over 8% per annum. Its great deception lay in its concealment of the fact that the figure appears so high since 2002-03 was a drought year, when the monsoon failed (and the rate of agricultural growth in that year was -3.7% over the previous year!). Agricultural economist Utsa Patnaik has pointed out that the output of foodgrains in 2003-04 is still 14 million tonnes below the high level reached in 2000-01, and is only comparable to the volume produced seven years ago. During these past seven years India 's population has grown by almost 100 million people! Little wonder that hunger and malnutrition have been at historically unprecedented levels. Today nearly half of India 's children below the age of three are malnourished and stunted and 40% of rural India eats only as much food as Sub-Saharan Africa. According to the UN's Food and Agriculture Organisation, India is one among 17 countries where the number of the undernourished decreased in the first half of the 1990s, before increasing in the second half to almost completely offset the gains of the earlier part of the decade.
(Research done by Abhijit Sen of Jawaharlal Nehru University shows that over the decade 1989-90 to 1999-00, while the overall consumption of the top 20% of the urban population grew by 40%, and that of the top 20% of the rural population by 20%, the consumption of the bottom 80% of the rural population actually declined! Moreover, it is worth keeping in view the fact that the data cover only the period till 2000, and the implementation of WTO-led policies in Indian agriculture has intensified in the past half-decade. One can legitimately speculate that inequalities have grown further by now.)
Utsa Patnaik computes that per capita availability of food has declined for the first time since the 1960s. This has happened not just because of growing population in a time of stagnant production (which could be compensated by increased imports if people had the necessary purchasing power to buy them), but also because more grain is being used as fodder for animals (whose meat is being exported abroad) and because more land than ever before is being devoted to the production of cash crops (including such items as prawns and flowers for export), instead of towards foodgrains for domestic consumption (area under coarse grains - a staple with the poor - declined by a shocking 7 million hectares during the 1990s). The rate of absorption of foodgrains per head of the population has dropped to the same level of 150 kilograms per year that it was in 1950-51, after peaking at 174 kilograms in 1997-98. Such a drop has not taken place in India since the Bengal famine of 1943 during the Second World War. The average Indian rural family eats 100 kilograms less food every year than it did at the time the reforms were first introduced in 1991. That is what economic reforms have meant for Indians living in the countryside.
The accumulating stocks of food in public godowns (overflowing with more than 60 million tonnes of foodgrains) bear witness to the hard work of India 's farmers. But even more, they stand testimony to the remarkably thoughtless policies followed by the BJP government, which repeatedly reduced food subsidies over the past five years, under pressure from the WTO, and thus raised the price of food distributed through the Public Distribution System (PDS), which it all but abandoned. This led to the accumulation of stocks, since the poor lacked the purchasing power to buy costlier food. Moreover, food stocks also grew since the government failed to use them for purposes of generation of employment through Keynesian-style food-for-work programmes, which had customarily been one of the key outlets for the accumulated grain.
There were two motivations behind the reduction of food subsidies. One was to address, in part, the issue of the budget deficit, in turn directed by the IMF-dictated structural adjustment austerity policies which routinely call for balanced budgets (though only in Third World countries), which are, additionally, deflationary in their effect on the economy. The more serious motivation was to allow cheap (heavily subsidised) grain from the US and the EU to be sold in Indian markets, according to the dictates of the WTO.
Thus, the BJP government was faced with a problem of its own making: what to do with the growing public stock of foodgrains, particularly since the costs of storage were a drain on the exchequer? It was this which led some people in the government to ask for shutting down the Food Corporation of India and reducing, if not putting an end to state procurement of food from farmers, an age-old policy which, coupled with the PDS, has been instrumental in ensuring, at once, stable agricultural prices and incomes to vulnerable farmers, as much as providing cheap food to the poor.
Not only has the BJP government's failure to use the food surplus to feed the hungry and the undernourished been spectacular, its agricultural policies have all but neutralised within a mere six years the immense gains made by Indian agriculture over the decades since independence. From a point of self-sufficiency in the production of food, India now has to worry about its long-term food security.
The demands of global agri-business, pushed through the WTO, and heeded gladly by the BJP government, have all but undone the finely balanced system of food procurement and distribution that India had painstakingly evolved over four decades after 1947. As textbook economics would predict, under the new 'free' trade dispensation forced upon developing countries by the WTO, producers of food in India now have to sell food at lower prices than before (leading to shrinking rural incomes) while consumers of food have to buy food at higher prices than before (resulting in an unnecessarily large number of hungry people: assuming the official estimate of 270 million people under the poverty line, the 60 million tonnes of food stocks in public storage could conceivably feed each hungry person to the tune of 222 kilos per head for one year!) Unsurprisingly (and this is indeed the agenda of the agribusinesses behind WTO rulings), since 2000, food imports from the subsidised West into India have grown markedly, and by as much as 400% since the inception of WTO!
It is obvious that the largest multinational corporations engaged in the food business have been eyeing India (which has a sixth of the world's population) as the great plum in planning their growth strategies for the future. This is the story behind the demands for 'market-access' being made not just by the WTO, but also (more blatantly) by US trade officials. Even the new US Ambassador to India David Mulford has emphasised that "there must be new market openings from developed and developing countries, especially those like India", and that the US is determined to "further open international markets and to mitigate trade distortions, particularly in agriculture."
From the point of view of Indian farmers however, this has meant a threat to the procurement system for the purchase of food, something which has traditionally assured them of stable prices. (As students of elementary microeconomics know very well, agricultural prices in the best of times, thanks to production decisions lagging behind market demand, tend to wobble in cobweb-like fashion and the only protection against this is the purchase of crops and the accumulation of temporary buffer stocks by the state.)
The immense unfairness in the prevailing WTO rules for trade in agricultural produce is obvious. They overlook massive dumping of cheap, heavily subsidised food in the poor countries by giant Western agribusinesses. They permit the OECD countries to subsidise their agriculture to the tune of a billion dollars a day (compared to Indian farmers who receive a billion dollars of government support a year ). But they have forced poor countries, including India , to remove import restrictions and slash tariffs on agricultural products. It is this set of issues which led to the successful breakdown of WTO talks at the Cancun summit last year.
Rising agricultural subsidies in the US and EU have caused declines in global agricultural prices such as of wheat and cotton of between 30 and 50% over the last decade. Indian farmers have not been able to bear the force of this competition, especially since their revenues have been falling at a time when their costs have been rising sharply.
Why have costs of agricultural production been rising? Partly as measures to address the fiscal deficit (again, driven by IMF prescriptions of austerity budgets) and to a greater extent in order to please the WTO, the BJP government slashed agricultural input subsidies during its tenure in office. Farmers now have to pay significantly higher prices for power, water, seeds, pesticides and fertilisers. The cost of urea, for instance, rose by over 30% between 1998 and 2004. (During 2002-03 the BJP government slashed fertiliser subsidies precisely during the worst drought in 15 years!) The price of diesel, critically needed for running tubewells and tractors, more than doubled between 1998 and 2004.
Further, thanks to gene patenting and Trade-Related Intellectual Property Rights (TRIPS), enforced by the WTO on developing countries, farmers now often have to buy costly seeds from corporations (which they could earlier freely replenish from their own stocks).
However, most catastrophically for the small and marginal farmers of India , the past six years of BJP rule have witnessed a severe credit crunch. Institutional credit has traditionally constituted a key pillar of agriculture. It is needed to tide over the farmers' short-term needs of consumption and purchase of inputs as much as for long-term investments like boring a tube-well for purposes of irrigation.
Over the past six years, agricultural credit became a low priority with the government. Some committees even suggested withdrawal of all credit support to farmers. The priorities of the BJP government can be judged from the fact that in addition to their under-spending last year's earmarked budget for agriculture by 14% (including in irrigation), there was a widely noticeable easing of credit for consumer purchases in urban areas (part of 'shining' India ), while rural credit all but dried up! Thus, credit for housing and buying a car has been available at 9 to 11% rate of interest while crop loans to farmers fetch a hefty interest of 17%. Not surprisingly, the Government of India's Economic Survey reported that almost 20% fewer tractors were purchased in the country in 2001-02, compared to 1999-00.
Thus, small and marginal farmers have had to take recourse to private sources of lending. As many as 60% of them have been borrowing from private moneylenders. Poorer farmers have had to pay even higher rates of interest, ranging from 100% to as high as 460% in some of the arid districts of the country, the worst stories being reported from Orissa, Jharkhand and Madhya Pradesh. Thousands of farmers have even been sent to jail for their inability to pay back small loans. Many, many small and marginal farmers have actually lost their land over the past decade and turned into landless labourers after not being able to get out of the debt trap. According to the government's own estimates the number of small and marginal farmers who are ending up losing their land and becoming landless labourers has been over 2 million every year since 1998! In states like Tamil Nadu, the government has had to offer one meal a day for free to small farmers and their families, together with the free meals offered to unemployed landless labourers.
These rude realities, added to the increased exposure of the Indian peasantry to international markets and the continued dependence on the monsoons, have made agriculture increasingly unviable for any barring the rich peasantry (who have plenty of land and abundant access to cheap credit), and underlie the over 20,000 suicides by farmers reported from across the country. It needs to be noted that for every suicide committed there were reportedly scores of farmers on the brink of it. Even areas like Punjab , Haryana and Western Uttar Pradesh, traditionally successful areas under the green revolution since the 1960s, have witnessed farmers drinking pesticides and killing themselves in order to draw attention to their plight. Their hope has been that the unpayable debts against their name would be cancelled or bought by the government, and their surviving families would gain a lease of life. (The Congress-led UPA government has been busily trying to remedy this situation during its first month in office.)
The governments of various concerned states, as much as the BJP government itself, have been keen to connect the suicides with alcoholism among farmers, rooted allegedly in psychological causes to do with loss of swabhiman (self-respect). However, studies done by the governments themselves (as in the case of Karnataka), have shown a nearly perfect correlation between suicides and high debts. Death was often the only way for the afflicted farmers to redeem themselves and their families from a humiliating predicament, stemming from material hopelessness.
Log-jammed between adverse market conditions, on account of unfairly low prices induced by the WTO-led agricultural policies of the BJP government, and sharply rising costs of inputs in a time of extremely cruel credit conditions, India's small and marginal farmers (especially in the dry districts of the country) have been all but wiped out by government policies which have not merely been insensitive but, as the election results show abundantly, in the end, politically suicidal for the ruling coalition.
It is one of the many shames of the BJP's rule in New Delhi that its policies have all but succeeded in making agriculture unattractive, if not unviable, for the majority of rural Indians in a primarily agricultural society.
(Aseem Shrivastava is a Ph.D in Economics from the University of Massachusetts ( Amherst ) and currently teaches philosophy at the United World College in Norway)
InfoChange News & Features, July 2004
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