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'India's rural poor need a New Deal'

By Rashme Sehgal

Rural India is in acute distress, crying out for food and work, says economist Utsa Patnaik. Rural Indians are actually purchasing and consuming less foodgrain per capita today than they were in 1991

Large sections of rural India are starving or on the brink of starvation. In 1991, an average Indian consumed 178 kilograms of foodgrain per head. In 2002, the per capita consumption was 155 kilograms. These figures are equivalent to what people were purchasing between 1937 and 1942, at the height of the British Raj.

Utsa Patnaik, Professor of Economics at the Centre for Economic Studies and Planning at Jawaharlal Nehru University (JNU), New Delhi, has done outstanding research on India 's agrarian crisis. With 75% of the country's population living in the countryside, Patnaik believes it is time the government and international agencies awoke to the rural crisis.

You keep stressing the fact that rural India is in acute distress. How have you arrived at this conclusion?

The government seems oblivious to the agrarian crisis facing the country. Farmers are not only producing less, they are also consuming less. Unemployment levels have risen drastically. And since farmers' purchasing power has dropped drastically, they are consuming much less than they did a decade go. Rural India is crying out for food and work, but neither is forthcoming.

One of the first things Finance Minister P Chidambaram did on coming to power was slash development expenditure. It was as though the agrarian crisis didn't even exist.

Can you be a little more specific?

Loss of purchasing power is reflected in the fact that large sections of rural India are starving. In 1991, people were consuming 178 kilograms of foodgrain per head. In 2002, they were consuming 155 kilograms per head. These figures are equivalent to what people were purchasing between 1937 and 1942, at the height of the British Raj, though the levels went down further during the Second World War.

According to National Sample Survey (NSS) data, five years ago (in 2000) more than one-third of the rural population of three states had a daily intake of less than 1,800 calories. Today, according to the latest NSS figures, eight states fall in this category. Half our rural population, or 350 million people, are below the average food energy intake of sub-Saharan Africa . But despite the country facing its worst drought in 15 years, the National Democratic Alliance (NDA) government went ahead and exported a record 17 million tonnes of foodgrain.

Which are these eight states that you are talking about?

The eight states include the southern states of Andhra Pradesh and Karnataka, Maharashtra, Gujarat and West Bengal. We must not forget that the central government is giving the states less and less money. Their sources of revenue are being further slashed because excise and other duties have been taken from them. And then the central government imposed VAT. So obviously the states are not in a position to spend as much as they would like to.

Is the finance minister unaware of what is happening in the countryside?

Of course he is unaware of what is happening. I would say that for the whole lot of them. Chidambaram has pulled the same trick that Manmohan Singh did when he was finance minister in 1991. He too sharply cut development expenditure, under pressure from the World Bank and the IMF. These agencies are obsessed with containing inflation because low inflation rates benefit them. They operate no better than sahukars (middlemen). Even if there is high unemployment, they keep saying 'do not spend'. Within a week of becoming finance minister, Manmohan Singh had slashed fertiliser subsidies by 30% and also devalued the rupee.

The NDA government followed the same elitist approach, which resulted in a sharp decline in foodgrain production. In the last four years, production of foodgrains has come down way below the population growth rate. If foodgrain absorption had been maintained at the 1991 level of 178 kg per head, the internal demand would have been 26 million tonnes higher than it is today. In China, the intake per head is 325 kg, in Mexico 375 kg, in Europe 750 kg, and in the US it is 850 kg. We are at the lowest levels possible.

What you say seems to be at variance with the poverty figures that are being released by the Planning Commission....

The Planning Commission is giving us an unrealistic estimate of only 27% below the poverty line, by applying a poverty line that is far too low. The price index adopted in 1973-74 was Rs 49 and this covered fuel and housing and other expenditure. What would be required today is Rs 570, but the Planning Commission continues to use the figure of Rs 328, which is false.

The kind of colonisation we are witnessing has also taken place in the past. Whenever countries have been forced to export their agricultural produce, as has happened to colonies in the past, the foodgrain production of the country has been affected. This is because agriculture is not like any other area. It is crucially dependent on land, which is its primary resource.

Why did we get colonised in the past? Because countries that were colder were unable to produce a wide range of goods and were therefore dependent on the produce of tropical countries. These countries want access to our land in order to maintain their own standards of living. Seventy per cent of the goods in any supermarket in North America are imported from other parts of the world. The living standards of people in these countries depend on cheaply made products from around the world.

But isn't the entire trend towards commercial production likely to help farmers earn more money?

Global prices are high only at the initial stage. Sooner or later, prices are bound to crash. In Andhra Pradesh, for example, the price of cotton in 2001 was half the price it was in 1997, but during that period Chief Minister Chandrababu Naidu increased power tariffs five times over. That is why farmer suicides in that state are continuing unabated. Input costs and credit costs have risen and the result is that farmers are getting more and more into debt. From 1998 to date, over 9,000 farmers in Andhra Pradesh have committed suicide.

International bodies continue to predict a fall in real prices of primary products up to 2010. State marketing bodies are being bypassed, as key products like tea, coffee and spices are cornered by transnational corporations.

Forty years of successful efforts to raise foodgrain production/absorption through the Green Revolution and planned expansionary policies have been wiped out in a single decade of deflationary economic reform. Even countries such as France and Germany have relaxed their fiscal austerity norms to deal with unemployment, and their figures do not in any way compare with ours.

But the government keeps saying it has no money?

The total budgetary outlay for the entire Tenth Plan between 2002 and 2007 is over Rs 300,000 crore. Three years of the plan period are over, and only Rs 100,000 crore have been spent. They still have to spend another Rs 200,000 crore in the next two years.

Do you think the Rozgar Employment Scheme, which has just been passed in the Rajya Sabha, is the answer?

The Rozgar Employment Guarantee Scheme is extremely important because it will help put some purchasing power in the hands of the poor. But I think the time has come for the government to abolish the division between those considered above and below the poverty line. The poor must be given access to food.

I think the prime minister and the finance minister are faced with a historic choice. Will Prime Minister Manmohan Singh follow the path of Chancellor Heinrich Bruning's deflation -- which resulted in high unemployment levels in the Weimar Republic , and the subsequent rise of fascism -- or will he follow Roosevelt 's New Deal which helped the US emerge from the great depression? India's rural poor need a New Deal.

InfoChange News & Features, September 2005