The Irreversible Damage A Liberalised Economy Has Done To Indian Farmers

Posted on November 1, 2016 in Society

By Nilanshu Kumar

India is the seventh largest, and one of the fastest growing economies in the world and the government policy think tank ‘Niti Aayog’ which has replaced the planning commission, has recently predicted that our growth rate could touch the coveted double-digit mark in the coming years.

In the last decade, when most of the countries were facing acute economic crises, India was among the few countries which boasted of robust economic growth. Currently, our economy is growing by a decent 7.6% when measured in terms of nominal GDP. We are also the third largest economy when measured in terms of purchasing power parity.

The Indian economy took a turn for the better after policies to liberalise the economy were implemented after 1991. In the last two-three years, the service sector in India has contributed as much as 57% to the GDP and is growing by 9% per annum. Our service sector is also one of the fastest growing in the world.

But if we were to look at the grassroots level, certain data won’t corroborate with the above-mentioned success story. We might chant about our growth rates on a daily basis, but we forget to talk about certain problems that have been plaguing our country for a really long time. We often say that the period before liberalisation (mainly, the 1980s), was the darkest period in the post independent Indian economy but the most crucial sector of the economy was performing much better in the period before liberalisation.

During the early twentieth century, the average per capita absorption of foodgrains was around 200 kg/year, but as we moved towards the 1950s, the figure came down to 144.1 kg/year. After the independence, when Nehru’s policies promised to protect our peasants, farmers and the domestic market from the rest of the world; the absorption of food grains on a per capita basis increased to 171 kg/year in 1961. The figures, however, turned stagnant after liberalisation and as of 2007 has come down to around 160 kg/year.

It is said that when we become better off economically, we start to consume less. By that logic, because our consumption has decreased, it would mean that we’ve developed or are in a better condition than before. We can debunk that logic with this statement – the USA has a per capita food absorption of 900 kg/year. The only conclusion that can be drawn is the fact that, even in the age of high economic growth, India has failed miserably in meeting the basic needs of many of its citizens.

For many people around the world, edible food is still a luxury. According to a UN report, there are 800 million hungry people around the world, and 90% of them are in Asia and Sub-Saharan Africa. In Asia, the largest number of undernourished people are in India, Bangladesh and Pakistan.

According to a survey conducted by the Food and Agricultural Organisation (FAO), India has topped the world hunger list with 194 million Indians either undernourished or malnourished.

Food security depends on adequate production, equitable distribution and clean fuel for its preparation. Foodgrains are produced in several regions in our country. If we were to look at the production of cereals, 20% of the world’s rice is produced in India. Right before the economy was liberalised (between 1980 and 1990), rice production in India had increased by 39%. If economic prosperity meant that conditions would get better, rice production fell between 2007 and 2010, a time when India’s economic conditions were better than they had even been since independence.

60% of the Indian population is employed in the agricultural sector, and even then it adds up to only 20% to the GDP. One of the sharpest drops in agricultural production in independent India was seen in 2003 when production fell by 12.6%. In 1991 (the period just after liberalisation), agricultural growth was 4.69% which came down to 2.6% in 1997-1998 and later to 1.1% in 2002-03. And the biggest contrast is that Indian economic growth in that period was 6%.

Farmers have been deeply distressed after the economy was liberalised. Seeds work as capital for farmers. Before liberalisation, the state would provide the farmers with seeds and the market was also maintained and well regulated. But with liberalisation, India’s seeds market was thrown open to global agribusiness. As a result, prices of seeds shot up and farmers were hit. From the 1950s to the late 80s, the state shielded our farmers from market forces. They provided the farmers (big and small), with subsidies, assurance of a remunerative price, invested in the development of rural infrastructure including irrigation, reservation policies in the handloom sector, etc.

In a neo-liberalised economy, we have linked our economy to the world and welcomed global financial flows. This has significantly altered the nature and functioning of the state. The state now has to cater to global economic interests; our domestic capital has also become an integral part of the process wherein we continuously cater to the needs, interests and demands of global capital. Farmers somehow seem not to have found a place on the Indian government’s priority list when it comes to economic development.

Capitalists can increase their market either by ‘accumulation through expansion’, where capitalists add their savings to enhance its capital or by ‘accumulation through encroachment’, where they exploit petty producers. Today, capitalists operate in the second mode and take over the state’s property, a process we can otherwise call, privatisation (accumulation by the capitalist at the expense of the state).

The market forces have been cruel to those in the agricultural sector; small producers have been migrating from agriculture to the informal sector.

Growth can’t be the only factor that determines the well-being of the people; we should also look at other facets of development. China is an example we can use to draw parallels. When land reforms were underway, the state supported farmers who had small land holdings. In China, a large number of farmers have small land holdings, and it’s one of the major producers and exporters of cereals and food grains in the world. Between 2000 and 2009, India’s agricultural sector grew at 2.9% while China’s grew at 4.6%. The productivity of China’s agricultural sector is higher than the average rate of agricultural productivity in the world.

China channelled a major chunk of its resources to reduce poverty levels. In 2005, China brought the levels of poverty down to 15.9% that was an 84% in 1981.

In India, levels of poverty were at 59.8% in 1981 that was brought down to 41.6% in 2005. In 24 years, China reduced the poverty levels by 69% while India managed to bring it down by only 18%. Growth rates alone can’t define if a country is prosperous or not. It is essential that India realigns its priorities and focuses on the kind of development that is inclusive in nature.


Image source: Wikimedia Commons