Readers Write In #62: Understanding agrarian crisis

Posted on December 8, 2018

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The following essay will give a brief introduction to the origins of the current agricultural crisis in India. Knowledge of the origins shall serve as an effective background to understand rising farmer unrest all over India.

What is Liberalisation/Neoliberalism?

India in 1991, in return for financial assistance from IMF and World Bank agreed to implementing a set of prescriptions, under the broad term ‘Liberalisation’. These ‘prescriptions’ were meant to apply to almost every sector of Indian economy but agriculture was the one which had to suffer the greatest impact.

Foremost among the many prescriptions was for the government to make a concerted endeavour to restrict the Annual Budgetary deficit to a stipulated/agreed minimum. In other words, the IMF and The World Bank were not happy with the government diverting a huge chunk of its financial resources towards providing subsidies to the common man which in turn, effectively regulated the market. The cash-strapped government readily agreed to the demand of the international financial institutions, lest monetary assistance be denied.

Dismantling the ‘Welfare State’ :

These ‘prescriptions’, many of the economists warned, inevitably would entail dismantling the entire 40 year old Welfare state which India was such a fine example of.

The government right from independence, under the concept of Welfare State had been diverting a considerable percentage of its revenue towards agriculture, especially through subsidies to farmers. The government, over the years, also had been consistently raising quotas for state procurement of grain at very agreeable prices to farmers. The procured grain purchased at competitive prices was being sold in turn, to the Indian consumer at fair prices through ration shops under the famed Public Distribution System (PDS).

A vast portion of the annual expenditure of the government was marked for construction of dams, building of canals and various other irrigation facilities in order to bring more land into the agricultural ambit.

The government was also keen on capping the prices of seeds, fertilizers and insecticides produced by private manufacturers. On some occasions, the government bore a margin of these costs in order to supplement the needs of the poor farmer.

However, the IMF and the World Bank, from 1991 onwards, wanted agriculture, the only ‘industry’ which employed more than 70 percent of the Indian workforce, to be detached from the Government’s auspices and be placed at the mercy of market forces. The reasons why they pressed for these measures will be explained later.

The Impact of Liberalisation:

Right from the advent of Green Revolution in India in the late 1960s, Indian agriculture, which had hitherto been heavily dependent on organic inputs, had slowly started developing an unhealthy reliance on local and multinational corporations. The new kinds of hybrid seeds which promised increased output per hectare of land, were introduced as part of the Revolution in order to bring about a self reliant agricultural economy. The seeds even though efficient as they were proclaimed to be, were not inherently resistant to insects and pests. This required on the part of the farmer, frequent insecticidal and pesticidal intervention whose scale of use was gradually becoming unprecedented. In addition, new fertilisers, some of them with radioactive constituents, were also introduced to multiply the volume of agricultural output.

The manufacturing companies of these ‘suddenly indispensable’ inputs – hybrid seed, synthetic fertilizer and insecticides, had soon discovered a new and thriving market for their products and were being ushered into hitherto unimaginable levels of prosperity and influence. These companies however, till 1991 had to contend with governmental regulations that kept these prices in check and were waiting in their wings to break these interventionist barriers.

Strictly following the prescriptions of the International financial institutions, the Indian government started relaxing restrictions on the prices of the farming inputs. Also the gradual phasing out of subsidies on these inputs was also being carried out whose impacts were becoming inescapable by the end of the 20th century.

The rising input costs for the farmer started touching levels of unsustainability and the farming community had no other ways than to appeal for institutional credit.  Public Sector Banks(PSB) who were hitherto largely entrusted with the responsibility of financing agriculture, had started turning their backs on the hapless farmer. The ‘prescriptions’ had wanted the PSBs to do away with ‘priority sector lending’ and wanted them to focus on financing large scale businesses and industries. This was a double whammy for the farmer who was now driven into the hands of scheming local money lenders, most of whom were usurers.

Inspite of these reversals, the farmer even till this point had harboured hopes that proper Minimum Support Prices (MSPs) fixed by the government and large scale State Procurement could help him offset the escalating input costs. The farmer hence had no inhibitions in taking small loans from local creditors even if the interest rates were unjustifiably high. But the government, to make things worse, was slowly withdrawing itself from the sector allowing a free hand for the markets to fix the prices. Many state governments were instructed not to increase procurement quotas and those states which did not budge were heavily disincentivised by the Union Government. Newer trading methods like Forward and Online Trading manipulated skilfully by middlemen, enabled fixing up of arbitrary prices for the grain, most of which ended up being detrimental to the already cheated farmer. Many demands from various Left parties for the government to intervene and curb middlemen were no longer heeded, as the government was busy negotiating more deals with the International financial institutions.

Problems like escalating input costs, government’s reluctance to take up new irrigation projects and conserve existing ones, lack of competitive prices in the market for the harvested grain were compounded by newer forms of usury developing in the rural countryside. The usurers started sentencing the farmers to new types of ‘contracts’ where the farmer even before sowing, would agree to sell the year’s harvest well in advance to the usurer for a very small, arbitrary sum of money most of which would be consumed as interest to the loan that has not been advanced yet. This type of usury which was already in vogue in a few rural areas not covered by institutional credit, was rapidly becoming the norm throughout the country. These artificial debt traps engineered by local usurers, directly and indirectly abetted by the governments started consuming the lives of farmers by the end of the 20th century.

From then on the annual suicide rates of farmers has only been increasing and the National Crime Records Bureau was forced to collect information under the head ‘Farm Suicides’ every year. The NCRB records show that more than 3 lakh farmers have taken their lives in the last three decades, owing to the escalating agricultural crisis. These crime records are usually supplied by local police authorities and many activists contend that the gap between the reported numbers and real ones is usually very large. The embarassed Modi government recently issued an order to stop collecting and maintaining statistics on farm suicides.

In addition to the alarming issue of farm suicide, one needs to observe the fact that more than 10 million farmers have already moved out of agriculture trying to find other means of employment. If one could take the trouble of asking what profession one of the many North Indian migrants working in nearby eateries were engaged in before they came here, he could easily find evidence to my apparently simplistic contention.

The aims of International Financial Institutions:

To find out any possible solution for the current agrarian crisis, one must find out the factors governing the motives of the International Financial Institutions whose success in driving millions of farmers into poverty, all over the world, remains unparalleled.

Both the IMF and the World Bank are financial institutions funded on a large part by the United States and countries of the Western Europe. These countries which are obviously at the top of the international food chain, leverage their influence on these institutions by forcing the debtor countries to frame policies that would suit the needs of the so called ‘global capital’. In other words, the major multinational corporations, on whose behest the governments of these powerful countries operate, have been wanting access for quite a long time to the huge markets the developing countries could potentially serve as. Hence these corporations force the international lending institutions to offer loans to developing countries on conditions that would allow free and unhindered access to these markets without the intervention of the local governments.

These institutions in turn offer neatly prepared guidelines based on which local governments must operate in order to obtain continuous financial support. The local governments as long as they regulate domestic food prices through subsidies (farm incentives, PDS) unwittingly restrict the profitability of the global corporations. These corporations insist on fixing ‘international’ prices for the grain forcing the local governments to withdraw import duties. As a result, imported wheat from the US, for example, is designed to cost lesser than domestic wheat and hence the consumer is forced to prefer only the imported variety. This brings down the prices of domestic wheat even further, and the local farmer, no longer able to recover even the input cost, is condemned to bear the brunt of it.

I can name a lot of developing countries whose agricultural communities have been ripped apart due to the IMF/World Bank dictated policies of ‘Liberalisation’. The major corporations belonging to the West have successfully been able to penetrate into these countries, destroy the local farming practices along with millions of livelihoods and establish powerful hegemonies even to the extent of dictating the affairs of the local political establishment.

The ‘prescriptions’ and the ruling parties:

One needs to be aware of the fact that no major political party in India excluding the Left, has spoken vocally about the ill-effects of the ‘prescriptions’ of the International financial institutions so far. On the contrary, both the largest mainstream political parties who have had the privilege of ruling India post liberalisation, have only been  extremely successful in faithfully implementing the anti farmer dictates of the International Financial Institutions, thereby orchestrating the greatest agricultural crisis, independent India has ever seen.

These parties, whenever in power, have never worked in the best interests of the nation and hence let us not assume that only because they could not find any other means of obtaining the requisite financial support to foot the government’s bills , they had agreed to follow these harmful ‘prescriptions’ of the International financial institutions.

The intentions of these parties become sufficiently clear when you look at recent developments such as American Walmart officials admitting that they had offered bribes to Indian politicians so as to gain a foothold in the massive Indian consumer market. One must not be surprised to learn that these international financial institutions employ people named ‘economic hitmen’ who are sent on missions to developing countries to convince or persuade or bribe or threaten local leaders to bring them into the all consuming web of ‘Neoliberalism’ and accept the ‘prescriptions’ in return for attractive loans and investments, even if there is no contingent need as such.

REFERENCES:

  1. The Market That Failed – By CP Chandrasekar and Jayati Ghosh
  2. Globalisation and Its Discontents – Joseph Stiglitz
  3. Open Veins of Latin America – Eduardo Galeano
  4. Confessions of an Economic Hitman – John Perkins

By G Waugh