People's Democracy

The Ruinous Impact Of The NDA Rule

 On Indian Agriculture

Anamitra Roy Chowdhury

 Shouvik Chakraborty

 Taposik Banerjee

AGRICULTURE employs around 69 per cent of the work force in the Indian economy and contributes around 24 per cent of the GDP. For such an economy, not only is the performance of the agriculture sector important from the point of view of economic growth but also for the well-being of the majority of the population. The policies of the NDA government for the past six years, however, far from contributing positively to the performance of the agriculture sector have led to its ruin. The agricultural growth rate has declined from 9.6 per cent in 1996-97 to –3.1 per cent in 2002-03 (see figure 1).

                                                                 Figure 1

      Source: Economic Survey, 2002-03       

In three out of the five years from 1998-99 to 2002-03 the agricultural growth rate was negative, leading to a secular downward trend in the growth rate. This speaks volumes of the neglect shown by the NDA towards agriculture which has led to the grim agrarian scenario during its rule. The most devastating impact of this slowdown in agricultural growth has of course been on the production of foodgrains which has fallen to historically low levels. The implications of this decline in foodgrains production for India’s food security have been discussed elsewhere. Here we discuss the impact of the NDA government’s policies on the peasantry.

DENIAL OF CREDIT

Credit is a crucial component of agriculture, required to meet the peasantry’s short-term needs like consumption, purchase of inputs, etc. and long-term investments like irrigation. Institutional credit for the peasantry has dried up under the NDA rule, which can easily be seen in the falling credit-deposit ratio of the commercial banks in rural areas. The simultaneous rise in the credit-deposit ratio in the metropolitan areas imply that a larger part of the deposits have been lent through the metropolitan branches, causing a liquidity crunch in the rural branches (see Table 1). The deterioration of the banking system in rural areas resulted from the virtual subversion of the priority sector lending norms by the NDA government, as a part of the package of financial liberalisation. The drying up of institutional credit has forced the peasantry to borrow at usurious interest rates from private moneylenders, eventually falling into debt traps and committing suicides in many cases.

                                                                                     Table 1

                                          Source : Reserve Bank of India.

AGRARIAN DISTRESS

By refusing to undertake protective measures at a time of falling global agricultural prices the NDA government made the Indian peasantry vulnerable to the world recession, causing destitution to a large section of people engaged in agriculture. The government, moreover, aggravated the agrarian distress by cutting down input subsidies, which raised the cost of production substantially at a time when domestic agricultural prices were falling as a result of falling global agricultural prices. Fuel and fertilizer prices have increased substantially under NDA rule (See Table 2).

                                                               Table 1

                      Source: K. Varadharajan’s article, ‘Reel’ India and Real India

The returns accruing to peasants from the cultivation of almost all major crops fell sharply under the NDA rule. Data from the Commission for Agricultural Costs and Prices suggest that the real net returns per hectare from paddy, wheat, cotton and sugarcane fell substantially between 1996-97 and 2000-01 (See Figure 2). In many cases the real net returns have fallen to or even below the levels of 1986-87. 

                                             Figure 2

Source: Commission for Agricultural Costs and Prices.                                                                                        

The cutbacks in rural development expenditure by the NDA government have led to a slowdown in capital formation in agriculture. Decline in the rate of public investment has also led to a slowdown in private investment, and gross fixed capital formation (public + private investment). (See Table 3)

                                                                          Table 3

  Source: Report of Committee on Capital Formation in Agriculture, Directorate of Economics   &   Statistics, Department of Agriculture & Cooperation, Ministry of Agriculture.

The deteriorating condition of the peasantry can also be gauged from the declining number of tractors and power tillers sold in the country from 1999-00 to 2001-02.

                                                                  Table 4

              Source: Economic Survey, 2002-03

POLICY SHIFT

The NDA government has brought about a policy shift in Indian agriculture from a Food First Regime to an Export First Regime, encouraging huge diversion of acreage and other resources towards exportable cash crops. Besides having a detrimental effect on the food security front, unbridled conversion to cash crops which have higher costs of production, in the backdrop of declining institutional credit, made the peasantry vulnerable to debt traps. The high rates of suicides committed by peasants during the tenure of the NDA was an outcome of a combination of export-oriented agriculture and declining institutional credit, which were results of the NDA government’s policies.

It needs to be understood that for each suicide committed by a farmer there were hundreds of others who were on the verge of doing so. Acute distress engulfed the agrarian economy, not only in states like Andhra Pradesh, from where the maximum suicide cases were reported, but also in states like Punjab, Haryana and Western Uttar Pradesh, which were hitherto considered to be relatively prosperous states. It is a great irony that the NDA government, which has been squarely responsible for this agrarian distress, is shouting from rooftops about a ‘feel good factor’ working in its favour across the country.