People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)

Vol. XXX

No. 05

January 29, 2006

The Agrarian Crisis And Importance Of Peasant Resistance


Utsa Patnaik

THE principal contradiction in the colonial period, was between the Indian people as a whole, and imperialism and its local comprador allies. After Independence, the principal contradiction changed to the contradiction between the mass of the working peasantry and labourers on the one hand, and the minority of landlords, traders and moneylenders who monopolized control over land and money-capital, thereby exploiting the peasantry through rent, interest and exorbitant traders’ margins. While imperialism was by no means dead, it was on the retreat in the context of the post-War shambles that was the advanced world, and decolonisation allowed space for third world countries like India to try to de-link from the earlier international division of labour under which they had been completely open and liberalised economies geared to metropolitan growth, not national growth. They could now protect their economies and undertake state intervention in the interests of national development - in which they were helped by the existence and aid of the socialist camp. The old liberalisers were silenced, while the new liberalisers had not yet appeared.


In the agrarian sphere in India the resolution of the principal contradiction was tied up closely with the solution of a number of other important secondary economic and social contradictions. The principal contradiction implied the need to break land monopoly by measures of effectively re-distributing land from the landlords to the land-poor and landless, to break the monopoly of credit and marketing through co-operative institutions of the peasants themselves, and state intervention in channelling credit to the credit-starved and setting up non-profit marketing institutions between producer and consumer with the aim of stabilising prices for both. It was essential that the principal contradiction should be tackled boldly in order to resolve the many other important and related contradictions.


There was the contradiction between the continuing caste, class, gender and other social types of oppression in a particularly intense form in rural areas on the one hand, and the very constitutional basis of the Indian polity which considered every citizen to be equal and to have equal opportunities regardless of caste, class, gender and so on. The non-left political forces, economists and planners in India however have consistently underestimated the role of effective re-distributive land reforms for breaking the economic and social power of the rural landed minority for laying the precondition for measures of mass poverty reduction and providing an expanding market for industry, and for reducing the old class, caste and gender based forms of inequalities which express themselves in high levels of illiteracy, declining sex-ratios, atrocities against dalits, and the persistence of child labour. Only in the states where the Left movement has been influential were effective measures of land reform undertaken, with a very positive impact despite their relatively limited nature.


While the achievements of forty years of planned development in India were in many ways substantial, its economic and social failures therefore have been equally glaring. These lay in the inability to substantially reduce mass poverty, which is particularly concentrated in rural areas; an insufficient growth of the internal mass market and hence the emergence of pressure to seek external sources of growth in collaboration with foreign capital.




International developments led to the re-emergence of finance capital as a dominating force over industrial capital in the advanced world from the late nineteen seventies. The relative political unity achieved by the national bases of this finance capital (by subordinating inter-imperialist rivalry, to common aims vis a vis the third world), the aggressive use by finance capital, of the supra-national Bretton Woods institutions (the International Monetary Fund and the World Bank) for implementing its aims, and the collapse of the Soviet Union, have together led to a highly favourable conjuncture for imperialism, which is once again aggressively trying to re-colonise the third world and has substantially succeeded in many smaller countries. In recent years however tendencies of resistance to the dominance of finance capital have also started emerging in varied ways.


The new liberalisers arrived on the scene in Latin America and Africa many years ago; they have been stridently pushing the theories and practice of the new liberalisation in India since the beginning of the nineties. The old imperialism was transparent because there was direct political control, while the new imperialism is less transparent and therefore in many ways, more dangerous. The new liberalisation differs from the old colonial liberalisation in at least two respects : it has a strategy of improving further the economic position of the third-world rich at the expense of their fellow-citizens, which has materially corrupted the elite of our country; and it has an ideological thrust in terms of wrong theories, which has intellectually suborned the same third world public figures and intellectuals who were earlier supporters of independent growth, but who now mindlessly parrot the mantra of liberalisation they have memorised from their advanced country mentors. The new compradors are following anti-national theories and policies no less than the old compradors had done. It is extremely important for those who are within the Left movement to fight the revisionist tendencies creeping into the movement which lead to a ‘soft’ stance on liberalisation. To support any aspect of liberalisation even for pragmatic reasons is equivalent to political liquidationism.




India has been following since 1991 exactly the same set of deflationary policies at the macroeconomic level, already followed in the 1980s by nearly 80 indebted countries under the guidance of the IMF. These included reduction in Central and state government development expenditures, tight money, reduction of the ratio of budget deficit to GDP, caps on organised sector wages, and devaluation.


The useful papers in the two volume study edited by Cornia, Jolly and Stewart, titled Adjustment with a Human Face (1987), have detailed the effects of the neo-liberal policy package in those developing countries which undertook these policies a decade or earlier compared to India. The picture which emerged was alarming indeed: reduction in investment rates, reduction in growth rates, and absolute decline in output and income in a number of cases, a reversal of progress on the fronts of literacy, infant mortality rates and other health indicators, sharp cuts in wages and employment, and rise in poverty. All this was exactly as sensible macroeconomic theory would predict: if deflationary and contractionary policies are consistently followed, the results are bound to be as observed, and only those people can ever think otherwise, who adhere to a logically incorrect theory serving the narrow interests of finance capital.


The fact that neo-liberal policies represent an attack on the forces of production in developing countries is still neither understood nor believed by most people despite the overwhelming theoretical and empirical evidence which has emerged in favour of this conclusion during the last quarter century. Many persons are misled by the assertion that India has the second highest GDP growth rate in the world after China, namely 7 to 8 per cent annually, into thinking that the growth is taking place in every sector. On the contrary, from the mid-1990s in particular, both the material productive sectors – industry and agriculture – have been in decline with agriculture being more severely affected than industry. The only sector which has expanded fast is the services sector. There has been a perverse structural shift in the economy even before any substantial industrial growth has taken place.


The share of agriculture and related activities in GDP has fallen steeply from one-third of GDP before reforms to only 24 percent at present. The share of industry has stagnated around a quarter while that of services has risen fast to one half of GDP. Deflationary policies have thus impacted severely on the material productive sectors of the economy. Both agriculture and industry have seen decelerating rates of output growth and therefore rising unemployment. Further, the reform period has seen a reduction of labour’s bargaining power through the casualisation of the work force including in public sector undertakings.


During the 7th Plan period marking the pre-reforms phase, from 1985 to 1990, Rs 51,000 crore was spent on rural development, amounting to almost 4 per cent of Net National Product, and Rs 91,000 crore or over 7 per cent of NNP was spent on infrastructure. In rural development we include the plan expenditure heads of agriculture, rural development, special areas programmes, irrigation and flood control, and village and small scale industry. By 2000-01 the share of spending under these heads taken together was down to 5.8 per cent of NNP, the rural development part halving to only 1.9 per cent. The per capita expenditures in real terms declined from Rs 151 in 1989-90 to Rs 124 in 2000-01. This harsh contractionary policy had nothing to do with any objective resource constraint but simply reflected the preferred policy package of the BWI which were internalised and sought to be justified by the Indian government.


There is no economic rationale for believing that "public investment crowds out private investment" which is the common argument put forward for reducing the state’s role in rural development. Precisely the contrary has been shown to hold for an economy like India, such as public investment in irrigation projects of all types and crop varieties research. The result of the unwise cut-back of public investment and in rural development expenditure (RDE) has been a drastic slowing of output growth – both foodgrains and non-foodgrains growth rates have halved in the nineties compared to the eighties, and have fallen well below the population growth rate. Hence the nineties have seen falling per head output, for the first time since the mid-sixties agricultural crisis, which however was short- lived, whereas per head output continues to fall today even after fifteen years.


The combination of decline in state RDE and halving of agricultural growth has produced a major crisis of rising unemployment with both fast growing open unemployment and fall in number of days employed of the work force during the 1990s. The ratio of labour force to population, has declined, the ratio of work force to labour force has also declined because open unemployment has been growing at over 5 per cent annually. The elasticity of employment with respect to output was 0.7 during 1983 to 1993-4 but has fallen to zero during 1993-4 to 1999-00.




The deeply disturbing feature of the current thrust for liberalizing trade is that it has been taking place within an investment-reducing, deflationary regime. I predicted in 1992 that given the deflationary climate, food security would be undermined with trade liberalisation in India and that is precisely what has happened. As soon as trade was liberalised from 1991, within a few years, 8 million hectares of food-growing land were converted to exportable crops leading to fall in per head foodgrains output, but farmers did not benefit since their exposure to steeply falling global primary prices from mid-decade has plunged them into spiralling farm debt and insolvency. The nine thousand officially recorded farmer suicides in India since 1998 (actual number are much higher) are only the tip of the iceberg – there is a pervasive agrarian crisis and foodgrains absorption in India is back to the level prevailing fifty years ago.


Trade liberalisation and an export thrust makes sense when local and global markets are expanding owing to expansionary developmental policies which promote growth in the material productive sectors, rising employment and incomes. But when the opposite is the case, when both globally and in local economies the dominant policy sentiment is strongly deflationary as at present, then trade liberalisation spells lowered mass welfare in developing countries. India’s experience in the last fourteen years provides a good illustration of this.


India, a signatory to GATT 1994, removed all quantitative restrictions on trade and converted to tariffs by April 2001, lowering the average tariff rate at the same time to 35 per cent, or well below the bound rates which were 100 per cent for crops and 150 per cent for agricultural processed products. This thrust for trade liberalisation could not have been worse timed, since advanced country markets were in recession and global primary product prices went into a steep tailspin with 40-50 per cent decline in unit dollar prices of all crops –cereals, cotton, jute, sugar, tea, coffee – and up to 80 per cent decline in some oil crops between 1995 and 2001. With a brief spike in 2002 most prices have continued to fall and some prices are today lower than as far back as 1986. The price to growers of tea, coffee, pepper today is even lower than world price the state marketing boards have been run down and replaced by the monopoly of transnational companies.


As prices fell for Indian producers of export crops, their access to low-cost credit was also reduced under financial sector reforms, thrusting farmers into dependence on private moneylenders giving high-cost credit (interest rates are usurious, ranging from 36 to 60 percent annually). Other crucial input prices including power tariff were raised as part of the neo-liberal dicta on reducing subsidies (which were already meagre compared to developed countries). Reduced tariff protection meant that producers of rice, fresh fruit and dairy products faced the undermining of their incomes from inflow of foreign goods.




More than five thousand indebted farmers, mainly cotton farmers, have committed suicide in Andhra Pradesh alone since 1998 as its government which had entered into a state-level Structural Adjustment Programme with the World Bank, raised power tariff five times even as cotton price fell by half. Over a thousand farmer suicides have also taken place in Punjab, and a similar number in the Vidarbha region of Maharashtra where suicides continue at present. During the four years from 2001, over 1,250 suicides are recorded in the single district of Wynaad in Kerala as prices to the local growers of coffee, tea and spices have nose-dived even more steeply than global prices once large companies have taken over purchase and marketing. Thus by 2003 the price of coffee to the grower was only one-quarter and that of tea and pepper only one-third of the prices prevailing in 1999.


The agrarian crisis was the main reason for the decisive mass rejection of neo-liberal policies and the May 2004 electoral defeat of the NDA coalition at the Centre as well as the TDP government in Andhra Pradesh. In recognition of the employment crisis the new United Progressive Alliance or UPA had promised to implement an Employment Guarantee Act which has been formulated, but which is yet to be implemented. Resisting the sabotaging of the financing of the employment guarantee and ensuring that the Act is actually implemented, now poses the major challenge.




India has exported record volumes of wheat and rice during the last six years, and its share in global exports of rice and wheat has risen quite noticeably. Despite the drastic slowing of output growth, India exported 22 million tonnes of foodgrains during the two years 2002 and 2003, and the share of grain exports in total exports has risen from under one –fifth to almost a quarter. There is higher global trade integration reflected in rising trade-GDP ratio. During the severe drought year starting from monsoon 2002, despite grain output being 30 million tonnes lower than in the previous year, from June 2002 to November 2003, a total of 17 million tonnes of foodgrains were exported by the former NDA government. Superficially it looks as though policies of trade liberalisation have ‘worked.’


The crucial fact which is suppressed in official publications and in the writings of pro-reform economists, and this is true even after the elections and the change in government, is that the vastly increased grain exports have been coming out of more and more empty stomachs as millions of rural labourers and farmers have suffered job loss and income decline. Food grains absorption in India today has reached a historic low as a result of the massive decline in purchasing power especially in villages owing to the combination of rising unemployment, rising input and credit costs for farmers and exposure to global price declines. Loss of purchasing power is pervasive affecting both the 158 million wage-dependent workers as well as the 120 million cultivating workers and their families. Targeting the food subsidy from 1997-8 by restricting supply of cheaper grain to only those officially identified as ‘below the poverty line’ has also added to the institutional denial of affordable food grains to the poor, not merely owing to mistakes of wrong exclusion from the set of the officially poor, but also owing to the gross official underestimation of the numbers in actual poverty.


The actual rural population in poverty (applying the official definition of those with less than 2400 calories intake to NSS data) was 75 per cent in 1993-4, increased to at least 78 per cent by 1999-2000, and the depth of poverty also increased with more people moving below 1800 calories, the bare minimum for survival. In 1983 only in three states of India (West Bengal, Tamilnad and Kerala) one third or more of the rural population had an intake below 1800 calories. The 1999-00 data show that West Bengal and Kerala have improved greatly, West Bengal sufficiently to move up out of this set, but four new major states (Andhra Pradesh, Assam, Karnataka and Madhya Pradesh) have seen sharp decline in nutrition and one-third or more of their population fell below 1800 calories intake. The situation after 1999-00 to the present, would be worse still, since it is from 1998 that we see the steep fall in per capita foodgrains absorption to which I have repeatedly drawn attention. In fact the situation is even worse than the nutrition data indicate since the poor have been selling assets and losing land against debt in order to survive at these lower levels. (The Planning Commission estimates of ‘falling’ poverty are a fairy-tale since they have been obtained using a logically wrong procedure which entails continuous decline over time of the consumption standard against which poverty is measured).


The per capita availability or absorption of food grains in India has fallen alarmingly during the decade of deflationary neo-liberal economic reforms, to only 154 kg. annually taking the three year average ending in 2002-03. This current level is about the same as fifty years ago, and it is lower than the level of 157 kg. during 1937-41 under colonialism. This means that the food security gains of the four decades of protectionism up to 1991, have been totally reversed by now. This important finding and the reasons for the present debacle have been discussed in greater detail in three of my papers - "Food Stocks and Hunger – Causes of Agrarian Distress", ‘The Republic of Hunger’ and ‘Theorising Food Security and Poverty," all published in Social Scientist between 2003 and 2005.




When we argue that the principal contradiction is shifting rapidly in the agrarian sphere to that between the peasantry and workers on the one hand and imperialism with its local landlord and other collaborators on the other, many persons in the left movement who are not familiar with the idea or analysis of contradictions, feel alarmed because they think that ‘the land question’ is being put on the back burner. Nothing could be further from the case: they should remember that when the principal contradiction shifts to that between all the toiling masses and imperialism, it means that this contradiction is the one, "whose existence and development determines and influences the existence and development of all other contradictions" including what was earlier the principal contradiction.


There is a direct onslaught today on peasant land and water resources by the corporates. The restrictions on landownership by non-cultivators where they existed have been removed by state governments, ceilings on landholdings have been rolled back in many states to facilitate the entry of agro-business corporations. The peasantry is losing land against debt on a massive scale and despite asset loss is getting pushed further and further down into the mire of hunger. Even the former rich peasants and surplus producers are facing steeply falling profitability conditions and have started leasing out on hunger rents to dispossessed peasants. The earlier phase of capitalist development in agriculture marked by rise of capitalist farming from within the peasant classes, as well as the emergence of landlord capitalism, has virtually ended owing to the steeply falling profitability of direct capitalist cultivation. Reverting to extracting surplus through land rent and usurious interest is once again the order of the day, and peasant pauperisation is seen once more.


The clearest indicator that the principal contradiction is changing, is provided by the very fact of the agrarian crisis itself, which in its scale, generalised nature affecting all the peasantry, and in its depth, is quite unprecedented. This ongoing agrarian crisis is the direct outcome of the implementation of neo-liberal reform policies and trade liberalisation detailed above, in short of the impact of imperialist globalisation on our agriculture.


The corporatisation of agriculture which is sought to be promoted by the government, represents the control of transnational capital over our peasant production, and not ‘the development of capitalism in agriculture’ which has a completely different connotation in Marxist-Leninist literature. The ‘development of capitalism in agriculture’ took place when expansionary policies of autonomous national development were followed as during 1950 to 1990 in India, and it was geared to an expanding internal market. It led to some prosperity, though very unequally shared, in the agrarian sphere. By contrast the corporate subjugation of peasant production is nothing but the imperialist domination of our peasantry for the purpose of export production and it pauperises the peasantry and labourers.


When in general profitability is falling because prices on global markets are low, the giant transnational corporates entering our agriculture today by tying peasants to contracts under debt on account of advances of high-tech GM seeds and inputs, set the terms of contract in such a way as to grind the peasants down to sub-human levels of living because they ruthlessly seek to maximize their own profits. The experience of other countries in Latin America and sub-Saharan Africa has demonstrated this clearly as has the experience of growers of coffee, tea, and other export crops in Kerala who are losinfg land against debt and committing suicide.


Thus the land question has now become one of defending the right of peasants including tribal peoples to their land and livelihoods. Not only can it never be separated from the fight against imperialist globalisation, this fight is a necessary condition for any advance on the land question. It is shameful that no resistance has been articulated by the liberal intelligentsia and political movements to the modification of ceiling laws or the permission for non-agriculturists to acquire land, all for the benefit of corporations. There is no outcry against blatant usury or land loss against debt, whereas even the colonial period had seen anti-usury laws and enactments against peasant land alienation owing to debt.


Moreover, the worst effects are yet to be seen, for there is a determined effort being made by the advanced countries today, supported by the local compradors, to acquire direct control over our land and water resources through contract farming and corporatisation of agriculture, to enmesh our farmers in high-tech debt through GM seed and plants, and a direct effort to acquire control over the genetic basis our bio-diversity and over water resources through privatisation of water. In this they are aided by the comprador elements in government placed in key decision making positions and they also have the support of comprador elements of the domestic landlords.




Our peasantry and labourers are reeling under the attacks on them and are struggling today merely to survive. Their agony is being turned destructively upon themselves in the form of suicides. The agony has to change to anger and be directed towards their oppressors. Only a fighting unity of all the peasant classes and workers against the onslaught of imperialism and its domestic collaborators including collaborating landlords, can now save the peasantry. In fact this unity is necessary for repulsing the imperialist attack in every sphere and not only in the agrarian sphere, for with its sheer weight of numbers the peasantry has the potential to act as a revolutionary force where the working class on its own cannot. Of course, it is only the working class ideology that can provide the basis for an effective anti-imperialist mobilisation. This fighting unity of peasants and workers will not come spontaneously and automatically from the millions facing increasing impoverishment, hunger and loss of assets. It has to be patiently but urgently forged by the left and progressive movement. For this a clear theoretical understanding on the nature of the principal contradiction combined with an awareness of the urgency of the present conjuncture, is required. Otherwise, imperialism will roll over our masses like a colossal tank and break the spines of our toiling millions, while intellectuals and activists impotently look on.