www.sacw.net | 23 June 2004
Jai Kisan! not Jai Jawan, Jai Kisan!
by Aseem Shrivastava
"Common sense is, after all, very uncommon."
- Mark Twain
With the 2004 General Election results, the kisans (farmers) of India have tarred the BJP's "India Shining" billboards and declared in visible colors: "we too exist." They have also said that their real material losses cannot be compensated for by the pseudo-nationalistic pride sought to be generated by sending jawans (soldiers) to the Pakistan border, a psychological affliction perhaps only limited to the elite and the urban middle classes. The farmers have said that they are unable to bask in the reflected glow of the sunshine in which 20% of Indians have been living these past 6 years.
There has been abundant reflection on the results of the elections. Although most analysts and observers seem to read a variety of political messages in the outcome, the main lesson is actually eminently simple. Read in the long-term perspective of the results of the past half a dozen Indian elections, the writing on the wall is that any government -- led by the BJP, the Congress or any other -- which fails to enable ordinary people, especially the rural poor, in meeting their basic needs, does not stand a chance of keeping its hold on the seat of power in New Delhi.
Times don't change so easily. During the past 15 years India has had 6 general elections. In every single one of them the ruling party or coalition has been thrown out of power, a fact unmatched in perhaps any other democratic country. It is for this reason that observers have cynically started assuming an anti-incumbency factor in their analyses of Indian election results, as though it was but natural that the electorate would like each time a replacement of the men in power, as though it is only to be expected that the government of the day would not be interested in delivering, or be able to deliver, the basic needs of people.
However, in West Bengal, belying nation-wide trends, the Communist government has retained power for the past 27 years, while 10 different Prime Ministers have been in and out of New Delhi. This clearly suggests that there is no inevitability about the constant change of guard in New Delhi.
There is an obvious answer to the rise of the anti-incumbency factor during the past decade and a half. In a significant break from the world-view of his mother, grounded as it was in the realities of the electoral arithmetic (and rhetoric), dominated by rural India, Rajiv Gandhi in 1984 inaugurated a new era in Indian politics. He became inordinately concerned with "taking India into the 21st century". With him, ruling elites became increasingly obsessed with technological modernization, which essentially implied becoming more like the West (if not catching up with it). In practice this has meant focusing on high-profile urban economic growth while neglecting the agrarian countryside. The process preceded by almost a decade the inception of the economic reforms in 1991 and accelerated rapidly during the past 6 years of BJP rule (1998-2004).
In terms of electoral arithmetic, as has become obvious after the latest shock for the BJP, ruling parties and coalitions in New Delhi have been consistently neglecting (since Rajiv Gandhi in the 1989 elections) the central concerns of at least two-thirds of the electorate. Should the anti-incumbency factor or the recent "upset" of the BJP have surprised anyone? On the contrary, what should have been a matter of some surprise is how every political party concerned could ever have imagined that those on the receiving end of unfair policies would overlook their neglect of the interests of the vast majority of people and vote them back to power! Only pie-in-the-sky, self-delusional optimism could lead any politician or analyst to sanguinely arrive at such a conclusion.
By now, based on elementary electoral arithmetic, it is safe to predict that every government which fails to bring clearly noticeable improvement in the lives of the rural poor stands absolutely no chance of being voted back to power. Two-thirds of India will in the future decide the political fate of all of India, as is only in the fitness of things. This is especially true since the gap between the overall performance and promise of the Indian economy, reflected in the high growth rates and the even more visible prosperity of the elite and the middle classes on the one hand, and the stagnant or deteriorating condition of the majority of the population on the other, has never been as perceptibly wider. Even many who claim that poverty has declined since liberalization admit that inequalities -- between rich and poor and between cities and villages -- have grown markedly.
The simple reality that Prime Minister Manmohan Singh has to face is that if he sidesteps the interests of the less than 2% of "shining" Indians whose fortunes are directly affected by the movements of the stock market (which involves a mere 4% of national savings) he does not risk his party's tenure in office nearly as much as if he does not give due priority to the concerns of the two-thirds of India whose fate rests on the well-being of agriculture. If this elementary lesson is lost on the Congress and its allies, one can rest assured that the dark days of saffron rule will return to haunt India once again. The farmers and landless laborers of India have not voted so much for secularism as for survival. They will keep trying till they succeed in making the government in New Delhi do their bidding.
The Congress enjoyed its share of good fortune in the 2004 elections. By ignoring virtually three-quarters of the country, their opponents brought themselves down, leaving plenty of "default" votes for the Congress. This is not something the Congress can rely on as an electoral strategy for the future. The shoe will tend to be on the other foot next time. If there is one thing that the election results have made amply clear it is that people cast their votes on the real economic and administrative performance of the government, rather than on "shining" talk about it. More than a vote for the Congress it has been a vote against the BJP and, in fact, for good governance and the basic needs of the poor. The Congress already knows this. In the era of multi-party coalition politics -- and this is the first time in its long history that the Congress is heading a coalition government -- there is nothing holy and sacrosanct about it or any other party. Indian democracy is not a stage-managed, two-party system, like the American one. Unlike in many parts of the Western world, where voter apathy is rife and democratic systems are yielding cynically predictable outcomes, the underlying vitality of the democratic ethos in India survives stiff odds and its outcome is mercifully and spectacularly unpredictable.
However, in the rough and tumble of everyday politics it is easy to forget the lessons of the past. The Congress-led UPA government must keep up the wise restraint that Sonia Gandhi showed in not responding to the everyday barbs directed at her by the Sangh Parivar (nobly denying the post of Prime Minister too), and instead focus on an achievable set of goals for rural development, generation of employment and the elimination of poverty in addition to maintaining a secular peace. It just has to stay loyal to such a minimalist agenda -- enunciated lavishly in the recently announced Common Minimum Programme -- and the votes will come in the next elections. The Congress needs to avoid like the plague the provocations that the bankrupt BJP-led opposition is bound to send in its direction. But they will have to get defensive if their programmes are not working in the countryside and the urban slums.
The new government has to anchor its priorities in rural India. It is this India, Bharat, where the wheat and paddy fields will have to shine within a season or two if the Congress wishes to continue to be in power and be voted back to office in the next general election. The UPA speaks of introducing "economic reforms with a human face." Clearly, the reforms introduced since 1991 -- opening up of the economy to imports, privatization of public assets, engaging India more fully in globalized production and investment -- have had their inhuman side, which the media, the economists and the political establishment have been loathe to acknowledge. The reforms themselves stand in need of serious reform today. In particular, the reformers need to recognize the economic and political centrality of agriculture.
The re-prioritization of a devastated agriculture
For all the industrialization, and the growth in the service economy, it is most unlikely that India will ever be anything in the long run other than a country wherein most people will continue to live by agriculture. While it is true that it has contributed a mere quarter to a third of overall national output, 7 out of 10 Indians still derive their livelihood from agriculture (the figure has diminished but a little since independence). All this is exactly as, practical idealist as he was, Mahatma Gandhi foresaw rather clearly in the 1940s.
When you contemplate the catastrophe that has been brought upon the Indian countryside by the agricultural policies of the BJP government, it is in fact surprising that the electoral verdict was not even more severe. As the journalist P.Sainath has noted, only a deluded mass media obsessed with consumerist fantasies could fail to notice the banal realities of the Indian countryside. While city journalists fastened their attention on the fashion parades and the beauty contests, droughts ravaged the villages, growing millions went hungry and across India thousands of farmers drank pesticides and committed suicide in order to draw the attention of the government to their plight in the wake of agricultural policies influenced heavily by the demands of the World Trade Organization (WTO).
The UPA, in its Common Minimum Programme (CMP) speaks of "spreading and deepening rural prosperity." But where is the "rural prosperity" it is promising to spread and deepen? Indian agriculture has recently suffered from willful, cruel neglect and, in the wake of the Neo-liberal reforms, has had its most disastrous decade since independence. It has recorded its lowest rates of growth since 1947. The annualized rate of growth in agriculture has slipped from 3.7% to 2.3% within a decade. The Government of India's Economic Survey for 2002 reports that capital investment in agriculture (involving key expenditures on areas like irrigation and electrification), as a proportion of GDP, has fallen from an already meagre 1.6% to 1.3% over the first decade after the reforms were introduced. Not surprisingly, as a result, the rate of growth of agricultural productivity has fallen from an annual 3% to a dismal 1.2%. Agriculture used to contribute about a third of the GDP around the time that the BJP alliance took power in 1998. Today it contributes a little under a fourth of the GDP, thanks to the declines that have taken place in rural incomes and the declining prices that agricultural producers have been receiving for their crops. (Even the share of industry in India's GDP has fallen, thanks to government policies indifferent to small industry. Only the share of the service sector has grown, reflecting growth in the financial sector, tourism, vanity services in the cities and so on.)
The BJP, in its "India Shining"/"Feel Good" electoral campaign was claiming that national foodgrain production had never done better, growing at over 8% per annum. Its great deception lay in its concealment of the fact that the figure appears so high since 2002-03 was a drought year, when the Monsoon failed (and the rate of agricultural growth in that year was --3.7% over the previous year!). Agricultural economist Utsa Patnaik has pointed out that the output of foodgrains in 2003-04 is still 14 million tons below the high level reached in 2000-01, and is only comparable to the volume produced 7 years ago. During these past 7 years India's population has grown by over 90 million people! Little wonder that hunger and malnutrition have been at historically unprecedented levels. Today nearly half of India's children below the age of three are malnourished and stunted and 40% of rural India eats only as much food as Sub-Saharan Africa. According to the UN's Food and Agriculture Organization, India is one among 17 countries where the number of the undernourished decreased in the first half of the 1990s, before increasing in the second half to almost completely offset the gains of the earlier part of the decade.
(Research done by Abhijit Sen of Jawaharlal Nehru University shows that over the decade 1989-90 to 1999-00, while the overall consumption of the top 20% of the urban population grew by 40%, and that of the top 20% of the rural population by 20%, the consumption of the bottom 80% of the rural population actually declined! Moreover, it is worth keeping in view the fact that the data cover only the period till 2000, and the implementation of WTO-led policies in Indian agriculture has intensified in the past half-decade. One can legitimately speculate that inequalities have grown further by now.)
Utsa Patnaik computes that per capita availability of food has declined for the first time since the 1960s. This has happened not just because of growing population in a time of stagnant production (which could be compensated by increased imports if people had the necessary purchasing power to buy them), but also because more grain is being used as fodder for animals (whose meat is being exported abroad) and because more land than ever before is being devoted to the production of cash crops (including such items as prawns and flowers for export), instead of towards foodgrains for domestic consumption (area under coarse grains -- a staple with the poor -- declined by a shocking 7 million hectares during the 1990s). The rate of absorption of foodgrains per head of the population has dropped to the same level of 150 kilograms per year that it was in 1950-51, after peaking at 174 kilograms in 1997-98. Such a drop has not taken place in India since the Bengal famine of 1943 during the Second World War. The average Indian rural family eats 100 kilograms less food every year than it did at the time the reforms were first introduced in 1991.
The accumulating stocks of food in public godowns (overflowing with more than 60 million tons of foodgrains) bear witness to the hard work of India's farmers. But even more, they stand testimony to the remarkably thoughtless policies followed by the BJP government, which repeatedly reduced food subsidies over the past 5 years, under pressure from the WTO, and thus raised the price of food distributed through the Public Distribution System (PDS), which it all but abandoned. This led to the accumulation of stocks, since the poor lacked the purchasing power to buy costlier food. Moreover, food stocks also grew since the government failed to use them for purposes of generation of employment through Keynesian-style food-for-work programmes, which had customarily been one of the key outlets for the accumulated grain.
There were two motivations behind the reduction of food subsidies. One was to address, in part, the issue of the budget deficit, in turn directed by the IMF-dictated structural adjustment austerity policies which routinely call for balanced budgets (though only in Third World countries), which are, additionally, deflationary in their effect on the economy. The more serious motivation was to allow cheap (heavily subsidized) grain from the US and the EU to be sold in Indian markets, as per the dictates of the WTO.
Thus, the BJP government was faced with a problem of its own making: what to do with the growing public stock of foodgrains, particularly since the costs of storage were a drain on the exchequer? It was this which led some people in the government to ask for shutting down the Food Corporation of India and reducing, if not putting an end to state procurement of food from farmers, an age-old policy which, coupled with the PDS, has been instrumental in ensuring, at once, stable agricultural prices and incomes to vulnerable farmers, as much as in providing cheap food to the poor.
Not only has the BJP government's failure to use the food surplus to feed the hungry and the undernourished been spectacular, its agricultural policies have all but neutralized within a mere 6 years the immense gains made by Indian agriculture over the decades since independence. From a point of self-sufficiency in the production of food, India now has to worry about its long-term food security.
The demands of global agri-businesses, pushed through the WTO, and heeded gladly by the BJP government, have all but undone the finely balanced system of food procurement and distribution that India had painstakingly evolved over four decades after 1947. As textbook Economics would predict, under the new "free" trade dispensation forced upon Developing countries by the WTO, producers of food in India now have to sell food at lower prices than before (leading to shrinking rural incomes) while consumers of food have to buy food at higher prices than before (resulting in an unnecessarily large number of hungry people: assuming a liberal estimate of 360 million people under the poverty line, the 60 million tons of food stocks in public storage could conceivably feed each hungry person to the tune of 166 kilos per head for one year). Unsurprisingly (and this is indeed the agenda of the agribusinesses behind WTO rulings), since 2000, food imports from the subsidized West into India have grown markedly, and by as much as 400% since the inception of WTO!
It is obvious that the five largest Multinational corporations engaged in the food business have been eyeing India (which has a sixth of the world's population) as the great plum in planning their growth strategies for the future. This is the story behind the demands for "market-access" being made not just by the WTO, but also (more blatantly) by US trade officials. Even the new US Ambassador to India, David Mulford has emphasized that "there must be new market openings from developed and developing countries, especially those like India", and that the US is determined to "further open international markets and to mitigate trade distortions, particularly in agriculture."
From the point of view of Indian farmers however, this has meant a threat to the procurement system for the purchase of food, something which has traditionally assured them of stable prices. (As students of elementary Microeconomics know very well, agricultural prices in the best of times, thanks to production decisions lagging behind market demand, tend to wobble in cobweb-like fashion and the only protection against this is the purchase of crops and the accumulation of temporary buffer stocks by the state.)
The immense unfairness in the prevailing WTO rules for trade in agricultural produce is obvious. They overlook massive dumping of cheap, heavily subsidized food in the poor countries by giant Western agribusinesses. They permit the OECD countries to subsidize their agriculture to the tune of a billion dollars a day (compared to Indian farmers who receive a billion dollars of government support a year). But they have forced poor countries, including India, to remove import restrictions and slash tariffs on agricultural products. It is this set of issues which led to the successful breakdown of WTO talks at the Cancun summit last year.
Rising agricultural subsidies in the US and the EU have caused declines in global agricultural prices such as of wheat and cotton of between 30 and 50% over the last decade. Indian farmers have not been able to bear the force of this competition, especially so since their revenues have been falling at a time when their costs have been rising sharply.
Why have costs of agricultural production been rising? Partly as measures to address the fiscal deficit (again, driven by IMF prescriptions of austerity budgets) and to a greater extent in order to please the WTO, the BJP government slashed agricultural input subsidies during its tenure in office. Farmers now have to pay significantly higher prices for power, water, seeds, pesticides and fertilizers. The cost of Urea, for instance, rose by over 30% between 1998 and 2004. (During 2002-03 the BJP government slashed fertilizer subsidies precisely during the worst drought in 15 years!) The price of diesel, critically needed for running tube-wells and tractors, more than doubled between 1998 and 2004.
Further, thanks to gene patenting and Trade-related intellectual property rights (TRIPS), enforced by the WTO on Developing countries, farmers now often have to buy costly seeds from corporations (which they could earlier freely replenish from their own stocks).
However, most catastrophically for the small and marginal farmers of India, the past 6 years of BJP rule have witnessed a severe credit crunch. Institutional credit has traditionally constituted a key pillar of agriculture. It is needed to tide over the farmers' short-term needs of consumption and purchase of inputs as much as for long-term investments like boring a tube-well for purposes of irrigation.
Over the past 6 years, agriculture credit became a low priority with the government. Some committees even suggested withdrawal of all credit support to farmers. The priorities of the BJP government can be judged from the fact that in addition to their under-spending last year's earmarked budget for agriculture by 14% (including in irrigation), there was a widely noticeable easing of credit for consumer purchases in urban areas (part of the "shining" India), while rural credit all but dried up! Thus, credit for housing and buying a car has been available at 9 to 11 per cent rate of interest while crop loans to farmers fetch a hefty interest of 17 per cent. Hardly surprisingly, the Government of India's Economic Survey reported that almost 20% fewer tractors were purchased in the country in 2001-02, compared to 1999-00.
Thus, small and marginal farmers have had to take recourse to private sources of lending. As many as 60 per cent of them have been borrowing from private moneylenders. Poorer farmers have had to pay even higher rates of interest, ranging from 100 to as high as 460% in some of the arid districts of the country, the worst stories being reported from Orissa, Jharkhand and Madhya Pradesh. Thousands of farmers have even been sent to jail for their inability to pay back small loans. Many, many small and marginal farmers have actually lost their land over the past decade and turned into landless laborers after not being able to get out of the debt trap. According to the government's own estimates the number of small and marginal farmers who are ending up losing their land and becoming landless laborers has been over 2 million every year since 1998! In states like Tamil Nadu, the government has had to offer one meal a day for free to small farmers and their families, together with the free meals offered to unemployed landless laborers.
These rude realities, added to the increased exposure of the Indian peasantry to international markets and the continued dependence on the Monsoons, have made agriculture increasingly unviable for any barring the rich peasantry (who have plenty of land and abundant access to cheap credit), and underlie the over 20,000 suicides by farmers reported from across the country. It needs to be noted that for every suicide committed there were reportedly scores of farmers on the brink of it. Even areas like Punjab, Haryana and Western Uttar Pradesh, traditionally successful areas under the green revolution since the 1960s, have witnessed farmers drinking pesticides and killing themselves in order to draw attention to their plight. Their hope has been that the unpayable debts against their name would be cancelled or bought by the government, and their surviving families would gain a lease of life. (The Congress-led UPA government has been busily trying to remedy this situation during its first month in office.)
The governments of various concerned states, as much as the BJP government itself, have been keen to connect the suicides with alcoholism among farmers, rooted allegedly in psychological causes to do with loss of swabhiman (self-respect). However, studies done by the governments themselves (as in the case of Karnataka), have shown a nearly perfect correlation between suicides and high debts. Death was often the only way for the afflicted farmers to redeem themselves and their families from a humiliating predicament, stemming from material hopelessness.
Log-jammed between adverse market conditions, on account of unfairly low prices induced by the WTO-led agricultural policies of the BJP government, and sharply rising costs of inputs in a time of extremely cruel credit conditions, India's small and marginal farmers (especially in the dry districts of the country) have been all but wiped out by government policies which have not merely been insensitive but, as the election results show abundantly, in the end, politically suicidal for the ruling coalition. It is one of the many shames of the BJP's rule in New Delhi that its policies have all but succeeded in making agriculture unattractive, if not unviable, for the majority of rural Indians in a primarily agricultural society.
The perils of open-economy agriculture
Many of the disastrous consequences of implementing policies demanded by the WTO in a liberalized Indian economy have already been spelt out above. But there are some others too.
Not only has Indian food security been put in some danger because of a disturbing decline in self-sufficiency in food (despite being technically self-sufficient in foodgrains, India imports more food today than at any time since the 1960s and, as noted earlier, agricultural commodity imports to India have grown by no less than 400% since the inception of the WTO), the topography of Indian agriculture is undergoing a rapid transformation in the wake of trade liberalization policies enacted at the behest of the WTO. A growing fraction of cultivable land is being devoted to the production of cash crops (such as oilseeds and horticultural crops) and animal meat for exports (including, as mentioned before, such unorthodox items as shrimps). Apart from subjecting Indian agriculture to notoriously wide international price fluctuations, over which Indian farmers have little or no control, this is taking land away from critical areas of production for domestic consumption, such as coarse grains (which accounts, in significant measure, for the decline in per capita availability of foodgrains).
With regard to food security, the argument is often made, including by such eminent economists as Amartya Sen, that the gain in export earnings (from cash crops and other sources), especially in a growing economy, can readily be used to import the shortfall in food, should such a need arise. They suggest that self-sufficiency in food production has become a "fetish" and has got confused with food security.
Now, an industrialized nation like the Netherlands, which has the adequate economic and political muscle, being a member of the EU, certainly does not need to be self-sufficient in food to enjoy food security. Nor does Japan, for similar reasons. These nations, for instance, don't suffer from the vagaries of massive fluctuations in the prices of their exports, which tend to be industrial products and services. They do not suffer systematically from what economists call "adverse terms of trade." Nor do they need, as poor countries do, the bulk of their foreign exchange to get critical imports of capital goods, not to speak of oil.
But, for a number of reasons peculiar to poor countries, and well-known to students of Development Economics, a nation like India is much more vulnerable and is placed very differently in global markets than the Netherlands or Japan. Foreign exchange, despite recent successes, tends to be scarce. It has to be spent with caution. India still imports annually $15 billion worth of goods more than it exports. Besides, India's exportables (since they still tend largely to be industrial raw materials and agricultural products) are much more subject to the vagaries of international markets than those of rich countries. This can make foreign exchange earnings quite volatile. Since the work of Raul Prebisch first brought it to public notice, economists and policy-makers have been well aware of the declining long-term trends in the international prices of primary products. In recent decades, between 1980 and 2001 the international price of rice has fallen from $571 to $179 a ton and wheat from $219 to $131 a ton. Over the same period cotton has fallen in price from $2.60 a kilo to $1.09 a kilo, sugar from $0.80 to $0.20 a kilo and coffee from $4.12 to $0.63 a kilo. (Significantly, only tobacco and timber have succeeded in maintaining their prices!) The declines are only marginally on account of lower costs of production arising from higher productivity. Preponderantly, the long-term fall in the prices of primary agricultural products have come about because of gluts in international markets arising from oversupply by farmers across the world seeking to maximize revenues in the face of falling prices being offered to them by middlemen and representatives of powerful transnational agribusinesses.
Frequent IMF-led devaluations of Third World currencies -- by making exportables from poor countries cheaper for the rich nations -- only contribute further to this tendency of prices received by agricultural producers to fall.
Moreover, agricultural prices are deeply sensitive to the subsidies being provided by the governments of the OECD countries. Indian farmers, as much as those in other developing nations, have to bear the consequences of this. Between 1995 and 2001, the international price of cotton declined by 50%, wheat by 27% and soybean by 35%, not on account of greater productivity, but because of a rise in agricultural subsidies being provided by Western nations to ensure, among other things, their food self-sufficiency and food security.
It is well worth asking whether it is not more fair to demand that the rich countries stop worrying about being self-sufficient in food in order to ensure their food security. The EU had initially justified agricultural subsidies by declaring food to be a "strategic good" in the days of the Cold War, a necessity whose supply could be disrupted in times of war and conflict. The US gave similar reasons for its subsidies. (Is the Third World entitled to similar justifications?) The reality is that farmers even in rich countries often constitute significant vote-banks and agribusinesses are economically powerful groups with politically influential lobby groups. The US is supposedly committed to phasing out farm subsidies and yet they recently passed legislation for farm support of $180 billion over the next decade. (If they stop making wars on the rest of the world, there will be no danger of disruption of food supplies and everyone could enjoy in a fair way the benefits of free trade!)
Shouldn't Developed countries be forbidden by the WTO to subsidize their agriculture so heavily in order to falsely maintain the illusion of comparative advantage, when in fact the Developing countries are comparatively far more efficient in the production of food (even if the productivity of labor in a far less mechanized agriculture is much lower in the poor countries)? In all fairness, shouldn't Developing countries have a greater right to subsidize their agriculture and protect their markets than the wealthy countries?
Poor countries can least of all afford to make their food security a function of variable, if not fickle, export earnings. The present international economic order implies free trade for (against?) the Third World, but protectionism for the Developed world. The rich countries have a hugely greater obligation to level the playing field of international trade before Developing nations can be expected to endure the brunt of free trade and not confuse food security with self-sufficiency in the production of food. It is the rich countries who appear to conflate the two issues. If there is a rationale for subsidizing agriculture at all, it is precisely in the poor countries and not in the Developed world!
However, there is a powerful lobby of multi-billion dollar agribusinesses which has its sights set on complete global domination of grain markets, regardless of what theories of comparative advantage in Economics, or underlying practical economic realities, may have to say. They also wish to propagate the myth that the world needs genetically modified foods (over which they have oligopolistic patents) to meet the needs of the hungry billions, when in fact, as we know from the contributions of Amartya Sen himself, people go hungry not because there isn't enough food to go around (we already dump enough surpluses in the oceans or let them rot in storage), but because the poor don't have the purchasing power to buy the food which is available (or readily possible to produce with existing technology, if there is sufficient demand). Moreover, hunger also exists, as Sen has repeatedly emphasized, because the poor don't get a chance to exercise their political voice enough. There simply isn't enough democracy for them.
Of late, it's only been the political voice of the omnipotent which appears to matter. Listen to the words of George W. Bush"s Chief Economic Advisor, Gregory Mankiw: "outsourcing is just another way of doing international trade." He goes on to argue, as does the Chief Trade Representative of the US, Robert Zoellick, trying to restore the privileges of the pre-Cancun days, that if America is providing India with jobs (less than 200,000 by the way), "fairness" demands that India should provide free entry to America"s agribusiness exports. Underscoring India"s "trade-distorting tariffs" in the agricultural sector, Zoellick testified to the US Senate Finance Committee that India had "one of the most closed economies in the world." So, as has been pointed out by some commentators, the 650 million rural Indians who live by agriculture should be willing to foot the bill for US corporations giving jobs to 200,000 Indians in the cities.
Basic economic understanding of the real world has been thrown out of the window! Is outsourcing, in fact, another way of doing international trade? Is labor in the present world traded like any other commodity? Any undergraduate student will be able to attest that outsourcing is more accurately understood as subcontracting within the sphere of production (IBM lays off a 1000 workers in New York State and hires the same number at a tenth of the wage through its subsidiary in Bangalore). The global labor market is anything but free. It is kept unfree by strong immigration laws in rich countries. Outsourcing in fact enables US corporations to take advantage of cheap skilled Indian labor without breaking US immigration laws which prevent a globally free labor market (which would bring down the government overnight). It is not as though American corporations are yielding concessions through outsourcing! On the contrary, they are lowering their labor costs and deriving unpaid advantage from the Indian taxpayer, whose money financed the education of their new Indian recruits (a new form of brain-drain). To use the outsourcing argument as a device to force open Indian markets for American agribusiness is outrageous and presumes guilelessness, subservience or corruptibility on the part of Indian negotiators and decision-makers!
To return to the changing topography of Indian agriculture: another effect of the liberalization of the economy on agriculture has been that rural land on which no well-defined property rights exist (for example, the village commons) are being arbitrarily fenced off (without taking note of their informal local, often ecologically sensitive, uses) and export crops are being sown either directly by the agri-businesses or by the farmers they contract. A sharp increase in prawn culture has often made many adjoining plots saline and unsuitable for cultivation, forcing their owners to give up and join the ranks of landless labour. Rapid growth of exports of animal products also means that a greater proportion of the stagnant or declining grain output is being used as fodder.
One of the challenges before the new UPA government is to insulate the rural economy from the shocks and fluctuations it is now exposed to as a result of the greater export orientation of the economy (which, incidentally, does not imply that exports have grown significantly).
The upcoming budget and Indian agriculture
In light of the approaching Union Budget to be announced by Finance Minister P.Chidambram in a few weeks, the UPA government needs to be reminded that it should not try to address the growing fiscal deficit in the central government's budget by cutting funds for rural development or by slashing subsidies for food or agricultural inputs. It needs to reverse the trend, induced by the IMF and the World Bank, of deflationary fiscal policies and resume active state support for agriculture.
As it is, government expenditure on rural development has declined from almost 15% of the GDP in the pre-reform late 1980s, to 6% during the last 5 years. This decline in public support for agriculture has had far-reaching consequences for growth in agricultural productivity and rural employment, the decline in the latter having deepened rural poverty and hastened migration to the cities. (This has had a disproportionate impact on work for women, since it is men who migrate more readily to the cities.)
Moreover, in the past 6 years, thanks to the growing indebtedness among small and marginal farmers (who obviously have not been in a position to take advantage of "hi-tech horticulture and precision farming") there has also been a dramatic increase in the number of landless laborers, as afflicted cultivators have had to forfeit their lands.
If the crisis in rural unemployment is to be addressed (and the ensuing migration to urban centers is to be stemmed) with any hope of success, the government needs to invest far greater sums of money than has become customary in the post-reform era in such areas as irrigation, water-management and the supply of cheap electricity. Without these forms of public investment in agriculture, the complementary private investments by farmers (in such things as cattle, farm implements and tube-wells) are also not forthcoming. Both growth and employment in agriculture will suffer unless public investment in agriculture is sharply increased. Employment can also be raised significantly through food-for-work programmes, something the Singh government is trying to implement through the scheme of guaranteeing 100 days of employment annually to one member of each household.
The fate of Indian farmers was left to the vagaries of international markets and the Monsoons by the BJP government. While the safety nets which protected the Indian peasantry from price fluctuations in the international market were dismantled, 60% of the 143 million hectares of Indian farmland agriculture have continued to be rain-fed, a fact which we were reminded of in the year 2002, when the Monsoons failed and agricultural production, growth and employment plummeted.
It is these parameters of Indian agriculture, which have to be altered rapidly if lasting improvement in the lives of the rural poor is to be brought about. While famines haven't happened in democratic India, as Prof. Sen would predict, farmer suicides on a historically unprecedented scale indeed have taken place and agriculture has become a significantly more risky undertaking than it used to be in the pre-reform era. Moreover, thanks to the BJP's severe mismanagement of the food buffer and its neglect of the Public Distribution System for the supply of affordable food to the poor, hunger and malnutrition have been on the rise during the past half-decade.
The UPA government does not have much time to reverse these trends.
The UPA government also needs to learn that agriculture can contribute far more to the central government's budget -- as India's corporate managers are pointing out nowadays -- if fundamental tax reforms are introduced and the tax shelter that has always been there for the rural rich (top 20% of the farmers) is removed. Enhanced growth in agriculture, spurred on by public investment, will automatically yield higher tax revenues.
Furthermore, growing rural incomes, by inducing greater demand for industrial products through what economists call "multiplier effects", will give an impetus to industrial growth too. If agriculture becomes more productive, critical raw materials for industry, such as raw cotton, can be cheapened in cost. True to the theory of economic development, if growth in agricultural productivity releases labor from agriculture over time, it can be educated and trained to work in the service sector, if not as industrial labor. Agricultural prosperity can in these and other ways contribute to growth in the rest of the economy. In fact, managed properly, agricultural and industrial growth can feed off each other and a virtuous cycle of growth can be induced both in the countryside and in the cities if a judicious set of policies is adopted by the UPA coalition.
Moreover, in the era of high technology, industrial recoveries and growth are often "jobless" on account of automated productions systems. This is true in the developing world as in the developed one. Thus, the employment potential of industry is, in fact, not very high. 13 years after the inception of the reforms, 92% of Indians are still employed in the informal, unorganized sector, three-quarters of them in agriculture. Evidently, agriculture has a key role to play in employment generation in the years ahead.
With the latest election results the otherwise voiceless millions have sent a wake-up call to India's political elite who, in their post-reform affluent slumber, were busy pandering to the demands of the financial elite and the international multilateral institutions who have been bargaining on behalf of the giant corporations in the rich countries. They had all but forgotten the existence of the peasantry and the poor. The election results demonstrate in the loudest possible way the politically disastrous consequences of a theological faith in trickle-down Economics, which seems to have eyes only for those sectors of the economy which give rise to conspicuous consumption. Trickle-down promises have proved to be more promises than trickle-down. In fact, given the rate of loss of land by small and marginal farmers to private moneylenders, the rich peasantry, large agribusinesses, or the government itself, and the general mania for privatization of public assets nurtured by the BJP government, it is time to acknowledge the "trickle-up" implications of trickle-down economics in practice.
In the end, the Prime Minister and his government are accountable to the people of India who have given them the mandate to govern in the interests of the latter. They are not to answer to the stockbrokers on Mumbai's Dalal Street, or to the Chief Trade Representative of the US or to the IMF, the World Bank or the WTO. Moreover, there is no economic need to pander to the vagaries of the stock market, or for that matter to the others who the BJP had taken as its masters. India is a large enough developing nation to assert its economic autonomy.
The Congress and its allies need to appreciate the fact that they have not received an unconditional mandate from the people. In case they persist with the follies of the BJP, and patronize the interests of the financial and global elites, they will end up sooner than they may anticipate where the BJP is today, and the game of electoral musical chairs will resume yet again.
Indian farmers need water to drink and farm, not pesticide.
Jai Kisan, not Jai Jawan
The UPA government needs to distinguish its policies sharply from those of its failed predecessor. There has to be a clear shift in priorities and approach on both the domestic and the external fronts.
The Sub-Continent needs to demilitarize and the governments of India and Pakistan need to keep open the pathways to peace, despite the occasional provocation from Kashmiri militants. In his first press conference Manmohan Singh, when asked about the possibility of peace with Pakistan, responded with wise optimism, saying that India sought "most friendly ties" with its largest neighbor. He held out the hope that if the Berlin Wall could collapse, anything was possible! Since then, more positive steps in the direction of lasting peace have been taken, with the leaderships of the two countries setting up a hotline to avoid nuclear disasters.
Pseudo-nationalistic militarism as an electoral strategy has evidently failed. The slogan Jai Jawan is a pathetic lie. The BJP tried to offer, in American-Republican fashion, psychological compensation to the ordinary people of India for the real material losses inflicted on them by its own senseless policies. It also, following Marie Antoinette's lead, gave them cake instead of bread, Coca-Cola instead of water. Too bad for the BJP that the ordinary village peasant with sun-baked fields could not appreciate why grapes from France and apples from New Zealand are being sold in Indian cities while he is unable to water his crops and has to wait an eternity to get a small loan to buy seeds and fertilizers. There are hard lessons here for the Congress and its allies.
Ruling parties and coalitions need to have far greater regard than has become customary in post-liberalization India, for the political sagacity of common people. The BJP was willing to needlessly endanger the lives of tens if not hundreds of thousands of soldiers by drumming up war hysteria against Pakistan and ordering an unprecedented build-up on the border. This was a pseudo-patriotic charade to make up for the ravages its policies had wrought on millions of people.
The UPA government has to amend Lal Bahadur Shastri's slogan of the mid-sixties for our times if the ordinary person's India is to survive and common people have to find a semblance of peace and happiness in it: "Jai Kisan!" not "Jai Jawan, Jai Kisan!" is a more apt motto for the precarious times we have come to live in.
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