Agrarian Crisis And Distress In Rural India --- II

  Kartik Rai

THE decline in rural development expenditure by the government affects rural employment in two very distinct ways: the first, mentioned earlier, is through its immediate multiplier effects; an injection of purchasing power from outside dries up and this fact has a cumulative effect on employment via an overall reduction of purchasing power that is many times the initial reduction. Additionally however there is another effect that operates over time. The reduction in public development expenditure has an adverse effect on rural infrastructure, on the availability of irrigation and extension facilities, on the availability of cheap inputs, and so on. All these affect the growth rate of agricultural output over time, and, through this mechanism, the employment situation. (And if the decline in public development expenditure is accompanied by a drying up of rural credit and a reduction in input subsidies whose impact is borne by the producers, then the effect on agricultural growth rate and hence employment is all the greater).

DECLINING INVESTMENT

Table 5 gives figures for gross capital formation in agriculture as percentage of GDP. The first point to note is the abysmally low share of investment in agriculture as a percentage of GDP. Since agriculture accounts for roughly a quarter of the GDP and since GCF accounts for roughly a quarter of the GDP, if GCF in agriculture was to be in accordance with this sector's overall weight, then it should have been 6.25 per cent (a quarter of a quarter). In contrast we find a figure that is no more than a mere 1.6 per cent. What is more, even this has been declining through the nineties. Within investment moreover the share of the public sector has declined quite sharply. Now, much of private investment goes into high value crops which have a lower employment intensity than the more commonplace agricultural crops, notably foodgrains, that benefit from public investment on irrigation, infrastructure and such like. It follows that the decline in public investment has had an adverse impact on agricultural employment via lowering growth rate not only of agriculture, but in particular of the employment-intensive crops within it. This is quite separate from its immediate demand-side effects.

Table 5

Gross Capital Formation in Agriculture as Per cent of GDP

(Annual average, Rs crores in 1993-4 prices)

Source: Economic Survey 2002-03,  p.172.

GCF = Gross Capital Formation

Figures in brackets are percentages to total.

FALLING AGRICULTURAL GROWTH RATE

The confirmation for a reduction in the growth rate of the more common crops, including foodgrains, is provided by Table 6.  

Table 6

Decline in Growth rates of Agricultural Output during Nineties

Source : Economic Survey, 2001-02, p.189.

Not only has there been a remarkable decline in the rate of growth of agricultural output, but this rate of growth, whether of agriculture as a whole or of foodgrains, has fallen well below the rate of growth of population in the 1990s while it had exceeded the rate of growth of population in the 1980s. The 1990s were indeed the first decade since independence when per capita foodgrain output in the country declined in absolute terms. The fact that despite this decline the country still faced a massive accumulation of surplus foodgrain stocks shows the extent of the squeeze on rural purchasing power, a squeeze arising both from this decline in growth rate itself and from the reduction in the injection of purchasing power from outside which also underlies this growth decline.  

STAGNATION IN AGRICULTURAL EMPLOYMENT

Direct evidence on employment is provided in Table 7. While the growth rate of employment has declined in both urban and rural India in the 1990s, the magnitude of decline is much sharper in rural India. What is more, the absolute level of the growth rate of employment in rural India is an abysmal 0.58 per cent, which is so far below the rate of growth of rural population that one can safely infer a substantial increase in the rural unemployment rate.

Table 7

Annual Growth Rate of Employment

During Nineties

Source: NSS.

Note: Concept of Employment is for all Workers ( Principal Status plus Subsidiary status).  The figures are for employment growth in all economic sectors - primary, secondary and tertiary- in rural India and in urban India respectively.

Periods of increasing unemployment also are periods when the work participation rate declines, a phenomenon referred to as the "discouraged worker effect": when work is not available, many simply stop looking for work, which is statistically reported as dropping out of the work-force. The ratio of the work-force to the population, i.e. the work participation rate, therefore declines in such periods. This is precisely what has happened in India according to Table 8.

Table 8, taken from the government's own Economic Survey, shows another startling phenomenon, namely an absolute decline in the employment in agriculture. The NSS figures for the same period show a slightly different picture, namely a 0.18 per cent increase in agricultural employment, but even this is so minuscule an increase that we can conclude quite safely that agricultural employment in the nineties scarcely grew at all.  

Table 8

Decline in Work Participation rate in the Country, 

and in Numbers employed in Agriculture 

despite larger Labour force in Agriculture, in 1990s

_______________________________________________________________________

Source: Economic Survey 2001-02, p.240.

This picture of an absolute stagnation in agricultural employment and a near stagnation in total rural employment sums up the situation of acute distress in rural India, precisely in the period of the nineties when the government-controlled media and economists on the pay-roll of the Bretton Woods institutions were celebrating the "achievements of liberalisation".

INCOME DEFLATION

But it was not just unemployment that plagued rural, especially agricultural, India. In addition there was a drastic fall in cash crop prices, which was imported from the world market under the new dispensation of "liberal trade". The price-fall in the world market in turn was the result of the stagnation and recession in world capitalism, which arose because, among other things, of the ascendancy of a new form of international finance capital. This made a continuation of Keynesian demand management of the post-war years impossible, and favoured the imposition of deflationary measures, which are always much liked by finance, all over the world. The price declines did not for long remain confined to cash crops alone; even foodgrain producers have seen declining prices in the recent years.

The drought has come on top of all this. Its effect would be a further squeeze in the purchasing power in the hands of the rural poor and hence an acute aggravation of distress. The fact of a drought affecting the demand side even more sharply than it affects the supply side would appear incredible to anyone familiar with the history of the post-independence Indian economy. In the old days a drought always entailed a rise in prices and hence a squeeze on the rural (and urban) workers through a price inflation relative to their money wages (or what is called a profit inflation). But now the picture is altogether different. The effect of the drought is much greater on the demand side than on the supply side, as a result of which while the drought brings great hardships these are no longer reflected in the figures of inflation.

Most observers have not still become accustomed to this phenomenon of income deflation, which has the same effect on the living conditions of the group whose income is being deflated as a profit inflation has, but which is a more silent killer. A person's real earnings can be halved either through a doubling of prices or through a halving of the money earnings. The effect in either case is exactly the same but the former attracts greater notice than the latter. Just a few days ago when the rate of increase of the index of wholesale prices, which is quite low at this moment (though that fact is of little consolation since income deflation is being imposed upon the rural population) climbed up by a couple of decimal points there was a hue and cry that inflation was rearing its ugly head once again! But the much more persistent and the much more drastic income deflation that has been imposed on the rural working people throughout the nineties, ever since the programme of "liberalisation" was launched, has scarcely been noticed at all.

Whenever this overwhelming evidence, drawn from the government's own statistics, on rural distress is presented, the typical reaction, when all other arguments attempting to refute it fail, is: "If things are so bad, why aren't people rising up?" There are to be sure the signs of that peculiar involuted resistance that the peasantry alone is capable of, namely suicides, which are occurring on a large scale. In addition however it must be borne in mind that distress also saps the capacity to rise up. Manik Bandyopadhyay in a classic Bengali short story, set in the context of the Bengal famine, "Why didn't They Snatch and Eat?", had pointed to this very fact. The reason why people died of starvation in millions, often in full sight of shops and restaurants full of food, was because they were too weak to snatch and eat. Something of the sort may well be happening in rural India today. It is the duty of the progressive forces to instil hope, anger and the will to resist among the distressed people of rural India.

                                                                              (Concluded)

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