Ruinous Impact of NDA Government’s Policies on Indian Agriculture

 March 25, 2004 

 

 

The claim of `Shining India' does not appear as bankrupt as in any other sector as agriculture. It is so much so that even Advani had to admit this in one of his election meetings in Haryana. Therefore, the plight of 70% people whose livelihood depends on agriculture brought out in this ninth episode of our "Lies, damned lies and statistics" series.

 

  Is India Really Shining?

Agriculture employs around 57 % of the work force in the Indian economy provides livelihood support to about 69% of population and contributes to around 24 % 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% in 1996-97 to –3.1% in 2002-03 (see chart below).

 

 

 

Share in GDP of agriculture has declined from 61% in 1950-51 to 24.2% in 2001-02. But the population dependent on agriculture has declined only marginally from 77% to 69% during this period. There has been a major shift of population from agriculture as an occupation to other sectors in all the major countries. This has not happened in India.

 

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.

  

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 below). 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.

 

 

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. 

Prices of Agricultural Inputs (in Rs)
INPUTS	1998	2004
DIESEL (per litre)	10	22
UREA (per ton)	3680	4830
DAP (per ton)	8300	9350
N.P.K (per ton)	7500	8060

 

  The Indian reality of decreasing subsidy becomes all the more grim in the context of comparison with other countries. In the year 2000, the subsidies given by governments of different countries to their agriculture were as follows, calculated in percentage of total value of their agriculture produce:

Japan               72.5%

South Korea    61%

Europe            37%

China               34%

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 and wheat fell substantially between 1996-97 and 2000-01.

 

The crisis of Indian agriculture and its disastrous impact on farmers is also evident from the low level of productivity as compared to other countries of the world: Comparative yield of principal crops (1999) (Kg per hectare)

Country	Paddy	Wheat	Maize	Groundnut	Sugarcane
India	2929	2583	1667	913	68012
China	6321	3969	4880	2799	85294
Japan	6414			2336
USA	6622	2872	8398	3038	80787
Indonesia	4261		2646	1523
Canada		2591	7974
Vietnam	4105			1435
World average	3845	2711	4313	1336	65689
Rank of India in production in the world	Second after China	Second after China	Accounts for only little over 4% of world's production	Second after China	Second after China

 

 

The cutbacks in rural development expenditure by the NDA government have led to a slowdown of investment in agriculture. The Committee on Capital Formation in Agriculture appointed by the Ministry of Agriculture had pointed out the decline in the gross fixed capital formation (public + private investment) in and for agriculture as a share of GDP during the NDA rule. (Report of the Committee available at http://agricoop.nic.in/statistics2003/FinalReport.doc

 

                        

Gross Fixed Capital Formation in and for Agriculture at 1993-94 Prices    (in Rs. Crores
		GFCF		Percent Share in GDP of GFCF
Year	GDP	in Agriculture	For Agriculture	in Agriculture	for Agriculture
(1)	(2)	(3)	(4)	(5)	(6)
1995-96	899563	16824	25283	1.9	2.8
2000-01	1198685	18364	27946	1.5	2.3
2001-02	1265429	19880	28830	1.6	2.3

 

 

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 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.