Friday, 30 December 2011

Indian Agriculture in the Context of Globalization

Indian Agriculture in the Context of Globalization
(This article was published in the book - WTO, GLOBALIZATION and Indian Agriculture) 

                                                                                                                   - Dr. S. Vijay Kumar


The new economic policy of India (1991) includes three elements –Globalization, Liberalization and Privatization. Globalization integrates Indian economy with global economy through the reduction in import duties and export restrictions, promotion of foreign investments and permission for free flow of foreign technology and skills (Buggi et al., 2001). In India, economic growth improved significantly in last two and half decades particularly in the post-reform period. India is considered as one of the fastest growing economies in the world. However, the problems of globalization have not been seriously addressed by the government policies and strategies, especially with regard to agriculture sector. The experience of the economic reforms in the last 16 years indicate while there have been improvements in economic growth ,foreign exchange, IT revolution, export growth etc, the income distribution has been unequal and only some sections of the population benefited more from higher growth and prosperity. We have problems of poverty, unemployment, inequalities in access to health, education and poor performance in agriculture sector.

One of the excluded sectors during reform period was agriculture which showed low growth and experienced more farmers’ suicides due to fake and terminal seeds, low prices and inadequate agricultural policies. The post- reform growth was led by services. Commodity sector growth (agriculture and industry) has not been higher in the post reform period as compared to that of 1980s. Particular worry is agriculture sector which showed lower than 2% per annum in the last decade. There is disconnection between employment growth and GDP growth. In other words, employment is not generated in industry services where growth is high. On the other hand, GDP growth is low in agriculture where majority are employed.                                                          

Today, even after 60 years of independence agriculture sector bears 60% of population with low earnings, while industry and services together bears 40% with high incomes. Thus, there has been lopsided approach to development in India in the last two decades. Governments are more interested in pleasing the corporate sector (e.g., SEZ   policy) rather than helping agriculture sector which bears 60% of the burden, while the European Union is considering the release of additional land for agriculture-set aside under 1992 regulation to control excess capacity. Globalization policies in the 1980s and particularly 1990s and beyond have created many challenges for agriculture in developing countries. Some of the consequences and impacts of globalization are: exposure of domestic agriculture to international competition, growth of non-agricultural sector and its impact on demand for agricultural products, urban middle class life style changes including diets, rising food imports in developing countries, competitiveness of diversification of domestic production systems, vertical integration of the food supply chain.

 Because of demographic pressure, there has been significant increase in small and marginal farm holdings. These farmers have to face the challenges of globalization. Risk and uncertainty has also spread to marginal lands. The diversification of agriculture also raised concerns on food security.


One of the paradoxes of Indian economy is that the decline in the share of agricultural workers in total workers has been slower as compared to the decline in the share of agriculture in GDP. The share of agriculture and allied activities in GDP declined from 57.7% in 1950-51 to 25% in 1999-00 and to 20% in 2004-05. The share of agriculture in total workers, however, declined slowly from 75.9% in 1961 to 59.9% 1999-00 and to56.7% in 2004-05. Between 1961 and 2004-05, there was a 34% decline in the share of agriculture in GDP, while the decline in share of agriculture in employment was 19% only. As a result, the labor productivity in agriculture has increased only marginally while that of non-agricultural workers increased rapidly. The growth in GDP in agriculture was around 2.2 to 2.5% per annum during 1950-51 to1980-81. It recorded the highest growth rate of more than 3% in the 1980s. In the post-reform period, the growth rate declined to 2.76% per annum. Growth in agriculture GDP which was 4.7% per annum during Eighth Plan (1992-97) declined to 1.8% per annum during Tenth Plan (2002-07).Thus, there has been significant deterioration in the growth of agriculture since mid – 1990s.


A study by Sen and Bhatia (2004) based on cost of cultivation data indicates in the growth of farm business income (FBI) over time. This study shows that the all India rate of growth of real (deflated by Consumer Price Index for Agricultural Laborers) FBI per hectare declined sharply from 3.21% per annum during the 1980s to only 1.02% per annum during 1990s. However, farmer is interested in farm income rather than price-cost or FBI per hectare. Estimates of FBI per cultivator using growth of cultivators and cropped area revealed that the growth rate was 1.78% per annum in the 1980s but decelerated to 0.03% per annum in the 1990s- indicating almost stagnant FBI per cultivator in the later period.

In India, according to National Crime Records Bureau (NCRB) on farmer’s suicides in 1997, 14000 farmers committed suicides. From 2002 onwards every year not less than 17000 farmers committed suicides. In 2006, over 17000 farmers’ suicides confirms this trend In our country per every half-an-hour one farmer is committing suicide. From 1997-2005 in four big states- Andhra Pradesh, Maharastra, Karnataka and MadyaPradesh 89362 farmers committed suicides(A.P-16770,M.S-28911,K.S-20093,M.P-23588). The official estimates show that the number of suicides is more than 9000 in these four states .The unofficial estimates would be much higher than this. The reseaons are growing indebtedness, increasing risk, sharper decline in absolute productivity, price uncertainty due to trade liberalization and rise in cost due to domestic liberalization, decline in credit, and non-farm work intensified the crisis. Long term factors like decline in farm size, ground water depletion, deterioration in soil quality etc. have also been responsible for the agrarian crisis and farmers’ suicides.                  

The emerging trend towards urbanization in a more spatially dispersed pattern in the Indian context is not good. This involved reduction of labour force in agriculture and contributes less to national income and a corresponding increase in the non-farm employment in rural and urban areas (Subramaniya, 2003). The five basic problems of global concern are rapid growth of population, abuse of natural resources, reduction of agriculture production, increased industrial production and heavy pollution.

Globalization resulted in the neglect of agriculture that adversely affected the vulnerable classes of rural society in their employment conditions, income and consumption pattern, their education and health status. The small and marginal farmers are affected as there is a reduction in the fertilizer and chemical subsidies and in the budget for poverty alleviation programs as well as shift of area under food production to export oriented commercial crops (Buggi et al., 2001). The disintegration of rural economy brought about by globalization lead to the disintegration of village communities, their society, culture and religious aspects.

The Human Development Index shows wide gap between the developed and developing countries. India stood 128 in the HDI value list of Human Development Report, 2007, this is same as in 2000 i.e., no change in our position According to Swaminathan (2000) "more people are watching T.V, and talking on phone and communicating on line, but it is also true that the world today faces huge backlogs of deprivation and inequality that leave huge disparities within countries and regions". India's growth rate was 5.8 per cent between 1980 and 1990 while it was 6.9 per cent between 1990 and 1999. But there has been an increase in poverty also. Increase in growth rate has no much significance when it can't help the poor people of India (Verma, 2001).


74 percent of India's population lives in villages. Their livelihood mainly depends on agriculture and related activities. The village economy had been independent throughout the ages and even the industrial development has not reduced its importance. It played a crucial role in the economic development of India by providing food and raw materials, employment to 2/3 of work force, capital for development and surplus for national development (Buggi et al., 2001). The Indian agrarian structure is dominated by 90 per cent of small and marginal farmers. The extent of landholding is associated with caste and social status. The small and marginal farmers and agricultural laborers constitute the vast majority of rural society.

In the villages, farmers are not much aware of global economic system. Most of the food crops are converted into cash crops. Sugar cane farmers are getting advance loan from banks and MNCs. They used to supply hybrid seedlings, fertilizers and highly advanced equipments. This equipment utility reduced the human labour force. Hence the rural people are shifting from place to place for want of labour for their livelihood. Natural manure is replaced by synthetic fertilizers. As there is a shift from food crops to export crops, the prices of food items went on high, and the poor people couldn't buy from their meager income. Similar trend continued for clothing, housing, transportation, health etc. So people were forced to consume less of even basic necessities.

Bhargava and Dave (2003) argue that in a democratic set up it is important that fruits of development are equitably distributed between regions and among the various echelons of the society. Industrial and agricultural transformations occurred during the nineteenth century helped the rich than the poor people (Rathakrishnan, 2003). The industrial development not only widens the gap between the rich and poor but also it promotes urbanization and flow of rural poor to urban areas and diversion of potential cultivable land to urban activities. As a result the food production is slowed down and availability of food per capita also undergoes decline. Earth friendly economic development must be our aim.
 Deaton (2003) opines that more than one fourth of the World's poor live in India. India's economic liberalization in the early 1990s resulted in high rates of growth, whether it reduced the numbers of poor or benefit only increasingly wealthy urban elite is a question. Because of growing inequality, consumption by the poor couldn't rise as fast as average consumption and poverty reduction was only about two-thirds of what it would have been had the distribution and consumption remained unchanged (Deaton, 2003). The gap between rural and urban areas widened because of the vast differences in the levels of literacy, availability of living facilities such as water, drainage, housing, power, lighting, food and transport etc.


There is an urgent need for improving the social and economic conditions of the tribal community and to solve their problems. India has failed to have a national policy of tribal development, to provide them with basic facilities like clean drinking water, education, employment and access to health facilities. Due to widespread corruption and negligence, there was ineffective implementation of programs for development of tribal communities. The tribal became ousters due to the construction of large dams. They lost their habitats and livelihood. Tribal women had to walk several kilometers for safe drinking water. Thousands of them die every year due to starvation and epidemics. As the tribal are uneducated and ignorant, land protection was not possible for them. When foreigners are allowed to exploit their traditional knowledge about medicinal plants their livelihoods are in danger.


            Due to globalization food items are being exported to India in the form of increased consumption of meat, western fast food, sodas and cool drinks, which may result in public health crisis as speculated by certain researchers. The rich biodiversity of India has yielded many healthy foods prepared from locally available organisms. But the marketing by MNCs with large advertisement campaigns lead the people to resort to their products (Mascarenhas, 2003).   


(1) Revival of agriculture:

(a) To achieve 4% growth and equity in agriculture, the supply and demand side constraints have to be removed. The support systems have to be tuned to improve productivity and incomes of farmers with emphasis on small and marginal farmers and dry land areas.
               (b) Agriculture policies have to keep in mind increasing risk and uncertainty due to liberalization, gender sensitive as the share of women is increasing and on cost of production.

               (c) Infrastructure including irrigation, natural resource management, research and extension, inputs including credit, diversification by maintaining food security,  marketing, regional planning have to be focused for higher agriculture growth.

(2) Subsidies:

India should stress on the implementation of Uruguay round agreements to reduce subsidies and other distortions caused by policies pursued by developed counties.        

(3) Demand Side Issues:

(a) Adequate insurance is needed for those carrying out diversification with in agriculture or from agriculture to non- agriculture.

 (b) Social security should be provided for the unorganized workers also.
(4) Rural Non-Farm Sector:

The ultimate solution for reduction on land is to improve rural non-farm sector and planned urbanization. Chinese experience shows that Globalization with better initial conditions has increased employment and incomes for workers which in turn was due to rural diversification.     
(5) Structural Change:
Structural change in economy should follow agriculture-industry sequence. But, in GDP shares India leap-frogged from agriculture to services without concentrating on manufacturing. This happened in many other South East Asian countries. But, their share of employment in manufacturing sector is more when compared to India. For e.g. the share of employment in manufacturing in Malaysia is 50%, in Korea 62%, in China 31%, in India it is only 11%. There, is need to develop industry in order to improve employment. Jumping to services is not the solution.
(6) Special Economic Zones (SEZs):

The Government of India is allotting agricultural lands as SEZs to industrialists. The examples of Nandigram in West Bengal and Rajasthan (“Arre arre chor aaya re…SEZ layare!”. So goes rallying cry) may be cited, where farmers resisted against governments. This should not happen in future.

(7) Political Economy of Agriculture:

There is a feeling that governments (Central and State) promise a lot for agriculture without much allocations and implementation. Hence, the governments should come up to the expectations of farmers.

 (8) NGOs role:

NGO's have a moral obligation to call upon our political leaders, businessmen, labour leaders to make economic decisions, so that first priority is given to the basic needs of the vast majority of the people for food, employment, housing, education and health care. Through organization, collecting the small farmers, conducting formal and non formal education for the adults to create analytical mind to be aware of the existing economic system, how it affects their life directly or indirectly must be explained. NGO's should come forward to organize a net work system - at District, State, Regional and National level. They respond at a macro level.

(9) Strategies:

In the era of globalization, the rural societies can adopt certain strategies for safeguarding their existence, livelihood and culture. The strategies include:
  • Mobilization of the small farmers for regional campaigns.
  • Building good coalition with different likeminded organizations (NGOs) and trade unions.
  • Establishing a mechanism, to challenge the MNCs
  • Having deliberations with bankers and industrialists in order to consult them with NGOs.
  • Setting goals with specified objectives so that they reach the grass root level of the rural societies.
  • Planning at grass root level with full people participating in different levels.
  • Collecting more information on economic policy and disseminate it to every individual for collective responsibility.
  • Keeping gender balance.
  • Forming net work among leaders in various levels with solidarity and commitment.
  • Creating common understanding and purpose among the people in all the sectors of the society.
(10) Encouragement to Rural People:

Rural people must be encouraged to stay back in their rural areas and to start their enterprises to get the same degree of satisfaction, an urbanite gets while leading his day to day life. The dichotomy between urban and rural societies must diminish leading to total elimination. Modern industries could be split into various components which require simple industrial skills can be manufactured in rural areas by giving them training in addition to their own traditional skills. Planning for rural, urban growth should be such that dichotomy vanishes automatically.

The next of stage of reforms in agriculture has to focus on developing institutions for better delivery systems. Agriculture can be ignored at our own peril. If we want inclusive growth, both Central and State Governments have to focus on agriculture sector. Let us hope that Government has the political will to implement the policies effectively and help the farmers without testing their patience.

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Deaton A. Is World Poverty falling? Southern Economist, January 2003, P. 21.
Mascarenhas M. Unpalatable truth. The Hindu, June 22, 2003 p.1.
Mohammed C and Nazar M, The Role of Multinational corporations, Southern Economist, February 1, 2003. P.24
Rathakrishan, Myth and Reality of Limits to growth, Southern Economics, February 1, 2003, P.10-2.
Sah R.K., Indian Economy in the Post Globalization Mileu. Southern Economist, January 2003, P.5
Sharma S, Markets, stable and society in the new age: Towards Holistic Development and Management, Southern Economist, January 1, 2003. P.9
Subramaniya S, Doing without rural urban Divide: issues analyzed, Southern Economist, Feb 1, 2003, P1-3.
Verma J.M.S., Globalization and Economic Reforms in India, Third concept April 2001, P.22-23.
Chand, R., S.S Raju and L.M. Pande (2007), “Growth Crisis in Agriculture: Severity and Options at National and State Levels”, Economic and Political Weekly, Vol, 42 No.26.   
Pingli,(2007),” Some Recent Issues in Agriculture “,in Dev ,S. Mahendra .
K.S.Babu(2007), India’s Economic and Social Development, Academic Foundation.
Suri,K.C.(2006), ‘Political Economy of Agrarian Distress’, Economic and Political Weekly, April 22.
Agriculture Can not Wait - New Horizons in Indian Agriculture, Edited by  M.S.Swaminthan. Academic Foundation in Association with National Academy of Agricultural Sciences (NAAS), New Delhi.





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