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Harvest of Despair

out that PTAs can lead to trade creation, if due to the formation of the regional agreement, PTA members switch from inefficient domestic producers and import more from efficient producers from other members of the PTA. In this case, efficiency gains arise from both production efficiency and consumption efficiency. On the other hand, trade diversion takes place if, because of the PTA, members switch imports from low-cost production in the rest of the world and import more from higher-cost producers in the partner countries. Trade diversion lowers welfare of not only the partner countries, but the rest of the world also.


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Harvest of Despair Archana Aggarwal agricultural output. The author also argues that the accompanying rise in input sub sidies is problematic as it suggests a diversion of resources from the capital to the current account. This conclusion

his book is divided into two sections. The first section titled “Macro Dimensions of Agrarian Crisis” contains essays on an overview of the crisis, capital formation in Indian agriculture, agricultural credit and indebtedness and on research and development in agriculture. The second section titled “Farmers’ Distress: A Few States in Focus” has a total of six essays five of which deal with studies of farmers’ distress in states with a high incidence of suicides, viz, Maharashtra, Andhra Pradesh, Karnataka, Kerala and Punjab. The book uses both explanations based on data from national surveys as well as state-specific details weaved from case studies and household surveys.

Link with Reforms

The lead essay by the editors links the agrarian crisis to the impact of economic reforms in a detailed and comprehensive manner. Using data from the National Sample Survey, it shows the increasing marginalisation of landholdings and argues that small-marginal farming cannot be sustainable without substantial public infra structure support – comprehensive social security covering health, education, employment and old age support and supplementary non-farm employment. Attention is drawn to the contradiction between agriculture’s declining contribution to the

Agrarian Crisis in India edited by D Narasimha Reddy and Srijit Mishra (New Delhi: Oxford University Press), 2009; pp xxix+286; Rs 695 (hardcover).

gross domestic product (GDP) and continued concentration of the workforce in this sector. Economic reforms with policies promoting trade liberalisation, a decline in public investment in agriculture, a reduction in formal, institutional credit to agriculture, rising input costs and the volatility of commodity prices are seen as factors contributing to the crisis.

The growth of farm business income (the difference between the value of output produced and the costs actually paid out) per hectare, decelerated from 3.21% in the 1980s to 1.02% in the 1990s (p 27). This, accompanied by a steep rise in the cost of living in rural areas, accentuated the disparities between agricultural and non-agricultural incomes and often resulted in pauperisation of the peasantry. The authors show that the incidence of suicides has been higher among small-marginal farmers moving from subsistence agriculture to high value crops.

In the second essay, Ramesh Chand shows that public sector capital formation in agriculture for the country as a whole declined or showed stagnation after 1980 with an adverse impact on growth of

JUly 18, 2009

needs to be questioned as it assumes fixity in the resources to be allocated to agriculture. It may be noted that the share of agriculture, irrigation and flood control in actual plan expenditure declined from 37% in the First Plan to 16.5% in the Tenth Plan.1

Credit and Indebtedness

In the essay on agricultural credit and indebtedness, S L Shetty traces the growth of institutional credit to agriculture. This is a significant area of concern as credit becomes crucial for purposes of commercial cultivation. Shetty shows how the share of agriculture in the commercial bank lending experienced an impressive increase after bank nationalisation but with the banking sector reforms since the early 1990s, it has steadily declined to reach a low of 11% in the period 2004-06. Since then, there has been an increase in the share of informal sources in the indebtedness of rural as well as agricultural households. Small and marginal farmers, dependent on non-institutional sources of credit were paying exorbitant rates of interest, sometimes more than 30%. In this essay, Shetty poses the question:

How to bring about coexistence of banking reforms with societal goals of banking policies addressed at meeting the financial needs of small producers like peasant farmers? (p 64).

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Looking at the evidence presented by Shetty and other authors on the withdrawal of credit from agriculture and the deterioration in the access to credit for farmers in the period after banking sector reforms, it is indeed doubtful whether such coexistence is achievable or desirable.

Further, referring to the decision of the government in 2004 to double the flow of credit to agriculture within three years, he welcomes the “fresh thrust [of the government] for expanding the bank credit base for agriculture and other informal sectors” (p 76). He cites the increase in the number of loan accounts in agriculture in one year (March 2004 to March 2005) as evidence for this.

However, as Ramakumar and Chavan2 have shown, the growth in agricultural credit in the 2000s has largely come about due to (a) high growth in indirect finance to agriculture rather than direct finance to cultivators; (b) changes brought about in the definition of “indirect finance” (which now categorises loans given to dealers of agricultural machinery, state electricity boards and non-banking financial companies as credit to agriculture); and (c) sharp increases in the number of loans with a credit limit of Rs 10 crore and above, and particularly, Rs 25 crore and above (which implies loans to big cultivators and businesses), and a correspondingly steep decline in the share of direct advances with credit limit of less than Rs 25,000. This kind of “revival” of agricultural credit does not address the needs of the small and marginal cultivators, who have been worst affected by banking reforms.

The emphasis by the author on microfinance institutions and microcredit as a way out of the problems of small borrowers does not take into account the problems with existing microcredit schemes, such as the 24% per annum rate of interest charged by them.

In the essay on implications of research and development (R&D) for managing the vulnerability in agriculture, Suresh Pal contends that the “unfolding challenges of Indian agriculture can only be addressed through science and technology” (p 88). This is despite the evident limits to technology-driven growth in agriculture and the serious issues of sustainability, equity and environment that have arisen due to such growth. Advocating a “technologyonly” approach is akin to subjecting the patient to the same contagion that made him ill in the first place. Pal recognises the inherent problems associated with greater participation of private sector (mainly multinational agribusiness companies) in agricultural R&D, such as the exaggeration of claims about the performance of a technology, withholding information from the farmers and consumers, and the increase in seed prices not commensurate with yield or other economic advantages.

He also points to the fact that the new intellectual property rights regime might lead to concentration in the seed industry and domination of market by the multinational corporations (MNCs). And yet, he continues to advocate “improving private sector access to public research material, encouraging public-private joint programmes, and involving the private sector’s participation in policymaking” (p 103) as the future road map for R&D in Indian agriculture. The Indo-US Knowledge Initiative on Agriculture, mentioned by the author, is a blatant attempt by the US to orient our agricultural policies to suit their interests. It is not a coincidence that the Knowledge Initiative has on its board, three large US multinational companies – Monsanto, Archer Daniels Midlands and Wal-Mart. The harmful effects of unsustainable technology promoted by MNCs cannot only be mitigated by effective regulatory mechanisms, as has been suggested by the author.

The essay by V M Rao makes an extremely relevant distinction between two dimensions of the crisis – the crisis in agricultural growth and agrarian crisis. Rao argues that they lead to “sharply differing diagnoses… the former favours liberalisation, globalisation, and a less interventionist role of the State, the latter firmly believes in the need for radical changes in the structure of the society through land reforms and political mobilisation of the poor” (p 110). However, the book as a whole seems to recommend an overlap of the two kinds of diagnoses. It locates the complexity of the present crisis in “interrelatedness between agrarian crisis and agricultural crisis” (p xx).

The state-specific studies contained in the second part of the book bring out both the diversity of conditions in different states and the common factors responsible for farmers’ distress such as indebtedness, rising costs, declining returns and inadequate policy support to the farmers. Growing fragility of resources, especially groundwater, and inappropriate cropping patterns are also identified as causes of farmers’ distress. The profitability of agriculture has been declining due to cost of inputs increasing faster than the output prices. The method used is that of analysing through household surveys and secondary sources of information.


On the whole, the book is informative, contains extensive data and the adverse impact of economic reforms on agriculture is brought out well. But the major lacuna lies in the absence of politicaleconomic understanding of the policies adopted. The crisis in agriculture has definitely been aggravated by economic reforms but it should be remembered that there is a continuum in the political processes which led to the adoption of Green Revolution in the late 1960s and the policies of liberalisation and privatisation in the 1990s.

Another serious problem lies in the solutions and recommendations offered in some of the essays. They take the present set of policies as given and talk about ways and means of how best to minimise the adverse impact of the same. Worse still is the advocacy of the very same policies and measures which have created the crisis in the first place such as allowing the private corporate sector in the marketing of seeds or in agricultural research. One dimension of the crisis which ought to have been paid more attention to is public procurement and marketing policy.

Nevertheless, given the gravity of the agrarian crisis and the dearth of literature on the issue, this book is a welcome effort.



1 Praveen Jha, “Some Aspects of Well-being of India’s Agricultural Labour in Context of Contemporary Agrarian Crisis”,

2 Pallavi Chavan and R Ramakumar, “Revival of Agricultural Credit in the 2000s: An Explanation” Economic & Political Weekly, 29 December 2007.

Economic & Political Weekly

JUly 18, 2009 vol xliv no 29

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