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Capitalist Development and Rural Livelihoods

In Search of a Cohesive Development Approach

Subrata Dutta ( teaches at the Sardar Patel Institute of Economic and Social Research, Ahmedabad, Gujarat.

Indian agriculture has been facing intrusion of large capital into its domain in various forms, such as contract farming, industrialised agriculture, forcible acquisition of agricultural land for industrial plants. The impacts of such capitalist development on rural livelihoods are explored. It is argued that reform in agriculture—through setting up of special agricultural zones and other similar means—needs to be undertaken for further rural economic development, in general, and for protection of agriculture-related livelihoods, in particular. The prospects of the rural industrial sector are also examined and, in this context, it is argued that the clustering of rural non-farm enterprises can pave the way for an alternative development paradigm.

The author is thankful to K P Satheesan, Sarita Ranga and Pradip Chauhan for their assistance in drafting this paper.

The development policies of most of the developing countries have been premised on the conceptual framework that conceives development as a process of structural transformation from predominantly rural, agrarian and subsistence economies to predominantly urban, industrial and capitalist economies (Reddy et al 2014). In such a capitalist development process, agriculture is also being industrialised with the help of capital-intensive technology. While the industrialised agriculture can potentially augment the level of agricultural production, but at the same time would result in “an increase in the ratio of capital stock to land” and thus “[t]he livelihood outcomes of this process are, for many in the countryside, negative, as market imperatives and profitability requirements undermine the capacities of many small-scale farmers to compete on domestic markets” (Akram-Lodhi 2015: 235).1 On the other hand, the big industries largely provide employment to the skilled labourers. Thus, capital-intensive production process is not likely to follow the Lewis (1954) model and create large-scale employment opportunities for the rural, unskilled masses.

In India, while the agriculture sector’s contribution to the gross domestic came down to around 14% circa 2011–12, its share in the country’s employment was at 47.5% (Thomas 2015). This indicates that shift in output structure—considerably towards the software services led service sector—has not been significantly translated into corresponding shift in employment structure. With the surplus and unskilled agricultural labour force finding it increasingly difficult to be absorbed outside agriculture, it is inferred that the growth of the non-primary sector has not been much successful in offering possible solutions to the prevalence of underemployment—whether disguised or seasonal—in the agriculture sector, thereby forcing the rural workforce to migrate to other regions, and/or to engage in informal sector activities for a livelihood.

In this context, there are legitimate reasons for questioning the potential of the neo-liberal rural development initiatives, such as contract farming, creation of special economic zones (SEZs) on fertile agricultural land, and township development programmes in villages, for absorbing the surplus rural labour. Figure 1 (p 37) suggests the plausible routes by which the neo-liberal capital shrivels the rural livelihoods and income, especially of the small and the marginal farmers.

Amidst such capitalist development, what are the possible ways of protecting (and creating) the livelihoods of the rural poor? In quest for this, we must keep in mind that while alternatives to capitalist development processes need to be identified and promoted, it is, at the same time, imperative to look for opportunities that would facilitate integration between the processes of capitalist development (which emphasises capital-intensive techniques) and alternative development (emphasising on labour-intensive techniques). For instance, whether and how arrangements like contract farming, special agricultural zones (SAZ), or rural industries clusters be “inclusive” of the small and marginal farmers in order to protect their livelihoods?

Answering these research questions not only brings in clarity to the concerned issues, but their interconnectedness also helps us in formulating a cohesive development approach. However, conceptualising such a cohesive approach that seeks to emphasise the livelihoods of the rural poor by highlighting different linkages within the rural production processes, including the capitalist development process, entails a broad review of literature of the latter with reference to agriculture as well as the rural non-agricultural sectors.

Contract Farming and Rural Livelihoods

Can small and marginal farmers participate in contract farming and thereby benefit from this? Empirical results from Punjab in India showed that the system of contract farming was biased towards medium and large farmers. The companies preferred large growers in order to avoid problems of dealing with too many small growers (Kumar 2008).2 This would help the contracting firms to reduce the costs of monitoring, supplying inputs, lifting outputs, billing, payment, etc. (Singh and Asokan 2005). The productivity data from Punjab study also showed a superiority of the contract farmers over their non-contracting counterparts across all farm-size classes (Kumar 2008). While there are evidences of contracts benefiting the contracting farmers, there are also evidences that the small and marginal farmers are discriminated from participation, which in turn can inhibit the improved distribution of income across the farming community.

The possibility of smallholders gaining from contract farming due to wider market access is not ruled out in the discourse (Dietrich 1994; Simmons et al 2005), but a number of authors expressed their concerns about the fact that the development process that stems from contract farming does not integrate the poorer growers (Little and Watts 1994; Runsten 1994),
and in India, in particular, contract farming as an option for small and marginal farmers does not stand strong due to high transaction costs (Khairnar and Yeleti 2005).

In some cases, however, fragmented production units may be preferred by the firms. In the case of gherkin, for instance, Singh and Asokan (2005) observed that the processors preferred farmers with smaller plots but sufficient family labour to ensure the manual care needed for a particular quality of the produce as demanded by the client abroad. If such care, and the quality in turn, is available at a cost that is cheaper than that of advanced technology then the small and marginal farmers have a good chance of participating in contract farming.

On the other hand, Sarkar (2007) argued that contract farming could break the feudal chains of agricultural marketing, especially if direct links are established between the farmers and big retailers, and such improved marketing would provide higher returns to farmers.3 In such a case, the multiplier effect of higher income (and, consequently, greater consumption) of the larger farming community may be expected to bring about growth in several other sectors through various linkages (Mellor 1976). This enhances the scope for creation of new livelihoods opportunities in the rural non-agricultural sector (conceptual details in Figure 2, p 38).

Little (1994) pointed out that contract farmers not only diversify through participation in contracting schemes but also through earning income from non-agricultural activities (such as wage employment and trading). This brings in a new dimension to the present discussion, that is, the farmers’ choices of agricultural and non-agricultural livelihoods. But some uncertainty is associated with this conceptualisation. While industrialised farming system can generate some off-farm employment opportunities in the regional or local supply management of a contracting firm or in the transport and logistics sector or in processing or other value-added operations (Little 1994; Singh 2005), but it has not been empirically verified whether members of the local farming community have access to such employments or have benefited from these. Especially if value added activities such as processing is not done in the producing region, the off-farm employment would not benefit the locals (depicted in Figure 2).

A concern in tandem is whether the control of production is shifted to the contracting/processing firm since they are providing the farmers with new technology, credit, quality raw materials and other inputs, and technical advice or extension service besides linking them to the international market. Such shifting of control often leads to the exploitation of the growers by the processors. This is evident from the growing number of court cases filed by the contract farmers against the processors in the United States (US) (Welsh 1997). If this is the case in the US, cannot a rather worse situation arise in India and other developing countries? Singh and Asokan (2005) had observed some form of exploitation of the gherkin contract farmers in Karnataka where the processor-cum-agribusiness firm retained the right to change prices according to the fluctuations in the international market. Hence strong institutional regulation and monitoring are essential to protect the interests of the farmers in developing countries (mentioned in Figure 2).

Apart from these issues, there are also some larger issues that raise concerns. Some may argue that capitalist farming’s sole emphasis is on production and income and not on social development. In this regard, Sarkar (2014) argues that, contrary to green revolution or land reform, the perspectives of national or regional development are missing in contract farming. But this can be reinterpreted in the following manner. While contract farming has been criticised by many researchers on account of food insecurity (since contract farmers ignore food crops), environmental degradation (attributed to excess water exploitation) and income inequality (contract farmers have higher income than non-contract farmers), the industrialised agriculture has scope for greater employment generation (along with generating higher income) when it inclines towards labour-intensive crops (Swain 2011). Furthermore, it creates, as said, some off-farm employment as well. Hence, it is inappropriate to say that the larger regional development perspective is completely missing in proliferation of industrialised agriculture.

However, finally, if smallholders are not preferred by the contracting firms and if the rights and interests of the contract farmers are not protected by the rules and regulations, the benefit of contract farming would cease to reach the poor. The policymakers need to take cognisance of this and thereby frame policies for wider benefit of the society, especially the rural underprivileged farming community.

Land Acquisition and Rural Livelihoods

Structural transformation of the economy in developing countries is often found to be accompanied by the encroachment of fertile agricultural land for the industrial sector. For instance, in West Bengal in India, different development projects are estimated to have used 47 lakh acres from 1947 to 2000, which affected almost 70 lakh people, of whom 50% faced displacement from their own land (Fernandes 2007). In recent times some instances of land acquisition such as, that at Singur for the Tata Group’s automobile manufacturing plant,4 and/or those for the Nandigram chemical hub5 and some SEZs6 were at the centre of contentions primarily on two grounds: First, that the compensations to the landowners were grossly inadequate (Guha et al 2007; Sarkar 2007). Second, that the government had undermined the other stakeholders of the land like the unregistered sharecroppers,7 and the landless agricultural labourers whose dependence on the land is no less than that of the owner (EPW 2007: 992).

On the other end of the spectrum are the farmers of Salboni village in Paschim Medinipur, who agitated when the JSW industrial group wanted to return the land to the farmers—who had willingly sold out their land to JSW in 2008 for setting up a steel and power plant—because they were unable to start production owing to the non-availability of adequate coal required for their project.8 Interestingly, the farmers wanted employment in the industrial plants, instead of getting their land back (Saha et al 2014). Finally, in January 2018, the JSW Group decided to set up a cement factory in that particular site and promised to provide employment to one person from each family that has given land (De 2018). However, even after such transformation, there is reason to be apprehensive about what would happen with the local sharecroppers and landless labourers who were dependent on that land for their livelihoods. The industrial group was in no position to take the responsibility of the whole local community.

This shows that these farmers wanted to accept this particular type of rural transformation and benefit from the process. A section of the rural youth, especially those who have received formal education, is not really averse to support the industrialisation strategies of the government (Kang 2010). Hence, while industrialisation is welcome, an integrated and inclusive approach of rural transformation is also called for. We would now go deeper into this.

Special agricultural zone and livelihood: Eminent agricultural scientist Swaminathan (2007) argues that any “Exit Policy” (for example, land acquisition policy) for small farmers through land markets should be accompanied by an “Entry Policy” (such as setting up of SAZs) which will provide the affected people with alternative and sustainable livelihoods. But the pace of progress of the Indian agriculture is too slow to create livelihoods in both the farm and rural non-farm sector. Furthermore, agricultural land is not only being encroached by the state governments (for wooing large industries), the realtors have also jumped into the opportunity of developing unprecedentedly large pieces of land for their real estate projects (Levien 2011). In such a situation, Swaminathan (2007) asserts that if agriculture goes wrong then nothing else will have a chance to go right. He states that small farm families urgently need life-saving support and incentives, more than rich industrialists do, mentioning that nearly 80% of the Indian farm families own one hectare or less cultivable land. That is why he recommended setting up of SAZs—in the line with the SEZs—which would aim at improving the productivity, profitability and sustainability of the major farming systems of the country (SAZ has been emphasised in Figure 2).

The SAZ and SEZ can be mutually complementary rather than competitive. Like SEZ, special incentives and support, such as soil health enhancement package, timely supply of credit and good quality inputs, effective extension services and insurance, post-harvest infrastructure like decentralised renewable energy generated from biomass, and marketing help, must be given to farm families in the SAZ areas. Furthermore, proper research system has to be established, since “agricultural intensification requires an adequate response of the research system” (Cuffaro 1997: 1159). According to Swaminathan, all these would pave the way to a second green revolution in India and he recommends that SAZs should be set up both in irrigated and rainfed areas. In this connection, Singh (2007) adds that since more than 61% of the total net sown area in India is rain-fed, proper water conservation systems should be installed in such areas for better agriculture (see also GoI 2004). This is very crucial, since, due to acute water crisis, farmland is not being used efficiently in India; efficient utilisation of agricultural resources would raise agricultural productivity which could enable the country to release part of the farmland to industry without affecting the current level of food security (Sau 2007).

Producers’ companies may be formed in the SAZs. Marketing is a huge problem for the small and marginal farmers and newly emerging producers’ companies are showing collective efforts as well as innovative ways to mitigate this problem (Singh and Singh 2014). Many of the small and marginal farmers cannot afford to access markets. Thus, middlemen take the advantage of such situation and they offer prices much lower than the market.

Difficulties in integrating small producers with modern markets include high transaction costs in dealing with smallholders having small volumes to sell, and lack of collectivisation of small producers. A very small proportion of Indian farmers are a part of any collective action for market buying or selling. (Gandhi 2014: v)

Public initiatives should be undertaken to encourage small and marginal farmers in forming producers’ companies and thus improving their livelihoods through organised as well as better marketing of their produces (as in Figure 2).

Until now we have discussed the issue of livelihood of the rural poor in connection with agriculture; however, the livelihood issue also relates to rural non-agriculture and this needs to be discussed as well.

Cluster of Rural Industries

One of the features of industrialisation in East Asia is that the petty producers and rural crafts “did not decline but were integrated with the capitalist system,” whereas in India such type of integration has not yet widely happened. Rather, “existence of relatively independent producers in the artisanal industry” is seen along with the growth of modern industries (both large and small) (Biswas 2003: 326). Many of the artisanal/cottage industries and petty producers have evolved from family/caste/community-based occupational traditions. Such producers, and also workers, are either illiterate or have very low level of education, and are poor; their tools and equipment are primitive or obsolete, and their products are of low quality (UNDP et al 1988: 52).

Levitsky (1996: 10) argued that the main problem of this industry is not its size, but its isolation. An isolated location does not only restrict the type of products and the quantities that could be sold, it does also hinder access to information, finance and institutional support. Collaborative knowledge accumulation has great significance (Cantwell 2005: 79). In order to become competitive in a wider market, even the poorest rural industry producers might attain collective efficiency through proximity, specialisation, social cohesion, and collaboration. Weijland (1999) argues that the condition of collective efficiency is not so hard to meet. As Bhargava (2007) noticed, a self-induced embroidery cluster emerged around two villages, namely Bhalau Teeba and Dhani Kumharan, in Churu district of Rajasthan, each having around 150 embroidery units. Clustering of such local skill-based units has made it possible to develop a cluster-agent-large trader relationship. Had the units been dispersedly located, it would have been difficult for the agents to liaison due to high transaction cost.

Weijland (1999) gave example from Indonesia and showed that among the efficiency gains of clustering, low search-and-reach costs were prominent. Close proximity of enterprises reduced the transaction costs of purchasing the inputs and marketing the outputs and consequently attracted traders who usually offered advances that helped to resolve urgent financial problems of poor entrepreneurs. Clustering also eased information flows, provided scale economies, and facilitated order-sharing, labour-sharing and subcontracting. In the more advanced clusters, more expensive equipment and special skills could be shared. Also, savings and loan associations contributed to resolve the financial problems.

Recent developments suggest that the multinationals and the big domestic business houses are encroaching the markets of the rural domestic industry. A glaring example, given by Taori and Singh (1991), is of potato wafers. Only 10% of the domestic demand in the 1990s was found to be supplied by the large-scale sector and the remaining by many rural and urban small entrepreneurs and shopkeepers. Gradually, however, a considerable section of them has rapidly lost incomes after the big companies entered their markets.

The National Bank for Agriculture and Rural Development (NABARD) suggested that if such small units formed clusters and forged alliances with the big units, they could have found new growth path (NABARD 2006). Apart from the fact that the small enterprises are located at decentralised places, NABARD found that many small food processing units have unhygienic surroundings. Formation of planned clusters with improved infrastructure may address these problems. For those small enterprises that would not go for alliance with the large units, NABARD suggested that advanced management and marketing methods need to be introduced in the cluster in order to help them cope up with the capitalist system. For all this, government intervention is necessary. Moreover, through the formation of the clusters, the government would find it relatively easy to offer training to the rural producers who are spatially concentrated than those who are scattered.

Synergising Large Industries and Rural Enterprises

Can we create a synergy between urban-based large industry and village-based small/tiny enterprise sector (that is, rural industry)? In order to keep pace with the world’s trend of modernisation and to face global competition on the industrial front, developing countries are endeavouring to promote large industries. If the policies are properly designed and the right kinds of industries are promoted, large industries may facilitate the growth of small industries, including rural industries.

Sau (2007: 575) argues that “such is the world around us now that unless India builds up a sufficient number of strong industries which can stand up to global competition [relatively rapidly], this part of the subcontinent will be reduced to a place of only poor peasants or landless labourers.” However, as Mountjoy (1982: 16) argues, large-scale industrialisation alone is not synonymous with development; the concept of progress applies to all sectors of an economy and, thus, an integrated as well as comprehensive approach needs to be adopted. In this regard, as we think, rural small-scale industries need to be prioritised as a significant part of the secondary engine of growth of domestic economy (while agriculture is to be the primary engine of growth).

Apart from the types of products, the rural small-scale sector forms a complex matrix in terms of size, capital invested, types of technology, labour employed, average skill level, and location type among other things. Only a very small segment of such industry has ancillary links with large factory. The isolation of the modern, privileged, formal manufacturing sector from the rural industries and the informal sector is a reflection of a “dualistic structure that restricts trade and the movement of resources between the two sectors.” The problem of existence of such dualism may be mitigated by creative interactions between the two sectors so that the growth of them is, in part, found complementary (United Nations 1979: 135, 275).

However, the interlinked relations between the rural small industries and the urban factory industries are rarely observed in most of the developing countries, including India. It is to be particularly noted that the state policies have significantly failed to promote ancillarisation or subcontracting of rural small firms and cottage industries by large firms in India (Bhalla 2004: 58). This has long been practised in countries in East Asia (United Nations 1979). Even in some South East Asian countries, such as Thailand, such type of subcontracting has been observed. The factory–villager subcontracting relationship in the fishnet industry in Khon Kaen town in Thailand is a good example (Thongyou 2001).

Subcontracting and technology: It may be worth mentioning here that the linkages between the rural and the urban industries through subcontracting require, in many cases, a certain level of upgradation of the former with a view to reaching the “level of quality” required by the latter. The large firms remain very much alert about perfection, precision and quality and these are crucially linked with technology. Also, since large firms prefer to innovate frequently, rural small firms have to cope up with such phenomenon if they want to enter into the subcontracting arrangements and, for that, the issue of technology (in other words, technology-related research) needs to be paid proper attention.

The roadmap is as follows: For the sake of developing indigenous technology, the government has to formulate new research and development (R&D) and technology policy that would make provisions for engaging universities, research institutes, technological institutes and R&D laboratories to produce innovations that would be cheaper and must be accessible to the poor rural producers (see the upper right part of Figure 2).

But, Teubal (1996) argues that the formulation of a technological policy is not an easy task, and its implementation is even more difficult. All these require a conceptual framework, because we have not yet generated adequate knowledge that would help us decide which project needs to be supported. More precisely, “[w]hat technologies should be supported? Is it always the case that high-tech and science-based sectors should be given first priority” (Lundvall and Borrás 2005: 609)?

Industrial technological policies need to be defined by the proper national body in order to integrate policies on industrial technology with policies on industrial location (rural/urban) and on structure (large/medium/small) (United Nations 1979: 276). However, the approach towards defining such type of integration and the subsequent implementation would face at least two major hindrances. First, the application of better technology, even in moderate degree, would release some resources, including labour—via productivity consequences—from the rural production process. As a result, further unemployment problem may crop up. Second, who would fund such programmes?

As regards the first issue, Mountjoy (1982: 16) elaborated that the application of science and technology would raise productivity per worker, which would release labour and resources for yet other productive tasks.9 If such “other productive tasks” are promoted well, the chance of released labour to remain unemployed would be mitigated. But, unfortunately, public policy in many developing countries often failed to recognise and support such “other productive tasks” and thereby have been unsuccessful in stepping up the rural economy. This needs further elaboration.

As far as technological improvement is concerned, innovation is an important determinant. But innovation is generally considered to be benefiting firms (by higher profits) and consumers (by lower prices). What could be the impact of innovation on employment? There is a general perception which asserts that innovation leads to unemployment in two ways: First, innovation can help firms in introducing additional labour-saving effects. Second, firms innovating in both products and processes may experience higher growth, but their technologically led expansion may jeopardise non-innovating firms and thus create unemployment (Pianta 2005; Katsoulacos 1986).

On the other hand, Pianta (2005) offers us the positive side as well. First, as the innovator makes extra profits, there is a chance that this would turn into new investment, which would lead to new production (as already indicated by other productive tasks), or, expansion of the existing production, and thus new jobs. Second, as technological unemployment crops up (through destruction of non-innovating firms), wages would fall and firms would hire more workers. But, in such transition, the unskilled or semi-skilled workers (that have been employed so far in non-innovating rural industrial activities) need to be properly trained so that they are found eligible to be absorbed in innovating firms.

The second important issue here is how to accommodate financial provisions, while adopting policies for technological improvements, in the rural industries? There is a need to remove policy bias and maintain necessary strategic balance between the large and the small rural industries. In this regard, United Nations (1979: 135) adds that in many countries the large industrial sector “is excessively subsidised and the small-scale industries are repressed by policy measures intended to stimulate manufacturing growth.” Let us now elaborate this discussion further.

In quest of affordable technology: Improved technology can be procured in two possible ways—through innovation and through import. Innovation is usually seen to be carried out by highly educated labour in the R&D-intensive companies, sometimes in close association with the leading centres of excellence in the scientific world, and the whole process involves huge public as well as private investments. Hence, the easy alternative is to import technology. National policy should create adequate room for cultivating indigenous technology through innovations at massive scale (Saeed and Prankprakma 1997: 696).

However, we have to keep in mind that a significant part of such innovations should have to be easily accessible for the poor (both producers and consumers) to benefit from these (Banerjee and Duflo 2011). In this regard, a distinct policy design in favour of the poor producers is required. Moreover, the transfer of the accessible innovations from universities/institutes/laboratories to the rural industrial clusters has to be rigorously ensured. Other avenues can also be explored. For example, some changes that are negligible in the context of global knowledge frontier—and that involve very low cost—may emerge as “new” in the local context. Such innovations may expand local market for the rural producers (Fagerberg et al 2010: 835).

Let us take a look at the case of India. Qualified research scientists are scarce in a country like India and this is a big barrier to improved R&D in the country (Mani 2018). The universities need to be provided with greater amount of funds, and, also, scholarships in schools—which are often considered to determine a students’ choices of scientific studies and/or careers—need to be substantially hiked (Krishnan 2010). Presently, non-availability of required number of well-qualified human resources in science and engineering has been recognised in policy circles but major and wide actions are yet to be taken (Mani 2018). Although the national government is endeavouring to address major engineering challenges through the collaborative efforts of the Indian Institutes of Technology and the Indian Institute of Science under the Impacting Research Innovation and Technology (IMPRINT) scheme, this, however, is not going to suffice the broader need. The broader need includes the need of rural industries. India’s post-liberalisation policy measures have endeavoured to induce technological consciousness exclusively among the large firms to increase their competitiveness and export earnings from the manufactured items (Tyabji 2018). Such biased attitude needs to be adequately altered.

As already indicated, the bottom of the pyramid is not integrated into the formal economy and operates on inefficient and poorly serviced rural markets that are mainly dominated by the informal sector. National and subnational institutions must scrutinise whether the emerging patterns of scientific and technological change would produce new dynamics that might mitigate poverty (Waldman et al 2008: 371). In this connection, the Organisation of Economic Cooperation and Development notes that if new innovations, such as mobile phones, can enable the poor to be integrated into the formal economy, they would do even more than marginally improve their well-being (OECD 2012: 17). However, the proposition whether mobile phones have really enabled the poor to be integrated into formal economy needs to be evidentially proven.

Fagerberg et al (2010: 842–43) argue that foreign technology acquired through imports of machinery or foreign direct investments may also accelerate a poor country’s national technological capability as it happened in the case of South Korea, which transformed itself from “one of the poorest countries in the world to a first world technological powerhouse in just three decades.” But, be it indigenous technology or be it upgradation of imported technology, social capabilities in the form of skill formation, technical education, and research have important roles to play. Otherwise, people at large would not be able to receive these technologies and thereby make use of them. Governments must provide necessary funding for all these purposes (Rosegger 1980).

In this paper, we have come up with a sketch of the capitalist development process in villages and its impacts on rural livelihoods. In addition, we have looked for an alternative development process that would protect and promote rural livelihoods, and, in doing so, we have also sought for a cohesive approach that would integrate capitalist development agenda with the rural, unorganised, traditional sector and, thus, would attempt to modify the dualistic dynamics of the development trajectory. Our framework is diagrammatically presented in Figure 2.


Large-scale industrialisation is important for regional growth and employment of skilled labour, but the large industries prefer to invest more and more fixed capital than variable capital (that is, the means of employment), and thus the scope for employment of unskilled or semi-skilled labour tends to shrink. Therefore, in a labour-abundant economy, agriculture and rural small enterprises assume special significance from the perspectives of livelihood and employment.

For the rapid transformation of rural economy, many developing countries have indulged in contract farming, acquisition of agricultural land for large industrial plants, etc. In this regard, this paper has sought to look into the pros and cons of such types of capitalist developments. The article has come up with certain clear-cut viewpoints. One, reform in agriculture—through setting up of SAZs and other similar means—is necessary for further rural economic development, in general, and for protection of agriculture-related livelihoods, in particular. Strengthening of agriculture would help rural non-agriculture to grow through the expansion of demand for rural non-agricultural goods and services (Mellor 1976). Two, at the same time, links between the large urban and the small rural industries needs to be created and enhanced. Three, to facilitate this process, clusters of rural industries need to be set up, for which state support might play a crucial role. Also, favourable technology and the R&D policies need to be framed and implemented with a view to foster innovations and then connect such innovations with the rural industrial sector through appropriate channels and mechanisms, which have been described above.


1 Rapid industrialisation is offering better inputs and improved technologies to agriculture, resulting in continuous decline in employment elasticity of agriculture.

2 However, in a case study carried out in Punjab (India), Dhillon and Singh (2006: 35) observe that large farmers due to their “high capacity to undertake risks find open market more lucrative than the contract farming.” They conclude that adoption of contract farming is more prevalent among “medium-sized” farmers. While compared to small and marginal farmers, as Glover and Kusterer (1990) find, more educated “medium-sized” commercial farmers (who are often urban professionals and businessmen with farming as secondary occupation) are preferred by agribusiness firms. Since these farmers are educated, this reduces the transaction costs. On the other hand, agribusiness managers often find small farmers backward and unreceptive to innovation, which affects productivity. As far as productivity is concerned, there is different opinion too as Sharma (2016: 68) observes in Punjab (India) that there is no relation between farm size and productivity and thus the small potato farmers, though less representative in contract farmers, are found to have earned better income.

3 Swaminathan (2007) also argued that contract farming could provide market security to small producers.

4 The project was finally shifted to Sanand in Gujarat state due to mass agitation supported by different opposition political outfits. In 2016, by the order of the Supreme Court of India, the lands have been finally given back to the landowners.

5 This also eventually fizzled out due to mass protest.

6 Lands for these two big projects were acquired by the government using the Land Acquisition Act, 1894 (enacted during the British era). However, after huge criticisms and protests, a new act, namely the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, has replaced the old one.

7 The registered sharecroppers got some compensation, but the unregistered sharecroppers were offered nothing.

8 The JSW Group expressed their desire to return the private land that they had bought from the local farmers, not the government land which constitutes more than 93% of their possessed land at Salboni.

9 Also, this leads to fall in prices (Pardey et al 2010).


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Updated On : 5th Jul, 2019


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