Trade Liberalisation and agriculture in bihar

3/19/2018

TRADE LIBERALISATION AND AGRICULTURE IN BIHAR

Supervisor Mr. Awanish Kumar Assistant Professor, St. Xavier’s College, Mumbai

Thesis submitted in Partial Fulfilment of the Requirements for the Degree of Masters in Public Policy | St. Xavier’s College, Mahapallika Marg, Mumbai-400001 By- Sankalp Singh | UID- 168140

ACKNOWLEDGMENT

Firstly, I would like to express my gratitude to my supervisor and Professor of St. Xavier’s College (Mumbai) Mr. Awanish Kumar to make me understand the context of this course I have been undergoing. His innumerable attempts in making the broad themes associated to Agriculture, both in my dissertation days and lectures have made me change the viewpoint on Agrarian system of India. His broad ideas and support in theorising and establishing the framework in my thesis has helped me the utmost. I would also like to thank Mr. Agnelo Menezes in making me understand the broad contours of Export Orientation in several countries, reflection of which is found in some chapters of this thesis.

I convey my regards to Mr. K.K. Verma, DAO (Government of Bihar) in taking out this precious time and giving his inputs on Agricultural system of Bihar. His inputs helped me a lot in understanding the bureaucratic model of Agriculture in Bihar.

I express my deep thanks to my father in talking about his past days in Bihar and the context of land in agriculture. His ideas have been very helpful during the course of my thesis.

Most of all, I would like to thank Department of Public Policy in providing me the opportunity to write a thesis. I have been grateful to be a part of this course.

SANKALP SINGH, MARCH 19 2018.

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CERTIFICATE

This is to certify that the thesis titled “Trade Liberalisation and Agriculture in Bihar” is an original work done by Sankalp Singh under my supervision. The result presented in this thesis has not been formed on the basis of other works done for degree, diploma, certificate for any university.

Signature of the Supervisor (Mr. Awanish Kumar)

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DECLARATION

I, Sankalp Singh, hereby declare that this thesis titled “Trade Liberalisation and Agriculture in Bihar” is the outcome of own study under the closed supervision of Mr. Awanish Kumar, Department of Public Policy (St. Xavier’s College). I have duly acknowledged all the sources used for reference by me in the present thesis. It bears no resemblance to the studies done with reference on Agriculture in Bihar.

Signature of Student (Sankalp Singh) Date:

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Table of Contents 1. 1.1 1.2 1.3

Abstract Introduction Research Question Research Methodology Literature Review

Page No. 5 6 7 9 12 13 13 17

2. Trade Liberalisation and Agriculture 2.1 Neoliberalism: A Brief History 2.1.1 Theory of Neoliberalism in Indian Context 2.1.2 Impact of Neoliberalism in Indian Agriculture 2.2 Neoliberalism and Agriculture Crisis: Identifying the Context 3. Shaping of Indian Agriculture in Neoliberalism 3.1 Indian Agriculture : A look at composition 3.1.1 Cropping Sector 3.1.2 Workforce Sector 3.1.3 Land Structure 3.2 Cropping Pattern

18 19 19 19 20 21

4. Export Orientation in Agriculture: Will it Work for India? 4.1 Export Orientation and Agriculture in India: A Briefing 4.2 Export Orientation and Neoliberal Policy on Agriculture in India 4.3 Does India need Export orientation in Agriculture?

22 22 24 32

5. Bihar on Agricultural Developments 5.1 Bihar- A Brief Outlook 5.2 Development Model and Bihar 5.2.1 Performance of Agriculture 5.2.2 Crop Production in Bihar 5.3 Boosting Agriculture in Bihar 5.3.1 Agriculture Infrastructure and Bihar 5.3.2 Challenges to Bihar Agriculture 5.4 Diversification Challenge in Bihar Agriculture 5.4.1 Mechanism to Diversify Agriculture 5.5 Regression Model and Analysis

35 35 38 40 42 44 44 47 48 48 49

6. Conclusion and Research Learnings

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7. References

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Abstract After many decades of plundering, India got its independence in 1947. During the period of 1947 to 1991, there have been experiments in the sector of agriculture. Of all the sectors, Agriculture got affected the most. The first five year plan led to the capital outlay of INR 601 crores, which was 31 per cent of the investment in total of INR 1960 crores. The achievements in first five year plan of India were ‘overachieved’ in some areas of agriculture such as food grains and oilseeds. The effect of increase in food grain production was quite remarkable. However, ever since first year plan, Agricultural revolution has seen a series of fickleness from the policy discourse. Green Revolution in 1960s was more of a sovereign reply to a Developed Nation (USA) who blocked their Public Law 480 for India. Moreover, Green Revolution was absorbed only by farmers who had land, capital and capacity to indulge in robust irrigation practices. After Green Revolution, there was a discourse of ‘opening up’ to the world in order. We were promised that we will ‘get the prices right’, according to the market that deems fit. We were also promised that performance in agriculture will respond well to the prices, which indicates a potential production signal to the farmers. The general analysis in agriculture became more of a demand and supply problem, and farmers were forced to ‘respond’ to the prices. Bihar had witnessed growth rates higher than the long terms growth trends of ‘green revolution beneficiaries’ like Western UP and Punjab. Yet, Agriculture in the state grew at a relatively slower pace. This paper deals with answering the discourse given to us by the Neoliberal paradigm of opening up our economy and responding to the world. I will attempt to answer the issues for an important agricultural state Bihar. The agrarian context has been chosen to indicate the importance and potential Bihar has in a sector like agriculture. It has friendly soil structure, and climate suits to boost productivity. The intention of the paper is to highlight a relationship between ‘opening up’ and ‘agricultural performance’ in Bihar. The paper’s illustration is based on a historical narration in an agricultural friendly state in eastern India. The research probes into following categories: 1. 2. 3. 4. 5.

Introduction to Agriculture as Historical Accounts Locating Neoliberal paradigm to an Agrarian context Agricultural problem of India Agricultural Context in Bihar Relationship of Agriculture in Bihar and the research question

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Chapter 1 Introduction Agriculture in India is the mainstay of Indian Economy, not only because of its high share of employment (52%, NCAER 2015), but also its vast role in supplying food commodities. Agriculture in India has been given several push and pull factors. These push and pull factors were responsible for prevailing conditions of agriculture in India. There has been a drop in the share of the agrarian sector in the general gross domestic product (GDP), mainly on justification of the high growth in services sector. In the last decades, the share of agriculture in GDP was 29.76 per cent during 1993-94 to 1995-96 and this got cut down to 23.15 per cent during the period 2000-01 to 2002-03. While we attach agriculture in India to soil, neoliberal discourse attaches agriculture to percentage share of Gross Domestic Product (G.D.P.), Productivity, Input-Output outlays, and Wage-Profit ratio. National Agriculture Policy (2000) had declared that it is essential to have 4% agricultural growth to capture 10% growth in G.D.P. Even before National Agriculture policy 2000, there had been significant reforms associated to agriculture1. Today, Indian agriculture presents a dismal scenario with stagnating yield and low farmer’s income. The objective of this research work is to dive into areas of enquiry about trade liberalisation and agriculture. Some of the questions like what were the promises made by trade liberalisation for agriculture, did the promises get fulfilled? Has agriculture been a friendly association of area for trade liberalisation? These areas of questions will invite multiple views; the scope of this research is limited to one state, Bihar. Some of the features of Indian Agriculture have been carefully captured: 1. From Sectoral share point of view, the share of agriculture in terms of G.D.P. has been at 10.2%. At the inception of National Agriculture Policy, it was 24% of GDP, while prior to economic reforms of 1991, it was 28% of GDP.2 2. From the livelihood point of view, 52% people of India depend on agriculture sector. Comparative analysis with developed countries like United States and Japan tell that only 2% of their GDP are sectoral share of agricultural GDP and less than 4% people depend on agriculture for the livelihood. 3. Agriculture, according to labour bureau survey has been the biggest unorganised sector in Indian economy. According to the bureau, it accounts for more than 90% share in total unorganised labour force. In year 2013, it had about 40 crore population in this unorganised sector3. 4. India has been a significant contributor to International Trade Sector, with exports worth US $45 billion in fiscal year 2013.

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Consider government mechanisms like Minimum Support Price (M.S.P.), introduced in 1966 in India. It is the minimum price at which the government will purchase farmer’s crops. New Agriculture Strategy (N.A.S.) 1966 gave rise to procurement prices. It is the price at which government purchases crops after harvesting. 2 Ministry of Finance, Economic Survey 2012-13, Government of India, New Delhi, pp 173. 3 Labour Bureau Survey, Government of India, New Delhi 2012.

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Some of the drawbacks are also important to picturize a layout structure for India’s economy. These drawbacks are drawn mainly from statistical point of view, and therefore do not reflect the concrete picture of agricultural sector in terms of trade liberalisation. 1. Agriculture has small and fragmented land holdings. Average size holdings were 2.28 hectares in 1970-71, and then it got reduced to 1.82 hectares in 1980-81. It further reduced to 1.50 hectares in 1995-96. Due to such insignificance in landholdings affecting productivity, there is a conception that such infinite subdivisions will further decrease land holdings and productivity. Problem of landholdings is intense in densely populated states like West Bengal, Bihar and eastern Uttar Pradesh. 2. Total operated area in fiscal 2010-11 was 159.59 million hectare, while operational holding was 138.35 million hectare. 3. Gross Cropped Area (GCA) was estimated to be at 193.76 million hectare, and 96% of operational holdings were located in village residence. This signifies why agriculture is linked to villages in India. 4. Although India is the second largest country of the world after China in irrigation, only one-third of the cropped area is under irrigation. Irrigation is the most important input in a tropically oriented economy like India. In India, rainfall is uncertain and therefore irrigation as an input is important to boost up productivity. 5. Large tracts of fertile area in agricultural land suffer from soil nutrient depletion by wind and water, and human malpractices in cultivation. 6. Indian agriculture is also looked down upon in terms of transport. There are several villages which are not connected to adequate infrastructure in transport. 7. Institutional credit in agriculture is dwindling. In 1999, it was 40% share of total institutional credit aligned towards agriculture. In 2005, it fell to 30% share. In 2012, it declined to 24%. The main suppliers of money to the farmer are the money-lenders, traders and commission agents who levy high rate of interest and purchase the agricultural produce at very low price. All India Rural Credit Survey Committee showed that in 1950-51 the share of money lenders stood at as high as 68.6 per cent of the total rural credit and in 1975-76 their share declined to 43 per cent of the credit needs of the farmers. These features and the statistical drawbacks reflect the overall basic picture of Indian agriculture scenario. The basic interpretation of these points tell that Indian Agriculture has been declining substantially in terms of its significance, it is also giving rapid boost to other sectors of Indian economy in terms of employment and income earning. If we see the Indian historical timeline of 1970-80, Agricultural sector was backbone of other two infant sectors of India, manufacturing and services. These three sectors co-existed together and helped each other contribute to the Indian economy. However, the discourse has now been changed substantially. Indian Agriculture sector is now too backward, less profitable, and it is less productive because of deteriorating land conditions. Thus, in order to understand trade liberalisation and its association with agriculture, it is first important to understand state of affairs of agriculture. Through state of affairs in Indian agriculture, we can establish a linkage between neoliberal ‘rules’ in Indian Agriculture and the global world order. Thereafter, to

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work on the scope of this paper, the methodological implication will be confined towards the eastern region of India, and Bihar as a state in particular.

1.1 Research Question The Basis of this research is an enquiry into India’s trade liberalisation and agricultural conditions in Bihar. The paper would probe into the agricultural sector of Bihar, a state in eastern India. Geographical location of Bihar makes it advantageous to produce important food grains like rice and wheat, however it is not able to utilise its potential to the full. To study the dimension of ‘opening up’ discourse of Neoliberalism, a deeper understanding of Neoliberalism in agriculture would be studied. Institutions that made this discourse and how it affected agriculture will be a pre-requisite in understanding the agrarian context with relation to Bihar. This paper also puts an inquiry into the general ‘Hypothesis’ into the question, which is ‘Does opening up promise better performance in agriculture?’. The paper will attempt to understand how Agricultural discourse has been affecting an agricultural friendly state like Bihar. To understand the overview of this research paper, a glance at the following aspects will help in creating a brief about this paper. 1. Neoliberal Discourse and Agriculture- To understand what Neoliberalism is, and how does it associate itself with India’s most backbone sector. 2. Responding to the Prices- To understand how Agriculture responds to the Prices and does this inducing technique to produce work? 3. Institutional Factors in Agriculture- To understand how Institutions in agriculture cater to a paradigm called Neoliberalism. 4. Production Factors in Agriculture- To understand what these factors are, and how these affect a state like Bihar.

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1.2 Methodology The study is based on a secondary research method in a selected state of India. The purpose of selecting this state is because I grew in this state, and have seen the conditions of the state from a ring’s angle. The objective of selecting agricultural sector is because a state like Bihar has immense potential, which remains depressingly unutilised. The state has launched two ‘Agricultural Roadmaps’ to boost agricultural productivity, out of which the recent one was launched in November 2017. The state has favourable agricultural conditions, but due to institutional and socio constraints, it remains underutilised. Due to the limited scope of this paper, I will focus on the hypothesis made earlier in section 1.1. There are two interviews conducted with bureaucrats, who are closely associated to agricultural sector of Bihar. The duration of the interview conducted was in November 2017. The paper also looks at primary studies conducted in Bihar in relation to agriculture. The paper is not complete without its certain limitations involved. Limitations: 1. The secondary study is a review of the works done on agriculture in Bihar. 2. The lack of relevant data analytical skill in imparting data to interpretations. 3. Limitations for time limit, which hindered me to not research intensely over a broad timeline from Independence India to the birth of Neoliberalism.

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1.3 Literature Review There have been varied opinions on Neoliberalism in Agriculture. A close interaction with these studies reveal how neoliberalism went on a market based regime, disenchanting agriculture to the social question of ownership, rights, land, and a way of living. Neoliberalism discourse of getting the prices right has affected agriculture in a significant way. Indian agriculture has been diversifying from cereals and food grains to high-value crops and livestock products in accordance with the changing consumption patterns in favour of livestock, fruits and vegetables. From the economic reforms of 1991, it was envisaged that the production strategy will shift to diversification of crop production which gives high value in returns, while it was also held that there should be proper attention towards maintaining food security. Some works (Vyas 1999, Patnaik 1996) have noted that diversification of agriculture generates greater employment opportunities and higher incomes for farm households. However, at the crux of this strategy lies rising inequality, stagnating bottom section of livelihood in agriculture. Ghosh (2015) has noted that rising population, declining investment in agriculture and degradation of natural resources will be overcome through a more nuanced approach which involves diversification in agriculture through neoliberal policies. Bhagwati and Srinivasan (1984) contrast saw substantial export growth as a feasible basis for an Indian development strategy. They ushered macro policies for ‘export promotion’. This strategy was similar to what countries like South Korea did, and became a competitive country in trading regime. Why would a country like India lean on export strategy? At the time period of autarky, it was argued on the lines of stagnation and recessionary tendencies of India. Through export promotion, India could curb its dwindling economic conditions. Another view point was about acquiring foreign exchange to increase finances for imports (Ghosh 1986). These matters need to be looked in some detail, as these trading strategies were widely followed and criticised from different viewpoints, strategies like export promotion and import substitution were envisaged to be a development strategy for particular states in India, Bihar being one of them. Owing to favourable production conditions, there were policy discourses about ‘second green revolution’ in Bihar (Planning Commission 2008). Martin (2017) has reiterated that Neoliberal experience has created the debate on Neoliberalism and its effect on development. Neoliberal experience is associated with inequality, particularly in developing country like India. In this line of argument, does Neoliberalism create more inequality in sectors like agriculture? Neoliberal Agenda: The Basics It is important to understand what exactly is the neoliberal approach and its discourse. Fundamental Neoliberals like Friedman claimed that free markets and free will lead to more individual freedom and well-being. Moreover, He also said that free market approach lead to an efficient distribution of resources. Does this mean the free market approach leads to a better approach towards development? A former director general of WTO has said that it is necessary to open markets to help the poor (Moore et al. 2000). In India, Majority of the population is engaged in agriculture, and an approach like this is likely to worsen the situation.

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There is an institutional approach towards understanding neoliberalism. Rapid development is assumed to follow neoliberal order, according to Kalim (2008). Pioneers of Neoliberalism like Bretton Woods Institutions (World Bank and IMF) has emphasised on improving poverty, inequality and unemployment. This is mainly due to state intervention, corruption and inefficiency. Farmers is getting ‘mis-incentives’ by economic mechanisms like input subsidies (Sadd-Filho 2005). There have been several critiques in the general discourse about neoliberalism. Markets are found to not work efficiently when there are ‘struggles’ within the internal system of a country. According to Shaik (2005), Powers like Class Power, State Power and Centre-State relations control the system of a country. An approach like market will not affect this system closely. David Harvey, a pioneer in Neoliberal critics argues that Neoliberalism is a global ‘hegemonic project’ which is telling us all to concentrate wealth and power around the world. He goes onto further argue that Neoliberalism has gone to the extent to extending benefits not to the poor, but to those who do not even need it. An interesting Paradox given by a neoliberal promoting institute itself has shown in report that how neoliberal policies have increased inequality and ‘jeopardized’ development (IMF 2016). A different dimension to neoliberalism is given by P Sainath, who says that “Gramsabha” and “Globalisation” have been competing, but it is the latter who is winning the decision making authority role. In his address to the “Inclusion of the Excluded” held in Thiruvananthapuram, he held that Neoliberalism has been a threat to democracy (Sainath 2014). Neoliberal capitalism has been focusing on development, without taking due considerations of the welfare of other ‘left outs’. According to Prabhat Patnaik, Neoliberalism has been more of a reason for the left to rise. Does Country like India survive without the left? On account of Neoliberalism, he said, “Even earlier, when the Indian economy was apparently growing at unprecedented rates, the petty production sector including peasant agriculture was getting drastically squeezed, a consequence of which was the suicide of more than three lakh peasants over the past two decades” (Patnaik 2017).

The peasant support to agriculture has dropped sharply, owing to world price fluctuations, which has led to an important concept in agriculture, called ‘Distress Selling’ in agriculture, where farmers are compelled to sell their produce at throwaway prices owing to fluctuations in prices. Thus, in all there are various implications to neoliberal approach to agriculture, and in this light we see how liberalisation in agriculture affects India, with the particular focus on the state of Bihar.

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Chapter 2- Trade Liberalisation and Agriculture Agriculture and liberalisation period in India has a specified history, and it is imperative to historicise Indian agriculture in the context of discourse presented to us. The period of 1990s proved to be essentially interventionist in nature, as we altered our economic system and aligned with those of the ‘West’. 1991 was a period of liberalisation for India, and its primary sector was not spared. India signed 1994 General Agreement on Trade and Tariffs in Agriculture. The 1994 agreement did not come in a day, it has a history. In 1947, our leaders thought that India growing only on the lines of economic growth will not be good for all the sectors of the economy; it became more important to grow robustly, and as socially as possible. Thus, the institutional approach towards ‘Mixed Economy’ came into being. The State had importance of control in the economy. The State had sovereign objective of social equity. There was a marked rise on equality during this era, as India had unique history of society due to its social stratification through caste, religion, and language. How Agriculture came into being? In terms of agriculture, the Green Revolution was propagated to fit this ‘new mode of economic system’. The emphasis was on self-reliance on food supplies, thus focusing on endogenous development. This revolution was a direction away from the old technique of subsistence farming, as some regions were required to produce food as essential as only rice and wheat. India has a record of policy paralysis when it comes to implementation. The public policy in agriculture looked greater in discourse, however it lacked certain targets. There was a marked rise in split development, where certain regions were only concentrated upon. What was neglected was India’s major objective, Social equity. It was a differentiated approach from agrarian reforms propagated post-Independence of 1947, where egalitarianism and social justice was the idea of the India. Green Revolution was more of a reaction to an international conflict, than a planned and envisioned public concern. 1960 was the year of food emergency, and there was a certain focus on select regions, select crops and social groups. Green Revolution was based on twin objectives, where one was the improving living standards, and the other was inclusion of most disadvantaged sections of the society by feeding them. First objective became concentrated on upper strata of the Indian society, and second objective missed the chance of absorbing ‘trickle-down effect’. A detailed table was created by Landy and Dorin (2009): Productivity Social Equity ‘Grow More Food’ Campaign 1965-1975 (Period of Green Revolution) 1950 (Period of Reforms)  ‘Grow More Food’ Campaign  Land Reforms  Crop Binary (Rice and Wheat)  Rural Credit Programmes  Regional Polarization (Punjab,  Panchayat Raj System Western U.P.)  Social Polarization (Rich and Welloff farmers).

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1975 (Period of Extensions)  Oilseeds revolution  Extended Irrigation programme  Public Distribution Systems  Jawahar Rozgar Yojana

1990 (Interventionist Policies)  Reducing Input Subsidies  Targeted Public Distribution Systems  Futures Markets in Agriculture

Source: Landy (2009): 200

India had associated itself with General Agreement on Trade and Tariffs in Agriculture in 1994. India launched economic reforms primarily aimed at liberalising industry and trade. Under the Uruguay Rounds, India signed the agreement. The agreement was more of a requirement than the desirability. India was the second largest food producer; however its share in international trade was below 1 per cent (Landy 2009). Integrating with Agreement on international trade in agriculture, India thought that it will strengthen its economy. The Western economies had huge demand for food grains and India had the good opportunity. If western economies did not protect their domestic economies from import barrier, and did not distort international food prices with their domestic export subsidies; then India had the best time available in being the food exporter. What was a boiling point of concern were India’s domestic agricultural initiatives, like subsidizing inputs to farmers, protecting its own food market, and operating on an inefficient procurement scheme. Most Indian crops are sold at prices below from those of the world prices, indicating a comparative advantage in food grain supply. It is imperative to know how India propagated its notion about agricultural trade to the World Trade Organisation round of 1995.4 Derived from the WTO notification on agriculture by India’s delegation, following table shows the information about India’s international perspective on agriculture. Public stockholding for food security purposes Domestic food aid General Services: 1. Research 2. Marketing and Promo 3. Provision for livestock 4. Others(Pest Control, Disease control and training services) Relief from Natural Disasters Structural Adjustment (Dry Land Farming) Environmental Programmes (Soil Conservation, Watershed, Management and Control of Shifting Cultivation) Subsidies (Agricultural Input) Investment Subsidies(Land Levelling, Shallow, Wells)

1570 163 105 105 25 125 59 33

149 105

Source: Landy 2009: 208, figure in million $.

4

After the breakout of Uruguay Round of 1994, World Trade Organisation was founded in1995 to settle the international trade matters quickly and more efficiently. India’s delegation to the WTO was dated June 17, 1998.

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A takeaway from the above table is the amount India spends on its subsidies. In India, there are three major subsidies- Electricity, Irrigation and Fertiliser. India accrued around $6.6 billion of subsidies on farming (which led to around 8.6 per cent of agricultural GDP). It is important to understand about the context of India in trade liberalisation, particularly to agriculture. It was the advent of neoliberalism that India came into the concept of ‘getting the prices right’ in agriculture.

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2.1 Neoliberalism: A Brief History The phase of India can be broadly divided into three distinct phases: a. Phase of Economic Liberalism, capturing a drive towards the external markets b. Phase of Keynesianism, aftermath the Great Depression c. Phase of Neoliberalism, after 1970s We note that the phase of economic liberalism was absorbed during the period when there was sudden rush towards capturing the markets, outside the territory. The phase of Keynesianism was a response to the Great Depression in 1930; this was also a period when rapid state intervention and state investment came into being. This phase had gained momentum post second world war, where recovery was a strong phenomenon. The phase of Neoliberalism happened during the period of 1970s, where the end of cold war and collapse of socialism in Soviet Economy triggered comparative advantage and free trade arguments. The ideology of neoliberalism was carved out from older economic principles by great economic thinkers, mainly David Ricardo, Adam Smith and David Hume. This was a counter to mercantilism, and sudden restructuring of capitalism which underwent several changes. How did this affect India? The process of economic openness under the British Raj was more of an imperial understanding, where resources were plundered ‘against the will’ of Indian people (Bagchi 1999). Post-World War Keynesian theory had created the notion of state intervention in market economies with the core vision of establishing employment opportunities and growth levels. However, this had weakened capitalism paradigm, where notions of laissez-faire was heavily conveyed. The development strategy adopted by India was influenced by Keynesian belief and the efficiency of state intervention was the notion of the leaders of India. There came the crisis of Capitalism in 1970s, which is more popularly called as ‘Structural crisis of 1970s’. It marked instability, and growing unemployment. This proved as a discouragement to the promotion of capitalist paradigm. The global political scenario saw the socialist bloc of the Soviet Union in 1990s to disappear with their internal problems with the end of the cold war period. This period provided immense opportunity to the capitalist paradigm to return to economic openness, but with a new touch. The ideology of Neoliberalism emphasised more on the marketization of the internal economy, which was a strong reaction to the phase of Keynesianism. It is the third world that became a target to this new incarnation to capitalism, where aspects like comparative advantage, free trade regime, and conditional loan through ‘Structural Adjustment Policies’ came into being. For India, this new paradigm was an ‘anti-dote’ for agricultural exports and reviving from the crisis they were facing.

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2.1.1 Theory of Neoliberalism in Indian Context The theory of Neoliberalism and its practice in Indian Society was pushed forward as a hope of restructuring its escalating debt. India was not the first developing country who became an experiment to this new practice. Regions like Sub-Saharan Africa and Latin America have been examples of Structural Adjustment Programmes and Liberalisation in Trade (Patnaik 1998). It is important to differentiate the ‘Economic Liberalism’ and ‘Neoliberalism’. Dictionary missed the context lying behind these two terms. It is the hidden political economy conjecture in each of these two terms. Economic liberalism in India was rampant during the colonial era, where the Imperialist Country (The British) exercised full control over their colonies (India being one of them). India was a subject of certain policies like trading with select nations like England and China on the imperialist terms. Trade happened freely, subject to the terms of their imperial master. On the other hand, Neoliberalism asserts that nations are politically and economically independent to pursue their own sets of policies, which is ‘guided’ by international neoliberal institutes like International Monetary Fund, and World Trade Organization. There are also some ‘parallel state organizations’ like Transnational Corporations (TNCs) who are an important aspect in this neoliberal in the making.

2.1.2. Impact of Neoliberalism on Indian Agriculture India changed its course of system in 1991 through adoption of Neoliberal ‘LiberalisationPrivatisation-Globalisation’ structure. Balance of Payment Crisis of 1990 is the most proximate factor that enhanced the adoption of Neoliberal policies in India (Livemint 2016). In India, there was already a pre-dominance in agriculture through inputs, output, employment and agriculture was also a strong linkage to the other sectors of the economy. India signing the GATT 1994 Agreement brought neoliberal paradigm in the Indian scenario. Import restrictions were compromised, and the exchange rate parted away with the favourable terms of trade with agriculture. It was said that removing trade barriers like import restrictions, and allowing the Indian rupee value to fall (Foreign Currency appreciating) will boost agricultural exports and thus increase agricultural income. This was a very singular vision of Neoliberalism in Indian Agriculture. India was giving high accounts of subsidies to people engaged in agriculture, and this was discouraged after India signed GATT. Input subsidies were ‘market distorting’ and food subsidy depresses ‘incentives’ for producers (Ghosh 1992). The core objective of the GATT round in Uruguay was the market distorting interventions like Input Subsidies, Protective measures such as quantitative restrictions and import tariffs should be done away with. What was the logic behind this mechanism? Neoliberal policies like those mentioned above aimed to make Indian Agriculture ‘more competitive’. The chart below depicts how India gives subsidy to its agricultural system. This is a major attack on Indian welfare system of subsidies.

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140000

Subsidy in Indian Agriculture, Various Years

120000

in ₹ crore

100000 80000

Total Subsidy(in ₹ crore)

60000

Food Subsidy (in ₹ crore)

40000 20000 0 1991-1996

1996-2001

2001-2006

2006-2012

Annual 5 Years Chart 1. Subsidy in Indian Agriculture Source: Sharma and Alagh 2013

Subsidy as % of GDP in India 35

Figure in %

30 25 20

% of Agricultura GDP

15

% of Total GDP

10

CAGR %

5 0 1991-1996

1996-2001

2001-2006

2006-2012

Year Chart 2. Subsidy in Percentage share of GDP Source: ibid

Agriculture is not like Industry. Agricultural output takes time, unlike industry. Agriculture does not yield output on a continuous basis. Indian Peasantry is handicapped to produce beyond their threshold level, and it is often difficult to hold large agricultural stocks. “This fact alone provides state intervention and support in agriculture” (Patnaik 1998). The strict implementation of various provisions like reduction of tariffs, elimination of non-trade barriers, reduction of production and export subsidies will give our exports ‘advantage’, which will contribute to the factor of agricultural-exports. Indian Agriculture is being experimented with these policy mechanisms, with ‘efficiency’ as the main objective. Implementation of Neo-liberal economic policies led to the greater concentration and centralisation of land and resources, which caused a differentiation in peasantry class. Neoliberal policy regime has caused a withdrawal of the state, and deregulation of agricultural input markets and interplay of Multi-National Corporations. It is

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important to know what the terms in Agreement on Agriculture were, which impacted India to follow a market based agricultural policies. Agreement on Agriculture has three boxes: a. Green Box- Non-Distortionary subsidies b. Blue Box- Non-Distortionary Subsidies c. Amber Box- Trade Distortionary Subsidies It was considered that the subsidies given by the developing countries were trade distorting in nature, and thus had to be done away with. Developed countries were completely justified giving agricultural subsidies, thus ‘maintaining’ its agricultural policy intact (Banerjee 2005). This practice was not only discriminatory, but also burdensome for the Indian peasantry. Rising Input Prices, and the subsequent market access gained by the MNCs, led them to ‘super profit’ situations. Based on this approach, the Indian Agriculture was seriously overhauled. The restructuring of Public Distribution System was causing a negative effect on the food grain availability. It would be futile to assess the impact of neoliberal reforms without the practical understanding. 80 70 60

50 40 30

1970-71

20

1980-81

10

1990-91

0

2000-01 2007-08

Production of Commodities, in million Tons. Chart 3. Source: Directorate of Economics and Statistics, Government of India5

As we can see, the food grain statistics tell a lot about how neoliberal reforms in agriculture went ahead with producing non-food grains. Also, look at growth in rice production; it has practically remained stagnant from 1970s. We see a rise in food availability in non-food grains. Pulses, a major agricultural output for India has also remained on similar levels since 1970s. So what are we talking about when we refer to neoliberal reforms in agriculture? Rice, Wheat, and Pulses have historically been a staple crop produce for majority of population for India. This agricultural distress in output has caused the farm sector to be in a state of disorder. Unemployment in agricultural sector has increased during the neoliberal reforms 5

Indian Agricultural Output Report, Directorate of Economics and Statistics, GoI (2008).

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period, because of unprofitability in producing food grains. This has been caused due to three reasons: I. There has been observed fall in overall price of farm products. II. Area under major food grain cultivation has been in a state of decline. III. The suicide of farmers is the third fall-out of stagnation in agriculture.

40 35 30 25

1987-88 1993-94

20

1999-00 15

2004-05 2009-10

10 5 0

Self EmployedAgriculture

Self Employed-NonAgriculture

Labour- Agricultural Labour

Other Labour

Chart 4. Source: Venkatesh 20136

This graph depicts status of employment in rural sector of India. P. Venkatesh has briefly stated that number of people who are employed in the primary sector and the area under cultivation has also decreased (Venkatesh 2013). The problem is not only the stagnation in agriculture, but also the decline in prospects of livelihood of Dalits and tribal, who depend heavily on agriculture. When agriculture was not yielding remunerative income, the life of the farmers became very depressing. Many of them committed suicide as a last resort. Sharad Pawar, the then Union Agricultural Minister, in the Lok Sabha in 2004, said that over one lakh farmers committed suicide in India after the economic reform started. According to the National Crime Records Bureau, 17,060 farmers committed suicide in the country in 2006 with Maharashtra having the highest number of 4453 suicide deaths. Punjab is the latest in the list of States having farmers’ suicide. This is a record in the agricultural history of India. It points to the acute nature of the problem which has affected the vast majority of the population, and which has created a real crisis.

6

Venkatesh, P. (2013). ‘Recent Trends in Rural Employment and Wages in India: Has the Growth benefitted the Agricultural Labours?’ Agricultural Economics Research Review, Vol. 26.

19

2.2 Neoliberalism and Agricultural Crisis: Reasons We can see that there is a strong connection of agricultural crisis with globalisation and neoliberal chanting. Most of the reasons have been cited in the above sections, this section is basically as brief to the other sections of this chapter. a. Liberal Import in Agricultural Products Removal of all restrictions to import cash crops caused agrarian distress in India. The removal of quantitative restrictions on imports, and following a market based approach to agricultural prices caused a state of instability in agricultural sector of India. b. Lack of easy and low cost loan to agriculture The lending pattern of agricultural loans got severely affected owing to India’s globalisation rush. Dr. M.S. Swaminathan pointed out the lending facilities and bank norms have led to the agricultural crisis in India (Sundaram 2011). When the farmers were not able to pay back loan together with interest, they fell into a huge debt trap. c. Proletarianisation of Peasantry India’s rural population is comprised of large numbers of agricultural workers, who are landless or holding very miniscule piece of land. Their economic engagement with the living standards is through their bare subsistence lifestyle earning. This is accumulating large reserves of labour force that are unemployed. Neo-liberal market driven policies have indebted peasantry. Peasantry is justified by getting paid low for their work on field because of the ‘crash’ in prices. This has affected tribal labourers more severely, as their basis means of livelihood is associated to agrarian systems. d. Agriculture as an unattractive area With the neoliberal policies in place, there have been rush in input costs that are making it difficult for low wage farmers to survive. There is also a lack of proper state machinery in procurement of food produce, which is causing a distress to the farmers who are producing tons and tons of food. In the Coming chapters, we will discover how Neoliberalism has affected Indian agriculture, in a particular state Bihar. We will continue the ongoing discussion, with a slightly expanded context. This chapter dealt with how India and its agriculture sector got associated with Neoliberalism. Some of the effects were discussed in last section of this chapter, and some of its broad discourse was discussed in preceding sections. It is essential to understand how a country like India is contained in the unique Indian structure of peasantry, where something as essential as Land has value embedded in society. Neoliberal chanting has commodified land too, breaking away with the conventional understanding of the society through land. Neoliberal understanding of agriculture has ‘bifurcated’ agrarian structure in which a system of capitalism in agriculture has been motivated to separate from classical peasant based agriculture, which is subsistence oriented and is not strictly according to the ‘norms’ of the market (Akram-Lodhi 2007).

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Chapter-3 Shaping of Indian Agriculture in Neoliberalism The neoliberal move towards the policies of globalisation has significantly affected the composition of Indian agriculture. There have been developments in literature on how this new agriculture paradigm in India is affected by globalisation (Gulati and Sharma 1990; Vyas 1996). I will attempt to develop a narrative analysis in this context. There is a one way relationship between economic growth and agricultural growth. Increase in economic growth leads to decrease in agricultural growth, and it has been witnessed in agricultural data over the years. In India, share of agriculture in GDP has declined and therefore it is deteriorating the primary sector of our economy. Following table shows the scenario. Year

Agriculture GDP, in crore

Share in percentage

1970-71 1980-81 1990-91 1995-96

40214 46649 65653 71907

44.47 38.10 30.93 26.04

GDP,

in

Table 3. Source: Vyas 2003: 79

So, what does this table imply? Agricultural growth has been described as having significant linkages to poverty alleviation. As Agriculture is labour intensive occupation, the impact of agriculture on poverty reduction is gradual, and not easily realisable.7 I will briefly describe how Indian agriculture took its course through neoliberalism in coming sections.

7

The context of Agriculture growth and Poverty reduction is found in rigorous and careful studies done by scholars such as Ahluwalia (1979). This context is beyond the scope of this paper, and is thus not been discussed here.

21

3.1

Years

1970-71 1980-81 1990-91 1995-96

Indian Agriculture Composition 3.1.1 Cropping Sector The advent of neoliberalism caused a shift in general basket of produce by the agrarian society of India. There had been growing importance of non-food grain crop sector. According to some authors, this sector is called ‘Sub-sector’ or ‘Ancillary sector’ (Vyas 1996). Given below table tries to present this fact. Share of Crop and Share of Fishery Income from Livestock income Livestock as % of Total Agricultural Income 89.35 1.74 15.59 91.03 92.90 18.63 92.90 2.73 24.63 93.06 3.07 26.01

Table 4. Source: ibid

Growth in these subsectors owes its credit to change in dietary pattern in India. Share of nonfood grain reduced and share of protein rich animal products and cereals increased. 3.1.2 Workforce Sector The neoliberal paradigm also brought a structural change in workforce of Indian Agriculture. There has been a relative decline in proportion of workers aligned towards agriculture for their primary source of livelihood. However, this is in sharp contrast to agricultural workers. India is attached to agriculture, and when we talk of commercialising the agriculture; India resists. There is a general stickiness of people tied to the agrarian society, and there are certain aspects of Indian society that cannot be altered on the basis of Public Policy of neoliberalism alone.

Workforce in India Total Workforce

Rest of Population

Secondary Sector

Tertiary Sector

14% 44%

Agriculture Sector

6%

14% 8% 28%

Chart 3. Source: FICCI 2015

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3.1.3 Land Structure There has been growing importance of market transactions of land holdings in India. A peasant in India would not like to sell his land, unless the dire need arises. The stark reality in Indian agriculture has been growing in problems. Instances of low and marginal farm holding families selling land to large and absentee farm families have been growing. A general correlation of land selling and society is related to indebtedness. Land is sold to money lenders or bigger landlords to clear out the debts. However, Public Policies like Land reforms have attempted to halt this process in India. During the 1950s and 1960s, small landowners became net gainers in this land grab public policy in India. Movements such as bhoodan did contribute significantly in creating an atmosphere of land equality and agrarian reforms.8

8

The Bhoodan Movement or Land Gift Movement, was a voluntary land reform movement in India, started by Acharya Vinoba Bhave in 1951 at Pochampally village in Telangana. For Context, see Bhagwati, R. (2015). “64 yrs on, Bhoodan movement beneficiaries yet to get land”. Times of India.

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3.2

Cropping Pattern Crop Composition has taken a major shift owing to neoliberalism. Importance of ‘Ancillary sectors’ such as fishery, poultry, and livestock farming are some consequences of this. The share of non-food grain sector has increased over the period of time. The farmers have been devoting major part of their small land holding on commercial crop to earn cash. During the period of Green Revolution, food self-sufficiency was the need of the hour, and therefore cash assistance in the form of ‘Minimum Support Prices’ (MSP) was given. Incentives for raising commercial crops improved. The coarse cereals and pulses, which contribute significantly to a farmer’s meal does not have the institutional support. Moreover, the sudden emphasis on cash crops and surge in cultivating only rice and wheat (owing to features of Green Revolution in India) has deteriorated the nutritional status of farmers. The ‘diversification’ of farm produce to non-farm produces in favour of commercial crops has influenced the agriculture sector in India to get marketised. There have been institutional and technological changes affecting Indian agriculture, particularly with the introduction of HYV seeds. Cropping pattern implies total proportion of area allocated under crops. Thus, a change in cropping pattern owing to globalisation will imply:

Δ𝐴𝑟𝑒𝑎 𝑈𝑛𝑑𝑒𝑟 𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑡 𝐶𝑟𝑜𝑝𝑠 Δ𝑇𝑜𝑡𝑎𝑙 𝐴𝑙𝑙𝑜𝑐𝑎𝑡𝑒𝑑 𝐴𝑟𝑒𝑎

Cropping pattern in an area depends on natural factors first, and then institutional factors like seed replacement. In India, food grain production has been a predominant structure for crops. The major food grain crops are rice, wheat, maize and pulses (Bhalla and Singh 1997). Change in cropping pattern has basically been the result of crop diversification method through multiple cropping. The introduction of seed variety has also been the major cause for depletion of soil nutrient, as the soil content in India is not very adaptable to western methods of production. The cropping pattern in India had shown a bias towards food grain crops (in particular, rice and wheat). Crop yield is the primary component in agricultural system, and hence it drives the factor towards making an agriculture policy. A study done by Ghosh reveals that increase in total production is dependent on increase in the yields of crops and not increase in area cultivated (Ghosh 2011). There are two broad concepts involved in cropping pattern of India, namely substitution effect and expansion effect. a. Substitution effect is shift (or decline) in area under crops and the relative increase in area of other replacing (or substitutable) crop. b. Expansion effect is increase in gross cropped area due to relative increase in crop input.

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Chapter 4- Export Orientation in Agriculture- Will it Work for India? 4.1 Export Orientation in Agriculture and India: A Briefing coming to the picture of international trade and agricultural liberalisation, it is important to know about the vivid picture lying underneath the ‘promises’. Under the chanting of International Bank for reconstruction and Development (World Bank) and International Monetary Fund, the policies had a profound effect on the countries concerned, and India is one of the biggest affected countries to sing such chanting. Food security is seriously undermined and in countries like India that started with average low levels of income and nutrition, famine conjectures led to actual famine situations, recovering out of which was not an easy task. There are three charts below that depict the supply side phenomena by Indian Agriculture.

Agriculture production in First Plan, 19511955 1955 tea

Year

1954

jute

1953

cotton

1952

sugarcane

1951

oilseeds 0

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

Food-grains

in 1000 metric tonne Chart 4. Source: Ministry of Agriculture, various years.

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Agriculture production in second plan, 19561960 1960 tea

Year

1959

jute

1958

cotton

1957

sugarcane

1956

oilseeds 0

20,000

40,000

60,000

80,000

1,00,000 1,20,000

Food-grains

in 1000 metric tonne Chart 4. Source: Ministry of Agriculture, various years.

Agriculture production in third plan, 19611965 (tentative) tea

1962 Year

jute cotton 1961

sugarcane oilseeds 0

20,000

40,000

60,000

80,000

1,00,000

1,20,000

Foodgrains

in 1000 metric tonne Chart 6. Source: Ministry of Agriculture, various years.

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4.2 Export Orientation and Neoliberal Policy on Agriculture: A look at select countries and India The neoliberal agenda looks at agrarian sector differently from the neoclassical agenda. It starts with first, withdrawal of the state from essential economic activity. However, some scholars have noted opposite to this view. It is not the apparent withdrawal, but the active intervention of the state (Patnaik 1996). The state was actively involved in new global policy packages under aegis of international institutes. Some of these were deregulation, deflation, reducing and removal of subsidies, opening up the autarky for flow of capital, and most importantly; agricultural trade liberalisation. However, these do not act friendly to the developing world like India. We see, Policy packages like deflation, which is demand contracting fiscal and monetary regime helps to curb imports and helps strengthen external balance wallet. However, there also rises the level of high unemployment, and poverty levels further exacerbate this problem. As Utsa Patnaik notes, Generalised deflation policies lead to cure economy by cutting of its head (Patnaik: 1996). In early 1990s, India was an entrant into this neoliberal agenda and agrarian regime. There was a widespread policy thought on ‘adjustment with a human face’. India, begun in 1991 by devaluing its rupee, then it multiplied this policy shift by income depressing methods like general deflation, and price inflation. So, what all happened eventually? India went on a downward spiral, as both public and private investments and production wages saw severe cuts from 1991. There was one positive policy consequence; there was a reduction of fiscal to GDP deficit from 8.4% to 5.9%. Public distribution system also saw sudden operating price hikes, and thus created the ‘wind’ in upsurge of economy. It was only because of good agrarian performance that India grew up by 5% despite having a down surge of administrative incomes, with rise in state backed prices. According to Tendulkar (1995) estimate committee, rural poverty rose to 48.1% from 36.6% in five years of 1991 reforms. Looking at economic survey of 1996 provides a snapshot to what all could have reflected in neoliberal policy packages.

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Figure in %

Average Annual Growth rates of REAL GDP in sectors 10 9 8 7 6 5 4 3 2 1 0

Gross National Product Net National Product at Factor Cost Net National Product per head Agriculture Sector

Manufacturing Gross Domestic Product

Chart 7. Source: Patnaik 1996 Note: 1.SAP: Structural Adjustment Policy of World Bank and IMF 2.NNPFC: National Income per cent 3.Manufacturing includes construction and Public Utility spending 4.Pre-SAP (1985-1990) is calculated at Compound Annual Growth Rate (CAGR)

With SAP regime, there was a noted decline in fertiliser subsidy, which evidently led to the rise in fertiliser prices; there also seem the evidence of rising issue prices of food grains under Public Distribution System. Seeing the Indian experience, it is evident that India witnessed policy discourse and consequences along the lines of stagnation like other countries (SubSaharan Africa, Mexico, Taiwan, and Sri Lanka). Reduction in growth rate, decline in real income, price inflation affecting wage earners. These wage earners are major net buyers of most of the food grains that India produces; their demand got affected substantially because of rising food price. Thus, to present this picture in a broad outlined way, India became selfstagnating and insisting economy on growth-reducing and poverty-increasing country. The neoliberal agenda therefore was not to improve the third world nations and their economy; it was the capitalist idea of building on the best and feeding on the best. An important truth led by Chandrashekhar and Sen (1996) presented the broad picture of poverty vision of India. Below graph presents the information based on the data derived from their statistical work.

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Population of Rural Poverty(in million) population(in million) 1993-94 1992-93 1990-91 1989-90 1987-88

population(in million)

1987-88 229.83

1989-90 208.79

1990-91 216.5

1992-93 279.07

1993-94 244.87

Chart 7. Source: Chandrashekhar and Sen (2013)

Poverty Ratio

1993-95 20%

1987-88 21%

1989-90 18%

1991-92 23% 1990-91 18%

Chart 8. Source: ibid Note: 1. Poverty ratio is defined as average poverty gap in population as a proportion of the poverty line.

Now, what is the core logic behind Internationalism in trade? Basic of international political economy tells that trading involves export of agricultural products by third world economies, and then imports of manufactured and finished goods from advanced/first world economies. However, something goes missing in the argument, as Utsa Patnaik (1996) says, it is relative international costs. We see that there is a basic difference between economics of agriculture, and economics of manufacturing. Moreover, there is a favouritism of surrounding for manufactured goods as compared to agricultural products. Manufacturing sectors, which involves goods like cement, textiles, crude steel, raw iron etc. can be ‘produced’ anywhere subject to economies of scale. A country lacking natural endowment can in fact add up the endowment by imports. By adding up the endowment, a country can produce these materials

29

at home. However, involving the same logic for agricultural sector, we cannot conclude in positive direction. Crops are soil exclusive, and soil is topography inclusive. We cannot transfer soil and its nutrients in other economies to ‘produce’ agricultural crops at home. Moreover, it is countries like India that has botanic advantage. India is located geographically in tropical and sub-tropical area. These areas are naturally endowed with productivity leaning methodology to crop production. This is in contrast to the thinking that India is an unlimited supplier of agricultural goods. Tropical lands, although in their uniqueness to produce vast categories of crops, has limited capacity. Even carrying forward this logic, investments in agriculture has been declining since green revolution period. Further, investment in agriculture has been declining after liberalisation period. What were the promises made? This question will keep popping in this paper, as there were several promises made with the ‘Structural Adjustment Policies’ of international institutes like IMF, India asserted these policies in 1991 through ‘Liberalisation-Privatisation-Globalisation’ (LPG) policy regime. What does this reflect? A decline in levels of investment in agriculture affects both consumption of agrarian sector, and its production. In the presence of dismal levels of investments, Tropical lands of India become a source of marketization. Lands become a source of fixed supply, and fixed supply invites market approach of costing high, and supplying low. Costing high and supplying low directly involves budget testing of population, and therefore those who can afford it and has the ability to pay has the ability to consume. According to political economy, international trade along the lines of India did not occur favourably towards conditions of Indian economy. First world economies had the economic advantage of industrialising early, and funding themselves via resource capturing from third world, who now are debt-growing economies. Burden of getting debts on increasing scale is also the outcome of developing economies like India getting which are getting low funds for the amount of supply in exports. In India, consumption of domestically grown food grains is in demand throughout the year. International discourse of trade rules in opposite direction with this. “Commercial exporting crops” like sugarcane, flowers, poultry are in more demand in trading regime, and therefore India affected its endowment by producing these in vast quantities. Low levels of domestic investment in ‘other basic crops’ such as wheat and rice became the idea of India’s SAPs. The investments in agricultural food grain crops were low by the colonial as well as Independent India government. In the present scenario, Developing economies like India continue to be a warehouse of agricultural exports to Developed economies. Reverse logic is not true in this direction, as historically developing economies did not emerge as major importer of food grains from first world economies like United States and United Kingdom. How does this logic of international political economy play in picture? Transnational Corporations (TNCs) became important as an intermediary of making ideas meet reality. TNCs now assert global power in agricultural sector of third world economies including India. The strategic role of TNCs in agriculture sector is to displace third world economies from their own natural endowment of food grains (Patnaik 1996). ‘Canning the agricultural exports’ became the idea of India’s trade discourse. India started importing canned vegetables from first world, while supplying cheap exports to first world. This led to the thrust in exportable commercial crops by an increase to 1.31% annual consumption from 0.11%. This is quite logical on the basis of an argument that the only way that exports can be pressed for low prices is by decreasing domestic food consumption at

30

home. Since investment rates have been falling, increasing export thrust specially for commercial crops can be done only by reducing domestic food grain consumption. International prices for primary products of third world economies do not reflect today, any more than they did earlier, the cost to the third world societies supplying them. Also, in the first world economies, there is a growing trend of health consciousness by leaning on diets which are favourable more towards calorie moderations. To this point, there is a relatively higher demand for ‘whole grain cereals’, green vegetables, and lean meat (without fats). There is also a growing concern in the third world economies like India which is moderately shifting towards products of ‘western diets’ like whole cereals. This has led to displacement of human consumption of food grains, with rise in livestock production. Gulf countries had been pioneering Indian exports of livestock production. Following graph picturizes this scenario in a vivid way. 250

200

Based on Growth 150 Projection in percent by Census of Indian 100 Agriculture

Food Grains Livestock

50

0 Year

1981

1985

1987

1989

1991

1993

1995

Index based on annual year Chart 9. Note: Year 1981 is read as 1981-82, 1985 as 1985-1986. Source: Economic Survey 1996

This different picture of India owes its credit to western idea of rethinking about food security. Internationalism has redefined food security for both developed and developing economies. They conceptualised food security with the view that it should not immediately mean food self-sufficiency (what India practised in her Green Revolution period), but making food available for developed economies. Therefore, what India’s LPG policy meant about India was to give an intervention on land use cropping strategy. It was substantially altered by the action of powerful discourse of international demand with its own specific commodity structure. This negated picture had its own historical placement. India (along with China) had the ability to alter international food prices in terms of two important agricultural commodity, rice and cotton. Starting from 1950s, India and China had followed robust strategy to promote production of food grains. Statistics are very appealing when it comes to the Indian scenario.

31

Foodgrain output in relation to Population, 1951-1991 Food Grain Consumption(in millon tonne)

Population(in million)

832

363 170 46 1951

1991

Chart 10. Source: Derived from Patnaik 1996

Talking about composition of consumption basket, wheat and rice grew at an annual rate of 3.48% and 2.53% respectively. It was argued that India is large producer of world rice output, however this does not substantiate in positive direction about revenues getting generated out of it. India’s global trading practice of full rice exports could have likely altered international price structure (Nayyar and Sen 1994). In order to establish a connection between Indian agricultural exports and robust foreign earnings, it is important to understand the linkage between productivity growth in past decades and agricultural sector. As we now know, number of major crops has seen a level decline in productivity growth. Also, discourse of international trade regime has created cheap imports for third world economies, including India. The ‘promises’ made by India’s reform policies could not cast its aspiration towards the sector that was employing more than half of the labour force of India in 1991 (Dhar and Kallummal 2004). This is also evident with the fact that agricultural sector saw a trend of declining capital sector formation. Share of agriculture in gross capital formation saw a declining output ratio, along with remaining in single digits. The momentum created remained for limited sectors only, that was at their infancy. International prices for food grains have slumped to the levels that did not benefit export earnings in agricultural sector of India. What could have been the possible causes behind it? The weights of subsidies given by first world economies like United States and United Kingdom have been increasing rapidly towards food grains. These ‘high dose’ of subsidies were leaned towards crops like rice, wheat, corn and sugar.

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100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Wheat and Soyabean (in million $) Rice (in million $) 1995

2001

Wheat and Soyabean (in million $)

16

3600

Rice (in million $)

12

700

Food Subsidy by United States to Third World Chart 11. Note: Wheat and Soyabean were compounded based on the index calculation of Food and Agricultural Organization statistics 2002. Source: Dhar 2004

As we can see in the graph above, In 1995 US was a major contributor in World Trade Organization Charter. Wheat, Rice, corn and Soyabean were some of the commodities that witnessed an increase in subsidy significantly between 1995 and 2001. This was also the period when India shifted from autarky to market based economy in major sectors. The tendencies shown in above graph reveal that global agricultural markets got distortions from first world economies in order to control agricultural prices. For the similar statistics of India, it is even more gruesome when it comes to subsidies and price distortions. Ever since WTO establishment, India was under pressure to reduce its tariffs. India was also among the few developing economies that had its ‘bound tariffs’ (maximum tariffs allowed under WTO) higher than other developing economies. From the standpoint of food security and India, it was important to maintain high bound tariff rates to ensure adequate amount of food security.

33

India Peak (Bound Tariff) Rate (%) 160 140 Figure n %

120 100 80 60 Peak Rate (%)

40 20 0

Year Chart 12. Source: Singh 2017

Trade tariffs of select countries in 2016 100 90 80 70 60 50 40 30 20 10 0

Agricultural Tariff %

Non-Agricultural Tariff %

Chart 13. Source: WTO and UNCTAD, “World Tariff Profiles 2016” Note: 0 indicates unavailability of data. Countries showing no indicator indicate that the data is not available.

As we see in the above two graphs, under the prevailing circumstances, it is vital for India to adopt a concrete strategy for the agricultural sector. India had to protect its domestic market with appropriate level of bound tariffs (Dhar 2004). India’s level of bound tariffs is different from those of other economies like China and United States. For India, these level of bound tariffs are mainly attached for livelihood and food security concerns, whereas for economies like US, these are attached to protect industries and earn revenues domestically. It becomes imperative for India to adopt a policy measure of ensuring adequate food security along the

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lines of international trade regime that does not distort its own markets and compromise around National food security.

4.3 Does India need Export Orientation in Agriculture? Export oriented strategy in terms of industrialisation is often promoted in third world economies to develop. The central question concerning third world economies is about development, and a robust trading strategy and the question ‘What is the concrete way to develop?’ remains unanswered even today. There are evidences, examples, countries that developed on the basis of different experiences. However, there is no fact to support the argument that economies developed in a similar state of nature. They did, on the basis of their own unique identity. There are two strategies that have been present in most of the developing countries to develop, these are ‘import substituting industrialisation’ and ‘export oriented industrialisation’. Import substituting industrialisation was prominent among Latin American countries, while export oriented industrialisation is prominent among Asian Countries (Gibson and Ward 1992). The success of East Asian countries like Taiwan and South Korea held a developmental policy discourse for other economies to follow up. Export oriented industrialisation became a ‘pathway’ and a ‘follow up’ strategy for developing economies. There are unique identities of different economies, and all economies will not be able to hold up a ‘fixed’ development model. Each economy has a culture and a background to tackle with. The ‘myth’ lies in the fact is whether Export orientation strategy can be a successful path for developing economies. Authors like Bradford (1982) argues that there have been historical, social, and political contexts of economies that determined the success in such strategy. Further, he observed that Latin America was different from Asia in terms of polity, and socio-economics. To know why the terms ‘Import Substituting Industrialisation’ and ‘Export Oriented Industrialisation’ gained significance, it is important to know their historical context. Post World War II, Developing economies had the difficult time to develop in contrast to developed economies. Developing economies had the strategy to earn revenues from their primary agricultural endowments. However, post WW II collapse; these economies had suffered more than developed economies. Their ‘strategy’ had plummeted to depressing levels. In order to fly back to normal situation of growth, these economies had to grow. Several Latin American countries and Asian countries had developed an ‘inward’ development model, called “import substituting industrialisation”. This was a horizontal model. This horizontal model led to overvalued exchange rates (which made products expensive to foreign consumers). Furthermore, this model led to increased tariff rates, making export costs more. Owing to such irregularities, Latin American economies developed their ‘second strategy’ of development, called “Vertical ISI”. In comparison, Asian economies led their model to dictate in terms of ‘outward’ looking model. ISI strategy invited many critical thinking. As Balassa Argues, ‘the slowdown in the growth of primary exports and the lack of emergence of manufactured exports did not provide the foreign exchange necessary for rapid economic growth in countries pursuing inward looking development strategies (1981:15). The ‘vertical’ integration of developmental policy is seen by Balassa as ‘less interventionist’ and ‘less-protectionist’ in terms of development. Moreover, Export oriented industrialisation is seen as a neoliberal reform to import substituting industrialisation

35

(ISI) and is a market approach to determining the type of production, lowering the cost of inputs that lead to production, and earning maximum revenues from the trade. There is one critical point to note here, which is also a critical difference between classical development model and neoliberal development model, it is government policy. The government policy of intervening in economies for development is missing in the second model, and is present in first model. Some of the Asian economies led this discourse, and implied the state to stay out of the way of levying disincentives like tariffs, and extending incentives like export credits. If we go back to classical economists like Adam Smith, he created the theory of ‘invisible hand’ and thus said entrepreneurs will produce as the ‘market dictates’. One important point that Balassa argued in his remarkable work which said a lot about neoliberal reforms, “The evidence is quite conclusive, countries applying outward oriented export model had a superior performance in terms of exports, economic growth, and employment whereas countries with inward orientation encountered increasing economic difficulties. Policy reforms aimed at greater outward orientation brought considerable improvements in economic performance of countries that had earlier applied inward policies” (1981: 16)

Export oriented strategy are linked to reduced role for the state, getting ‘prices right’ and letting the markets ‘work’. On the other hand, policy doctrine of ISI lead us to areas such as large role of the state, more interventions in the markets, and distorted pricing that cripples markets (Bradford 1984). South Korea for instance, applied economic policies under the lines of uniform exchange rates, tax exemptions for exporters, reduced price of inputs, access to credit for investment. These policies were too State intervening, in a ‘successful’ way (Bradford 1982). South Korea also directed its economy towards ‘export targeting’. Taiwan for instance, undertook directive policies in 1960s to lead in the direction of ‘robust export strategy’. There were relaxed import controls, and flexible exchange rates. Flexible exchange rates in 1960s were a special formula, and not many economies had been directed in that direction. How does it differentiate within Asian paradigm of export model? We see, Asian countries had applied EOI from the external pressure of American Economy. South Korea and Taiwan had relied heavily on foreign Aid, America being the significant contributor. India was financed its agricultural input stocks from foreign assistance. Moreover, India was provided with agricultural inputs from a Latin American nation. Latin American economies had financed its developmental strategy through local industrialists with special assistance from the state. Asian model however had to rely on American funding, and therefore were pressed to take measures dictated by them. The pattern of high investment growth, foreign debts, capital goods imports, had seen global development trends. South Korea and Taiwan had created successful ‘governmental environments’ that led them to develop a concrete export oriented strategy. It is misleading to consider that import substitution was undertaken to be replaced with export orientation. Asian and Latin American societies were similar in lines of economy and development in 1950s, it was only during early 1960s that they diverged, with Asian economies focusing more on Export promotion techniques. The lure of export orientation and the hope of participating in a development program that promises similar levels of success like those of Japan, South Korea and Taiwan. Success of East Asian countries is a shining star, also showing the hopes of believing in export orientation model for enhancing economies. However, this ‘hope’ is not all time desirable for the economy. Chile, for instance adapted outward oriented strategy (EOI) to give a boost up to their economy in

36

the wake of oil crisis. Particularly, they undertook several reforms like selling of nationalized companies, elimination of entitlements, tax reforms and wide policies to abolish import duties and import tariffs. Chile, despite their great effort to strengthen their economy; could not give the strategic push to grow robustly. Chile did not become immune to debt shock of 1980s. Other Latin American economies like Brazil, Argentina and Mexico also led their economies along the lines of export orientation. Argentina, for instance gave a backward bending strategy from outward orientation to inward orientation for reviving their economy from debts (Gibson and Ward 1992). In effort to establish the export orientation model to India, and specifically to Bihar; it is firstly more important to get rid of the ‘necessary’ dichotomy between Export Oriented Industrialisation and Import Substituting Industrialisation. India is different on various spheres from the economies mentioned in this paper so far. Moreover, leaning only on EOI and not thinking about the areas of differentiation might make the situations worse, as they will affect innovations in a significant way. Bihar, as an Indian state cannot be simplified in terms of export oriented strategy. Bihar has rich soil content to create a significant export market, and it also has favourable climatic conditions for producing two important food grains, namely Rice and Wheat. However, this does not mean Bihar can go on a rapid spurt in producing food grains for the international markets. Taiwan and South Korea are often thought as glowing success of export led growth economies. Some of the works have presented an argument that instead of import substitution industrialisation ‘replacement’ policies, Export Orientation Industrialisation can be a ‘complement’ to existing inward oriented models, and not a substitute (Chan 1990a, 1990b). The important question is how would Bihar become an important state for export orientation model for India, as India has reformed its economy along the directions of neoliberal policies, more popularly called ‘Liberalisation-Globalisation-Privatisation’ in India. It will be a significant motive to establish an argument that places Bihar as an Indian state in history to conceptualise the fact about promises made by Indian reforms. It becomes understood that there are some neoliberal policies like mechanisation of farms, and pulling in farm to the market, which at longer scale be beneficial to India. However, will it be really beneficial for Bihar is the crux of this study. In the coming chapter, we will take this argument further and see if Bihar is that state where mistakes of Green Revolution vis a vis states like Punjab and Western U.P. can be rectified. My hypothesis remains the same, and it is the analysis of this hypothesis that will determine a core part of this thesis.

37

Chapter 5- Bihar on Agricultural Developments We arrive to the second last section of this paper, focusing on our research question, did opening up help Bihar in Agriculture. We have focused on Neoliberalism, primarily in agriculture sector. We went from its historical pathway, in terms of how it came into being. Then we saw how neoliberalism evolved itself from liberalising the economy of India to getting Agriculture along the lines of Markets. We also saw how it affected Indian agriculture, and whether neoliberalism was suitable for Indian Agriculture. With a particular focus on Bihar, it will be assessed whether the new technique of boosting agriculture from eastern part of India will be a leap forward or not. The essential argument remains the same, whether neoliberal approach in agriculture will help Bihar,

5.1

Bihar- A brief Outlook Bihar is the third populous state in India, with larger share of its population depending on agriculture. It is often said that one per cent growth in agriculture helps in contributing to three per cent growth in GDP. We will look at this fact in the coming sections of this chapter. Bihar has the potential to develop as a granary for India, both in food grain and non-food grain sector. Bihar is one of the states of India having around 88 per cent of its rural population where agriculture primarily is the main occupation (Census of India 2011). There are two elements involved with regards to Bihar. Bihar’s population is around 9.9 crore according to census data of India. It is expected to reach its two fold by next decade. The problem arises with the surge in demand for food in this state. The supply side can be either met through increased output in agriculture by way of increasing productivity, or by increased state imports of food. Bihar is in the middle of a great transformation phase, where it is urbanising, and also giving impetus to its rural development. In this transformational phase, it is imperative for Bihar to establish a good food security level. Punjab initiated a food security project in 1960 green revolution policy; however the growth was lackadaisical (Business Standard 2015). 9 We will see how Bihar is the focus of this paper. The maps below are the reference point.

9

Mukherjee, S. (2015). “Green revolution needs urgent mending”, Business Standard.

38

Map 1. Source: Bing Search

Map 2. Source: Department of Agriculture, Govt. of Bihar

39

Bihar has the natural endowment of fertile alluvial soil in the Gangetic Basin. It has abundant water resources. South Bihar’s soil endowment is different from North Bihar’s soil endowment. Due to this reason, we see a variety of crop grown in this state. Its geographical alignment has three broad zone, North-West, North East, and South Zone. North West Zone contains 13 districts, North East Zone contains 8 districts and South Zone includes 17 districts. Average rainfall in these entire three broad zone is around 800mm to 1200mm. Bihar has a rich history, as religion like Jainism and Buddhism originated here, and its affluent culture spread throughout the world (Kumar and Maulick 2016). Bihar had been the centre for agricultural boosting in the British Era too, because of its fertile endowment and favourable climatic conditions for indigo plantations (Pal 2009: 181). Bihar has faced low human capital investment, low agricultural upgradation and there has been industrial stagnation owing to low development in Bihar. Bihar is still far away from developing on its potential, as the capacity (particularly in Agriculture) remains unutilised. State policies like support services, irrigation, seed, and fertiliser support has been on increase in Bihar, but it still lacks the certain threshold. This indicates that vast potential of agriculture in Bihar needs to be exploited. Moreover, in developing a strategy for Agriculture in Bihar, we need to also focus on our original hypothesis. I will attempt to take some development models to interact with Bihar’s agrarian condition.

40

5.2

Development Model and Bihar Growth theory began its inception in 1960s all over the world, advocated from the US. However, with the limited scope of this paper, I will briefly focus on one model, the Lewis Model of Dual Economy. I am selective about this model because it propagates the idea of two sectors, namely traditional and Modern. Bihar has primarily two sectors, Rural and Urban. Rural development is taking place at a better pace now, and Urbanization of Bihar is taking place through current Government’s smart cities mission (Financial Express 2016)10. According to Lewis, process of development occurs owing to the interaction in traditional and modern sector (Lewis 1954). Agriculture is also the interacting sector in Indian economy. The output of agriculture in terms of produce must go to other two sectors, Secondary and Tertiary; to cater the overall development. Therefore, Agriculture must provide food as well as labour in other two sectors, in order for Lewis Model to be acceptable, and development to take place. What is the essential idea here? Agriculture has to be included in developmental agenda of Bihar. Agriculture needs inclusivity in development. How long will this ‘interaction’ take to happen?

Figure in ₹ Crore

GSDP Value of Indian States 900000 800000 700000 600000 500000 400000 300000 200000 100000 0

GSDP GSDP in Agriculture Per Capita Income

States Chart 13. Source: CSO 2014

10

Financial Express (2016). “Smart City Full List: Check which cities of UP, Andhra Pradesh, Bihar, Maharashtra make it to the list of 98”.

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State Gross Domestic Product, at 2011 Census (in per cent) SGDP 14.77 12.14 9.96

10.47

11.74

9.59

7.86

7.06

Chart 14. Source: CSO 2014

A look at the above chart shows that Bihar is at the bottom rungs in development in Agriculture. Bihar’s share in Agriculture GDP (NSDP) is 3 per cent; Maharashtra’s share is 15 per cent, while share of Andhra Pradesh is 7.8 per cent. All other states range around 7 to 14 per cent in State share of Agricultural GDP. Bihar is also below Uttar Pradesh, where food grain production is also major output sector, like Bihar. This is a clear indication of institutional factor, like Per Capita Income. In order for Lewis Model to take place, Bihar’s per capita income has to rise. There is also an anomaly involved. Bihar’s GDP is highest among the selected states given above; however the net realisation of GDP in agriculture is not very effective. Agriculture is an informal sector, and the realisation of GDP in this sector is a difficult exercise.

42

5.2.1 Performance of Agriculture in Bihar In order for Bihar to boost its agriculture, it is imperative to lay policies and implement them that are agriculture friendly in nature. However, given the national figures in Agriculture, it has become a difficult exercise. Between 1960 and 2000, National Agriculture share in GDP has declined, while compensatory changes have been visible in other sectors of Indian Economy.

Sectoral Share in Indian GDP, in percent 70 60

Figure in %

50 40 30 20 10 0

1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2010-11 2011-12

Agriculture

53.1

48.7

42.3

36.1

29.6

22.3

14.5

13.9

Manufacturing

16.6

20.5

24

25.9

27.7

27.3

27.8

27

Services

30.3

30.8

33.8

38

42.7

50.4

57.7

59

Chart 15. Source: CSO 2014

It is evident from the above graph that sectoral share in agriculture has been declining, and thus need an urgent focus. India is still an agrarian economy, and therefore the emphasis on Agriculture has not disappeared. In these situations, how do we emphasise on Bihar’s Agriculture and Lewis Dual Model? Bihar has witnessed a number of institutional reforms, and therefore this is a good input to boost Bihar’s Agriculture. Bihar has witnessed 11.36 per cent growth rate during 2004 to 2012 time period, which is called ‘revival of stagnant economy’ (Kumar and Maulick 2016). Does this mean that Bihar is on a ‘Take off stage’ model of Development11? Bihar has to ensure that the right kinds of inputs are available at the right time for the growth of agricultural sector, and there is sufficient availability of food grains to interact with the high demand for food. If the demand is not met with efficient supply of food, the resulting inflation will take Bihar at backward stages of development. Bihar has recently launched a ‘Third Agricultural Road Map’ (Indian Express 2017)., the details of which are available 11

The ‘Take off Model’ of Growth was created by American Economist William Rostow in 1960, gaining much attention after the World War as it emphasised on Development Economics. According to Rostow, there are five stages of growth: Traditional Society, Preparation to take off, Rise in Productive Capacity, Drive to Maturity, High Mass Consumption. In the Context of Bihar’s developmental situation, Bihar is at the middle of second and third stage, as it moved from a traditional to high productive capacity (With the Introduction of Service Sector in Bihar). See for Instance Mallick (2005).

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in Appendix Section of this paper. In my interview with Mr. K.K. Verma (District Agriculture Officer), it came to my point that there is a disconnect with Institutional and Agrarian factors, details of which are there in appendix section of this paper. Agriculture is the single largest occupation sector of Bihar, which makes Agriculture the primary source of Income in Bihar. Growth of Agricultural sector will not be effective, if there are no favourable price incentives.

Sectoral Growth Rate of GSDP in Bihar, in % 16 14

14.5

12 10 10.1

8

8.5

6 4 2

7.5

6.6 5.3

4.4

4.9

5

1.6

0 -2

-1.2 Primary

Secondary-0.2

Tertiary

2010-11

2016-17

2015-16

Gross State Domestic Product

Chart 16. Source: Economic Survey, Government of Bihar Note: 1. Primary Sector includes Agriculture, Forestry and Fishing, Crop, Livestock, Mining and Quarrying. 2. Secondary Sector includes Manufacturing, Electricity, Gas, Water Supply and Construction. 3. Tertiary Sector Trade, Hotels, Storage, Air Transport, Water Transport and Financial Services.

The primary sector has undergone major structural changes in the form of increase in GSDP, which indicates a shift in Agricultural Methods owing to Modernisation of Bihar Economy. It is the tertiary sector that has taken the great leap, indicating the focus has invariably been on services (Which also tell us that Neoliberalism’s focus on Services is happening in Bihar).

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5.2.2 Crop Production in Bihar Bihar has the natural endowment of soil fertility, which makes it an advantageous state in diversifying its crop production. Farmers are growing diverse crops now, which vary from Rice to Fruits and even flowers. However Bihar is at a disadvantage in terms of climatic conditions. Every Year almost, Bihar is smashed by draught and Flood, which disrupt the agricultural operations in the state.

Figure in %

Compound Annual Growth Rate of Crops in Bihar, in per cent 2.5 2 1.5 1 0.5 0 -0.5 -1 -1.5 -2 -2.5 -3 CAGR

Rice

Wheat

Maize

Oil Seeds

Fiber

Kharif

Rabi

-2.1

1.1

1.9

1.8

0.8

-2.2

-2.6

Chart 17. Source: Economic Survey, Government of Bihar Note: The compound rate is taken from financial year 2000 to financial year 2012.

Agricultural development cannot happen without a modification in cropping pattern as the soil loses it retention capacity. Bihar’s focus on diversification in cropping method is associated with alteration in climatic and seasonal pattern. A look at the above graph tells that Bihar is very much oriented towards subsistence production, where wheat and rice are given the emphasis. This is not a core diversification strategy, and causing a hindrance to boost agricultural prospects. Crops 2007-08 2008-09 2009-10 2010-11 2011-12 94.5 94.7 94.9 92.3 93 Foodgrains 86.5 86.8 86.8 83.2 85.6 Cereals 47.6 48.5 45.9 41.9 45.8 Rice 29.2 29.2 31.1 31.1 29.8 Wheat 9 8.7 9.4 9.6 9.6 Maize 1.1 0.9 1.0 0.9 0.8 Kharif Pulses 7.0 7.1 8.1 6.6 Rabi Pulses 6.9 1.9 1.8 2.0 1.9 1.7 Oilseeds 1.9 2.1 2.1 2.0 Fibre Crops 2.1 1.5 1.5 1.1 3.7 3.2 Sugarcane Table 5. Source: Kumar and Maulick 2016: 8 (Figure in %).

45

The strategy for Bihar to boost its agriculture is to boost its potential first, the potential can only be boosted through incentives, and incentives are related to prices. Looking at the above tables, it is understood that there is high investment potential in agriculture in Bihar, but there is low agriculture productivity.

46

5.3

Boosting Agriculture in Bihar There is a phenomenon of ‘missing machinery’ in Bihar, machinery being the most potential input that can boost agriculture in Bihar. Deficiency in agriculture in Bihar can be boosted through public investment in Agriculture infrastructure. Agriculture infrastructure is not simply investing and making warehouses available, but it also means providing the means to achieve agriculture boost in Bihar. I will briefly look at some of the ailing missing machinery problems in Bihar. In the later part of this paper, I will briefly look at some of the inputs we can use to boost agriculture in Bihar. This section is divided into two broad parts, the first part looks at the state side problem, where majority of the problems are embedded. The second part looks at the regression technique to assess how Bihar can be on its way to improve agriculture prospects.

5.3.1 Agriculture Infrastructure and Bihar Investment in agrarian infrastructure has the ability to boost farmer’s morale, access to markets, and motivate development in the agrarian economy (Gulati 2007). We will look at some of the infrastructural problems ailing in Bihar; this paper is limited to seeing infrastructural problems in a brief way. 1. Irrigation in Bihar- Rainfall received in Bihar is advantageous to agriculture. However, it seems to be noted that Bihar is not able to utilise its naturally endowed factor which is friendly for agricultural productivity. Farming in Bihar is still subsistence based, which means that the emphasis on production in Bihar is still on food grain crops. A look at the table above on page 38 depicts that food grain production is much emphasised. It is important to note that Bihar has been ranking high in gross irrigated area, but the area is not utilised properly for production. This cannot be correlated to neoliberal approach of diversification in agriculture alone, however the chances of diversifying crop in a very small area on a regular period has caused soil degradation in Bihar. Punjab had utilised its natural endowment to produce only select crops (Broadly Rice and Wheat) in her Green Revolution period, the very essence of a revolution in agriculture is directly connected to boosting select crops. However, this approach is old and the rising demand for food other than Wheat and Rice creates the new space in agricultural productivity. A graph below compares the Bihar’s irrigation potential to that of India.

47

Bihar Irrigation Potential and National Average 80 70

Figure in %

60 50 40 30 20

10 0 Bihar

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 57

India 41.7

58

57.9

56.7

58.5

60.2

60.9

61.2

60.8

61.8

67.4

68.5

68.9

42

41.1

42.4

43.7

45.1

45.1

45.5

45

45

46.9

47.6

48.2

Chart 17. Source: Directorate of Economics and Statistics

Tube well and canal is the primary source of water irrigation in Bihar, However tube well and canal irrigation is not accessible to all farmers in Bihar. Accessing these irrigation facilities require a dent in the pocket, which not all farmers are capable to do, except few. Those who are eligible to spend on these irrigation facilities are unable to effectively put their input into agriculture, as their motive is not agrarian boosting, but profit making and lending credit to small and marginal farmers on high interest rate. Bihar’s potential area for input in agriculture lies in its irrigation capability. Bihar can cover its cultivable area if it reaches its full potential through irrigation. Irrigation potential can be reached in Bihar if the sedimentation and breach in irrigation practices is dealt with. 2. Flood in Bihar Bihar’s agriculture has been on a fluctuation stage, which means that agriculture growth in Bihar in some years is followed by decline in growth of agriculture in some year. The state of Bihar has experienced flood in 2001, 2002, 2003, 2004, 2007, 2007 and 2013; followed by drought in 2005, 2007, 2008, 2009, 2010 and 2012 (Gulati 2017). Immediate policy response to this crisis by the ‘machinery’ has been construction of embankments, which is hoped to protect the state from floods. However, approach to flood by building embankments is not sufficient enough to contain the flood levels, as it is very strong. The better way in dealing with this problem is to build enough room to utilise the flood water in agriculture. Improving drainage systems can be one method. Building embankments have caused trouble for the water from tributaries. The capability to mitigate flood damages is limited in Bihar, because of the lack of potential infrastructure as means. 3. Energy, and Power Supply in Bihar Agriculture and supply of Power in this modern world is strongly correlated.

48

The state of Bihar has been deficient in providing robust energy supply to agriculture. A paper analysed the per capita power consumption in Bihar, and found out that its utilisation is much below the national average. Bihar generates around 94 Kilo Watt power, while National average is almost 8 fold to Bihar’s, around 927 Kilo Watt (Gulati 2017). Bihar is hugely dependent on central sponsored scheme for power generation. Naturally, the sources to which power is supplied are domestic (or household), Industrial and Commercial (or Entities). Agriculture has often been neglected in power supply.

% Share of Power Supply in Agriculture 35 30

Figure, in %

25 20 15 10

% Share, 6.1

5 0 Madhya Pradesh

Punjab

Gujarat

India

Uttar Pradesh

Bihar

Chart 18. Source: Gulati 2017

The depressed use of power in agriculture can be attributed to not so strong infrastructure, and lack of mechanism in seeing this issue.

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5.3.2 Challenges Ahead of Bihar Agriculture There has been a recognized gap in agriculture and realisation from neoliberal impetus in Bihar. Back in 2010, a special package of around ₹400 crore was announced for developing agriculture potential in eastern India 12(Livemint 2012). Since neoliberal agriculture implies an added emphasis on market based agriculture, it becomes imperative to understand how Bihar is not a place to conduct this methodology. Only diversification in agriculture can help sustain the livelihood in Bihar. Most of the farmers are small and marginal category; they need support and assistance in inputs in agriculture. Neoliberalism in agriculture implies attempts to do away with subsidising agriculture and providing support in farming. This has also been a recent debate between India and World Trade Organisation (Business Standard 2017)13. However, diversification of agriculture does not simply mean shifting of crop growing activities. Explicably, diversification means transition from subsistence based farming to commercial based farming methods. Primarily, it is a different approach than producing cash crops alone, as it involves producing food grain and non-food grain as well. Production of food as well as non-food grain will be an immediate response for the growing demand and rising population every year. There can be no doubt that a rise in population creates stress on agriculture the most, with the growing demand for it. It will be both a challenge and an opportunity for Bihar to utilise this opportunity to boost up agriculture. Bihar has witnessed a noticeable sign to diversify its agricultural methods in production. Some of the major reasons cited in some works are related to lack of storage facilities, lack of corruption free markets and lack of agro-processing industries (Sinha 2015 and Kalamkar 2008).

12

Under the Rashtriya Krishi VIkas Yojana, Green revolution in Eastern India was lauded by the Union Government in 2010. ₹332 crore was released for this project, impacting seven states of east, including Bihar. See Singh, R. (2012). “Rs. 332.87 crore for green revolution in east”. Livemint. 13 See Mukherjee, S. (2017). “Food Security: India’s stockholding subsidy stand at WTO and why it’s key”. Business Standard.

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5.4

Diversification challenge in Bihar According to a report on eastern region of India, there is around 77% of the gross cropped area (GCA) under food grains. For analysing the prospects of diversification in agriculture of Bihar, it will be helpful to see some data regarding this.

Crop Area in Bihar, several Years (area in '000 hectare) 7000000 2003-04

6000000

2004-05

5000000

2005-06 2006-07

4000000

2007-08 3000000

2009-10 2010-11

2000000

2011-12 1000000

2012-13

0

2013-14 Wheat

Rice

Maize

Cereals

Pulses

Chart 19. Source: Economic Survey of Bihar, various years.

From the above dense graph, it is evident that there is some shift in strategy of producing food grain crops in Bihar. Bihar’s comparative advantage in producing two of its most important crop, rice and wheat has declined over the years. Pulses have remained stagnant in product. This indicates about the capacity utilisation in producing crops in Bihar. Diversification impulse would not happen without tweaking on Bihar’s production strategy. However, Bihar has shown remarkable increase in area under cash crop production, particularly sugarcane and cereals. Cereal production and area utilisation has been on the huge scale over the years. There can be several mechanisms and policies in place. 5.4.1 Policy Mechanisms to diversify Agriculture Regression analysis has been presented at the appendix section of this paper, while the conclusive part has been presented here. Overall, there is a lack of institutional interaction with the production side of agriculture in Bihar. However, it is not the only blame we can place on neoliberal agriculture. There are several other blames.

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5.5

Regression Analysis of Neoliberal Claims

In the concluding section of the paper, I will begin building a model based on the neoliberal norms propagated on agriculture, and see whether it affects agriculture in Bihar in a positive or negative way. I will further argue how these claims affect the potential agricultural roadmap region of India. I have taken three essential dependent variables to build the regression model. Before beginning to build the model, it is important to introduce brief concept of regression analysis. Concept of linear regression model states that regression analysis identifies variables for defining the model and establishing the residual variables. 5.5.1 Basic Linear Regression Model

A.

Y=ß0 + ß1 X + Ɛ where, Y=Dependent Variable (outcome variable/ Response Variable) X=Independent Variable Ɛ=Error term. The variable that adds the influence of other variables, but are not expressed in the model. ß0 = Intercept shows average value of Y, when X=0 ß1 =Slope shows average “variation” of dependent variable Y, It is denoted by change in X variable as a result 𝝏𝑿

of change in Y variable (𝝏𝒀) The simplest way to determine regression equation is the graphical representation of correlated statistical distribution which suggests that there is a link, or causality between the defined variables. Purpose: To determine the statistical significance of Neoliberal inputs (Reduction in Subsidy+ Diversifying Crops in Agriculture + Market Based Approach) affect the Bihar’s agriculture situation, with reference to prices in agriculture.

B. Building the regression Model My null hypothesis will remain the same, as the beginning of the paper. My regression model will contain three inputs. They are Cost estimation of fertiliser subsidy, projected cost of producing rice and projected cost estimation of producing pulses. I will compare this model with neoliberal model where my variables will be slightly different from the conventional model of producing food grains. There will be cost estimation of sugarcane projection, reduced cost structure of fertiliser subsidy, and cost estimation of producing horticulture crops. 14

14

Please note that the cost estimation will be derived from Actual yield level of Bihar multiplied by projected cost of crop over the years (Essentially, the data available to me was from 2007 to 2014 time period). The cost estimation for fertiliser subsidy takes into account per hectare cost of applying fertiliser.

52

Model I. Traditional Model of Producing food grain with subsidy support: Traditional Model consist of variables of crop production (Rice and Pulse), and fertiliser support in the state of Bihar. Rice and Pulse were selected because it is the natural endowment of Bihar to produce these two food grain crop. The emphasis is more on the impact of extending support to these two food grains, which directs its objectives away from neoliberal focus on reducing the support. Yi = ß1X1 + ß2X2 + ß3X3 +………. + ßnXn …..(A) Here, Yi= Response Variable ß1X1= Fertiliser subsidy support to Agriculture in Bihar ß2X2= Cost estimation of Rice ß3X3= Cost estimation of Pulses

Regression Analysis on Traditional Model 3000

Cost in Mullion Rupees

2500 2000

y = 196.81x + 961.11 R² = 0.5786

Cost of Fertiliser Production Yield Level of Rice

1500 1000

y = 10.963x + 618.38 R² = 0.0299

Production Yield Level of Pulse Linear (Cost of Fertiliser)

500

Linear (Production Yield Level of Rice )

0

Year Regression Graph 1 Note: 1. The fertiliser cost is central subsidy given by Centrally sponsored scheme by Ministry of Agriculture, Government of India. 2. Data on Yield Level is derived from Department of Agriculture, Government of Bihar. 3. Data on cost of fertiliser has been obtained from CACP, Ministry of Agriculture, GoI.

Inference: Two things become clear from the above graph, the traditional notion of implying support in agriculture in Bihar is not significant. A residual square value of 0.5786 reveals that with development of modern fertiliser support to agriculture, the development of yield in major food grain has not happened significantly. Moreover, yield level of pulses has also not shown remarkable improvements over the years. The time period here is a clear witness of neoliberalism in agriculture, which started in India in 1995. Only 57 per cent of

53

the explanation and realisation is done by the fertiliser support to production of food grains in Bihar.

Model II: Modern Model of Producing food grain with reduced support in input, and a rise in wages of labour Modern Model consists of horticulture crops and cash crop such as sugarcane. This is an immediate response to what neoliberalism adheres to. Its objective is to use a market based approach and produce more for the markets. Sugarcane and Horticulture is the response to this objective. The model developed in context to this theme is: Yi = ß1X1 + ß2X2 + ß3X3 + ß4X4 ………. + ßnXn …..(B) Here, Yi = Response variable to Neoliberal emphasis on agriculture ß1X1 = Fertiliser support (Cost per Hectare) to Non-food grains ß2X2 = Cost Projection to Sugarcane production in Bihar ß3X3 = Cost Projection to Horticulture Production in Bihar ß4X4 = Labour response to rise in Wages 450 400

y = 11.8x + 316.87 R² = 0.959

350

Cost of Fertiliser

300

Production of Sugarcane

250

Production of Horticulture

200 Linear (Cost of Fertiliser) 150 Linear (Production of Sugarcane)

100 50

Linear (Production of Sugarcane)

0

2009- 2010- 2011- 2012- 2013- 201410 11 12 13 14 15 Regression Graph 2 Note: 1. Cost of Fertiliser has been obtained from report of taskforce of horticulture in Bihar, Planning Commission. 2. Production of Horticulture in Bihar is obtained from State Horticulture Mission, Government of Bihar. 3. Production of Sugarcane in Bihar is obtained from Micro, Small and Medium enterprises Ministry report on Bihar, GoI.

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Inference: While Traditional understanding of extending support to agriculture in Bihar resulted in 57 per cent significance (which is a poor fit to the model) also led us to understand that the logic of support to producing food grain is basically a false notion to increase yield and output. Traditional understanding of agriculture in Bihar was to develop food grains and increase yield. On the contrary, Modern approach to agriculture in Bihar is a vision of Neoliberalism in agriculture, where an emphasis on market is being laid. Several variables that have strong linkage to Bihar’s agriculture were taken, and the subsidy to a new domain in agriculture was introduced, which is Horticulture mission in Bihar. Data on extending support to horticulture in Bihar is limited in availability. But the trend says opposite to what the neoliberal understanding of agriculture envisages. It says to reduce subsidy, and emphasise on producing for the market. It is revenue driven approach, where price plays the important factor. The empirical results came opposite to what the original claim of Neoliberalism in agriculture was. A 95 per cent residual value is very significant with extending support to horticulture and sugarcane in Bihar. On a further note, two forecast trend lines has been created for the prospects of developing horticulture and market based approach to agriculture in Bihar. This is in contrast to what Bihar’s agriculture Road Map says. Extending support to agriculture in Bihar is an indication of public sector investment in agriculture. A rise in Public Sector investment in agriculture causes huge space for scope of private capital formation in Agriculture (Gulati 1995). Moreover, an added emphasis on response to prices is a direct indication that the relative scarcity is shifting towards high price elastic products like sugarcane and horticultural crops.

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Chapter 6- Summary and Conclusion This paper has been an influential account of Policies propagated by the western economies, which succeeded in making developing economies transition from conventional understanding of Agriculture to Modern Understanding of Agriculture. Bihar is a potential state to start second green revolution in India, where majority of the crops are food grains. However, with the influence of Neoliberalism and emphasis on prices, the state has seen a shift in production of food grain to non-food grain and cash crops. With this onset in mind, I read on How Neoliberalism in Agriculture came into being, starting from Post World War period. There have been several theories and pockets of explanations about it, but not all of them were directly related to agricultural deterioration. Trade openness in Agriculture attempts to focus on reducing support systems in production and yield, but focuses a lot on incentives by raising revenues through prices. Some countries like South Korea, Mexico and Taiwan developed on these lines, but they also constructed a robust infrastructural system to adhere to Neoliberalism’s objectives. India saw a different picture altogether beginning in her Green Revolution Days from Western Parts. Too much focus on producing food grains and too little focus on ensuring effectiveness in food security led to the deterioration of soil conditions in Punjab. Bihar has been designated to launch ‘Krishi Road Map’ (Details in Appendix) where it is envisaged to develop its agricultural sector that fulfils the objective of Second Green Revolution from eastern India (A report on the task force of Planning Commission has been cited). Bihar was taken purposively for this thesis for following objectives: 1. To Understand how openness in Agriculture affects Bihar 2. To Understand the context of Neoliberalism in Agriculture 3. To Analyse support systems in Agriculture that affects Bihar in both Traditional and Modern Dimension Findings of the Study: 1. Agriculture is the mainstay of India, even after neoliberal impetus in Agriculture, owing to large share of employment engaged with the backbone sector of the economy. 2. Openness in Agriculture has been determined to accomplish its objective of Market based approach in producing crops, Few Countries like Mexico and Taiwan have succeeded in using this input in their Agrarian system. A Causality had been established which relates this fact to better infrastructure in Agriculture. 3. Agriculture in India is understood differently with that of the western economy. Land is something intrinsic to the Indian society, and thus cannot be easily marketed in terms of its value. However, there have been

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some studies from authors like Chayanov that have expressed about land being marketised (op. cited in Thorner).15 4. I established two models to analyse the claims made by Neoliberal policy on agriculture which says to develop the agriculture sector on market based approach. The purpose of regression analysis was to see whether the claim made by Trade openness and its effect is positive on Indian economy (particularly Bihar). I took a traditional model which consisted of variables like Food grain crop production cost, and its support system like fertiliser in Bihar. The result came out to be heavily skewed towards negative. A correlation analysis was established which said that with the rise in fertiliser input in Bihar, the yield in Bihar in food grain crop is inversely related. An explanation of Agriculture Infrastructure is the focus point here. Similar argument was made in my interview with District Agriculture Officer, Government of Bihar. The second model, Modern Model laid emphasis on variables like non-food grain crops like sugarcane, horticulture and reduced fertiliser support. Reduced fertiliser support was derived from report of taskforce of horticulture in Bihar (Planning Commission) which had data about fertiliser support in horticulture. Data on Horticulture was taken from State Horticulture Mission, Bihar. I ran my regression model with slight changes from my original model. Results came out positive. It means that the increase in fertiliser cost in horticulture and cash crop sugarcane are strongly related to Bihar’s agriculture development, this is in stark contrast to what the road map of Bihar and second green revolution envisages. 5. Agriculture Infrastructure and policies to deal with Natural calamity is the strong point of focus here. Strong focus on market based approach in Bihar will prove futile in developing the agriculture potential of the state. My suggestion is to build capacities to emphasise on agricultural production. It is true that owing to geographical endowments, Bihar has the potential to develop in agricultural sector. However, with trade openness in place, it is less likely to do so. I am not suggesting any protectionist policy in developing agriculture sector of Bihar; I am suggesting using conventional understanding in food production in Bihar. Conventional understanding was to provide support systems in production and yield. Due to lack of established infrastructure, market based approach in Bihar will not work effectively.

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Thorner, D. “Chayanov’s Concept of Peasent Economy”.

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References: Vyas, V.S. (1999). Agricultural Trade Policy and Export Strategy. Economic and Political Weekly, 34(13), A27-A33. Vyas, V.S. (1996). Diversification of Agriculture and Food Security in Context of New Economic Policy: Concept Rationale and Approaches. Indian Journal of Agricultural Economics, Vol. 51, No. 4. Vyas, V.S. (2003). India’s Agrarian Structure, Economic Policies and Sustainable Development. Academic Foundation, New Delhi. Patnaik, U. (1996). Export-Oriented Agriculture and Food Security in Developing Countries and India. Economic and Political Weekly. Ghosh, J. (1985). Export Optimism and Import Liberalisation. Economic and Political Weekly, 20(22), 974-976. Planning Commission (2008): ‘Bihar’s Agriculture Development: Opportunities and Challenges’. Bhagwati, J N and T N Srinivasan (1975): "Foreign Trade Regime and Economic Development: India", New York: Columbia University Press. Martin, A. (2017). Please Mind the Gap: Winners and Losers of Neoliberalism in India. EInternational Relations Students Journal. Friedman, M. (1962). Capitalism and freedom. 1st ed. Harvey, D. (2005). A brief history of neoliberalism. 1st ed. Oxford: Oxford University Press. International Monetary Fund, (2016). Neoliberalism: Oversold? Harris, R. and Seid, M. (2000). Critical Perspectives on Globalization and Neoliberalism in the Developing Countries. Journal of Developing Societies, 16(1), pp.1-26. Watkins, K. (2013). Mumbai monolith epitomises need for post-2015 agenda to tackle inequality. The Guardian. Saad-Filho, A. and Johnston, D. (2005). Neoliberalism: a critical reader. 1st ed. London: Pluto Press. Shaikh, A. (2005). The economic mythology of Neoliberalism. 1st ed. London Press. Sainath, P. (2014). Neoliberalism: A threat to Democracy. Indian Ruminations: Journal of Indian English Writers. Patnaik, P. (2017). Why India needs the Left. The Wire. Bagchi, A.K. (1999). Globalisation, Liberalisation and Vulnerability of India and the Third World. EPW, Vol. 34.

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APPENDIX 1. United States Department of Agriculture, 1964

Note: The Forecast had been taken by an International agency; Data was also derived from internal agencies of India and compiled together to form a table.

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2. Directorate of Economics and Statistics, Government of Bihar

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3. Interview with Mr. K.K. Verma, District Agriculture Officer, Government of Bihar, Muzaffarpur (Bihar). The interview was conducted on a purposive question method, with primary focus on effect on agriculture reforms in the state of Bihar. The DAO was very intent on covering issues promoted by the government machinery, and therefore the policy inputs given by him were aligned in the direction of optimising inputs, and maximising outputs in Agriculture. Q.1 What do you think has been the impact on Agriculture since 1991? Q.2 Why has been Bihar emphasising on Zero tillage method? Q.3 Will Markets help farmers in Agriculture? Does it need any alternate method? Q.4 Who all are the stakeholders involved in boosting Agricultural reforms in Bihar? Q.5 You talked about some constraints, Can you elaborate on that matter? Q.6 We have moved backwards as you rightly said, What do you think has been the core problem? Q.7 What according to you is the focal point for choosing Bihar as second green revolution state? Q.8. What steps do we need to take so we do not repeat the mistakes of green revolution of Bihar? Q.9 Why is there an emphasis on Organic Farming in Bihar? Q.10 Is the Government of Bihar looking for Organic Farming only because Punjab’s agriculture status failed? Q.11 How does Climate Change affect Agriculture Roadmap in Bihar? Q.12 Will Agriculture and Development in Bihar work together? Q.13 Sir, What are the changes in methods of production in New Green Revolution? Q.14 What will be the role of APMC in Second Green Revolution? Q.15 Sir, you said that Farmer’s Committee has been formed for Second Green Revolution. How does this committee affect policymaking for agriculture in Bihar? Q.16 1991 Reforms focused on producing Horticulture more, Was this right policy initiative for Agriculture? How does this affect Bihar? Q.17 What are your views on increasing yield and productivity in cash crops? Q.18 How are we taking consideration of Natural Calamities in Second Green Revolution? Q.19 You talked about Contingency plan in Agriculture, Can you please elaborate? Q.20 Second Green Revolution talks about Tikaau Kheti (Sustainable Agriculture), What are your views on this? Q.21 Apart from Natural Constraints, Are there any other constraints in boosting Agriculture in Bihar? Q.22 Why did PUSA Institute shift from Bihar to Delhi? Does this affect making State policies in Agriculture? Q.23. How does Markets play the role in second green revolution? Q.24. What are your viewpoints on Fertiliser subsidy on crops in Bihar? Q.25. Any Concluding remarks on Targeted Plan for Second Green Revolution? Q.26 Any Remarks on Bihar’s Agriculture Infrastructure?

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File Photo of Interview with Mr. K.K. Verma, DAO (Government of Bihar)

Photo 2: District Agriculture Building, Muzaffarpur

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4. Bihar Krishi Road Map- Press Release

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