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Down on the Farm in India

Prepared by: Jayshree Bajoria
November 6, 2007


India's stunning economic success in recent years, fueled by its technology services sector, obscures the fact that it is still predominantly a nation of farmers. Almost 60 percent of India’s 1.1 billion people depend on agriculture for their livelihood. But as the overall economy booms, agricultural growth is a mere 2 percent. Both food production and consumption have declined since liberalization in 1991. Agriculture’s share of India’s GDP has fallen from 45 percent in 1972-1973 to 21 percent in 2004-2005. Utsa Patnaik, an economics professor at New Delhi-based Jawaharlal Nehru University says (InfoChange) per capita annual food consumption has declined from 178 kilograms in 1991 to 155 kilograms in 2002.

This autumn’s protests by the landless (Guardian) in the country are the latest in a series of incidents in which the poor have taken to the streets. But FT columnist Jo Johnson says these protests are “met with crushing indifference” as India and the world are preoccupied with the country’s booming stock market. The plight of Indian peasants reflects growing inequality in the country, as this new CFR Backgrounder explains.

One measure of the despair among India’s farmers: an estimated 100,000 farmers throughout the country committed suicide between 1993 and 2003. That’s according to India’s agriculture minister and the unofficial suicide figures are much higher (IPS). Most suicides are in the country’s cotton belt, which produces the world’s second-highest amount of cotton after China. The rise in cotton production is often linked (Hindu Business Line) to introduction of the genetically modified Bt (Bacillus thuringiensis) cotton seed, which entered the Indian markets in 2002. Many experts oppose the use of Bt cotton, saying farmers have to take on huge debts (PBS) every year to buy the expensive seeds and have struggled to make them productive.

Beyond indebtedness, a combination of other economic factors compound the plight of India ’s farmers. ActionAid India, an antipoverty NGO, says government investment in agriculture fell from 1.8 percent in 1993 to 1.3 percent in 2003. A recent PBS documentary noted: “In 1994, a pound of raw cotton fetched $1.10. In 2006, the same pound fetched 54 cents.” In his annual budget announcement, Finance Minister P. Chidambaram said only 27 percent of farmers receive credit from formal sources and 22 percent from informal sources.

In the midst of this growing crisis, India has felt international pressure (Bloomberg) to curb protectionism and cut subsidies to agriculture at the Doha round of the world trade talks.  But CFR Senior Fellow Jagdish Bhagwati writes the United States is to blame for stalling trade talks, saying the United States refuses to cut its own farm subsidies but expects Indian peasants to compete with subsidized farmers in rich countries. The Indian Planning Commission’s midterm appraisal (PDF) of the country’s tenth five-year plan (2002-2007) admitted the pitfalls of liberalization for the farm sector. According to the U.S Department of Agriculture, India removed all quantitative barriers to agricultural imports by 2001 and “voluntarily reduced tariffs below required levels for a number of commodities.”

Indian journalist P. Sainath, who follows the Indian farm crisis, proposes (Tehelka) immediate fixes such as creation of a price stabilization fund for all major crops similar to the fund existing for petroleum, providing farm inputs at affordable prices, new sources of credit for farmers, and guaranteed minimum prices. The government has announced almost a billion dollars in aid to farmers but Sainath says relief packages have fallen short. Another program aims to guarantee wage employment for rural workers, but this has failed to meet expectations.

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