The Agrarian Economic Struggle in India

The Agrarian Economic Struggle in India

Abstract

A comprehensive study of the agricultural sector as an important part of the economy is done by observing the various problems those employed in it undergo, highlighting its strange yet unique position in the Indian context. We look into a few measures undertaken by the government to remedy these obstacles to the agricultural sector and analyse it with reference to the IS-LM model.

Introduction

India’s economic problems with regards to agriculture are not an issue just in the contemporary timeline, but throughout its history. Although it comprises less than a measly 20% of our economy, more than half of the population is employed in it and are dependent on it for their livelihoods. Farming, animal husbandry, fisheries etc are some of the commonly practiced activities coming under this umbrella. Due to a large number of people being employed in agriculture, India is the largest producer of many fruits and vegetables, milk, spices etc.

Before independence, most of the agricultural produce was only of direct benefit to the British who exploited India as a mere producer of its exports. Farmers earned very less income to fend for themselves and their families during the colonial period, where they became prey to heavy taxes and the zamindari system. Farmers who owned plots of land managed to somehow maintain their livelihoods. Landless labourers were uncertain of employment. Agriculture was also affected due to natural disasters like droughts and famines. The Bengal Famine of 1943 was responsible for 3 million deaths alone. All this contributed to the reduction of the economic feasibility of agriculture.

After independence was achieved in 1947, certain measures were undertaken by the Government of India to improve the agricultural scenario in the country. They felt that the country had to be self-sufficient and sought technological methods over traditional practices. This paved the way for the Green Revolution in the 1960s incorporated the use of high yield variety (HYI) seeds, which greatly increased the production of agricultural, marginally and totally.  The White Revolution was undertaken to similarly increase milk production in India. The food security of the country has substantially risen. Reduced share of agriculture in the GDP is primarily due to rapid growth in services, industry and other sectors after the turn of the millennium.

However, slow growth in agriculture, accompanied with a large population dependent on it for employment has only created more and more problems for the country. The government has taken some policy measures to tackle these problems so as to ensure the needs of the people and the sustenance of the agriculture sector.

Agricultural Problems

"With a population of just over 1.3 billion, India is the world's largest democracy. In the past decade, the country has witnessed accelerated economic growth, emerged as a global player with the world's fourth largest economy in purchasing power parity terms, and made progress towards achieving most of the Millennium Development Goals. India's integration into the global economy has been accompanied by impressive economic growth that has brought significant economic and social benefits to the country. Nevertheless, disparities in income and human development are on the rise. Preliminary estimates suggest that in 2009–10 the combined all India poverty rate was 32 % compared to 37 % in 2004–05. Going forward, it will be essential for India to build a productive, competitive, and diversified agricultural sector and facilitate rural, non-farm entrepreneurship and employment. Encouraging policies that promote competition in agricultural marketing will ensure that farmers receive better prices." — World Bank: "India Country Overview 2011"

The rise in prices of goods (inflation) has been the main problem which greatly impacts those employed in agricultural practices. The income generated isn’t feasible as many producers do not get worthy return of investment. This issue supersedes many other problems.

Though the country has achieved self-sufficiency, the productivity still lags behind many other countries. The yield per area rate is very low in comparison to countries like Brazil, United States etc. The total factor productivity growth remains less too. Eradication of hunger and malnutrition is essential to achieve greater production comparable with other world nations.

Another problem is the lack of infrastructural development. India has very poor rural roads affecting timely physical distribution of both inputs and outputs. Irrigation systems are inadequate, sometimes leading to crop failure due to lack of water. The lack of storage facilities and the lack of an integrated market structure which promotes competition lead to wastage of agricultural produce.     

The effects of climate change and the ill-impact of greenhouse gases are also said to be responsible for agricultural crisis.

Implemented Policy Measures

Though economic growth has increased greatly in India, the growth in agriculture has been sluggish. As a result, the increase in per capita income has increased the demand by so much that the supply of agricultural produce isn’t adequate. This has seen as the factor responsible for the rise in prices. There is no long run relationship between money supply and agricultural price. Increasing public expenditure and unfavourable foreign exchange rate have some effects on price although the results are not robust.     

Recently implemented policy measures by the government to ease the agricultural labour of their tensions include:

1.) In 2018, under the PM-KISAN scheme, the government announced that every farmer will be paid an annual income of a minimum of 6000 Rupees.

2.) Start-ups with upgraded technology and new business models with government backing are working to solve problems in Indian agriculture and its marketing. An example is Kandawale, an e-commerce website which sells Indian red onions to bulk users direct from farmers, reducing unnecessary cost escalations.

3.) In 2016, National Agriculture Market (e-NAM) was launched. It promotes an e-marketing platform at the national level and supports the creation of infrastructure to enable the revolutionizing of agriculture markets by guaranteeing better price discovery. It also brings in transparency & competition to enable producers to get improved remuneration for their produce. 

IS-LM Linking to the Policies

1.) When the government announced that every farmer would be paid a minimum annual income of 6000 Rupees, it meant that the government vowed to generate enough money to pay all of these farmers. This was an expansionary monetary policy which meant that there would be an increase in the supply of money. This implies a rightward shift in the LM curve. When farmers receive this income, they are able to produce more output and this would naturally cause a rise in prices of agricultural commodities. When there is a change in price, aggregate demand moves along the curve.

The initiative was criticized by many owing to the fact that it wasn’t only specified for the lower income group of farmers, but to farmers of all income groups. Some felt that the minimum income wasn’t sufficient enough to meet the farmers’ needs.

2.) Upgrading of technology and marketing will help develop the agricultural sector in the country. This means that there is an expansionary fiscal policy in play as the government expenditure increases so as to bring in new technological methods. This implies a rightward shift in the IS curve. As more output is produced at lower costs of both production and physical distribution, the same price is maintained. Due to change in output, there will be a rightward shift in aggregate demand.

Technological changes help the agricultural sector in better promotion of its produces and greatly reduce the costs for them too.

3.) E-marketing helps in making the agricultural produce available to consumers on a larger scale. As this is another technological change, it is an expansionary fiscal policy which is involved due to increased government spending to facilitate this. This again implies a rightward shift in the IS curve. As there is a change in output, there will be a rightward shift in aggregate demand. Due to increased transparency and competitiveness, the producer is able to discover the same price or a price similar to it.

E-marketing is a brilliant technological change which will greatly benefit the agricultural sector as it enables a sense of competition and more transparency among producers. Costs are lower and they are motivated to grow their best produce to get the best price in the market amidst heavy competition.

  

Conclusion

The agricultural sector being the largest employer, even after rapid globalisation and liberalisation of the Indian economy bears a testament to the fact that India is incomplete without its agriculture. Albeit its contribution to the GDP is measly, a large number of people depend on it. These people face many obstacles in an eclectic range of forms while managing to maintain their livelihoods. In order to ensure their growth and development along with the country’s growth and development, the Government of India has taken various measures in the form of fiscal and monetary policy measures. These may have eventually had a direct or adverse impact on the agricultural sector, but they are taken with the interest of the sustenance of the agro-based sector. The IS-LM model effectively helps us analyse these measures to observe what has happened due to the measures undertaken and detect whether it has had a positive or negative outcome. With subtle and effective policy measures, the agricultural sector of India can hope to grow as a more important contributor to not just the employment side of the economy, but the economy as a whole.

References

“India Country Overview 2011”. World Bank 2011.  https://web.archive.org/web/20110522115104/http://www.worldbank.org.in/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/INDIAEXTN/0,,contentMDK:20195738~menuPK:295591~pagePK:141137~piPK:141127~theSitePK:295584,00.html

https://www.sciencedirect.com/science/article/pii/S2077188615000062

https://www.ndtv.com/india-news/nirmala-sitharaman-announces-reforms-in-essential-commodities-act-marketplace-rules-and-protection-measures-for-farmers-2229423

https://krishijagran.com/agriculture-world/164-crore-farmers-registered-on-e-nam-heres-the-process-of-selling-agricultural-produce-online-in-585-mandis/