Which decade was the best for India?


Devinder Sharma

is a journalist, author and respected expert on food security, hunger and international trade. He is considered to be one of the leading voices in this field from developing and emerging countries.

Translation: Stefan Mentschel

Indian farmers are struggling to survive

India produces so much grain that it has become an exporter. Despite this, a quarter of a billion people in the country suffer from malnutrition, but Indian agriculture is still in a serious crisis. The millions of smallholders in particular suffer because they can barely make a living from their work. At the same time, under pressure from government and companies, huge agricultural areas are being closed down and used for industrial and infrastructure projects. The consequences of this development could be fatal.

Rice harvest in Assam (& copy picture-alliance / AP)

It's paradoxical. India's granaries are bursting at the seams, there is hardly any storage space left for the massive crop surpluses of wheat and rice and the country is desperately looking for export opportunities. After India exported 22 million tonnes of rice and wheat in the 2012/13 financial year (April 2012 to March 2013), according to government figures, it will be another 18 million tonnes in 2013/14. In other words, India's food exports hit a record close to 40 million tons in just two years. In addition, government agencies will buy up wheat yields of around 31 million tons in the summer of 2014. This is a consequence of the rich grain harvest expected by the authorities this year, which is estimated at more than 263 million tons.

However, it is strange that food exports are being promoted when nearly 250 million Indians - a quarter of the world's hungry people - struggle every day to get enough food on their plates. In order to ensure food insecurity in the country, the government therefore launched the National Food Security Bill in 2013. The law guarantees around 830 million of the 1.2 billion Indians monthly purchase of five kilograms of wheat, rice or millet at heavily subsidized prices. Even if that is not enough to meet the needs of an average household, the law at least provides relief to those most affected by hunger. The government, in turn, needs 61 million tons of food reserves annually to meet demand.

WTO goals

So India can produce enough food for its growing population. However, some international players are pursuing the goal of curbing Indian production and opening the Indian market to cheap food imports. At the meeting of the World Trade Organization (WTO) in Bali at the end of 2013, for example, the United States, supported by the European Union, questioned India's measures to create food security. In the end, an agreement was reached in which India accepted a "peace clause" for a transition period of four years. The WTO had introduced this exemption once for countries that subsidized their food exports beyond the permitted level, and it actually expired in 2003. It was reintroduced in Bali so that the Indian government's subsidies can no longer be legally challenged for the time being.

At the heart of the problem is the rising cost of government warehousing of grain and the rise in the guaranteed prices for wheat and rice that the government pays Indian farmers every year for their harvest. According to the WTO Agreement on Agriculture, the total of subsidies - for example in the form of guaranteed purchase prices - must not exceed the so-called de minimis level of 10 percent of the value of the total annual production. (That means, if the harvest of one year is worth 100 million euros, then only 10 million euros may be distributed in subsidies.) In the case of rice, India has long since exceeded this limit of 24 percent.

The WTO therefore has less of the National Food Security Bill on its radar than India's system of guaranteed prices. Should India be forced to reduce the total rice subsidy to 10 percent of the total value of the crop and at the same time forbid the country to raise the guaranteed price of wheat, the death knell would ring for Indian agriculture, which is already facing massive problems suffers. Currently, the guaranteed prices offer the crisis-plagued farmers at least some security and protection from the often extremely low market prices at harvest time.

The United States distributed a quarter of a trillion US dollars (around 180 billion euros) in agricultural subsidies between 1995 and 2009, as the American organization Environment Working Group has calculated. In 2014, these subsidies were massively increased again for the next ten years - to around one trillion US dollars (719 billion euros), including 756 billion US dollars (543 billion euros) for government food aid under the Supplemental Nutrition Assistance Program (SNAP). Subsidies of this magnitude have fatal consequences around the world, because large quantities of agricultural products are thrown away, food prices are depressed and farmers are robbed of their livelihoods.

On the other hand, India paid out subsidies of just 9.4 billion US dollars (6.8 billion euros) in the form of state-guaranteed prices to its wheat and rice farmers in 2012. Notwithstanding this huge difference to US subsidies, 14 lobby groups representing the interests of American agricultural exporters have complained to the US government that the "peace clause" granted to India unduly restricted US farmers' business opportunities.

Agriculture crisis

The efforts of the WTO to realign India's agricultural policy come at a time when it is in deep crisis. Above all, the ecological consequences of intensive agriculture under the sign of the Green Revolution (see below) have become a huge problem for sustainability. Even more: the agricultural equilibrium is out of whack. The fertility of the soil is destroyed, the water table is falling as a result of the relentless use of water, and there is environmental pollution from the excessive use of chemical pesticides.

As agriculture becomes more and more unprofitable and incomes keep falling, the majority of Indian farmers would prefer to quit the job. A study by the Delhier Center for Research into Development Societies (CSDS) shows that 76 percent of farmers would turn their backs on agriculture if they had alternative career options. According to government figures, the average monthly income of a farming family in India is a meager 2115 rupees (25 euros). That is, the majority of farmers somehow survive below the official poverty line, and the farming profession as a profession is at the bottom of the income pyramid.

Against this background, it is not surprising that, according to the 2011 census, around 2,300 farmers quit their jobs every day to look for work in the cities. Ironically, agriculture is in its greatest crisis at a time when the Indian economy as a whole is growing. Economic growth averaged 7 percent over the past decade. Even in the years from 2005 to 2009, when growth was between 8.3 and 9 percent, around 140 million people turned their backs on agriculture, according to a study by the Indian planning commission.

Former farmers usually find work in manufacturing. But even in this area, 53 million jobs have recently been lost. A study by the US organization CRISIL shows that more than 37 million Indian farmers have migrated to cities since 2007. Between 2012 and 2014, however, around 15 million returned to their villages due to stagnating economic development and a lack of jobs.

Around 54 percent of the 1.2 billion Indians live directly or indirectly from agriculture. Nevertheless, the sector's share of the gross national product is just 14 percent. That something is wrong is also shown by the persistently high number of peasant suicides. According to official crime statistics, around 300,000 Indian farmers have committed suicide in the past 17 years. Even in the country's breadbasket, in the state of Punjab, one or two farmers commit suicide every day. Around 60 percent of all farmers are heavily in debt. Even more shocking, however, is that those who produce the food for the country are increasingly going to bed hungry themselves.

Green revolution

When the Green Revolution started in 1966, India was still a ship-to-mouth existence. That is, it was dependent on international food aid, which went almost literally directly from the ship into the mouths of the hungry. By taking a quantum leap in agricultural production, India has overcome this condition and has become an agricultural exporter over the years. But while the Green Revolution helped meet the country's food needs, it bypassed the small and medium-sized farmers. Mainly because of this, the massive increase in production was accompanied by an increase in hunger.

Technology alone could not turn the tide. It was a two-pillar "avoiding hunger" strategy that led to an increase in production. The founding of the Commission for fixing the prices for agricultural products (then Agricultural Prices Commission, today Commission for Agricultural Costs and Prices, CACP) guaranteed the farmers a good purchase price, which was an incentive to produce more. At the same time, the Food Corporation of India (FCI) would be launched, which would buy the farmers' surplus crops. These products were then distributed to the needy at heavily subsidized prices through a nationwide network of shops.

Before the Green Revolution and before the Agricultural Prices Commission was founded, farmers sold their crops to whoever offered a good price. However, this was an exploitative system, because at harvest time the traders kept prices down. Only when the government introduced guaranteed purchase prices did the farmers receive a fair wage for their work.

The successes of the Green Revolution are mainly due to the guaranteed purchase prices. But the system is now heavily criticized. Neoliberal economists call it "an outdated measure of a socialist era". Its goal is to abolish the state's Agricultural Produce Marketing Committee Act (APMC), which allows farmers to sell their produce on special markets. There they can initially do business with private dealers. When there are no more commercial buyers, government agencies such as the FCI intervene to buy the leftover products at a guaranteed minimum price.

Against this background, the WTO demands that India limit the subsidies in the form of guaranteed purchase prices to the de minimis level. In the meantime, even the price commission is calling for the CACP to end the system that has been built up over decades. The reason given is that farmers could obtain better prices in free competition. In view of the fact that only 30 percent of the 600 million farmers have access to state-guaranteed purchase prices anyway, the remaining 70 percent should have made substantial profits. But that didn't happen. Rather, the fact is that the crisis in agriculture is worst where the free market rules.

An example of this is rice production in the eastern state of Bihar, where the APMC system was suspended in 2006. Compared to the state-guaranteed price of 1310 rupees (15.3 euros) for 100 kilograms of rice that farmers in Punjab received in 2014, farmers in Bihar have to pay 100 kilograms of rice for around 800 to 900 rupees (9.4 to 10.5 euros ) to sell. This is a classic example of ruthless exploitation by the private sector. And should the state marketing system in Punjab be abolished, the farmers there face the same fate as their colleagues in Bihar.

Rural exodus

India's government is currently pushing a second "Green Revolution", the aim of which seems to be to leave agriculture increasingly under the control of corporations. To this end, laws on the acquisition of land, the use of water, seeds, fertilizers, pesticides and food processing are being adapted to the needs of industry. Contract farming (analogously: contract farming) and new forms of trade are to be introduced in a fast-track process.

This policy is based on reports from the World Bank, the International Monetary Fund and other global financial institutions. In 1996, the World Bank forecast that by 2015 around 400 million Indians will migrate from the countryside to the cities. Subsequent world development reports by the bank, especially in 2008, even recommended setting up a nationwide network of training centers in which young farmers should be retrained to become industrial workers. The World Bank has also urged India to make it easier to lease rural areas so that businesses can easily access agricultural land.

For some years now, however, there has been increasing resistance in rural regions to the acquisition of huge arable land by industry. Nevertheless, the construction of industrial parks, real estate projects and highways is being aggressively pursued without first determining how much arable land will have to be used for agriculture in the future in order to be able to guarantee the food security of the population.

So there is a double crisis. On the one hand, people are migrating from rural regions, which threatens a collapse of the infrastructure in the metropolises. It is estimated that around 50 percent of all Indians will live in cities by 2035. On the other hand, the emigration from the country leads to the closure of agricultural areas. The result of this could be food shortages and threats to the food security of the Indian population. Politicians do not seem to be interested in this, however, because in the 2014 election campaign no party commented on the consequences of a growth model that ignores sustainable and economically viable agriculture. There is therefore a risk that under these conditions India will sooner or later return to the ship-to-mouth existence that was believed to have been overcome.