When India became independent in 1947,
the economy of the country was very fragile and
facing many problems. The level of poverty was
very high. Nearly 80% of the population was
living in rural areas, depending on agriculture
for their livelihood. As the craft-based
occupations had suffered during British rule,
many skilled artisans had lost their livelihood.
As a result, agriculture was overcrowded, and
the per capita income from agriculture was very low. Agriculture was also characterised
by semi-feudal relations between landowners
and cultivators or peasants, who were often
exploited by the land-owning classes.
The industrial sector had grown in the
decades before Independence, but it was still
quite small. The best known heavy industry
was Tata Iron and Steel. Besides this, the
main manufactures were cotton spinning and
weaving, paper, chemicals, sugar, jute and
cement. Engineering units produced machinery for these units. However, the sector was
relatively small and did not offer a significant
potential for employing the surplus labour from
the agricultural sector. In fact, the industry
sector only accounted for 13% of the total
Gross Domestic Product (GDP) in 1950. Most
manufactured consumer goods were imported.
T
he Indian offices of major foreign companies
were involved only in marketing and sales, and
not in manufacturing.
Thus, the new government of India was
faced with the mammoth task of developing the
economy, improving conditions in agriculture,
widening the manufacturing sector, increasing
employment and reducing poverty.
Socialistic Pattern of Society
Economic development can be achieved in
many ways. One option would be to follow the
free enterprise, capitalist path; the other was to
follow the socialist path. India chose the latter.
In fact, the Preamble to the Indian Constitution,
cited in the previous lesson, stated
unambiguously that India would be “a sovereign,
socialist, secular democratic republic”. The
objectives of this socialist pattern of development
were: the reduction of inequalities, elimination
of exploitation, and prevention of concentration
of wealth. Social justice meant that all citizens
would have an equal opportunity to education
and employment. This essentially entailed the
active participation of the state in the process of
development.
In agriculture, social
and economic justice was
to be achieved through a
process of land reforms
which would empower the
cultivator. In industry, the
state would play an active
role by setting up major
industries under the public
sector. These were to be
achieved through a comprehensive process of
planning under Five Year Plans. These strategies
had been borrowed from the Soviet experience
of rapid economic development. Nehru was a great admirer of the success of the Soviet Union
in achieving rapid development, and thus the
ideology on which this strategy is based is often
referred to as “Nehruvian Socialism”.
Agricultural Policy
At the time of Independence, agriculture in
India was beset with many problems. In general,
productivity was low. The total production of
food grains was not enough to feed the country,
so that a large quantity of food grains had to be
imported. Nearly 80 percent of the population
depended on agriculture for their livelihood.
This automatically reduced the income of each
person to very low levels. This is a situation
described as ‘disguised unemployment’. That is,
even if many people shifted to other occupations,
total production levels would remain the same,
because this surplus population was not really
required to sustain the activity, and was, in
effect, unemployed. Given the high level of
poverty among the rural population, most of
them were heavily indebted to moneylenders.
At the time of Independence, agriculture in
India was beset with many problems. In general,
productivity was low. The total production of
food grains was not enough to feed the country,
so that a large quantity of food grains had to be
imported. Nearly 80 percent of the population
depended on agriculture for their livelihood.
This automatically reduced the income of each
person to very low levels. This is a situation
described as ‘disguised unemployment’. That is,
even if many people shifted to other occupations,
total production levels would remain the same,
because this surplus population was not really
required to sustain the activity, and was, in
effect, unemployed. Given the high level of
poverty among the rural population, most of
them were heavily indebted to moneylenders.
Land Reforms and Rural Reconstruction
Under the Constitution of India, agriculture
was a ‘state subject’, that is, each state had to
pass laws relating to land reforms individually. T
hus, while the basic form of
land reforms was common
among all the states, there
was no uniformity in the
specific terms of land reform
legislation among the states.
(a) Zamindari Abolition
Abolition of Zamindari was part of the
manifesto of the Indian National Congress
party even before Independence.
What was Zamindari and who were the
zamindars? Zamindar referred to the class of
landowners who had been designated during
British rule as the intermediaries who paid
the land revenue to the government under a
Permanent Settlement. They collected rent from
peasants cultivating their land and were obliged
to remit a fixed amount to the government as
land taxes. There was no legal limit to these
demands, and zamindars generally extorted
high rents from the cultivators leaving them
impoverished. In public opinion, these
zamindars were considered to be a decadent,
extravagant and unproductive class who were
living on unearned income. Abolishing their
privileges and restoring land to the cultivators
was therefore a prime objective of the
government.
Most provinces in India had enacted laws
abolishing the zamindari system even before
the Constitution was framed. By 1949, Uttar
Pradesh, Madhya Pradesh, Bihar, Madras, Assam and Bombay had introduced such
legislation. West Bengal, where the Permanent
Settlement was first introduced, the act was
passed only in 1955. Land taken away from the
zamindars was distributed among the tenants.
The provincial legislatures also recommended
the amount of compensation to be paid to the
zamindars.
Zamindars in various parts of the country
challenged the constitutionality of the zamindari
abolition laws in court. The government then
passed two amendments to the Constitution,
the First Amendment in 1951 and the Fourth
Amendment in 1955, which pre-empted the
right of zamindars to question the takeover of
their land or the value of the compensation.
Finally, zamindari abolition was completed
by 1956, and was possibly the most successful
of the land reforms. About 30 lakh tenants
and sharecroppers gained ownership of 62
lakh hectares of land. The total compensation
actually paid to the zamindars amounted to
`16,420 lakhs (which amounted to only about
one-fourth of the total compensation amount
due).
In sum, however, the reform only achieved
a very small part of the original objective. Many
zamindars were able to evict their tenants and
take over their land claiming that this land was
under their ‘personal cultivation’. Thus, while
the institution of zamindari was dismantled,
many landowners continued in possession of
vast tracts of land.
(b) Tenancy Reform
Nearly half of the total cultivated land in
India was under tenancy. Tenancy refers to an
arrangement under which land was taken on
lease from landowners by cultivators under
specific terms. Not all tenants were landless
peasants. Many small landowners who wanted
to cultivate additional land leased out land from
other landowners. Some richer landowners also
took additional land for cultivation on lease. In
general, the rent was paid in kind, as a share of
the produce from the land.
It was common for large landowners to
lease out the land to tenants. Usually these
tenancy arrangements continued for long
periods of time. The rents received by the
landowners generally amounted to about 50%
or more of the produce from the land, which
was very high. Tenancy was a customary
practice and agreements were rarely recorded.
Thus, tenants of long-standing were almost
never deprived of tenancy rights. However,
tenants could also be evicted at short notice,
and tenants therefore always lived under some
uncertainty.
Tenancy reform was undertaken with two
objectives. One was to empower the cultivators
by protecting them against the landowners.
The other was to improve the efficiency of land
use, based on the assumption that tenancy was
inefficient. Landowners rarely had any incentive
to invest in improving the land, and were
interested only in deriving an income from their
land. Tenants, who had no ownership rights and
were liable to pay high rents, had neither the
incentive nor surplus money to invest in land.
Tenancy reform legislation was aimed at achieving three ends:
(i) to regulate the rent;
(ii) to secure the rights of the tenant;
(iii) to confer ownership rights on the tenants by expropriating the land of the land
owners.
Legislation was passed in the states
regulating the rent at one-fourth to one
third of the produce. But this could never be
implemented successfully. The agricultural
sector had a surplus of labour whereas land
was a resource in short supply. Price controls
did not work in a situation when the demand
exceeded the supply. All that happened was that
rent rates were pushed under the table without
any official record.
Laws to secure the rights of the tenant
and to make tenancy heritable were equally
unsuccessful. Tenancy agreements were made
orally, and were unrecorded. The tenant thus
always had to live with the uncertainty that their land could be resumed by the landlord any time.
When tenancy reform laws were announced
many landowners claimed to have taken back
their land for ‘personal cultivation’ and that
tenants were only being employed as labour to
work the land. Tenancy reform was bound to be
ineffectual in the absence of a comprehensive
and enforceable land ceiling programme.
Land reform measures initiated in Kerala
and West Bengal met with reasonable success.
While abolition of landlordism was remarkably
successful, conferment of ownership rights to
tenants had mixed results.
(c) Land Ceiling
Land ceiling refers to the maximum amount of land that could be legally owned by
individuals. Laws were passed after the 1950s to enforce it. In Tamilnadu it was implemented first in 1961. Until 1972, there was a ceiling on
the extent of land that a ‘landholder’ could own.
After 1972, the unit was changed to a ‘family’.
This meant that the landowners could claim
that each member of the family owned a part
of the land which would be much less than the
prescribed limit under the ceiling.
Deciding the extent of land under land
ceiling was a complex exercise, since land was not
of uniform quality. Distinctions had to be made
between irrigated and unirrigated dry land, and
single crop and double crop producing land. At the
same time, exemptions from the Act were granted
to certain categories of land such as orchards,
horticultural land, grazing land, land belonging
to religious and charitable trusts, and sugarcane
plantations. These exemptions were also used to
evade the land cieling acts and reported cases of
manipulation of land records adversely impacted
the otherwise laudable initiative.
Ultimately, only about 65 lakh hectares of
land was taken over as surplus land. This was
distributed to about 55 lakh tenants–an average
of a little over 1 hectare per tenant.
Efforts like Bhoodan
started by Vinoba Bhave to
persuade large landowners
to surrender their surplus
land voluntarily attracted
much public attention.
(d) Overall Appraisal
Land reform legislation has overall not
been a great success. In economic terms, the
dream of an agricultural sector prospering
under peasant cultivators with secure
ownership rights has remained just that – a
dream – and there was no visible improvement
in efficiency. In more recent years, when
agriculture has grown due to technological
progress, a more efficient land market is seen
to be operating which is more conducive for
long term growth.
In terms of social justice, the abolition of
the semi-feudal system of zamindari has been
effective. The land reform measures have also
made the peasants more politically aware of
their rights and empowered them.
Development of Agriculture
(a) Green Revolution
By the middle of the 1960s the scenario with
regard to food production was very grim. The
country was incurring enormous expenditure
on importing food. Land reforms had made
no impact on agricultural production. The
government therefore turned to technological
alternatives to develop agriculture. High
Yielding Variety (HYV) of seeds of wheat and
rice was adopted in 1965 in select areas well
endowed with irrigation.
Unlike traditional agriculture, cultivation
of HYV seeds required a lot of water and use
of tractors, chemical fertilizers and pesticides.
The success of the initial experimental projects
led to the large-scale adoption of HYV seeds
across the country. This is generally referred to as the Green Revolution. This also created an
enormous demand for chemical fertilizers and
pesticides, and these industries grew as well.
Finally, within twenty years, India achieved
self-sufficiency in food production. Total rice
production increased from 35 million tonnes
in 1960–61 to 104 million tonnes in 2011–12.
The increase in wheat production was even more
impressive, from 11 million tonnes to 94 million
tonnes during the same period. Productivity
also increased. A large reserve stock of food
grain was built up by the government through
buying the surplus food grain from the farmers
and storing this in warehouses of the Food
Corporation of India (FCI). The stored food
grains were made available under the Public
Distribution System (PDS) and to ensure food
security for the people.
Another positive feature has been the
sustained increase in the production of milk
and eggs. Due to this, the food basket of all
income groups became more diversified.
While the Green Revolution has been
very successful in terms of increasing food
production in India, it has also had some
negative outcomes. First of all, it increased the
disparities between the well-endowed and the
less well-endowed regions. Over the decades,
there has been a tendency among farmers to use
chemical fertilizers and pesticides in excessive
quantities resulting in environmental problems.
There is now a move to go back to organic
farming in many parts of the country. The
lesson to be learnt is that development comes at
a certain cost.
(b) Rural Development Programmes
By the 1970s, the levels of poverty had
not declined in spite of overall development
of industry and agriculture. The assumption
that development would solve the problem of
poverty was not realised, and nearly half the
population was found to be living below the
poverty line. (The poverty line is defined as the
level of expenditure required to purchase food
grains to supply the recommended calorie level
to sustain a person.) Though the percentage
of the persons below the poverty line did not
increase, as the population grew, the number
of persons living below the poverty line kept
increasing.
Poverty prevailed both in rural and
urban areas. But since nearly three-fourths
of the population lived in rural areas, rural
poverty was a much more critical problem
requiring immediate attention. Poverty levels
were also much higher among specific social
groups such as small and marginal farmers,
landless labourers and depressed classes in
resource poor regions without irrigation and
with poor soil, etc.
A whole range of rural development
programmes was introduced by the government
to tackle rural poverty. These included
Community
Development
Programmes,
reviving local institutions like Panchayati Raj, and
targeted programmes aimed at specific groups
such as small and marginal farmers. The thrust
was on providing additional sources of income to
the rural households to augment their earnings
from agriculture. Two major programmes are
explained in greater detail below.
Integrated Rural Development Programme (IRDP), 1980–1999
In 1980 a consolidated rural development
programme called Integrated Rural
Development Programme was introduced. The
purpose was to provide rural households with
assets which would improve their economic
position, so that they would be able to come out of poverty. These could be improvements to
the land, supply of cows or goats for dairying or
help to set up small shops or other trade-related
businesses. Introduced in all the 5011 blocks in
the country, the target was to provide assistance
to 600 families in each block over five years
(1980–1985), which would reach a total of 15
million families.
The capital cost of the assets provided
was covered by subsidies (divided equally
between the Centre and the States) and loans.
The subsidy varied according to the economic
situation of the family receiving assistance. For
small farmers, the subsidy component was 25%,
33.3% for marginal farmers and agricultural
labourers, and 50% for tribal households. Banks
were to give loans to the selected households to
cover the balance of the cost of the asset. About
53.5 million households were covered under the
programme till 1999.
Dairy animals accounted for 50% of the
assets, non-farm activities for 25% and minor
irrigation works for about 15%. The functioning
and the effects of IRDP were assessed by many
economists as well as government bodies. Many
studies were conducted about the end result of
this programme.
Lack of proper selection procedures for
identification of beneficiaries, insufficient
investment per household, absence of post
implementation audits of the scheme, regional
disparities in lifting the identified beneficiaries
above the poverty line was a major issue.
Considering the limited success achieved
by the programme it was restructured in 1999
as a programme to promote self-employment of
the rural poor.
Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA)
Over the years, due to concerted efforts,
the percentage of households below the poverty
line has come down substantially in India. It is
now widely recognised that eradicating rural
poverty can be achieved only by expanding the scope for non-agricultural employment. Many
programmes to generate additional employment
had been introduced over the years. Many were
merged with the employment guarantee
scheme, which is now the biggest programme
on this front in the country.
The National Rural
Employment Guarantee
Act (subsequently
renamed MGNREGA
after Mahatma
Gandhi) was passed in
2005, with the aim of
providing livelihood
security to poor rural
households. This was to
be achieved by giving at
least 100 days of wage employment each year to
adult members of every household willing to do
unskilled manual work. This would provide a
cushion to poor rural households which could
not get any work in the lean agricultural season
which lasted for about three months each year.
In this exercise, the work undertaken would
create durable assets in rural areas like roads,
canals, minor irrigation works and restoration
of traditional water bodies.
The earlier targeted programmes of rural
development were based on the identification
of below poverty line families, which had led
to several complaints that ineligible families
had been selected. MGNREGA, however, is
applicable to all rural households. The reasoning
is that it is a self-targeting scheme, because
persons with education or from more affluent
backgrounds would not come forward to do
manual work at minimum wages.
The earlier employment generation
programmes did not give the rural poor any right
to demand and get work. The significant feature
of this Act is that they have the legal right to
demand work. The programme is implemented
by Gram Panchayats. The applicants have
to apply for this work and are provided with
job cards. Work is to be provided by the local
authorities within 15 days. If not, the applicant is entitled to an unemployment allowance.
The work site should be located within five
kilometres of the house of the applicant.
No contractors are to be involved. This is
to avoid the profits which will be taken by the
middlemen thus cutting into the wages. The
ratio of wages to capital investment should
be 60:40. One-third of the workers would be
women. Men and women would be paid the
same wage.
As with all government programmes,
many studies were conducted regarding the
proper implementation of MGNREGA. On
the positive side, agricultural wages have gone
up due to the improved bargaining power of
labour. This has also reduced the migration
of agricultural workers to urban areas during
the lean period or during droughts. One of
the most important benefits is that women are
participating in the works in large numbers and
have been empowered by the programme.
Wages of the workers are paid directly
into bank accounts or post office accounts to
ensure transparency and hassle – free transfer
of payments. The involvement of civil society
organisations, non-governmental organisations
and political representatives, and a more
responsive attitude of the civil servants have
improved the functioning of MGNREGA in
states like Tamil Nadu, Andhra Pradesh and
Rajasthan. Efficiency has increased up to 97%.
Between
2006
and
2012,
around
`1,10, 000 crores had been distributed directly as
wage payment under the programme, generating
1200 crore person-days of employment. In spite
of many shortcomings, the functioning of the
programme has improved due to higher levels
of consciousness among the rural poor and
concerned civil society organisations. Though
many critics feel that the high expenditure
involved in the programme increases the
fiscal deficit, the programme remains popular
and nearly one-fourth of all rural households
participate in the programme each year.