Indian Economy: A Rocking Horse Galloping Forward — III

This is the third part of a four-part article on the current state of the Indian economy by Kobad Ghandy. The author is a Marxist/Maoist thinker, incarcerated in Tihar Jail; he has written two books: one on the Indian economy (Globalisation: Attack on India’s Sovereignty, 2004) and the other on the world economy (Capitalism in Coma, 2009). The first and second parts of this article appeared in this journal’s May 5, 2012 and May 19, 2012 issues respectively.

Agriculture and Industry: Going Around in Circles

Productivity in agriculture always lags behind productivity in industry as technological advancement is much more rapid in the latter. That is why all developed countries, to cover this gap, heavily subsidise agriculture. Thereby the imbalance with industrial goods is minimised. Unfortunately, in India we see no such scientific planning; so agriculture is thrown not only to the vagaries of climate, but also to those of the market mechanism.

Industry too needs a vibrant agriculture and dynamic non-agricultural activities to create a sustainable market for its growth. Here too what we find is deep stagnation and the only vibrance (to an extent) is to be seen in some service sectors and for high-end goods.

Agriculture: Increasingly Unviable

Agriculture not only faces the vagaries of climate, stagnating yields due to environmental degradation, the tyranny of the market and middleman, but recently it has also been attacked by the neo-carpetbaggers seizing its lands.
First, let us look at the viability of agriculture. According to the Food and Agricultural Organi-sation in its recent report, both yield and per hectare crop value are far behind China, let alone the more developed countries. So, for example, the yield of rice in India averaged 3034 kg/ hectare, while that of China was 6233 kg/ hectare; for wheat these were 2688 kg/ hectare and 4155 kg/ hectare respectively. In 2009, the per hectare crop produce value for India was $ 911, for China it was $ 2780, and for South Korea it was $ 3530. The productivity of the agricultural labourer has increased by a mere 25 per cent between 1994 and 2009 in India, by 85 per cent in China, and by 185 per cent in South Korea in the name period. These figures indicate the extreme levels of stagnation in Indian agriculture.
Due to environmental degradation and lack of proper irrigation, the vagaries of nature cause havoc with the crops. Finally, if nature does not destroy the crop, a good crop results in a crash in prices; so either way the farmer is badly hit.
If we look at the rural market mechanism today, we find that the simple farmer has been pushed into the vampire-like grip of the middle-man. Never before has it been so devastating. In 1951-52, 89 per cent of what the consumer spent on food reached the farmer. Now, only 34 per cent reaches him, while as much as 64 per cent is swallowed up by middlemen. No wonder that agriculture is no longer viable, except for those big farmers who also indulge in trade. This amounts to a drain of a massive Rs 20 lakh crores from the agriculturists.

Over and above this, Vandana Shiva has esti-mated (The Asian Age, March 3, 2011) that Indian farmers are losing Rs 1.25 lakh crores ($ 25 billion) every year due to falling prices. So, for example, onion prices crashed this year to Rs 3.9 per kg from Rs 9 per kg in September 2011. Chilli prices fell from Rs 7000 per quintal in January 2011 to Rs 5000 per quintal by the year-end. Ginger (adrak) prices fell from Rs 3000 per quintal to Rs 600 per quintal last year; and vanilla prices, which had ruled at Rs 4000 per kg in the early 2000s, are just Rs 80 per kg today. Such drops in prices would be unimaginable in the industrial world, where inflation is pushing up the prices of all commodities, including inputs into agriculture.

So, Vijay Jawandhia, a farmers’ leader from Vidharbha, said (The Asian Age, March 17, 2012) that the cost of production of cotton went up by 42 per cent in just one year. With the government having capped the subsidy on potash and phosphate, the price of DAP has increased from Rs 485 in June 2011 to Rs 1050 today.
It is such outflows from agriculture which have created rural distress on an unprecedented scale. As per an NSSO study, this situation has pushed half the country’s farmer households into the debt trap. Of the 8.9 crore farmer households in the country, 4.4 crore are being sucked deeper and deeper into the quicksand of debt. This has resulted in an avalanche of farmers’ suicides—which continue non-stop into the fifteenth year. Earlier these were confined to the cotton-growing areas, beginning about the same time that the Bt Cotton seed was introduced (mid-1990s). Now it has spread to most agricultural commodities. For example, this year in Bardhaman district, the rice-bowl or West Bengal, which witnessed a bumper crop, also witnessed a spate of suicides due to the crash in prices.
If this is the state of the farmers who at least own some land, what would be the condition of the agricultural labourers?

Over and above this, huge amounts of prime agricultural land are being lost to industry, mining, real estate, infrastructure and just to speculation as with many an SEZ. In most cases the farmers get much below the market price, and are also deprived of any form of alternative source of livelihood. Those around the urban pocket who get huge amounts of cash, get drawn into moneylending, gambling and crime (see box below on the Tihar experience) and the lumpenisation of an entire population.

According to the ADB (Asian Development Bank), between 1951 and 1990 land equivalent to 1.5 lakh sq kms have been grabbed; more than half of this for private property. But in the last decade, the land grab has been even more fearsome. In UP alone, 33 per cent of agricultural land is being divested. Already 6.6 million hectares would be taken out of farming, which would mean a production loss of 14 million tonnes of foodgrains. In Maharashtra, the CM stated that the area under cereals and pulses further declined to 3.7 million acres in 2010-11. In Haryana, the government itself acquired 60,000 acres while all land in the neighbourhood of Delhi/Gurgaon has been bought up. In Chhattisgarh, 40,000 acres of double-cropped land has been bought in just two districts. And the story could go on and on from one State to the next. In Tamil Nadu, it is said that in most large villages, or those near towns, the land mafia is purchasing agricultural land, dividing it into plots, which are mostly bought up by middle-class employees of the region. Such a phenomenon is probably widespread in other areas as well.

All this displacement would be fine if this large mass of uprooted people could find fruitful employment. But, this is not the case as industry is not able to absorb them—for two reasons. First, it is itself somewhat stagnant due to the shrinking markets. And second, what little growth is there, is hi-tech, and so has little use of displaced farm labour.

Stagnant Industry

Industry, notwithstanding the major conce-ssions given by the government, is not in a very healthy condition—squeezed by falling markets, high cost of money, and spiralling inflation. India’s power, telecom and aviation sectors are in various states of crisis. All are capital intensive which attracted investment when global capital was cheap.

An already mentioned, the Index of Industrial Production (IIP) has been low throughout the latter part of last year. In January of the current year it dropped to just over one per cent.

A report of 200 BSE-quoted companies (that is, major companies quoted on the Bombay Stock Exchange) showed that while revenues went up by 26.6 per cent in Q3 of 2011 (that is, Quarter 3: October to December), profits grew by just 5.4 per cent. Another analysis of 444 companies showed that net sales in Q3 grew by 28 per cent, ’Other’ income by 41 per cent, but expenses increased by 33 per cent—resulting in a net profit decline of 0.7 per cent.

Companies were in such a pathetic state that in the nine months to the end of 2011, 75,000 loans from banks had to be restructured. Over two-thirds of these were those of big corporate with loans of over Rs 1000 crores—nearly 30 per cent being in the power sector.

In spite of this downturn in industry, the top echelons’ fortunes have been rising. In just last year the top 87 company CEOs have found that their average salary (that is, the legal part) rose by a gigantic 30 per cent to reach Rs 2 crores each. So, for example, in a company like Maruti between 2007 and 2011, the workers’ earnings went up by 505 per cent (given inflation, a de facto decline) while that of the CEO has gone up by 419 per cent. Here 65 per cent of workers are on contract, with draconian rules of work and leave.

While India’s top 100 families have a wealth of 25 per cent of our GDP, 90 per cent of our labour force is in the unorganised sector. Our billionaires are not true entrepreneurs, but more like the carpetbaggars of the 19th century, Arindam Chaudhuri, a management guru, has put it succinctly (The Asian Age, April 13 2012):

Our billionaires have accumulated their wealth purely through scams, loot and the criminal transfer of national wealth into private hands... In the latest phase, it is actually the GOI (Government of India) that created the process of creating numerous global billionaires out of our existing industrialists through the SEZ Act—what we at IIPM have termed the National Loot Act—and other such processes of giving away natural resources to private hands (for example, 2G, Coalgate etc.) … And that unfortunately is the story of India—blood billionaires making their billions out of scams, poverty and bloodshed…. One visit to Kalinganagar, Kujang and the likes, tells us the glaring tale of how a handful of companies are becoming abnormally wealthy by amassing an obscene amount of land and natural resources, that too at throw-away prices, thanks to the dacoits running this country in the garb of politicians.

Though the management people tend to have a general disdain for politicians, the fact of the matter is that much of the loot of our country’s wealth takes place through secret agreements called MoUs (Memoranda of Understanding). So while mining magnates mint thousand of crores, government royalties very from 0.5 per cent to seven per cent.

If the government is really serious about ‘privatisation’ and ‘liberalisation’, why does it give such massive doles to big business in the form of tax holidays, tax/excise duty concessions, low royalties, bailouts etc.? These business houses and banks should live or be allowed to die without state support, and the concessions etc. should go to those who really need them. With such measures the inefficient and corrupt businesses will disappear, while the people’s purchasing power will grow to create a vibrant market for industrial growth.

Towards Sustainable Agriculture/Industry

THE present form of industrial-agricultural complex is resulting in urban ghettoisation and rural destruction; it is just not sustainable at both the human and ecological levels. It dehumanises man and toxifies nature. Not only in most Third World countries we see this, but also the earstwhile communist societies like Russia, China, East Europe etc. are going in the same direction. This dehumanisation often takes place in the name of religion and in a country like India it fits comfortably in an already existing inhuman caste system. But, this dehumanisation also takes place in name of crass materialism and even in the name of socialism/communism. Ecological destruction is the product of this same materialism and crass consumerism which takes place in the name of development.
No society can really flower, whether in the sphere of social equity or in that of justice, in an atmosphere where man has been so dehumanised and reduced to mere reduced to mere robotic cogs in a monstrous industrial/financial machine.
Industry and agriculture need to be so reorganised as to be able to bring out the best in human beings and also to reverse the destruc-tion already wreaked in nature. Mere good intentions cannot achieve it, unless the material base helps it evolve. One cannot expect beautiful roses in a desert; we have to develop a fertile soil for the flowers to bloom. Both the India-type structure and the monstrous, impersonal state-forms have miserably failed.

But before we take a look at the possible alternatives in the light of past experiences, let us first have a look at today’s GOD—the Market in India.

(To be continued)