Ending India’s Agrarian Nightmare

In 1991, the Congress-led government of Indian Prime Minister P.V. Narasimha Rao passed a series of groundbreaking reforms that unshackled the economy from its tight state controls, transforming it into a market-oriented, globalized giant. Those reforms unleashed India’s growth miracle and lifted millions of people out of poverty.

Today, India once again finds itself at a crossroads as its political left and right go to war over the country’s future. Hanging in the balance is the fate of its farmers and rural poor.

Although the reforms of 24 years ago liberalized the market for products and services, casting off the excesses of an industrial licensing system that required a government permit to do virtually anything associated with business or trade, they left untouched the markets for factors of production: land, labor, and capital. That led to a lopsided pattern of development that focused growth on high-tech industry and services and largely bypassed India’s large pool of unskilled labor, most of whose members were still working the land. After 10 years of a left-of-center, Congress-led government that consistently shelved reforms in favor of large entitlement-based welfare schemes, Prime Minister Narendra Modi’s right-of-center Bharatiya Janata Party (BJP)-led government is finally attempting them.

Of the three factors of production, land market reform has proved the most controversial. It is also the reform on which the BJP has expended the most political capital. Until 2013, land acquisition was governed by a colonial-era law dating back to 1894 that essentially allowed the government to expropriate any land it wanted without receiving consent from those whose land was acquired, paying them little or no compensation in the process — a nasty form of eminent domain. In the long period after independence when India was largely under the rule of the Congress party, this law was used and misused extensively. The government often acquired land from farmers on the cheap and turned it over to crony capitalists, with politicians and their friends reaping the benefits.

Many agreed that the colonial-era law needed to be reformed, a task the government finally undertook in 2013. But the Congress-led government tilted to the other extreme, enacting a law so stringent that it became nearly impossible for the government to acquire land for infrastructure, defense, or other public purposes. This is because the reform was crafted by the left-of-center social activists and academics who constituted Congress party leader Sonia Gandhi’s National Advisory Council.

The Modi government recognized that this law would stifle its development agenda and needed to be changed. In late 2014, his government introduced an amendment that would exempt certain key areas, such as infrastructure and defense, from the onerous, time-consuming, and costly consent and social-assessment requirements of the 2013 law. But the government didn’t have the numbers in the upper house of Parliament, forcing Modi to use his executive power to push the law through as an ordinance in December 2014 after the parliamentary session concluded. The ordinance, which has a term of six months, was renewed in April and is once again expected to be brought before Parliament for approval later this session.

The stakes couldn’t be higher. For the Modi government, backing down would be nothing short of a disaster, signaling that it doesn’t have the stomach for a fight, despite sailing to victory last year on a massive mandate for development. For India’s political left, it’s an existential moment, as it tries to reassert its relevance by claiming that the government’s land reform is anti-farmer and anti-poor. Leading the charge is the Congress party, which, since losing badly last year, has lurched even further to the left, portraying itself as the champion of the poor and attempting to cast the Modi government as in the pocket of big business.

Joining the political left are a motley group of far-left communist parties whose vote shares have shrunk drastically over the years and that are trying to stave off political extinction by beating the drum that the Modi government is working in the interests of large corporations rather than ordinary people. It’s ironic that while the Chinese Communist Party has ditched the ideology of Marx, Lenin, and Mao, preserving only its political control, Indian leftists continue to oppose economic reforms that have lifted millions out of poverty, a goal they should presumably share.

The left-of-center coalition allied against the government’s land reform includes the populist, far-left, Aam Aadmi Party (AAP), which swept to power in Delhi’s Legislative Assembly election this year and whose leader, Arvind Kejriwal, has theatrically and provocatively referred to himself as an anarchist. At an April 22 rally organized by the AAP against the land bill, Gajendra Singh, an individual the party originally claimed was a farmer, allegedly hanged himself in plain view of Kejriwal, who has claimed the alleged suicide was an act of protest against the land bill. The actual circumstances of Singh’s death — even whether he was actually a distressed farmer — are in dispute and currently under police investigation. The latest reports from the Delhi police claim that AAP volunteers goaded on Singh, leading to his accidental suicide.

But none of the murkiness surrounding Singh’s death has stopped the bill’s opponents from prematurely linking the tragedy to the government’s land reform. In their campaign against the land bill, they have also attempted to invoke well-known, long-standing problems in the agricultural sector, such as the suicide of debt-laden farmers and crop failures owing to droughts or unseasonal rains. (In fact, official data shows that farmer suicides as a percentage of total suicides hovered around 15 to 16 percent for about a decade, before dropping to their current level of 8.7 percent,a percentage far below farmers’ share of the total population.)

Ironically, it is the very unviability of small-scale farming that is the best argument in favor of the government’s bill. To improve their lives, farmers need a way out of agriculture and into the manufacturing or services sector. In fact, polls show that most small-scale farmers would happily sell their land, if only they could.

A survey of some 5,350 farmers across country conducted in late 2013 and early 2014 by the Centre for the Study of Developing Societies, a nonpartisan Delhi-based think tank, suggests a dubious future for Indian agriculture. Twenty eight percent of those surveyed said they did not like being farmers. But of the 72 percent who said they did, fully 60 percent claimed they were farmers only because it was a traditional occupation, while only 10 percent said that farming actually led to a good livelihood. Sixty two percent of the respondents said they would give up farming if they could find a better alternative in the city. And tellingly, a whopping 76 percent of farmers’ children said they would like to get out of farming. India’s farmers, present and future, feel trapped.

Another key statistic: Nearly half of India’s population works in agriculture, but produces only 14 to 18 percent of India’s GDP. By comparison, in advanced economies like the United States, farmers constitute around 1 to 2 percent of the workforce and represent an approximately equal share of GDP. Indian agriculture is highly unproductive and inefficient. Indeed, data shows that the 65 percent of farm households that own less than one hectare of land cannot break even, sending them spiraling into debt. They’re only kept afloat by government schemes that funnel money to them and by periodic waivers of farm loans.

The only people who seem to want beleaguered farmers to be shackled to an unproductive lifestyle are the ideologues of the left. Their ideology is politically useful for the Congress and other parties struggling to remain relevant. It’s noteworthy that Rahul Gandhi, Congress vice president and fifth-generation political dynast, has held rallies attacking the land bill and drawing a spurious — though, for some, emotionally stirring — connection with agrarian issues. But he has failed to critique the unglamorous and very real problems impacting farmers, such their lack of awareness of crop insurance and the imperfect rollout of bank accounts needed to receive compensation payments. The more basic point is that Gandhi’s approach essentially freezes farming and farmers as a static identity, forcing them into a lifelong vocation rather than an activity they might or might not choose, depending on the economic incentives.

While populist Indian politicians are trying to turn private enterprise into a dirty word among the intelligentsia, the poor have no such ideological hang-ups. In the 2014 general election, they came out in droves to vote for Modi’s pro-development, pro-growth agenda. They are seeking better opportunities for employment and entrepreneurship, and Modi’s reform agenda is a crucial first step.

If Modi blinks first, it’ll be a huge defeat not just for him and his party, but for the prospects of real economic opportunity for millions of farmers seeking to be liberated from living on the land. And with that, India can also bid farewell to Modi’s dream of turning India into a manufacturing powerhouse and offering gainful employment to the 13 million new workers who’ll be coming on stream every year — for years to come.

Photo credit: Chandan Khanna / AFP