Agriculture, Agrarian Crisis and

The Indian Journal of Labour Economics, Vol. 49, No.
4, 2006
AGRICULTURE, AGRARIAN CRISIS AND

EMPLOYMENT: SOME VIEWS
Surjit Singh*
The paper examines a few issues concerning performance of agriculture, state of

Indian farmers, agrarian crisis and employment. It finds that the agrarian crisis is
due to the policy regime. Diversification of agriculture would hardly lead to more
employment on its own. The post-1996-97 era was a crisis period as rural employment
and farmers’ incomes slowed down. Rural employment is on decline and the new
policy regime has fuelled it. State has to be pro-active to restore the balance.
I. INTRODUCTION
The importance of agriculture in India is very obvious. Agriculture continues to be the main
employer in India. Agriculture, comprising crop and animal husbandry, fisheries, forestry and
agro-forestry and agro-processing, is the largest private sector industry in India, providing
livelihood opportunities for over 60 crore women and men. This has great significance as an
alternative viable source of livelihood and employment is not available for vast amount of the
population in the near future. Food consumption accounts for a large share in expenditure of
the total household income in rural India. Even a small change in agricultural employment
opportunity, or prices, can have major socio-economic effects.
The social and economic vulnerability of agriculture in India is reflected in parameters
such as contribution of agriculture to the gross domestic product (GDP), low commercialisation
of agriculture, low productivity, weak market orientation, preponderance of small and marginal
uneconomical operational landholding (80 per cent of farm families belong to this category),
lack of infrastructure, dependence on monsoon, susceptibility to natural calamities, and
dependence of a very large percentage of population on agriculture for their livelihood etc.
From the late 1960s, the rate of growth in food production generally exceeded the rate of growth
of the population. Thirty years after the dawn of green revolution, Indian farmers are realising
that their love affair with intensive agriculture is over. Harvests are not plentiful now. Indian
agriculture today is at the crossroads. There is fragmentation of holdings. Food grain production
in frontline agricultural states has decelerated. The number of landless in the rural areas too is
multiplying over the past few decades. The negative terms of trade for agriculture and declining
public sector investments in farming are indices of the sluggishness in this sector.
Workforce participation rates in rural areas have declined as a consequence. It is more for
rural women than men. Besides the feminisation of lowly paid menial and arduous work,
women’s employment in the post-reform phase has declined since the early eighties. Informal
sector has become a source of employment. Agriculture and allied activities continue to dominate
in work in rural India. The 1980s and 1990s saw a significant fall in the pace of urbanisation
that coincided with distinct increase in the rate of GDP growth. There is eceleration in agricultural
growth and rural non-agricultural employment growth, and the rate poverty reduction has also
slowed down. One finds little correspondence between reforms and rural development or between
urban economic development and rural development. In rural areas the unorganised sector is
* Invited Paper. The author is Director, Institute of Development Studies, Jaipur.
766 THE INDIAN JOURNAL OF LABOUR ECONOMICS
generating too few jobs, the majority of which are casual with woefully low labour productivity.
Rural employment growth rates have shrunk. There appears to be distress diversification. New
initiatives are taking place in rural areas like contract farming, rural employment guarantee
scheme, opening up of agricultural goods markets, reduction in procurement by the state, water
privatisation etc that have added implication for rural labour markets. Land concentration is
taking place too and land reforms have failed leading to crisis in rural livelihoods. Farmers’
debt is increasing and suicides in certain parts is a daily occurrence now. There is credit squeeze,
especially for small and marginal farmers. Rising population, the emergence of a labour surplus
economy and commercialisation of agriculture has contributed to weakening of the social support
system. This means that there is now an agrarian crisis in India. In this context this paper
examines a few issues concerning performance of agriculture, state of Indian farmers, agrarian
crisis and employment.
II. THE PERFORMANCE OF AGRICULTURE

The GDP growth in agriculture and allied sectors has observed a deceleration in the second half
of the 1990s, from 3.2 per cent per annum in the period 1980-81 to 1995-96 to 1.9 per cent per
annum during 1996-97 to 2001-02. The first two years of the 10th plan observed a growth rate
of only 0.9 per cent per annum. In fact the per capita agricultural GDP showed no significant
upward trend after 1996-97, only fluctuations. Delving further, the following are also noticed:
(i) There was deceleration in both livestock and crops sectors, but more markedly for
crops. Growth rates of livestock and crop output have averaged about 3.6 and 1.1 per
cent per annum respectively after 1996-97, down from 4.5 and 3.1 per cent during
1980-97.
(ii) Within the crop sector, only fruits and vegetables, condiments and spices and drugs
and narcotics continued to grow at over 2.5 per cent per annum. The growth rates of
output of other crops fell below 0.5 per cent per annum after 1996-97 as compared to
over 3 per cent earlier.
(iii) Growth of input use in agriculture also decelerated after 1996-97, to about 2 per cent
per annum from over 2.5 per cent during 1980-97. This occurred mainly after 1997-
98 when, reversing an earlier trend, output prices began to fall relative to input prices.
(iv) Deceleration in agricultural growth can be partly attributed to lower profitability leading
to slower increase in input use. Also growth of input productivity fell from about 1 per
cent per annum prior to 1996-97 to negligible thereafter.
(v) Since 1997 agricultural prices declined relative to prices not only of inputs but also
non-food consumer goods. This resulted in purchasing power of agricultural incomes
(current price GDP divided by consumer expenditure deflator) decelerated more than
GDP at constant prices. Real farm incomes defined thus not only show no per capita
growth after 1996-97, but also exhibit increased variability.
(vi) The deceleration in output growth after mid-1990s went in arms with a fall in the
relative price of agricultural produce implying a demand problem, which increased
market risk.
(vii) The private consumption expenditure data confirms this. Real per capita food
consumption declined after 1998-99 despite fall in relative food prices. Per capita
consumption declined absolutely in case of cereals, pulses, and edible oils and its growth
decelerated for all types of food, including fruits, vegetables and milk.
AGRICULTURE, AGRARIAN CRISIS AND EMPLOYMENT 767
At the crop level, the worrisome feature is the trend in rice and wheat production is lower
than the population growth since the ninth plan (GoI, 2005). Yield growth decelerated from 3
per cent per annum during the 1980s to 1 per cent throughout the 1990s. This is attributed to
exhaustion of technological progress. The yield growth rate of coarse cereals stood around 2
per cent during the 1990s, however. The credit goes to maize crop here. There has been area
shift from coarse cereals, except maize, to other crops (Singh, 2005a). This led to no growth in
total coarse cereals output. On the pulses front, stagnating yields accompanied shrinking area.
Till the mid-1990s, area, yield and production expanded in case of oilseeds, but cheaper imports
and disincentives to producers led to stagnation in yield and decline in area since then. The
peak production of 244 lakh tonnes in 1996-97 has never been achieved, exceptions though.
Growth rates are negligible. India now imports almost half the domestic production, which was
10 per cent in 1994-95. Cotton production also has not performed well despite introduction of
Bt cotton varieties. This crop has rather led to increasing suicides by farmers in cotton belts of
India. The main culprits cited are lower prices and pest incidence. The costs also went up with
greater use of pesticides.1 India’s cotton imports between 1996-97 and 2004-05 stood at over
115 lakh bales. This is over three times what was imported in the preceding 25 years. The exports
did not cross 30 lakh bales. The cotton economy continues to suffer from well-known problems
causing low yield and poor quality. Sugarcane production, however, increased from 27.8 crore
tonnes in 1996-97 to 29.7 crore tonnes in 2001-02, 1.5 per cent per annum growth. Expansion
in area helped this when yield growth decelerated (fell to nil from 2 per cent). The production
fell to 28.2 crore tonnes in 2002-03 and then sharply to 23.6 crore tonnes in 2003-04. Looking
further into the sad commentary of Indian agriculture, we find that even plantations performed
poorly since 1998. The world prices started declining. Tea production increased by 2.5 per cent
per annum between 1990-91 and 1998-99, but declined since then. Coffee production decelerated
from 5.5 per cent per annum to almost nil. Rubber production also steeply declined from over 6
per cent to 3 per cent per annum. The effect on income was tremendous. The only saving grace
is the fruits and vegetables sector where the data itself is poor and cannot be relied up on
effectively. The allied sectors like livestock and fisheries had a modest run during the 1990s
and thereafter. This means that almost every sector experienced lower growth after 1996-97
than the previous decade and a half. The per capita output in 2003-04 was less than 1996-97 in
every crop sector except horticulture.
What is the regional story? The district-wise data on production of individual crops reveal
(GoI, 2005) that
(i) In the relatively rich irrigated rice-wheat and wheat-sugarcane regions, although yields
decelerated and almost stagnated, income growth did not slow down significantly. It
is attributed to Minimum Support Prices (MSP). There was no crop diversification
and area increased further under wheat, rice and sugarcane.
(ii) In high rainfall un-irrigated regions mainly growing rice, growth decelerated but yields
continued to grow faster than the national average. However, since MSP policy was
ineffective, farm incomes declined in these regions when it was decided in 2001 to
reduce stocks by lowering sales prices and increasing food for work. Nearly a third of
crop growth in these regions since mid-1990s has been on account of diversification,
mainly towards vegetables.
(iii) The dry and arid regions growing un-irrigated coarse cereals, cotton and oilseeds were
the most dynamic during 1992-98 when world prices were high. Yield growth was
moderate but area increased rapidly and there was very significant diversification
from coarse cereals, pulses and lower valued oilseeds towards cotton, higher value
oilseeds and horticulture. However, lower world prices since then have combined
with successive droughts to reduce incomes very significantly. These regions, already
most vulnerable to monsoon risk, bore the brunt of transmitted world price volatility.
(iv) The other regions affected significantly by world price movements were the plantations
and the already diversified coastal regions in the South.
Thus, Ninth Plan onwards there is a serious set back to agriculture sector. Input use and
productivity growth decelerated on the supply side and it was accompanied by low demand
growth and higher farm income variability. This is the most candid admission of crisis that has
engulfed the agriculture sector by the Planning Commission (GoI, 2005). Does this mean that
the policy regime during the first half of the nineties put the clock back as far as agriculture
sector is concerned? Host of reasons are cited in the literature for this.
The slowing down of agricultural growth is widely attributed to the slowing down of
investment, especially public investment. The decline in the share of the agriculture sector’s
capital formation in GDP from 2.2 per cent in the late 1990s to 1.7 per cent in 2004-05 is a
matter of concern (Table 1). The nineties saw a significant decline in capital formation in the
agriculture sector; the post-1996-97 period is a sheer neglect era of agriculture sector. It may
be pointed out here that though private investment in agriculture has been much higher than
public investment, it has been mainly concentrated on ground water exploitation i.e., deepening
of wells and installing more powerful pumps (submersible) and mechanisation. These
investments do not enhance production capacity. Mechanisation replaces human and animal
labour; their contribution to increasing productive capacity is very limited. Besides the other
factors, the deceleration in input use growth has also contributed towards deceleration in
yield growth though the potential for yield growth with dissemination and application of
known technologies is not yet exhausted (GoI, 2006).
India joined the WTO in 1995-96 and international experience of liberalisation on import
regime shows that it had direct adverse impact on small and medium scale producers. It is argued
that cost reductions can happen through economies of scale and vertical integration, which is a
domain of rich and large farmers and enterprises (see Tauli-Corpuz, Sidchogan-Batani and Maza,
2006; Raman, 2006). Under the new dispensation, many poor farmers are passive participants
who sell at low prices (immediately after harvest) and buy at high prices, with little choice of
where they conduct transactions, with whom, and at what price (see IFAD, 2001a). In certain
areas, poor infrastructure also hinders participation of small farmers resulting in post-harvest
losses (IFAD, 2001b). The comparative advantages in production have been increasingly being
lost. The classic example is of man-made facilities created for production in one area affecting
producers in traditional areas (Raman, 2006). India has unilaterally reformed after the first
multilateral negotiations on agricultural trade and rendered small and marginal farmers vulnerable
to greater openness and imposed further constraints on policy intervention aimed at promoting
agricultural growth (see also FAO, 2003).2 The food import bill also more than doubled (FAO,
2001; Khor, 2006). Thus, it is the policy regime that has led to the present situation. This period
saw diminishing role of the state and the expanding role of market institutions. Some states also
allowed agribusiness firms to buy and operate large land holdings for R&D, and export-oriented
production processes. Changes in land laws seen as a part of the global process of new
internationalisation of agriculture also have contributed to the problems in hand. We have run
into the risk of landowners becoming landless. Increasingly farmers are being pushed towards
Table 1
Gross Capital Formation in Agriculture
(Rs. crore)
Year Total Public Private investment in agriculture
of GDPAs % at constant prices
Old Series (1993-94 prices)
1990-91 14836 4395 10441 1.92
1995-96 15690 4849 10841 1.57
1996-97 16176 4668 11508 1.51
1997-98 15942 3979 11963 1.43
1998-99 14895 3870 11025 1.26
1999-00 17304 4221 13083 1.37
New Series (1999-00 prices)
1999-00 43473 7754 35719 2.20
2000-01 38176 7018 31158 1.90
2001-02 46744 8529 38215 2.20
2002-03 45867 7849 38018 2.10
2003-04 47833 12809 35024 2.00
2004-05 43123 12591 30532 1.70
Source: Economic Survey 2005-2006.
private traders with state withdrawal. Private traders have created problems as observed in case
of cotton producers in Maharashtra; paying prices that are lower than MSP. We have agriculture
in crisis when real wages in manufacturing sector are also actually declining despite an increase
in labour productivity by over 84 per cent between 1990 and 2001 (ILO, 2006).
III. STATE OF INDIAN FARMERS

The National Sample Survey’s 59th Round raised important questions while looking at the
situation of Indian farmers. Among others it reports on liking- disliking of farming as an
occupation, indebtedness, income and expenditure. At the all India level, 59.4 per cent farmer
households reported that they like farming as a profession. The remaining 41.6 per cent were of
the opinion that, given the choice, they would take up some other occupation. Table 2 shows
that those who did not like farming, 26.5 per cent said so because they felt it is not profitable
any more while 13.6 per cent argued it is too risky, lacks social status, etc. There is striking
uniformity among major states in the proportion of farmers liking farming as a profession. It
varied from 46.8 per cent in case of farmers in Uttaranchal and 77.4 per cent in case of Meghalaya.
The states like Andhra Pradesh, Maharashtra and Punjab where suicides by farmers have been
reported extensively have 75.4, 60.7 and 60.8 per cent farmer households reported liking for
farming respectively. Farming is considered most unprofitable in Uttaranchal (42.3 per cent
farmers reporting it) followed by West Bengal (35.4 per cent) and Bihar (35.2 per cent).
On the issue of debt, the maximum average debt per farmer household is in Punjab
(Rs. 41576) followed by Kerala (Rs. 33907) and Haryana (Rs. 26007). The least average debt
is reported in Meghalaya (Rs.72). This shows that debt alone is not responsible for crisis. If the
suicides by farmers are the sole criterion for determining crisis in agriculture, then it does not
appear appropriate. Suicides are concentrated mostly in low rainfall and poorly irrigated regions;
Punjab is an exception though. It is also mainly in the cotton belt of the country. There is no
denying the fact that imports liberalisation has had a strong dampening effect on the prices of
several crops like cotton, oilseeds, plantations etc. This has caused considerable distress in
regions where such crops are prominent in the farm economy.3
Coupled with the above, on an average, a farmer household at all India level, earns
Rs. 2115 per month with 46 per cent accruing from cultivation, 39 per cent from wages, 11 per
cent from non-farm business and 4 per cent from animals (NSSO, 2005e). This income excludes
income from rent, interest, dividend etc. At the state level, highest monthly income for farmer
household is in J&K (Rs. 5488) followed by Punjab (Rs. 4960), Kerala (Rs. 4004), Assam (Rs.
3161) and Haryana (Rs. 2882). The lowest income is in Orissa (Rs. 1062) followed by Madhya
Pradesh (Rs. 1498), Chhatisgarh (Rs.1618), Uttar Pradesh (Rs. 1633) and Bihar (Rs. 1634). In
five states, the income from wages exceeded income from cultivation. These states are Rajasthan
(62%), Orissa and Tamil Nadu (53-54%), Kerala (50%) and West Bengal (43%). The contribution
of animals to this income is the highest in Gujarat (17%), Bihar (15per cent), and Maharashtra
(6per cent), while non-farm income is highest in Kerala and West Bengal (18per cent), Rajasthan
Table 2
State of Indian Farmers (%)
States Liking Not liking farming All Per farmer MPCE in Rs. for
farming Not Others Total HH average Farmer Rural
profitable debt (Rs.) Diff. in per
HH. HH. cent
Andhra Pradesh 75.4 16.7 7.5 24.2 100 23965 512.56 566.89 9.6
Arunachal Pradesh 72.1 10.7 14.3 25.0 100 493 582.65
Assam 59.0 21.2 19.7 40.9 100 813 479.42 520.45 7.9
Bihar 48.6 35.2 15.3 50.5 100 4476 403.60 414.63 2.7
Chhattisgarh 53.7 24.2 22.1 46.3 100 4122 378.89 408.64 7.3
Gujarat 66.8 25.4 7.5 32.9 100 15526 562.86 626.02 10.1
Haryana 60.3 29.9 8.4 38.3 100 26007 741.10 780.76 5.1
Himachal Pradesh 64.9 18.4 16.7 35.1 100 9618 708.47 858.88 17.5
J&K 61.5 20.9 17.6 38.5 100 1903 711.82 761.29 6.5
Jharkhand 52.8 30.2 16.8 47.0 100 2205 352.85 422.07 16.4
Karnataka 56.7 27.9 15.4 43.3 100 18135 491.19 555.50 11.6
Kerala 66.6 27.9 5.1 33.0 100 33907 900.59 981.41 8.2
Madhya Pradesh 59.5 21.4 18.9 40.3 100 14218 406.30 454.58 10.6
Maharashtra 60.7 28.6 10.7 39.3 100 16973 524.12 584.05 10.3
Manipur 67.4 28.2 4.2 32.4 100 2269 592.27 655.93 9.7
Meghalaya 77.4 15.2 7.4 22.6 100 72 592.73 640.74 7.5
Mizoram 50.8 34.1 14.6 48.7 100 1876 656.60
Nagaland 67.6 26.8 4.5 31.3 100 1030 882.93
Orissa 53.1 33.8 12.9 46.7 100 5871 341.72 397.89 14.1
Punjab 60.8 27.2 9.7 36.9 100 41576 828.01 886.10 6.6
Rajasthan 61.2 21.5 17.3 38.8 100 18372 557.45 569.59 2.1
Sikkim 64.6 30.2 5.2 35.4 100 2053 548.02
Tamil nadu 68.9 25.0 6.0 31.0 100 23963 572.81 609.08 6.0
Tripura 52.5 20.2 25.1 45.3 100 2977 561.89 560.80 -0.2
Uttar Pradesh 58.8 24.0 16.5 40.5 100 7425 474.89 509.03 6.7
Uttaranchal 46.8 42.3 10.9 53.2 100 1108 566.60
West Bengal 53.8 35.4 10.1 45.5 100 5237 507.74 538.06 5.6
All India 59.4 26.5 13.6 40.1 100 12585 502.83 554.15 9.3
Note: Diff. Refers to by how much MPCE of rural households is higher than the farmer households (HH) in
per centage terms.
Source: NSSO (2005a; 2005b).
(14%), Uttar Pradesh and Bihar (11%). Given these aggregates, it would not be impossible to
point out that most of the farmer households worth land up to 1 hectare and many farmers
households with land between 1 to 2 hectares may not be earning enough to meet the family
consumption expenses (also see appendix 1). There is a clear indication of non-viable status of
these farmer households.
There is also an issue of profitability of farmers in India to which rural economy mainly hinges.
Farm business income (FBI) is not only important for farmers but also for agriculture labour. Sen
and Bhatia (2004) observe that per hectare real FBI had increased in every state during the 1980s,
but in most states peaked in mid-1990s. In Karnataka, Maharashtra, Orissa, Bihar and Gujarat,
real FBI per hectare was lower at the end of the 1990s decade than at the start. The rate of growth
of real FBI per hectare at the national level decelerated sharply from 3.21 per cent per year during
the 1980s to 1.02 per cent per year during the 1990s. As number of cultivators during 1990s grew
by 1.44 per cent per annum and cropped area by only 0.45 per cent per year, implying that real
FBI remained stagnant; 0.03 per cent growth. Sen and Bhatia (2004) also revealed that only Andhra
Pradesh, Gujarat, Haryana, Madhya Pradesh, Rajasthan, Punjab and West Bengal have actual
average landholding bigger than the minimum required for keeping the farm family above the
official poverty line. In this situation, a very large number of farmer households are unable to
generate adequate income from their farms. The margins have deteriorated for cotton, all coarse
cereals and oilseeds (GoI, 2006). For major food grain crops for 2005-06, MSP has not covered
the costs (C2). In long run, thus, it would be not possible to continue to cultivate those crops
where C2 costs are not covered. Thus, falling farm incomes do not augur well for rural communities;
agrarian distress was imminent and as it has set in, it would worsen.
Nonetheless, one important factor for agriculture crisis, besides the long-term growth trend
in production and productivity, considerably less than required to sustain the projected high
overall growth rates in future, is the growing economic and social disparities between agriculture
and rest of the economy and between rural and urban sectors (see Bhalla, 2005). Table 3 shows
that within rural areas MPCE (monthly per capita consumption expenditure) of farmer households
is observed to be lower across states compared to MPCE of all rural households. At the all India
level, MPCE of farmer households is 9.3 per cent lower than the MPCE of all rural households.
This per centage varies between a low of 2.1 per cent in Rajasthan and a high of 17.5 per cent in
Himachal Pradesh. Many major states have a difference of 10 per cent or above. The MPCE in
case of food and non-food items for farmer households is also lower than that of all rural
households. This difference reflects genuine differences between the levels of living of the farmer
and all rural households.
Moreover, as National Sample Survey estimates reveal, the ratio of urban to rural per capita
consumption expenditure has risen progressively from about 1.28:1 in the mid-1970s to 1.47:1
by 1999-00 and further to 1.84:1 in 2003. In 2003, this disparity ranged between a low of 1.33:1
in Kerala and a high of 2.26:1 in Madhya Pradesh (NSSO, 2005d). Of the 16 major states, 5
states had the rural-urban differential of higher than the national level (Table 3) and one state
equalising it. In the recent period, some states have observed reduction in the rural-urban gaps
in consumption expenditure, while in many others widening of disparities is noticed. It is
important to note that in the early 1950s, GDP per worker in non-agricultural sectors was twice
that in agricultural sectors. This ratio currently is 4:1 (Singh, 2006).
Thus, Indian farmer is cornered from all sides. His income sources are at stake with no
sustainable alternatives. Odds are against him. A serious effort is required to stabilise his sources
of livelihood.
Table 3
Rural Urban Consumption Disparities (MPCE) (Rs.)
1999-2000 2003
Rural Urban Urban rural Rural Urban Urban rural
States ratio ratio
Andhra Pradesh 496 870 1.75 567 1065 1.88
Assam 450 925 2.06 520 875 1.68
Bihar 410 717 1.75 415 674 1.62
Gujarat 598 1005 1.68 626 1046 1.67
Haryana 745 1019 1.37 781 1141 1.46
Jharkhand 781 1415 1.81 422 888 2.10
Karnataka 539 1065 1.98 556 960 1.73
Kerala 848 1092 1.29 981 1300 1.33
Madhya Pradesh 429 792 1.85 455 1029 2.26
Maharashtra 542 1136 2.10 584 1166 2.00
Orissa 392 702 1.79 398 832 2.09
Punjab 786 1001 1.27 886 1250 1.41
Rajasthan 597 927 1.55 570 912 1.60
Tamil Nadu 547 1055 1.93 609 1087 1.78
Uttar Pradesh 505 806 1.60 509 786 1.54
West Bengal 487 970 1.99 538 991 1.84
India 525 980 1.87 554 1022 1.84
Source: Bhalla (2005) and NSSO (2005d).
IV. RURAL EMPLOYMENT-UNEMPLOYMENT

Rural employment situation has deteriorated during the nineties. The contractionary public
expenditure reducing economic reform policies in the nineties resulted in a collapse of rural
economic growth and thereby income growth. The sharp reduction in farm prices for commercial
crops, both global and domestic from 1996-97 also reduced incomes, for the extent of price fall
has rivalled the extent of price crash in the years of agricultural depression preceding the Great
Depression as some scholars say so. The fall in employment in rural areas is indicated by a
deceleration of employment growth rate from 2 per cent annually during 1993 to 1998, to less
than a third of this rate at 0.58 per cent annually during 1987 to 1993 (Patnaik, 2003). The data
for the year 1999-2000 reveal that there has been absolute decline of number employed in
agriculture by 50 lakh compared to 1993 (Table 4). During this period employment growth has
been negative.4 This has continued in the post 1999 period too. This is a consequence of falling
development expenditures in rural areas during the reform era. It was 14.5 per cent of GDP in
the 7th plan but declined to 6 per cent by 1997-98. The recovery has not occurred. The output
growth is going down and so the contribution to GDP by this important sector. Vaidyanathan
(2006) argues that public investment in this period had failed to raise the production capacity.
Therefore, the magnitude of public investment is not important but its contribution to increasing
production capacity in necessary. Srivastava (2006) argue that both the rates of increase of
cultivated area and labour absorption per hectare have slowed down. There are large inter-state
disparities in labour use per gross cultivated hectare or net sown hectare. The labour use in
Punjab was one-third the national average, while that of Bihar was 2.2 times higher. There has
also been secular decline in employment elasticity in cultivation with respect to growth in crop
output since 1983. It is also the case with elasticity of employment in agriculture with respect
to growth in state domestic product from agriculture.
Table 4
Decline in Work Participation Rates and Numbers
Employed in Agriculture in 1990s (Crores)
Sector 1983 1993-94 1999-00 Annual growth rate
1983 to 1993-94 to
1993-94 1999-00
Population 79.0 89.5 100.4 2.10 1.93
Labour force 33.35 38.2 40.6 2.29 1.03
Participation rate per cent 42.2 42.6 40.4
Employment total 32.43 37.45 39.70 2.43 0.98
Employment agriculture 20.72 24.25 23.76 1.51 -0.34
per cent of agriculture 63.9 64.8 59.8
employment to total
employment
Source: Economic Survey 2001-02.
In rural India, the proportion of males among all usually employed, about 66 per cent of
the males were engaged in the agricultural activities in 2004. The corresponding proportion of
males engaged in agricultural activities was 78 per cent in 1983, 75 per cent in 1987-88, 74 per
cent in 1993-94 and 71 per cent in 1999-2000. Thus, there has been a consistent decline since
1983. The female proportions have been relatively higher, but almost stagnant over time. The
60th Round of National Sample Survey for the year 2004 provides information on the nature
and type of work from which a household derives its major part of income. It is an important
indicator of the activity pattern of its members.
Table 5 shows that during January-June 2004, members of about 51 per cent of the rural
households took recourse to self-employment. They constituted about 55 per cent of the rural
population. Another 35 per cent of the rural population belonged to rural labour households.
Such households constituted 37 per cent of all rural households. Among the self-employed
households, 35.3 per cent are self-employed in agriculture with the other 15.3 per cent in non-
agricultural activities. Self-employment in agriculture is the lowest in Goa with only 1.1 per
cent rural households engaged in agricultural activities. At the other end is Uttaranchal where
62.6 per cent households are self-employed in agriculture activities. There are wide inter-state
variations in employment in agriculture. Table 5 shows that 60.7 per cent households derive
income from agriculture directly either as self-employed or as agricultural labour. Andhra Pradesh
has the highest proportion of households dependent for income on agriculture as agricultural
labour (64.5per cent households derive income from agriculture).5 The agriculturally developed
states like Punjab and Haryana have 41.1 and 48.4 per cent households respectively deriving
income from agriculture. There are 10 states in India, which have agricultural labour households
above the national proportion deriving income from agriculture sector.
Another related issue is of agricultural wages. Have they contributed to the crisis? The
average daily wages of casual labour situation in India reveal rural-urban differentials (NSSO,
2005c). In rural sector, on an average, Rs.50.70 was earned in a day by a worker while the daily
average daily wage of the regular salaried employee is Rs.132.69; a wage differential of 2.62:1.
The growth of rural employment during the 1990s was sluggish as observed earlier, real wages
increased. However, real wages improved in the post reform period despite deceleration in
agricultural productivity and slow down in the rural non-farm employment (Radhakrishna, 2002).
Besides, NSSO (2005e) report that wages formed 39 per cent of the monthly income of the
Table 5
Distribution of Households by Household Type by State
Self-employed Household type
Agriculture Non- All Agri Other Others Total Dependent
States agriculture house- cultural labour on agriculture
holds labour house- (total of 2&5)
households holds
1 2 3 4 5 6 7 8 9
Andhra Pradesh 25.4 14.2 39.6 39.1 9.4 12.0 100 64.5
Assam 48.9 16.1 65.0 14.6 8.4 11.8 100 63.5
Bihar 35.7 16.3 51.9 34.9 3.7 9.3 100 70.6
Chhattisgarh 44.4 5.2 49.6 37.6 4.6 8.1 100 82.0
Goa 1.1 31.9 33.0 2.3 16.2 48.5 100 3.4
Gujarat 32.8 11.9 44.7 31.0 13.4 10.8 100 63.8
Haryana 40.4 18.9 59.3 8.8 13.5 18.4 100 49.2
Himachal Pradesh 43.9 11.7 55.5 4.4 15.8 24.3 100 48.3
J&K 36.6 18.2 54.7 5.3 13.9 25.9 100 41.9
Jharkhand 36.6 19.0 55.6 15.3 15.7 13.4 100 51.9
Karnataka 31.2 11.7 43.0 37.3 11.4 8.3 100 68.5
Kerala 18.6 18.3 36.9 13.9 29.7 19.6 100 32.5
Madhya Pradesh 45.4 9.8 55.1 27.7 9.0 8.1 100 73.1
Maharashtra 31.7 9.9 41.6 34.0 13.2 11.1 100 65.7
Orissa 27.0 17.7 44.7 31.8 9.6 13.9 100 58.8
Punjab 22.5 18.1 40.7 18.6 21.2 19.6 100 41.1
Rajasthan 49.0 15.4 64.4 6.6 17.2 11.9 100 55.6
Tamil nadu 17.5 15.2 32.7 32.8 20.7 13.8 100 50.3
Uttaranchal 62.6 9.9 72.6 11.0 6.1 10.4 100 73.6
Uttar Pradesh 51.4 16.9 68.4 14.3 7.5 9.8 100 65.7
West Bengal 26.4 22.4 48.8 27.3 12.4 11.4 100 53.7
North-eastern states 45.8 16.4 62.2 7.6 13.6 16.5 100 53.4
All India 35.3 15.3 50.6 25.4 12.0 12.0 100 60.7
Source: NSSO (2005c).
farmer households. In Rajasthan, Tamil Nadu, Orissa and Kerala, the wages formed 50 per cent
or more of the monthly income. There has been a debate whether slow growth of agricultural
employment was a consequence of increasing wages. The strategy to improve employment
prospects in future will have to be to ensure that all the new entrants to the labour market are
equipped with knowledge and skill for high productivity and high quality employment.
Literature shows that poverty is concentrated and food deprivation is acute in rural areas
with limited resources such as rain-fed agricultural areas. Agricultural labour and migrant
labour are susceptible to hunger. There are nearly 31.1 crore rural workers, 10.3 agricultural
labourers, 4.8 crore and females agricultural workers (GoI, 2006). Female agricultural
labourers are vulnerable to food security due to lower wages and effects of migration. Besides,
one-third of the rural work force is dependent on casual employment that faces uncertain
wage and works situation and so is susceptible to food deprivation. Between, 1993-94 and
2004, the current daily status unemployment increased from 5.6 to 9.0 per cent for rural males
and from 5.6 to 9.3 per cent for rural females. All these indicate inadequate purchasing power
and causing food insecurity in rural areas.
1. Diversification of Agriculture and Employment

Diversification of agriculture in favour of more competitive and high-value commodities is
considered as important strategy to overcome many emerging challenges (Joshi et al., 2004). If
diversification is undertaken appropriately, then it can augment farm income, generate
employment, reduce poverty and preserve environment (Pingali and Rosegrant 1995; Vyas,
1996). Besides, all other benefits and negative influences of diversification, a shift in cropping
pattern could create more employment in rural areas. View is also expressed that a diversified
cropping pattern is not compatible with modern commercial farming. Cultivation of many crops
in each crop season is the inherent trait of subsistence farming. This had implications for labour
use in agriculture, at least of family labour. There is also a section that is questioning the
diversification as being forced on small and marginal farmers; there is strong debate going on
in the context of Punjab.6 The modern commercial farm is highly specialised production
enterprise. It is also highly mechanised. As in the Green revolution era, mechanisation displaced
labour. Joshi et al., (2004) present some information on labour use in production of different
crop activities (Table 6). It may be noted that labour use for cultivation of non-cereals is substantially
higher than cereals (except rice). Area shift from cereals to vegetables would generate substantial
employment opportunities in rural areas. Rough estimates suggest that one hectare shift in area
from wheat to potato would generate 145 additional man-days. Also, one- hectare shift from coarse
cereals to onion would generate 70 man-days more employment. If other vegetables replace coarse
cereals, it can generate additional 70 man-days per hectare employment. It is argued that a marginal
shift in area from wheat and coarse cereals in favour of high-value crops can generate enhanced
employment opportunities. Generating additional employment in rural areas has welfare and equity
implications. However, vulnerability of producers increases many-fold. Also impact of change is
not uniform across states. If less employment is used, it is because of mechanisation for the existing
crop cultivation as observed from appendix 2. There are inter-state labour use variations for the
same crop. The labour use at crop level declined in the 1990s even in the North/Western states
and for wheat in almost all states. A mere shift in cropping pattern would not take place as is
witnessed by Punjab where area under rice has gone up during the recent years (Singh, 2005b).
However, diversification to livestock at the farm level would be more beneficial at this juncture
as it is less vulnerable to changing environment.7 However, equation would change with WTO
and other trade agreements (Oxfam, 2005).
Table 6
Average Labour Use (Man-days per Hectare)
Crop Labour use Crop Labour use
Potato 200 Rice 105
Onion 125 Wheat 55
Cabbage 110 Sorghum 55
Cauliflower 120 Pearl millet 50
Eggplant 70 Cotton 100
Tomato 195 Sugarcane 190
Source: Joshi et al. (2004).
V. ISSUE OF RURAL MIGRATION

Populations move from poor economic situations to better economic situations. When there is
an agrarian crisis, then rural population from crisis-ridden areas should be moving into rich
agricultural regions or urban areas. Has this happened in the nineties? Inter National Sample
Survey migration rates are presented in Table 7. At the all-India level, considering all the migrants
till the date of survey, one finds that per centage of migrants to the total population was higher
in urban areas than that in rural areas. Also in both rural and urban areas, females showed a
higher propensity to migrate than males. Among females, about 43 per cent in rural areas and
about 42 per cent in urban areas were migrants whereas only about 7 per cent in rural males and
about 26 per cent of urban males reported themselves as migrants. Low migration rate among
rural males indicates that males neither from rural areas nor the urban areas have the tendency
to migrate to rural areas. Besides, during the period 1983 to 2000, the per centage of male
migrants to the total population remained nearly constant (7%), for rural areas and showed little
variation (24-27 per cent) in urban areas. In case of females, a rising trend is, however, visible
in per centage of migrants to the total population over this period. For rural females, it increased
steadily from 35 per cent to 43 per cent between 1983 and 2000, while for urban females, the
increase was from 37 to 42 per cent during the same period.
Table 7
Migration Rates
Rounds Rural Urban
Male female All Male female All
th
55 Round 69 426 244 257 418 334
49th Round 65 401 228 239 382 307
43rd Round 74 398 232 268 396 329
38th Round 72 351 209 270 366 316
Source: NSSO (2001).
Besides, the net migration rates for major states considering all the periods of migration.
Maharashtra observed the highest in-migration among all the major states. Uttar Pradesh, West
Bengal and Haryana followed it. The out-migration was the highest for the state of Uttar Pradesh
followed by Bihar and Maharashtra. Among the major states a gain in in-migrants over the out-
migrants is observed for most of the states excepting Assam, Bihar, Karnataka, Uttar Pradesh
and Tamil Nadu. It is also noticed that the net-migration rate was the highest for Haryana followed
by Maharashtra, West Bengal and Punjab.
What prompted this migration? The NSSO (2001) for the year 1999-2000 shows that it is
mainly the non-economic factors that have motivated migration of recent rural male migrants
(Table 8). At the all India level, the economic factors viz., search of employment, search of
better employment, taking up employment/ better employment, transfer of service/ contract and
proximity to the work place are valid in case of 33.7 per cent migrants while the remaining 66.5
per cent moved because of non-economic factors for those who migrated at the time of survey.
In case of those whose migration period is 1 to 4 years, economic factors accounted for 30.1
per cent. This means that approximately those who migrated after 1996-97 did so, on account
of non-economic factors. However, economic factors dominate in states like Maharashtra and
Punjab (around 58 per cent) in case of just migrated. The other states where it is of significant
importance are Rajasthan, Haryana and Karnataka. Surprisingly, Andhra Pradesh, one of the
most affected states by rural crisis, has migration largely due to non-economic factors in case
of just migrated. Of course, those who migrated 1 to 4 years prior to the survey, the proportion
of economic factors is significant.
Table 8
Distribution of Rural Male Migrants by Reason for Migration (%)
Period since migrated
0 years 1-4 years
States Economic Non-economic Economic Non-economic
Factors Factors Factors factors
Andhra Pradesh 18.5 81.5 25.4 74.4
Assam 28.0 71.9 28.7 69.9
Bihar 18.6 81.4 27.4 72.6
Gujarat 28.5 71.3 29.9 69.3
Haryana 41.3 52.5 37.1 62.9
Karnataka 43.7 56.2 34.2 65.4
Kerala 31.0 68.9 22.0 77.7
Madhya Pradesh 23.5 76.5 29.0 70.1
Maharashtra 57.2 42.8 34.7 64.6
Orissa 32.7 67.3 20.3 78.6
Punjab 58.6 33.4 54.1 43.5
Rajasthan 42.6 57.4 38.9 61.0
Tamil nadu 25.0 75.0 34.3 63.8
Uttar Pradesh 26.0 74.0 25.0 73.7
West Bengal 28.6 52.6 21.6 76.0
All India 33.7 65.4 30.1 69.1
Note: May not add to 100 as there are no responses in the survey.
Table 9 shows that rural male migrants with usual activity, as agriculture is quite significant
in case of three cohorts. There are four categories of migrant, viz. self-employed in agriculture,
regular employees, casual labour and workers. It is clear that for casual labour economic reasons
are significant during all the periods. However, for self-employed in agriculture migrants in the
year of survey economic reasons become important compared to older cohort of migrants. A
similar situation more or less is found in case of regular agriculture sector employees. Among
the economic reasons search of employment, search of better employment and taking up
employment/ better employment are reported. This does reveal that agriculture crisis did push
rural male engaged in agriculture to look for better opportunities either in rich rural areas or
urban centres. It may, however, be mentioned here that seasonal migration for short durations is
on an increase. An improvement in infrastructure and better connectivity of rural areas has helped
this process. The major reason, however, is the rural distress complicated by rising input costs,
falling farm returns, drought, new varieties like genetically modified crops etc. It may be pointed
out here that state had full control over green revolution, but it is the corporate sector that is in
the forefront with profit maximisation as a driving force presently.
It is argued that farm investment helps slow migration.8 More investment by government in
agriculture and the right farm policies would help keep rural populations on the land and reduce
migration (FAO, 2006). The returns to public investments in agriculture are very high. Properly
managed agriculture can not only produce food but also have a positive impact in such areas as
poverty alleviation, food security, population distribution, and the environment. FAO cautions
that the rural exodus looks like gaining further momentum as rapid economic growth in India
draws growing numbers of country dwellers into urban centres. Indian government has failed
to appreciate agriculture’s indirect, non-food, importance in the development process during
the reform period.
Table 9
Per Thousand Distribution of Migrants (Rural Male) by Reasons for
Migration for Usual Activity Category (Agriculture) before Migration
Reasons for migration
Type 01 02 03 04 05 01-05 Rest All
Period since leaving last usual place of residence- 0 years
Self-employed 183 247 102 0 1 533 467 1000
Regular employee 14 95 138 192 19 458 535 1000
Casual labour 104 305 53 107 5 574 427 1000
Workers 120 277 71 83 5 556 443 1000
Period of 1-4 years
Self-employed 83 193 144 0 14 434 556 1000
Casual labour 144 298 79 5 1 527 472 1000
Workers 110 232 102 47 6 497 494 1000
Period of 5-9 years
Self-employed 65 246 128 1 38 478 522 1000
Casual labour 126 314 86 0 5 531 471 1000
Workers 91 268 100 14 16 489 496 1000
Note: in search of employment (01), in search of better employment (02), to take up employment/ better
employment (03), Transfer of service/ contract (04), proximity to the work place (05). Rest- non-
economic factors.
VI. POVERTY ISSUES

Agricultural growth often helped reduce poverty more than any other economic sector. It had
dramatic effects on poverty and hunger that were felt not only in rural areas but in urban ones
too. It has acted as a multiplier. Every per centage point in agricultural growth was equivalent
to a 1.5 per cent decrease in poverty at national level, though the benefits were not necessarily
distributed evenly between town and country. In Indonesia, for example, agricultural growth
was found to be responsible for a 50 per cent reduction in rural poverty and a 36 per cent drop
in urban poverty.9 But farm production had to move from the subsistence level to some scale of
commercialisation before any impact was felt on food insecurity and poverty. In addition, which
farming sectors produced the growth was of fundamental importance. China, for example, has
become self-sufficient in grains in order to achieve national food security. But China’s consequent
sharp rise in cereals production has had negative effects in terms of overexploitation of natural
resources and degradation of the environment, and has failed to significantly increase rural
incomes. Any gain has been offset by a rise in marginal costs and lower prices due to higher
production. For China to achieve integrated rural and urban development it is necessary to move
from agriculture to off-farm opportunities, which result in increased labour productivity.
There are other examples in the world as highlighted by Kenya’s experience most
prominently. Just how agriculture impacts on economies in areas that have nothing to do with
food, feed or fibre is shown by the “elephants or onions” riddle facing the Kenyan government.
For instance, Kenya’s Amboseli National Park, a spectacular, 392sq km wildlife preserve at the
foot of Mt Kilimanjaro, features elephants and other land animals and is also one of the world’s
leading bird sanctuaries (FAO web sources). In 2004, it attracted some 2 lakh tourists and earned
about US$ 35 lakh. Maasai pastoralists whose traditional herding activities are compatible with
the wildlife inhabit the Amboseli area. On the contrary, they provide the park with such “services”
as environmental management and bear the costs of living cheek-by jowl with wild animals in
terms of personal safety, grazing competition and damage to crops. But they receive no payment
for their indirect contribution to the tourism industry and have consequently turned to farming
to increase their incomes. Some of the land is now adjoining the park’s southern and eastern
borders is therefore now fenced in to protect the Maasai’s tomatoes and onions from intruding
elephants. But the fences limit the animals’ access to water, food, breeding grounds and seasonal
migration routes. The quandary is whether to protect the Maasai’s onions or the tourists’
elephants. A solution to this could be to pay the Maasai in recognition of the services they
provide to the park. Such PES (Payment for Environmental Services) would mean they no longer
had to grow tomatoes to make ends meet. They could easily be funded by a one-dollar increase
in the park entrance fee. While the Maasai’s services to Kenya’s tourism industry remain
unrecognised (and unpaid) there are many other ways in which agriculture assists the economic
and social development of nations. It can play a crucial role as a social buffer in times of economic
crisis. In many cases, the farm sector has proved more resilient than others in economic
downturns, providing an economic and social safety net for urban workers, who migrate back
to the countryside and for the poor in general. It is also an essential element in preserving the
environment, impacting at global level on biodiversity, climate change and wildlife habitats
and at regional and national level on such areas as soil conservation and the rural landscape. As
incomes grow, people are in a better position to pay for quality environment and are prepared to
spend more to obtain it. But environmental damage, once done, is difficult and expensive to
repair. The issue should thus be addressed as early as possible in the development process-
possibly through direct incentives to small farmers to invest in the protection of natural resources.
One important issue here is designing effective incentives for use when justified. India can learn
from this experience a long way.
The progress achieved to fight poverty had real gains between the 1970 and 1990. These
gains have been stalled since then. Rural economies have been neglected; aid for agriculture
has dropped from 20 per cent of overall assistance in the late 1980s to 12 per cent today.
IFAD’s Rural Poverty Report 2001 points out that the international commitment to halving
poverty by 2015 must focus on reviving agriculture. It is stressed that while non-farm activities
are emerging as major factors in the lives of the rural poor, the critical role of food staples
must be recognised in technology and marketing policy. People in extreme poverty usually
get about 70-80 per cent of their calories from staple foods. Rural poverty reduction requires
better allocation and distribution of water. Rural water supplies are becoming scarcer, not
least because of pressure to divert water to urban areas and industrial uses. Securing more
water to help increase the output of staple foods is a major challenge. Economic growth alone,
in rural areas, will not be enough to ensure that the target of halving poverty is met. Inequality
may be too great and poverty too deep. “Redistributive empowerment” of the rural poor is
needed. Particular groups merit special attention, especially women; and the importance of
the participation of the rural poor in decision-making should be recognised. Access to land,
water, credit, information and technology and also to health-care services and education to the
poor can help reduce poverty.
Finally, though the transition from (low-wage) agriculture to (higher wage) non-farm sectors
may be the key to poverty reduction, making the transition is not easy or automatic for the poor.
In other words, there are costs to be incurred on the part of a poor agricultural worker in making
the transition. These costs are not only pecuniary but also non-pecuniary, associated with
investments in minimum levels of education, nutrition, and health, enabling him or her to work
productively in the non-farm sector (Ravallion and Datt, 1999).
VII. RECENT INTERVENTIONS: SEZS

The stock of arable land is limited and increased farm production must increasingly come from
greater productivity per unit of land and water. This would increase labour intensity of agriculture
and generate more employment while further investments create more gainful jobs in the
manufacturing and service sectors. It is argued that Indian agriculture can do with fewer farmers
on uneconomic land holdings. To achieve this, the argument is that infrastructure deficit must
be made up and maintained in good order. To this end, special economic zones (SEZs) are
being promoted to develop the necessary infrastructure and foster industrialisation, exports and
concomitant urbanisation and services.
The Commerce Ministry has approved 225 SEZs till date10 with 92 in-principle approvals
and 133 final approvals. The SEZ Act was passed by parliament in May 2005 when in February
2006, rules to the Act were notified (Table 10). A policy was introduced on 1.4.2000 for setting
up of Special Economic Zones in the country with a view to provide an internationally
competitive and hassle free environment for exports.11 It is forecasted that an investment of
Rs.14,50,000 crore by 2012 on this programme, but a revenue loss of Rs.100,000 crore between
now and 2009-10.12 However, an estimated direct employment of 5 lakh persons would be created
by these SEZs. A regards the rules and regulations, units may be set up in SEZ for manufacture
of goods and rendering of services. All the import/export operations of the SEZ units will be on
self-certification basis. The units in the zone have to be a net foreign exchange earner but they
shall not be subjected to any pre-determined value addition or minimum export performance
requirements. Sales in the Domestic Tariff Area by SEZ units shall be subject to payment of
full Custom Duty and import policy in force. Further, offshore banking units may be set up in
the SEZs. The policy provides for setting up of SEZ’s in the public, private, joint sector or by
State Governments. It was also envisaged that some of the existing Export Processing Zones
would be converted into Special Economic Zones. Accordingly, the Government has converted
Export Processing Zones located at Kandla and Surat (Gujarat), Cochin (Kerala), Santa Cruz
(Mumbai-Maharashtra), Falta (West Bengal), Madras (Tamil Nadu), Visakhapatnam (Andhra
Pradesh) and Noida (Uttar Pradesh) into a Special Economic Zones. In addition, 3 new Special
Economic Zones approved for establishment at Indore (Madhya Pradesh), Manikanchan- Salt
Lake (Kolkata) and Jaipur have since commended operations.13 In addition, private/ joint sectors
or the State Government have been given approval for setting up of 42 Special Economic Zones
in various parts of the country.
Table 10
Major States with SEZs Approvals
States Final approvals States In principle approvals
Andhra Pradesh 29 Haryana 23
Maharashtra 39 Maharashtra 24
Tamil Nadu 20 Karnataka 15
Karnataka 21 Uttar Pradesh 9
Gujarat 13 Gujarat 7
Haryana 11 Punjab 7
Tamil Nadu 7
Source: www.sezindia.nic.in. (visited on November 8, 2006).
It is expected that for formally approved SEZs 30,000 hectares of land would be acquired
while another 95,000 hectares would be required for in- principle approved SEZs. This means
large-scale displacement of people. The landowners may get compensation, but the fate of
landless would be precarious. However, the worst part of this all is that land is being acquired
by developers first and then proposal sent for approval to overcome this criticism.14 The point
in case is Haryana government offering 25,000 acres to Reliance.15 This in itself invalidates
Board of Approval (BoA) procedures. This means that farmers have been already uprooted,
but if the project fails to get formal approval- who then are the losers? Another classic example
is acquisition notice served to farmers just outside Mumbai for 35,000 acres in 45 villages.
A regulatory framework is planned to ensure equity, appropriate compensation and
resettlement of those displaced. R&R must move away from the futility of “land for land” to
re-housing and stakeholder participation for those displaced, with training for new employment
opportunities created by or around the new facilities or industries being created. To say that
this has not been done or well done in the past is no cause for despair or to perpetuate an
unsustainable, subsidised status quo, but to ensure that a suitable and just rehabilitation package
is implemented on the ground. It has been rightly urged that good arable land, especially if
irrigated, should not be acquired unless absolutely necessary and that excessive land acquisition
for an SEZ or other “public purpose” should not mask land grab or profiteering in real estate.
Some part of the appreciation in land values with development should be given back to those
from whom it was acquired in the first instance. Innovative ideas have been mooted to achieve
this objective within an enlarged concept of corporate social responsibility. Meanwhile, to
decry industry, urbanisation or private enterprise as pandemics and see the Tatas, POSCO or
Reliance necessarily as vectors of some dreaded disease is to betray a fevered imagination.
SEZs cannot be a panacea for all the country’s ills. But they represent a new strategy that has
worked well elsewhere to stimulate growth, not at the cost of farming or the poor but as part
of an integrated programme in which human resource development and poverty alleviation
remain core values. Projected rural hubs and retail trading with linkages to rural supply and
national marketing chains must be harnessed for gharibi hatao. It also argued that SEZs in
2004-05 accounted for only 1 per cent of factory employment and their contribution to regional
economies is very limited (Agarwal, 2006).16 The worrying issue is that largest number of
approvals (61per cent) is in IT sector; it has its own limitation. The manufacturing sector
accounts for only one-third of total approvals. As the competitiveness of the manufacturing
sector is on a decline, the focus of SEZ policy has to be manufacturing oriented. Another
concern is that the state industrial departments are promoting most SEZs. They may meet the
same fate as the industrial areas.
VIII. CONCLUSIONS
The institutional barrier comprising governance, the quality of public systems and economic
policies has become the most serious impediment to agricultural growth and rural employment.
To ensure secured and adequate livelihood for all farmers, they must be assured of access to
some control over the basic resource base for livelihood. Need is to check the declining resource
flow to the agriculture sector and control rising indebtedness of small and marginal farm families.
Farming cannot be viable proposition with rising input cost and declining factor productivity.
There is a need to correct the technology fatigue, as smaller the farm the greater the requirement
for sustained marketable surplus, in order to have cash income. Farm-laboratory linkage requires
strengthening, good and affordable quality seeds are needed, input supply correction must in
dry farming areas, initiating awareness building on WTO issues, investment in irrigation that
raises production capacity, farmer friendly marketing etc. are all ingredients for taking agriculture
out of mess it is in today. In view of SEZs, a mechanism has to be set up to regulate the sale of
agriculture land and it has to be based on quantum of land nature of proposed use and category
of buyer. As nearly 77 per cent of the rural population consume less than the poverty line
calories requirement of 2400 calories and so productivity and income of farmers have to be
raised. Farmers are also largest group of consumers. Agricultural Research has to be geared
to dry land agricultural crops, horticulture, tree crop and animal husbandry to stabilise rural
incomes. This research has to be farmer oriented. One also has to be careful about genetically
modified crop introduction. Safety nets to protect the interests of crops, people and regions
which are likely to be affected in the process of globalisation are required. A very large
proportion of our population has no marketable skills and either no or little formal education;
currently only 5 per cent labour force in the age group of 20-24 years category have any type
of formal vocational training. This is compounded by the fact that in 2002 there were 3.5
crore unemployed in India, nearly three-fourth reside in rural areas, it is put in official quarters
like India Vision 2020. The growth in employment in agriculture is related to growth in intensity
of cultivation, growth rate of area under labour intensive crops, level of agricultural wages,
institutional and socio-economic factors. Finally domestic policies with regard to agriculture
have to be very judicious. The policies which could give the rural poor greater control over
land, augment productivity of small farms, increase area under labour intensive crops and increase
productivity would help in increasing the growth of agricultural employment. No amount of
foreign direct investment and setting up of SEZs can absorb the lakhs of people disturbed by
the agrarian crisis. It has never happened anywhere; even in the economies from where the
present set of policies are being transplanted.
Appendix 1
Average Monthly Income by Source, Consumption Expenditure and
Net Investment in Productive Assets Per Farmer Household (Rs.)
Holding size (ha.) Income from Net receipt from Total Net Total
Wage Farm Farming Non-farm income invest- consumption
of animals business ment expenditure
< 0.01 1075 11 64 230 1380 40 2297
0.01 to 0.04 973 296 94 270 1633 37 2390
0.41 to 1.00 720 784 112 193 1809 96 2672
1.01 to 2.00 635 1578 102 178 2493 151 3148
2.01 to 4.00 637 2685 57 210 3589 387 3685
Source: NSSO (2005d).
AGRICULTURE, AGRARIAN CRISIS AND EMPLOYMENT
Appendix 2
Labour Use across Crops in Man Hours (2001-02)
Labour use in man hours by crops
State Sugar- Paddy Cotton Jowar Bajra Maize Tur Moong Urd Wheat Gram Lentil Mustard Ground-
cane nut
AP 2276 979 841 441 492 619 548 295 570
Haryana 1125 586 475 364 308 210 322
Karnataka 1942 1278 748 408 708 406 505
Maharashtra 1860 854 624 455 566 548 448 384 1172
Tamil Nadu 2582 1051 1560 421 366 792
Uttar Pradesh 1223 840 481 780 520 407 466 354 351 391
Rajasthan 597 274 281 718 317 415 590 340 304
MP 701 425 390 421 478 365 280 257 330
Gujarat 839 589 682 649 566 505
Bihar 901 823 537 245 309
Orissa 1089 386 332 372
Assam 752 494
West Bengal 1131 627
Punjab 445 682 250 327
Kerala 827
HP 429 299
Chhatisgarh 430 270 257
Jharkhand 363 249 207
Uttaranchal 484 353
Source: Agricultural Commission for Costs and Prices.
783
Notes
1. Fertiliser wholesale price index increased from 130.5 in 1996-97 to 168.8 in 2002-3 (1993-94=100) when
electrical machinery (irrigation) index increased from 139.2 to 261.8, pesticides index from 118.2 to 131.0,
non-electrical machinery index from 128.2 to 158.0, tractors’ index from 130.6 to 156.4, lubricants index
from 121.0 to 155.6, diesel high speed from 125.0 to 285.0 and diesel index from 141.8 to 240.6 during the
same period.
2. The cost-risk return structure of farming is becoming adverse, to over 8 crore farming families operating
small holdings, since the resource-poor families cultivating 1 to 2 hectares or less are unable to benefit from
the power of scale at either the production or post-harvest phases of farming (GoI, 2006). Farmers with 0.01
hectare of land presently hardly draw income from cultivation; about 86 percent incomes from dairy (NSSO,
2005b).
3. More than 75 percent of all farm households in the six crisis districts (Amravati, Akola, Yavatmal, Washim,
Buldhana and Warda) of the Vidharba region are in distress as found by door-to-door survey conducted by
Government of Maharashtra. It is reported that of 17 lakh plus families covered, over a fourth (more than 20
lakh people) were under maximum distress. And more than three- quarters of the rest were under medium
distress. The major reasons cited are debt, crop loss or crop failure. The health cost and social expenses led
to debt. Rising input cost is another factor. The study covered 8351 villages (See Hindu, 2006, November 22,
pp11).
4. The estimated labour per net sown hectare (NSS estimates) increased from 290 days in 1983 to 317 days in
1987-88 to 345 days in 1993-94 to 361 days in 1999-00. However, the growth in labour days per gross cultivated
area (hectare) increased from 231 days in 1983 to 248 days in 1987-88 to 264 in 1993-94 and only to 266
days in 1999-00.
5. Low productivity in agriculture has led to the concentration of the poor in this sector (Radhakrishna, 2002).
6. There have been two reports on diversification in Punjab (Johl Committees set up by Punjab Government).
See also Shergill (2006) for opposite views. There are studies by IFPRI on the subject and also the reports of
farmer commission. World Bank in its state reports calls for diversification and horticulture is important
even for Rajasthan.
7. For instance (GoI, 2006) points out that small and marginal farmers account for 71 percent of the in-milk
bovine stock and for marginal farmers major share of income is derived from animal husbandry sector.
8. In the past 50 years, according to Roles of Agriculture (RoA) some 80 crore people have moved from the
countryside to the cities (FAO, 2006).
9. One of the ways this occurs is that as farm production increases prices drop and lower food prices translates
into more disposable income for urban dwellers.
10. The Board of Approval, in its first meeting, cleared 148 of the 166 proposals before it in March 2006.
11. Indian SEZ policy has following distinguishing features: (i) The zones are proposed to set up by private
sector or by state Govt. in association with Private sector. Private sector is also invited to develop infrastructure
facilities in the existing SEZs; (ii) State Government has a lead role in the setting up of SEZ. A framework is
being developed by creating special windows under existing rules and regulations of the Central and State
Governments for SEZ.
12. The Commerce Ministry contest it by saying that the government’s tax collections would increase by
Rs.137,000 crore.
13. SEEPZ Special Economic Zone; Kandla Special Economic Zone; Cochin Special Economic Zone; Madras
Special Economic Zone; Visakhapatnam Special Economic Zone; Falta Special Economic Zone; Noida Export
Processing Zone; Surat Special Economic Zone; Manikanchan, Salt Lake SEZ (for gems and jewellery);
Indore Special Economic Zone (Multi-product); Jaipur Special Economic Zone (Gems and Jewellery);
Mahindra City-SEZ, Chennai (Tamil Nadu) (Information Technology); Mahindra City-SEZ, Chennai (Tamil
Nadu) (Apparel and fashion accessories) and; Salt Lake Electronic City-SEZ, Kolkata (Software Development
and IT enabled services). These have exported goods worth Rs.13853.58 crore in 2003-2004 and Rs.18309
crore in 2004-2005.
14. Mr. G.K. Pillai of BoA has stated that none of the 181 SEZs has displaced any farmer (Frontline, 2006).
15. 80% of the land has been acquired and handed over to Reliance as admitted by Commerce Ministry.
16. On an average, an investment of US$10 crore creates 2500-3000 jobs in SEZs (see Agarwal, 2006).
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The Indian Journal of Labour Economics, Vol. 49, No.

AGRICULTURE, AGRARIAN CRISIS AND

The paper examines a few issues concerning performance of agriculture, state of

II. THE PERFORMANCE OF AGRICULTURE

III. STATE OF INDIAN FARMERS

IV. RURAL EMPLOYMENT-UNEMPLOYMENT

1. Diversification of Agriculture and Employment

V. ISSUE OF RURAL MIGRATION

VI. POVERTY ISSUES

VII. RECENT INTERVENTIONS: SEZS

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