explain the impact of economic liberalisation on agriculture in india
Answers
IMPACT OF LIBERALIZATION ON AGRICULTURE IN INDIA
The economic liberalization in India refers to ongoing economic reforms in India that started on 24 July 1991. After Independence in 1947, India adhered to socialist policies. Attempts were made to liberalize economy in 1966 and 1985.Till today Agriculture remains a sensitive issue in India with almost 70% of its population still directly dependent on it. Indian agriculture, unlike big capital based European agriculture, revolves around numerous small farmers, who earn their livelihoods from cultivating small plots of land, and with limited access to resources like water, seed and fertilizer. Until June 1991, India followed a very restrictive economic policy characterized by exclusion of the private sector from many important industries. India faced liquidity crisis in 1991. The balance of payment situation had deteriorated so sharply and the foreign exchange reserves had fallen so low that, the possibility of default in payment was imminent. The fiscal situation has deteriorated sharply. The budget deficit as well as overall fiscal had sharply increased, contributing on the one hand to large increase in money supply, and on the other side to sharp increase in interest payments. The economic liberalization ushered in June 1991 changed the scenario very substantially. The government had undertaken wide ranging measures to promote exports even prior to 1991, but even then the coverage of imports by export earnings was quite low. This significant change in the trade balance position seems to have been realized on account of various export promotion measures, which the government has undertaken recently.
The biggest input for farmers is seeds. Before liberalization, farmers across the country had access to seeds from state government institutions and the seed market was well regulated, with liberalization India’s seed market opens to global agribusiness. This hit farmers and unregulated market, seed prices shot up and fake seeds made appearance in a big way. This also happens in fertilizers and pesticide market and it effects agriculture in India.The effects of trade liberalization on selected commodities namely rice, maize, rapeseed-mustard and chickpea at the national level and farm level. Liberalization and its resulted government policies had direct and indirect effects upon agriculture. The most significant related to the efforts at reducing subsidies which affected both agricultural producers and consumers, and the reduction of public expenditure which would have benefited cultivation. Thus, both food and fertilizer subsidies were sought to be reduced over this period. However, both of these strategies, which involved raising the prices for consumers of both food and 10 fertilizers, had undesirable and even counter-productive effects, leading to the paradoxical results of reducing consumption and simultaneously increasing subsidies.
Agriculture employs 60% of the Indian population today, yet it contributes only 20.6% to the GDP. (Isaac, 2005) Agricultural production fell by 12.6% in 2003, one of the sharpest drops in independent India’s history. It also found that 48.6% of all farmer households are in debt. The same year, a report by the Commission of Farmer’s welfare concluded that agriculture was in ‘an advanced stage of crisis’, the most extreme manifestation of which was the rise in suicides among farmers. Given the performance of agriculture and figures of farmer suicides across the country, this can be said to apply to Indian agriculture as a whole.
The biggest problem Indian agriculture faces today and the number one cause of farmer suicides is debt. Forcing farmers into a debt trap are soaring input costs, the plummeting price of produce and a lack of proper credit facilities, which makes farmers turn to private moneylenders who charge exorbitant rates of interest. In order to repay these debts, farmers borrow again and get caught in a debt trap. The researcher will examine each one these 3 causes which led to the crisis in Andhra Pradesh, Kerala and Maharashtra, and analyse the role that liberalisation policies have played.
Andhra Pradesh’s experience is particularly relevant in this analysis because of its leadership. Chandra Babu Naidu, Chief Minister of Andhra Pradesh from 1995-2004, was an IT savvy neo-liberal, and believed that the way to lead Andhra Pradesh into the future was through technology and an IT revolution. His zeal led to the first ever state level (as opposed to national level) agreement with the World Bank, which entailed a loan of USD 830 million (AUD 1 billion) in exchange to a series of reforms in AP’s industry and government.
Answer:
Agriculture plays a vital role in the Indian economy. Over 70 per cent of the rural households depend on agriculture. Agriculture is an important sector of Indian economy as it contributes about 17% to the total GDP and provides employment to over 60% of the population.