The essence of the agrarian transition in post-Independence India has been the development of a socially narrowly-based agrarian capitalism. While there has been some change in the composition of the top land-owning stratum (with the decline of the erstwhile zamindars and the moving up of a section of the rich peasantry), land concentration, as measured for instance by the proportion of land owned by the top 15 percent of the landowners, has shown no decline. This relatively more homogeneous class of top landowners has been provided with a plethora of incentives to convert itself into a class of capitalist farmers. We thus have a combination of capitalist and pre-capitalist forms of exploitation in the countryside which is particularly oppressive for the rural poor and which also restricts the sweep of capitalist development. Nonetheless, as we discuss below, it has brought about a certain measure of output expansion in agriculture in contrast to the absolute stagnation in output that prevailed over the last half-century of colonial rule.
 
The "liberalisation"-cum-"structural adjustment" programme has a component which directly and specifically affects the Indian agrarian economy, apart from its general effects via investment- cuts etc. This consists of: (i) the removal over time of input subsidies such as on fertilisers, irrigation, electricity and credit (together with priority sector lending targets); (ii) the removal of trade restrictions on agricultural commodities so that domestic prices are not out of line with world prices; (iii) a unification of prices so that the current system of dual markets in foodgrains and other agricultural commodities disappears; (iv) a drastic curtailment of food subsidy by confining the Public Distribution System only to the "deserving poor", and even replacing it over time with an Employment Guarantee Scheme of strictly limited scope; (v) the removal of all restrictions on the choice of what to produce, where to sell etc.; and (vi) freedom of operation for agri-business, and for this purpose the elimination of land-ceilings. Not all these of course are going to be adopted immediately; they constitute the basic set of objectives for "economic reforms" in agriculture. It is important therefore to understand what the implications of this total package will be for the Indian economy in general and the agrarian economy in particular.
 
To see matters in a proper perspective, a very brief historical discussion is necessary. Trade in agricultural goods was not always subject to restrictions. On the contrary during the colonial period, not only was the economy as a whole subject to more or less free trade (until the inter-war years when a limited number of industries received tariff protection), but agriculture in particular remained totally free of any restrictions throughout (so much so that during the very years of the Great Bengal Famine, rice was being exported out of Bengal). As a result of this freedom, cash-crop production for exports expanded, and since very little investment in irrigation took place to increase gross cropped area (except in the canal colonies of Punjab), this expansion was at the expense of acreage under food crops. Since yields in agriculture were not rising (on the contrary they were declining in the absence of any changes in the methods of production), this meant a sharp decline in per capita foodgrain output. The total foodgrain output during the period 1893-1947 increased at an annual rate of 0.11 per cent while non-foodgrains increased at the rate of 1.31 per cent; per capita incomes remained virtually stagnant and, since the decline in per capita foodgrain production was not made up for by any imports, per capita foodgrain availability declined sharply. In Bengal during the inter-war period it declined by 38 percent; even in the most prosperous state, Punjab, it declined by as much as 20 percent. It is this decline, which increased poverty and pushed people to the brink of starvation, that formed the backdrop to the Bengal famine. In a situation where the people's survival ability had been severely eroded, the additional burden of war expenditure literally proved to be the last straw.
 
The food policy of the government in the post-independence period emerged out of this experience. While no radical land reforms were carried out, and hence the productive potential of Indian agriculture was not fully realised (in contrast for example to China where despite a far more adverse land-man ratio, per capita food output rose faster than in India), a plethora of measures ranging from public investment in irrigation to the spread of extension services and the provision of cheap credit and inputs ensured that agricultural production, especially foodgrain production, kept fractionally ahead of population growth. At the same time, starting from the mid-sixties which witnessed acute food-shortage, an elaborate system of food procurement-cum- distribution was set up. True, the growth in production was undertaken on the basis of an emerging tendency towards capitalist production, superimposed on an unreformed and exploitative agrarian structure; true also that the public food management system had only a limited presence in rural areas, except in states like Kerala and West Bengal, and, in the absence of any complementary programme of income generation through comprehensive employment guarantee schemes (again except in some states), did not make any dent in the massive poverty existing in the Indian countryside. Nonetheless, the terrible famines which had characterised British India were done away with. The decline in per capita food availability which had characterised the last half-century of colonial rule was arrested and even marginally reversed. With all its limitations this has been an important achievement. In a country with such vast poverty where even a marginal disturbance in the food economy can cause havoc, there has been a more or less successful avoidance of disaster, even in the darkest times of terrorism and violence; and this has been achieved not by leaving things to the market but precisely by purposive State intervention in the food economy.
 
What the "liberalisation" package involves is an undoing of even this achievement, a putting back of the clock to the food regime that prevailed in the colonial times. Let us examine its implications systematically.
 
(1) At the prevailing exchange rate of the rupee, a comparison of the domestic with the international prices indicates that domestic prices of rice and cotton are distinctly lower than those prevailing internationally, and of sugar and oilseeds distinctly higher. The domestic wheat prices are such that if we take account of transport costs wheat would be neither an exportable nor an importable. Opening up Indian agriculture to international trade therefore would have an immediate impact on the price of rice. Rice would cost more to consumers, but it is not only the urban consumers who would be hit by it; the vast bulk of the agricultural labourers and the poor peasantry in the East and the South of the country are net buyers of rice in the market and they would be equally hard-hit by any rise in rice prices. In fact the urban and the rural poor would be even harder-hit in the rice-consuming regions than the others for the following reason: the public distribution system in rice is supported largely by the surplus from the North-West. Rice is grown there as an additional crop but is not locally consumed so that almost the entire crop is available for procurement. Rice exports would take the form essentially of diverting this part of the country's output to the international market, thereby starving the public distribution system. The primary victims of any drive to export rice therefore would be those who rely on the public distribution system, namely the urban and the rural poor. Ironically, the reach of the public distribution system in the rural areas is greater precisely in the southern and the eastern states than in the rest of the country, in Kerala and West Bengal of course, but also to an extent in Tamil Nadu and Andhra. This very fact however implies that the primary effect of any starvation of the public distribution system would be upon the poor in these states.
 
The argument often advanced in official circles that the rice-growing states are going to benefit from rice exports is therefore fallacious for two reasons: first, much of the rice surplus available for immediate export is not located in the main rice-growing states but is located in the north-west where it currently feeds the PDS; and secondly, while the general rise in rice price which would accompany the withdrawal of PDS rice would benefit the landlords and the rich farmers who control the marketed surplus in the rice-growing states the bulk of the peasantry would be hit by it, including that section of the peasantry which sells immediately after the harvest to buy its consumption requirements later.
 
Exports of cotton would raise the cost of domestic textile production, while lowering that of textile production in some of the competing countries. This would not only threaten our domestic cotton textile industry which is the largest employer in the country, but would also raise the price of cloth. Even if imports come in at the expense of domestic production, some increase in cloth price is inevitable. The two most elementary necessities of the people over much of the country, namely food and cloth, therefore would both cost more as result of liberalising agricultural exports. Now, even if oilseeds and sugar cost less (on which more later), that would scarcely alter the fact that the living standards of the poor would be put to a squeeze.