The consequences of the Mahalanobis model for India’s political thinking and ideology were far more enduring and impactful. Grigory Feldman, the Soviet economist, had prepared the industrialization strategy of Joseph Stalin, who had ruled the Soviet Union from the mid-1920s to his death in 1953. It is widely believed, though without any official corroboration, that Feldman’s ideas had influenced the thinking of Mahalanobis and that led to the shift in Nehru’s economic policy approach. There was, however, a key difference between the situation in the Soviet Union and that in India: Feldman was asked to address through policy intervention the foreign exchange bottleneck in the Soviet Union and in India, by contrast, the foreign exchange bottlenecks occurred because of the implementation of the Mahalanobis model with its discrimination against exports. Nevertheless, the idea of the state leading the industrialization efforts through the use of scarce foreign-exchange resources for funding projects and meeting rising consumption demand appealed not just to Nehru but to a host of other socialist leaders and those belonging to the Left political parties in India.
Thus, even though there were flaws in the Mahalanobis model, as they became evident from the outcomes of the Second Five-Year Plan, Indira Gandhi, who succeeded Nehru after a short interregnum of about eighteen months, continued to espouse the same principles for a couple of more decades. At another level, the influence of the Left political parties on governance was hardly on the wane. Left leaders continued to provide ideological sustenance to the idea of the state leading the industrialization efforts in the country at least till the 1980s.
Heads of the government were either influenced by such Left-oriented thinking or were not strong enough to usher in a change in the direction of economic policy, departing from the path pursued by the nation’s first prime minister. It was only the crises in the late 1970s and the 1990s that led to a gradual dilution in the government’s approach to state-led industrialization efforts.
The final departure from the statist policies happened in the 1990s, and the nail in the coffin of state-led planning processes was driven by the Narendra Modi government by the end of 2014 when the Planning Commission was wound up and the pursuit of a socialistic pattern of the economy was finally thrown into the dustbin. But that statism in India’s economic policymaking held such a long sway is an indication of how a disruption initiated in the early years after India’s Independence had a long-lasting impact on the economy.
Section 4
The Food Crisis
CHAPTER 6
FROM SHIP TO MOUTH
An indication of how serious India’s food crisis in the 1960s was could be had from the way Prime Minister Indira Gandhi responded to a note from one of her senior civil servants sometime in May 1967. Her newly appointed secretary in the prime minister’s secretariat (which was rechristened Prime Minister’s Office [PMO] later in 1977), P.N. Haksar, brought to her attention the serious shortage in the availability of rice in the country.1 India was dependent not only on wheat imports from the US but also on imports of rice from Burma (as Myanmar was known then). It was noticed that there were no rice shipments from Burma for the whole of April. This could have caused major problems in different parts of the country and food shortage could be politically explosive. Gandhi wrote to General Ne Win of Burma requesting him to resume rice supplies to India to help avert hardships for the people of India. A major drought had pushed foodgrain output in 1965–66 down to just about 72 million tonnes, a steep fall of about 19 per cent over the output in the previous year. More worryingly, the dip in output was steep in rice—about 9 million tonnes, with its output falling to just about 30.5 million tonnes in 1965–66. In 1966–67, foodgrain output had marginally improved to 74 million tonnes, but was nowhere near a level to obviate the need for emergency imports to meet domestic demand.2
India’s continued dependence on imports of wheat and rice to meet domestic demand for these cereals was a major policy challenge, with serious economic and political consequences for the government. Not surprisingly, a major agrarian unrest had gripped the country a little later in the year. Poor peasants and tea-garden workers in and around Naxalbari of West Bengal were mobilized by a few Maoist ideologues to raise their voice against repressive landowners and demanded a share in the land they held beyond the statutory ceiling. Landowners retaliated and in one such incident assaulted a sharecropper. This triggered widespread protests in the area that led to violent clashes and forced acquisition of land and even confiscation of foodgrain by militants. On 23 May 1967, a few peasant militants killed a police inspector, Sonam Wangdi.3 The law enforcement agencies responded quickly, with the might of the state backing them. Two days later, the police killed nine tribal women and children.4
What started as agrarian distress was now a full-blown political crisis, with the peasant militants seeking guidance from the neighbouring China. The Chinese state-controlled media gave the development ample publicity. A month later, on 28 June, Peking Radio broadcast news of the unrest in India and a few days later, in the first week of July, the People’s Daily, an organ of the Communist Party of China, described the developments as ‘a revolutionary storm of Indian peasants in the Darjeeling area’. The movement spread to other neighbouring states of Orissa and Andhra Pradesh and even Bihar. A few months later, the movement spread further and Assam, Kerala and Punjab were not spared from its grip.
A government note5 prepared in October 1969 analysed the causes and nature of the agrarian tensions prevailing in the country at that time. The report sowed seeds of the idea of land reforms, and Gandhi’s subsequent attempts to undertake land reforms drew their inspiration from this report.
Famine, Food Shortages and Policy Response
Availability of food was not a strikingly new problem for India. Memories of the Bengal famine of 1942–43 were fresh in the minds of Indians when they gained independence in 1947. Nobel laureate Amartya Sen recounted in 1998 in one of his essays published in a Bengali weekly how he was haunted by the stories of poor families during the famine making do with just the starch left over after cooking rice. Even to get a few drops of that starch there would be long queues outside homes of relatively well-off people during those days. The Bengal famine claimed over two million lives.6
There have been academic debates over whether the famine was caused by the shortage of food or the inability of the distribution system to make food available to all the people in the country. In Poverty and Famines: An Essay on Entitlement and Deprivation, Sen argued that famines in India were not due to a shortage of food, but to ‘exchange entitlement failures’, which take place when workers are unable to exchange their labour for acquiring food. During the Bengal famine, agricultural labour was the worst affected because their ability to exchange their labour for rice or food was seriously undermined.
When the monsoon fails, one of the consequences, apart from a drop in farm output, is a decline in demand for farm labour. This leads to an increase in supply or availability of farm labour at a time when the demand for such labour has declined. Consequently, wages are depressed, undermining the ability of landless labourers to exchange their labour for wages. Such a drop in exchange entitlement for landless labourers, who dominate Indian agriculture, results in financial impoverishment and inability to buy food. The economist’s approach to such a problem is to introduce food-for-work programmes so that landless labourers can use such facilities for earning in the form of food from the labour they do in such programmes, usually launched by the government. The absence of such food-for-work programmes can aggravate the effects of a decline in food output and prevent it from degenerating into a famine.
Whatever be the reason for such famines in the past and the logic for the government to launch food-for-work programmes to mitigate the adverse impact of sharp drops in food output, the stark reality was that India could not feed its entire population of 300 million when it became a free country in 1947. Restrictions were in place on the number of people who could be invited to
wedding feasts. In ordinary circumstances, no more than thirty people could be fed during a wedding.
M.S. Swaminathan, the father of India’s Green Revolution and the man who steered India’s farm policies from the early 1960s and continued to influence policies in the post-Green Revolution period as well, makes no secret of the country’s poor agricultural infrastructure. In an essay he wrote in 2012,7 he wrote about India’s agricultural conditions in 1947 in these words:
Hardly 10 per cent of the cultivated area had assured irrigation and the average consumption of NPK (nitrogen-phosphorus-potassium) fertilisers was less than one kilogram a hectare. The average yield of wheat and rice was about 800 kilogram per hectare. Mineral fertilisers were mostly applied to plantation crops; food crops got whatever organic manure farmers could mobilise.
India’s precarious food situation had a political aspect as well. Recognizing India’s food crisis, Prime Minister Jawaharlal Nehru decided to visit the US in October 1949 and meet President Harry Truman to request help for India to meet its food scarcity situation. While Nehru received a rousing welcome from Truman, there was no actual progress in securing food supplies from the US, which had surplus wheat. While the Indian side argued that in spite of the green signal from Truman, bureaucratic procedures came in the way of a final decision on wheat supplies to India from the US, there were also suggestions that the US had sought to impose some policy conditions before wheat could be supplied to India. The Indian side decried such attempts to link food aid to secure some policy changes in the recipient country. The Americans, however, defended their stance arguing that no specific request for food aid had actually been received from India during Nehru’s visit. At the end of Nehru’s visit, there was no agreement between India and the US on wheat supplies and India’s food situation remained precarious.
Nehru made yet another attempt at securing wheat supplies from the US in 1950, when a specific request for food aid was communicated to Washington. India’s ambassador to the US, Vijayalakshmi Pandit, submitted a formal request to the US for supplying two million tonnes of wheat to India. Truman, according to senior journalist Inder Malhotra’s account,8 was cautious but did his best to get a US law passed to accept the request for food aid from Nehru. His caution arose from his own assessment that the US Congress would not easily pass the proposal. This was because Truman knew full well that US Congress leaders did not approve of India’s policy of non-alignment and also its friendly ties with China at that time. In spite of that, Truman sent the bill to the US Congress and even tried to secure the support of the Republicans.
Opposition to food aid for India came not just from the Congress, but also in equal measure from the House of Representatives. It was a different world, where India had few sympathizers in the US, where the political leadership would even wonder why India would not tap Pakistan for importing wheat to meet its shortage. Pakistan’s agriculture was in better shape at that time than India’s. This was largely because the more fertile western part of Punjab, which also benefited from the world’s most extensive irrigation canal networks at that time, had gone to Pakistan. Jawaharlal Nehru was extremely distressed by the US’s dilly-dallying on a request that was of critical importance for India and it was a question of Indian people going hungry and facing another famine so soon after the Bengal famine of 1942.
Malhotra quotes B.K. Nehru, who was at that time the minister for economic affairs at the Indian embassy in Washington, on a gripping conversation between Vijayalakshmi Pandit and Sam Rayburn, Speaker of the House at that time. Rayburn was also under the impression that India’s reluctance to import wheat from Pakistan was because of a rivalry between ‘a Hindu India’ and ‘a Muslim Pakistan’. Pandit had to correct that impression and told Rayburn that India was not a Hindu India, and it had more Muslims than did Muslim Pakistan. After that conversation, the US tone changed somewhat. A statement from Prime Minister Nehru, where he said that India would prefer two million tonnes of wheat from US as a loan and not as a gift, also helped improve the situation.
Within days of that statement, the US Congress passed the India Emergency Food Aid Bill to provide two million tonnes of wheat, valued at that time at $190 million, and all of that came to India as a loan. President Truman signed it into a law on 15 June 1951. But there was no celebration over the decision in India as everybody knew of the tortuous path the agreement had gone through. It was a deal that showed India’s fraught relations with the US as much as it brought to light India’s doddering food economy and its inability to feed its own people. Americans were also unhappy over the fact that while the US food shipment decision was not widely appreciated in India, there was much jubilation and applause over the Soviet Union’s decision to send wheat to India at around the same time although it was of a much smaller quantity.
In spite of India’s political travails with wheat imports soon after its Independence, the government of the day did not refocus its energies to bring about a comprehensive policy change to raise the agricultural sector’s capacity to produce adequate foodgrain and feed its people. The first two Five-Year Plans, of course, lay emphasis on expanding the area under irrigation and on fertilizer production. But they did not make any significant impact on India’s foodgrain output in the two Plan periods. In 1950–51, the output of wheat, rice and pulses was estimated at 50.83 million tonnes; it increased after ten years of planning to 82.02 million tonnes in 1960–61. This was a compounded annual growth rate of less than 5 per cent, not adequate to meet the growing demand for basic necessities of the Indian people who had just got independence and believed that true freedom would arrive for them when they attained freedom from hunger as well. Thus, import of foodgrains kept rising in this period. Net import of cereals and pulses was estimated at 1.39 million tonnes at the end of the First Five-Year Plan in 1956, and more than doubled to 3.49 million tonnes in 1961 by the time the Second Five-Year Plan ended.
Why did India’s planners ignore its agriculture? Economist Deepak Lal, who was part of the Planning Commission in the late 1960s, has an explanation. In his short note on economics in India in the New Palgrave Dictionary of Economics Online, Lal9 puts the blame on the model of development framed by Prasanta Chandra Mahalanobis, who was the inspiration behind the first two Five-Year Plans and was one of Nehru’s most trusted economists. Lal concluded:
An implicit assumption of the Mahalanobis framework was that agriculture could be left alone, merely being a source of ‘surplus labour’ and of the limited savings and foreign exchange for the heavy Industrialization strategy. By the mid-1960s, this neglect had led to a severe food crisis. The transformation of agriculture, which until then had been seen largely as a means of promoting equity through land reforms, then became a matter of debate.
In other words, the policy of treating agriculture only as an instrument of redistributing assets and resources through land reforms boomeranged on the Indian economy as inadequate farm output caused food shortages increasing the country’s reliance on imports.
Lal’s analysis of Indian agriculture also reveals three broad trends that hurt the Indian farmers’ productivity and economic well-being. One, the package of initiatives to address the ills afflicting Indian agriculture did not see any major change over the years. They were largely focused on improving irrigation networks and ensuring increased availability and use of fertilizers, supply of better seeds and enhancement in land tenures. Indeed, the availability of improved irrigation networks was a big boon for India’s agriculture after high-yielding varieties of seeds were introduced in the late 1960s, without which the goals of attaining self-sufficiency in agriculture would have remained unrealized. But the policy framework was not alive to fresh developments in agriculture and, therefore, could not come up with appropriate policy responses.
Two, the government chose to rely on such empirical research work on India’s agriculture that showed an inverse relationship between farm sizes and productivity per hectare. Such research showed that productivity
levels were found to be higher in smaller farms than the large ones. This finding, Lal argues, was used to push through land reform policies to give rise to small, family-labour-based peasant farms, which in turn would promote equity and efficiency. An improvement in the productivity of agriculture was cited as the economic rationale for land reforms resulting in smaller landholdings. In the process, the government ignored other studies that challenged such arguments.
And three, the shift in the industrial policy approach in the 1950s that introduced a licence-permit raj extracted a huge price for India’s agriculture. Such policies, Lal, argues, implied a heavy tax on agriculture. ‘From 1965 efforts were made to correct this by price supports to farmers, which led to an improvement in the terms of trade. But this changed again in the 1980s with growing but inefficient input subsidies becoming the main form of supporting agriculture,’ Lal noted. A combination of price support schemes and input subsidies was what the government pursued over the years to help Indian agriculture, paying less attention to the need for increasing basic investments in the sector and encouraging greater use of technology for productivity gains.
Even after the economic reforms of 1991, there was no noticeable shift in the government’s policy approach to agriculture. On the contrary, it got worse. Instead of improving rural infrastructure, amending laws that placed curbs on marketing of farm produce and increasing investments to ensure linkages of Indian agricultural crops with the markets through food-processing supply chains, the governments only brought in band-aid solutions. These included putting higher minimum support prices and even palliatives like waiving agricultural loans. Some feeble efforts in the right direction were made, but they were too few and far between. The government tried to create the infrastructure for agricultural marketing and amend the marketing laws for agricultural produce to provide farmers the freedom and choice on the question of selling crops, but no real headway was made in that direction.
The Rise of Goliath Page 8