The Rise of Goliath

by AK Bhattacharya

  The recollections of Surinder Sud, one of India’s most well-informed commentators on Indian agriculture, about the food crisis of the 1960s and the subsequent Green Revolution tells a riveting story of how Indian agriculture went through a dramatic phase of change. For Sud, the advent of the Green Revolution was a direct outcome of a combination of global politics and domestic shortages. According to him, ‘The ship-to-mouth food economy of India those days triggered the desire for self-sufficiency and the Green Revolution.’ With human rights violation in Vietnam and Lal Bahadur Shastri’s criticism on the US role in the war, the shipments of wheat under the PL 480 programme were diverted to other destinations. This aggravated the food shortage situation in India. Of course, the Soviet Union came to India’s rescue and the food situation was not allowed to get worse. But so precarious was the situation that Shastri exhorted Indians to give up on one evening’s meal in a week to save food consumption and reduce the country’s dependence on imports.6 Restaurants across the country were asked not to serve evening meals on all Mondays.7 With the consequences of India’s war with Pakistan being felt on the economy, Shastri coined a new slogan that underlined the critical role of both the soldier and the farmer—Jai Jawan, Jai Kisan.

  Three persons played a critical role in India’s food economy in that phase. M.S. Swaminathan, who was at the time doing research at the Indian Agricultural Research Institute (IARI), Norman Borlaug, who was the director at the International Wheat and Maize Research Institute, or SYMMIT, in Mexico, and C. Subramaniam, who was at the time minister for food and agriculture in the Union government. Swaminathan and Borlaug developed dwarf varieties of wheat plants. The big advantage was that such plants would not be easy victims of storm or rain.

  In addition, the new varieties responded well to fertilizers and irrigation, thereby increasing the yield. What’s more, the nutrition of the plants shifted from the stems to the grains, which meant more wheat output. The first round of shipments of these newly developed varieties were delayed and led to delayed planting in India. Borlaug flew down to India and made some critical suggestions like adding more fertilizers and introduced a concept of ‘gap filling’, which essentially meant that seeds were planted even in areas where they had earlier gone dead. The output from these varieties was substantially higher than the traditional ones.8

  Enter the third protagonist of Green Revolution—C. Subramaniam. On receiving reports of a huge increase in output from the new varieties, Subramanian wondered why the country was not importing large quantities of seeds of the new varieties for distribution across farms in the country. Once the scientists gave their go ahead, Subramaniam ordered for the import of 18,000 tonnes of seeds for the new dwarf variety of wheat—the largest ever consignment of seeds to land on Indian shores. As soon as the seeds landed in Indian ports, they were dispatched to different agricultural research institutions and universities so that they could undertake further research and ensure that they adapted to Indian conditions.

  Two institutions came up with the adapted varieties based on the imported seeds—the Punjab Agriculture University (PAU) in Ludhiana and the IARI in Pusa, New Delhi. PAU called the seed Kalyan and IARI named it Sona. A mongrel variety was produced from both these seeds and this was called Kalyan Sona. It is the Kalyan Sona variety of seeds that made the Green Revolution in the late 1960s a reality. Of course, the credit for the sharp rise in output should not just go to these seed varieties, but also to many other factors like the availability of supporting infrastructure including irrigation, fertilizers and an effective minimum support price mechanism. This is also why Punjab benefitted most from the new varieties of seeds—its farmers had larger landholdings and enjoyed an extensive network of irrigation through tube wells and a functioning procurement system along with a minimum support price mechanism. Sud recalls that in 1972 the country had a surplus wheat production to the tune of almost eight million tonnes. A country that suffered from chronic food shortages and had rarely focused on the need to create storage facilities was suddenly up against a problem of plenty. School holidays, scheduled for the summer months, were advanced and the surplus wheat was stored in the school classrooms in different districts of Punjab.

  The Green Revolution also put a lot of pressure on the government’s capacity to procure, store and distribute foodgrain. The Food Corporation of India—which had been set up in 1964 to undertake price support operations to safeguard the interests of farmers, distribute foodgrain across the country and maintain a safe level of buffer stock for national food security—was asked to pull up its socks and expand its operations to reap the full benefits of the Green Revolution.

  There were socioeconomic implications for farmers as well. Jat Sikh farmers, who so far had remained in the background and had a relatively low ranking in social hierarchy, gained hugely from producing more foodgrain and earning higher returns on their investments in cultivation. The pre-eminence of non-Jat Sikhs in the social hierarchy was challenged by Jat Sikh farmers, who now were becoming rich. Mechanization of farming was another direct consequence of the Green Revolution. With more earnings from higher produce, farmers were encouraged to introduce mechanized farming, and this led to an increase in the use of tractors in a big way. The propagation of the Kalyan Sona variety of seeds for growing wheat had another impact on the dining tables of Indians. The rotis, made out of imported wheat from the US under PL 480, had a reddish colour and, therefore, were not favoured in most Indian homes. In contrast, the wheat produced from Kalyan Sona was ideal for rotis. Their colour was amber, not red, and similar to the grains of desi wheat. More importantly, they were tastier than the rotis produced with US wheat.

  The verdict on the disruptive impact of the Green Revolution on Indian agriculture is best summed up by what Norman Borlaug said in 2000: ‘Increased food production, while necessary, is not sufficient alone to achieve food security. Huge stocks of grain have accumulated in India, while tens of millions need more food but do not have the purchasing power to buy it.’9 Kathryn Sebby of the University of Nebraska, in her research paper on the impact of the Green Revolution on small farmers in India had this to say:

  The lack of a stable agrarian system in India has made it difficult for Green Revolution technology to impact everybody positively. This is because of a rigid social structure, which makes it difficult for those without money to improve their social conditions. Those with more money (and therefore more land) can afford the seeds and chemicals necessary to compete in the Green Revolution market. Farmers with less money cannot afford to buy the necessary technology and resort to money-lenders to purchase on credit. They then find themselves in debt and paying exorbitant interest rates. They buy the technology on credit to keep up with large farmers and stay competitive in the market, but the debt alone negates any possible financial success they can achieve by adopting Green Revolution technology.10

  This is a sobering thought. The Green Revolution certainly bailed India out of a tight food situation in the 1960s. But it did not bail Indian farmers—particularly small and marginal farmers—out of their existential problems in farming and reaching their produce to the marketplace.

  In sharp contrast to statism in the sphere of industrial and economic policies, Nehru allowed Indian agriculture to remain in the private sector. Not only Nehru but all his successors have allowed agriculture to remain a private initiative and have kept it out of the reach of the organized corporate sector. Indian agriculture thus suffered from poor productivity, lack of technology and a marked absence of reforms of laws on marketing for agricultural produce.

  Many farmers remained poor, and unchecked population growth led to fragmented landholdings. This was a recipe for a food crisis. The disruption here was the Green Revolution that essentially resulted from the adoption of hybrid varieties of foodgrain, mostly cross-bred strains, and the use of inputs like water, fertilizers, plant-protection chemicals, including pesticides and weedicides, and improved agronomic practices. But its benefits did
not flow to all sections of Indian agriculture. Of that there is little doubt. A look at the preponderance of small and marginal farmers with landholdings of less than 2 hectares, estimated at about 85 per cent of all the landholdings in the country, and the growing agrarian distress becoming a political issue in almost every election since the Green Revolution are ample proof of that.

  Section 5

  Nationalization and More Statism

  CHAPTER 8

  THE ERA OF NATIONALIZATION

  The second phase of nationalization of economic activities in the country began under the prime ministership of Indira Gandhi. It caused no less disruption than the first round of nationalization in the 1950s. But this time there was a crucial difference. The second phase of the rise of the State had deeper political roots.

  Gandhi’s turn towards statism was as much influenced by her political compulsions as by the company of her close advisers during her first stint as the prime minister from 1966 to 1977.

  On the one hand, she had to counter the old guard in the Congress, which, in the garb of the Syndicate, was trying to put all kinds of political pressure on her to gain the upper hand in the leadership of the Congress. The Syndicate was led by K. Kamaraj, former chief minister of Madras; Neelam Sanjiva Reddy, a strong leader from Andhra Pradesh; Atulya Ghosh, president of the West Bengal unit of the Congress; S.K. Patil from Maharashtra; and S. Nijalingappa from Karnataka. The Syndicate was opposed to Morarji Desai for ideological reasons—the former were opposed to the pro-business leanings of the latter. When Nehru died in 1964, the Syndicate was active in ensuring that Desai could not become the next prime minister. Instead, the Syndicate propped up an alternative in Lal Bahadur Shastri, a mild-mannered leader from Uttar Pradesh, who kept a low profile even as a minister in Nehru’s Cabinet. However, the Syndicate received a jolt when Shastri showed he was his own man and led the country as prime minister, with strong determination and a clear direction, for about eighteen months. The Syndicate was active again when Shastri died suddenly in January 1966. Desai was the claimant again, but this time too, the Syndicate put up Indira Gandhi as an alternative to Desai in the belief that Nehru’s daughter would remain beholden to it and would be guided by its advice. However, like Shastri, Gandhi decided to wrench herself free from the influence of the Syndicate and opted for an economic policy course that would present her as a leader with firm conviction in a socialistic pattern of society. The Syndicate believed that Gandhi would become a puppet in their hands, but Gandhi decided through her actions that she was not going to be led by it. Indeed, she even appointed Desai to be her finance minister, almost as a signal to the Syndicate that she would have a person in such a key position even though he was not favoured by it.

  On the other hand, she saw the need to build her political base by winning the support of the Young Turks, or the relatively young members of the Congress, who wanted the party and the leadership to take economic steps that could achieve social justice and equity. She could achieve both the goals by the nationalization of key economic activities, which indeed marked the first few years of her prime ministership in a prominent way.

  Few people had heard of the Congress Forum for Socialists Action or CFSA in the first few years of its formation in 1962. The group was set up with a handful of senior Congress leaders and was led by Gulzarilal Nanda, who was a man of great integrity and associated with the country’s labour movement. It had the blessings of then prime minister, Jawaharlal Nehru, who summed up the mission of CFSA in the following words:

  The Forum is meant to spread socialist ideas and outlook among our people. More specifically, it is meant to help the study of various aspects of socialism in order to give an intellectual background to our people’s thinking. This is welcome because there is [a] great deal of vagueness in our thinking.1

  Apart from holding a few seminars, the CFSA was not very active in the first five years of its existence, until April 1967, when a few young Congress leaders like Chandra Shekhar, Mohan Dharia, Chandrajit Yadav and K.V. Raghunatha Reddy got together to revive the activities of the Forum and press for the adoption of socialistic economic policies.

  The outcome of such initiatives became evident at the All India Congress Committee (AICC) in New Delhi in the last week of June 1967. Just four months previously, the fourth general elections had been held and the Congress under Indira Gandhi managed to retain its power at the Centre. However, it had a reduced majority, thanks to a substantial drop in the number of Lok Sabha seats under its belt. It got 283 seats, down from 361 in the 1962 general elections. There were widespread protests over growing inequality, agricultural distress and rising inflation. The Congress’s performance in the state Assembly elections was worse, as it lost seven states, where different political parties gained power defeating the Congress. The ten-point economic policy that was adopted by the AICC was a response to the electoral reverses the Congress had faced.

  A Strong Political Trigger

  Behind the decline of the Congress in the 1967 elections was the economic consequence of the decision that Gandhi had to take immediately on assuming prime ministership in 1966 after Shastri’s death. Shastri died soon after India fought a war with Pakistan, whose adverse economic consequences were as devastating as the shortage-ridden food economy that had dogged the country for the preceding few years. The US had turned off the tap for financial aid for India. The country’s dependence on food imports and the foreign-exchange shortage left Shastri with no option other than a devaluation of the Indian currency. In return, the US not only offered more help but also leaned on the International Monetary Fund (IMF) to favourably consider a request of financial accommodation for India. Lakshmi Kant Jha, secretary to Prime Minister Shastri, had already prepared a blueprint for economic policy liberalization that could be introduced once some economic stability was restored with financial assistance from the US after the currency devaluation.

  Shastri, however, faced some internal opposition to the idea of devaluing the Indian currency. His finance minister, T.T. Krishnamachari, did not see eye to eye with him on this issue. The only option left for Shastri was to effect a reshuffle of the finance portfolio. Krishnamachari was replaced by a relatively unknown Congress leader Sachin Chaudhury and the calculation was that the new finance minister would be on board the controversial issue of devaluation. As events in the subsequent years of the 1960s would show, there would be another reshuffle of the finance portfolio—in 1969. Gandhi would divest Morarji Desai of the finance ministry just before she took an equally controversial decision on nationalizing fourteen banks. Two finance ministers were sacrificed by two prime ministers in the space of three years.

  With Chaudhury in North Block, the decks were clear for devaluation. Chief Economic Adviser I.G. Patel and RBI Governor S. Bhattacharya left for Washington to hold consultations with the IMF and inform them of the government’s plan to devalue the currency. Everything was going on smoothly so far. But in January 1966, Shastri, who had gone to Tashkent to hold talks with his Pakistani counterpart, died. The devaluation plan had to be put off.

  Gandhi assumed charge of the government on 24 January 1966 and her secretary, Jha, apprised her of the plan to devalue the currency. Gandhi held a round of consultations with economists and her advisers to decide on the quantum of devaluation. In April 1966, she visited Washington to gauge for herself the likely impact of the decision. At the end of the visit, she was convinced by the US and IMF administrations of the assistance she would get after going through devaluation. Many Congress leaders were not convinced and the decision to devalue the Indian rupee by over 57 per cent from Rs 4.76 a dollar to Rs 7.50 a dollar set off a chain reaction in the economy with higher import costs raising the inflation rate as a consequence. Remember that India was hugely dependent on imports of crude oil and petroleum products to meet its energy needs. India’s imports of petroleum and petroleum products spiked by 19 per cent from $84 million in 1966–67 to $100 million in 1967–68. On top of that,
the promise of assistance from the US took its own time to materialize and another drought hit the Indian farm-economy. India’s opposition to the US role in Vietnam complicated the situation as US President Lyndon Johnson used delaying tactics in sending foodgrain shipments to India.

  The Indian economy was in a perilous state; so critical was the situation that the Indian government had approached the IMF to seek temporary help under the latter’s compensatory financing facility. In 1966–67, India received a net assistance of $130 million from the IMF and following it up with another IMF dose of $32 million in 1967–68. A sharp drop in foodgrain production in the country led to an increase in food imports—up from $676 million in 1965–66 to $868 million in 1966–67. Imports had shot up from $2.87 billion in 1965–66 to $3.25 billion in 1966–67 but stabilized at a lower level of $2.75 billion in the following year. What, however, caused concern was the tepid rise in exports even after devaluation. Merchandise exports rose from $1.65 billion in 1965–66 to $1.77 billion in 1966–67 but again declined to $1.68 billion in 1967–68. It was becoming clear that the devaluation move without accompanying measures to improve efficiency and productivity levels had failed to deliver. It did not take much time before devaluation was blamed, and Gandhi became the target of attack even within the Congress. She had used her personal political capital to go for devaluation and turn towards the US and the IMF for help. She felt let down by her policy advisers and even the US. On her way back from a trip to the US, she took an impromptu decision to visit Moscow, capital of the Soviet Union. Soon after, she virtually junked the note on reforms that Secretary Jha had prepared for implementation. An idea that was attempted in a half-hearted manner failed to yield the desired results and then it was given a bad name and junked. The Indian economy was taking a fresh turn thanks to a combination of political and economic developments.2