(Basole and Basu)
Basole and Basu set out to understand the nature of exploitation of labour and appropriation of surplus in the Indian economy. Given the transitional nature of the Indian economy from feudalism where the appropriation and exploitation is direct, to capitalism where it occurs in a totally concealed manner, through the institution of wage labour, assessing the nature of exploitation becomes crucial to understand the political and social implications. Can this assessment be purely theoretical? Basole and Basu argue that it has to be empirical. They examine some key structural features of Indian agriculture to arrive at an assessment. For them, focus on agriculture and informal industry is crucial because most scholars agree on the prevalence of capitalist relations of production in the ‘formal’ sector. Such an empirical assessment, they note is important to assess the character of capitalist development in India.
How do they undertake this assessment? They build their argument on the basis of NSS data, from different rounds, both at aggregate level and also at the state level, related to agrarian structure, employment, tenancy, credit, and sources of income of the working masses in agriculture. Each of the following sections discusses in detail what such data suggests about capitalist transition in agriculture in India. The authors examine the class structure at the all-India level on the basis of the following factors: size of landholdings; ownership at the state level; types of tenancy; owner-tenant relationships; extent of landlessness; sources of livelihood in the rural areas; surplus accumulation; nature of dominant class.
1. Decline in the share of Agriculture in the Indian Economy
A typical modern capitalist economy experiences what economists call ‘structural transformation’, constituting a) declining share of income from agriculture and b) decline in workers dependent on agriculture in the national economy. In India, the first part is achieved, leaving a huge gap in the latter. The share of agricultural GDP declined sharply from 56% in 1950 to about 14% in 2011 owing to the relative faster growth of the non-agricultural sector. As a result, agriculture as a sector as a whole commands far less economic power. Yet, the share of labour force engaged in agriculture came down from 68% to only 49% during the same time. Such a large workforce still engaged in agriculture reflects, Basole and Basu note, lack of opportunities outside agriculture.
The share of GDP contributed by agriculture has steadily declined over the last five decades; this decline has not been matched by a decline in the share of the workforce engaged in agriculture. This renders large section of rural workers confined to low productive work and low income.
2. Increase in the number of marginal and small farmer households:
What is happening to those engaged in agriculture? Normally, with capitalist transition, one may expect, though it is not certain, an increase in average landholding size. Contrarily, in Indian agriculture, the average size of ownership holdings has declined from about 2.01 acres in 1961 to 0.81 acres in 2003. Same pattern of monotonic decline is also observed in operational holdings.
Next, they look at changes in agrarian structure in terms of holding size. NSS classifies agricultural holdings into five categories, namely, marginal farmer as one holding land less than 1 hectare, small 1-2 ha; semi-medium 2-4 ha; medium 4-10 ha; and large as holding more than 10 ha. In the last 60 years, among these size-classes, the proportion of marginal and small households has increased steadily from about 75 percent of all rural households in 1961 to 90 percent in 2003. This rather large increase in the share of marginal/small farmers has been matched by a steady decline of large, medium and semi-medium farmers. Large and medium farmer households together comprise a minuscule 3.6 % of total rural households in rural India today, down from 12% in 1961. Between the decline in the share of large landholding families and the increase in the share of marginal farmer families, the “small” farmer family has managed to more or less maintain its share constant over the past five decades, increasing marginally from 9 percent to 11 percent of all rural households between 1961 and 2003.
The average size of agricultural holdings, both ownership and operational, has seen a steady decline over the last five decades, with the average ownership holding in 2002-03 being 0.73 hectares.
3.Increase in the area owned by small and marginal farmers
They point out that the area operated by these respective size classes also shows similar trend. The share of total area owned by marginal and small farmers has steadily increased from 8 percent of total area in 1961 to about 23 percent in 2003. The share of area owned by large farmer households declined from 28 percent in 1961 to about 12 percent in 2003; the corresponding share owned by “medium” households declined from 31 percent in 1961 to about 23 percent in 2003. Caught between these two trends is the semi-medium farmer family which has kept its share in the total area owned more or less constant since 1971 at around 20 percent.
The share of land owned by large and medium holding families has steadily declined over the last few decades from around 60% to 34% which indicates their declining economic, social and political power in rural areas. The share of marginal, small and semi-medium holdings has increased from around 31% to 80% indicates proliferation of a large class of powerless petty landowners.
4.Continuing inequality in ownership of land
This changing structure of land ownership, they point out, has not made distribution any more equitable. The Gini coefficient, a measure of inequality, of ownership distribution, from being 0.73 in 1961-62, remained the same, marginally increasing to 0.74 in 2003 (GOI, 2006). Even the average size of the large holding is about 67 times that of the marginal holding in 2003; 27 times that of medium holding. This occurred due to the simultaneous reduction in the size of the small landholdings along with the large landholdings.
Such a skewed distribution of land ownership of course in itself, they note, is not very useful to understand the dominant relations of production and modes of surplus extraction most in use. A feudal mode of production can have as much skewed distribution as a capitalist mode of production. While it is true that class power and landholding size need not exactly match, it still may serve as a useful to approximate the class power, because those who have larger holdings also are likely to own more animals, implements, & machinery. Hence size classes can be taken to as a proxy for class power.
The ownership of land remains as unequal as it was five decades ago which indicates that the class dominance also has remained the same.
5. Which states have larger number of large landholdings?
State-level comparisons are essential, given the wide variation in historical and geographical conditions in India. For analytical convenience, Basole and Basu divide all the states into two groups. The first group consists of those with largest share of area by large farmers. Such “large landholding states” are: Andhra Pradesh, Gujarat, Haryana, Karnataka, Madhya Pradesh, Maharashtra, Punjab, and Rajasthan. The second group of states are those with a relatively small proportion of area held by large farmers or the “small landholding states”: Assam, Bihar, Himachal Pradesh, Jammu and Kashmir, Kerala, Orissa, Tamil Nadu, Uttar Pradesh, and West Bengal.
As also suggested by micro-studies, the first group of States with large landholding is also associated with a relatively higher growth of capitalist relations of production in agriculture; the second group consists of the states which are still encumbered by remnants of pre-capitalist modes of organizing production. But even here, there has been a decline in the share of land owned by large farmers. This suggests that the economic position commanded by semi-feudal landlords appears to have declined relative to the rich middle peasants and capitalist landlords at the national, state and regional level. The semi-feudal landlords seem to have been replaced by rich middle peasants as the ruling bloc in the agrarian structure of contemporary India.
More developed and big (irrigation and income wise) states have less fragmentation of holdings, like Andhra Pradesh, Gujarat, Haryana, Karnataka, Madhya Pradesh, Maharashtra, Punjab, Rajasthan. However, states like Assam, Bihar, Himachal Pradesh, J&K, Kerala, Orissa, Tamil Nadu, Uttar Pradesh and West Bengal have more fragmentation.
6. How many people continue to be landless?
Proletarianisation, an important indicator of development of capitalist economy, is reflected in extent of landlessness. According to (NSSO) data, the extent of landlessness in Indian agriculture has stayed more or less constant over the last five decades: at 11.7% in 1961 which marginally declined to 10 % in 2003. If those owning land less than 0.2 ha are added, it stands at 44% in 2003, if one uses 0.4 ha as a threshold, then it increases to 60 %. The poorest rural households, who are effectively landless, own only 6 percent of the land used for cultivation. Largest share of landless households are prevalent in Himachal Pradesh, Maharashtra and Karnataka; and the smallest share in states like Jammu & Kashmir, Kerala, Punjab, Rajasthan, Uttar Pradesh and West Bengal.
The relative share and absolute number of cultivators in total agricultural workers has been decreasing in the past one decade. At all India level, the number of cultivators, which increased between 1961-81 from 79 to 121 million, remained constant at 125 million between 1991 and 2001, but reversed during 2001-2011, to fall below 102 million for the first time suggesting about 23 million cultivators have quit agriculture 1991-2011. A fall in cultivator number should mean they are diversifying either into non-farm sector as producers of various kind or workers.
Effective landlessness (by including those who have 0.29 ha or 0.73 acres) is quite large to an extent of 60 % in 2002-03.
7. Declining tenancy:
Growing landlessness may not itself suggest proletarianization when tenancy is widely prevalent. There are after all, two different ways in which the surplus labour is appropriated by the ruling classes, one directly as wage-labour and second indirectly as land rent. The first source is clearly associated with capitalist relations, while the second could be associated with semi-feudal methods of surplus extraction.
Aggregate level data from NSSO (and also from Agricultural Census) suggests a sharp decline in share of tenant households, from 25% in 1971-72 to 12% in 2003; the percentage of area leased in total area owned has too declined from 12% in 1971-72 to 7% in 2003. Such decline of tenancy is also observed for operational holdings.
The share of operational holdings with partly or wholly leased-in land has fallen drastically from around 24% in 1960-61 to 10% in 2002-03. In terms of the total area operated, the percentage share of area leased in has declined from 10.7% in 1960-61 to 6.5% in 2003. This indicates a gradual shift from tenant cultivation to self-cultivation.
Among size classes, while there is an increase in share of large tenancy holdings, which increased from 9.5 % to 13.5% during 1961-2001, but area leased-in by them declined from 8.3 to 6.1 %. For all other classes, shares of tenancy holdings in total holdings and their respective shares in land leased-in also declined.
How consistent is this trend across states? The states with area under tenancy increased are Andhra Pradesh, Gujarat, Orissa, Kerala, and Punjab. Except in Punjab, the area is less than 10 percent. In all other states, the share of tenant holdings and area is leased has significantly reduced. This means that tenancy is increasing in states where the hold of semi-feudal relations is already weakened.
Share of tenant holdings, as per the NSS data, declined drastically in the last five decades, area from 24 to 10 percent. The area under tenancy also drastically declined. While sharecropping – that house pre-capitalist relations held on, in the other areas fixed rent contracts reflecting commercial character is on rise.
8. Are current forms of tenancy feudal or capitalist?
Thus, states which are usually considered to be the bastions of semi-feudal and pre-capitalist production relations are not the ones which have the highest prevalence of tenancy, with the exception of Orissa. It seems, therefore, that the development of capitalism in Indian agriculture has peculiarly used tenancy and other forms of pre-capitalist relations of production as means of reducing the costs of production and controlling labour.
Further, in order to understand the nature of tenancy, one should look at types of tenancy contracts. Fixed cash or kind rent which indicate more capitalist relation; whereas sharecropping can involve semi-feudal relations. As per the NSS data, area under sharecopping has not changed much over time which stood at around 40%, while informal commercial leasing on kind and cash rent has increased from 38 to 50 % during 1961-2003.
In Haryana and Punjab, which have the largest share of leased-in land, the predominant type of tenancy is fixed money lease contracts. Poorer states like Assam, Bihar, Orissa and Uttar Pradesh, have sharecropping as predominant form of tenancy contract. This difference is important because the form of tenancy is radically different in the two groups of states.
In states like Punjab and Haryana, tenant cultivators are not the landless and poor peasants; it is rather the middle and rich peasants who lease-in land to increase the size of their agricultural operations and reap some economies of scale on their capital investments. Fixed money rent form of tenancy is no indicator of pre-capitalist relations, but is very much a capitalist development in agriculture. In states like Bihar and Orissa, on the other hand, tenancy is still predominantly of the old form, where the largest group of lessees is landless and near-landless peasants. In such a scenario, sharecropping operates as a semi-feudal mode of surplus extraction, where land rent can be considered pre-capitalist rent.
Tenancy in certain states is capitalist, where the landed peasants lease in land to reap economies of scale on their capital investments. In other states, tenancy is in the old form where it operates in the semi-feudal mode of surplus extraction and is pre-capitalist in form.
9. Wage labour and family labour: which is feudal and which is capitalist?
Sources of income in self-employment category include implicit wage for family labour, proceeds from trading and finance. All these reflect capitalist relations (mainly variations on the putting-out system), but are of different nature; hence non-wage income can often mask the underlying capitalist relations.
Similarly, wage income can often mask prevalence of ‘unfree’ labour relations. Many of these “unfree” relations, for example institution of annual farm labour, are created by capitalism and are not relics of a pre-capitalist past. In addition, often the same individual participates in several types of economic activities, requiring us to distinguish between wage and non-wage income at micro-level. With these caveats, Basole and Basu proceed to study the sources of rural income since the aggregate level distinction between wage and non-wage income still has important clues to offer about the relations of production in India.
With a preponderant share of petty commodity producers among those in agriculture who derive their income from farm activity as well as wage labour, it is important to look at sources of income for farm households. Which is the dominant source? A predominance of wage income would suggest an increasing proletarian character; but a continued dependence on income from cultivation would suggest an unclear story. At the same time non-wage income source need not imply pre-capitalist relations.
Small agricultural holdings are unviable, dependence on these keeps the rural households in perpetual indebtedness and pauperisation.
10. Which is more: wage income or income from cultivation?
Small size of the holding, which is a serious problem in India, generally leads to low farm income. Existence of the ground-rent barrier, lack of formal credit, dwindling rural public investment, eroding irrigation and exploitative input markets all contribute to this low income. As data indicates, the average profit per hectare from cultivation (excluding value of family labour or rent of owned land), was Rs. 6756 for Kharif and Rs. 9290 for the Rabi season in 2003. Such low level of income compels most rural families to supplement incomes through wage labour with petty commodity production in both agricultural and non-agricultural sector.
NSS data on different sources of rural income by the size-class of ownership holdings suggests that, first, it is only among the rural families with more than 4 hectares of land total farm that income exceeds average expenditure. If one remembers that 96% of rural households owned less than 4 hectares in 2003, farm incomes for 96% of rural households come from cultivation, wage labour and petty production. Second, for a large majority of 60% of farm households, the primary source of income is wage income, not cultivation, which provided more than 50% of their total monthly income in 2003. Landless households anyway depend on wage income. Third, income from petty commodity production accounts for 20% of the total income for about 80% of rural households in 2003.
Thus aggregate level data suggests that wage income has become the most important source of income for the majority of the rural population. This implies that surplus extraction through the institution of wage-labour has become the dominant form of extracting the surplus product of direct producers. Income from petty commodity production being as low as 20% indicates the exploitation of this large section by merchant capital through unequal exchange.
In spite of large number of rural families owning small parcels of land, their major source of income now is wage income, almost up to 60%. Only 20% of their income comes from cultivation, which reflects the exploitation in agricultural markets. The rest 20 % is from other petty activities.
11.Why do informal and formal credit services decline or increase?
Unregulated informal credit market operated by usurious capital gets a larger share in surplus labour without participating in its generation hence is necessarily parasitic. Informal credit often operates through inter-linkages in product and labour markets, which facilitate extraction of surplus through unequal exchange. It is the small peasantry which is often the biggest victims of these. Has the share of those dependent on informal money-lender class really changed?
NSS rounds suggest that the share of total rural credit provided by moneylenders declined substantially between 1961 and 1981 from 70% to 18% of total credit. This is a huge decrease! However, money lenders seem to have made a comeback in 1980s. Their share went up to 28%. A new class of moneylenders replaced older class of landlords. Now various groups of the rural population, like traders, school teachers, government servants, lawyers, rich farmers, and other members of the petty bourgeois class, have entered this lucrative business, facilitated by the gradual but steady retreat of formal credit institutions.
Among the states, other than five states of Punjab, Rajasthan, Assam, Bihar and Andhra Pradesh, all the other states have a higher proportion of formal credit in 2003. Second, some of the states with relatively well developed capitalist agriculture like Punjab, Andhra Pradesh and Tamil Nadu also have a higher prevalence of informal credit. In Punjab, for instance, one of the main players in the informal credit market is the trader-middleman known as the adtidar or the commission agent who often provides credit, sells inputs and also procures the output from the farmer. This typical pattern of interlinked markets allows the surplus product to be easily extracted from the direct producer through unequal exchange whereby input prices are inflated and output prices depressed. Interestingly, West Bengal, which has had some limited degree of land reforms in the past, also shows a high percentage of non-institutional forms of rural credit.
There is a reasonably high growth of formal credit market, which caters to 70% of farm investment. While this disproportionately goes to large and medium farmers, smaller peasants remain dependent on informal moneylenders.
12. Capital formation or investment in agriculture
An important question relating to the development of capitalist relations of production in Indian agriculture is whether there has been any significant trend towards reinvestment of surplus and capital accumulation in the agrarian economy. Lack of capital formation in agriculture would indicate production relations hindering the development of productive forces. Aggregate level data on gross capital formation in Indian agriculture shows interesting temporal patterns. The gross value of capital stocks has more than tripled in real terms (1993-94 prices) over the last four decades, moving from Rs. 63,000 crore 1961 to Rs. 1,90,000 crore in 1999.
For the period 1961-99, gross capital formation in agriculture (GCFA) grew at about 3% per annum, a significant rate of growth by developing country standards. GCFA grew at 5.05% in 1960s, 8.7% in 1970s; thereafter, it slowed down at -0.33% in 1990s. It again picked up to 2.8% in 1990s. The slowdown in capital formation is largely due to deceleration of public sector capital expenditures in agriculture. Since 1993, however, the private capital expenditure, increased at a whopping 16.7% (Gulati and Bathla, 2002). The data suggests two things, investment or capital formation in agriculture significantly increased in 1970s and 1980s, spearheaded by the state investment. After the reforms, a decline in public investment is more than outweighed by private investment in agriculture.
There was a significant capital accumulation in the agricultural sector during the 1970-90s that enabled a long term growth of output at growth rate of 2.7%, This capital formation was led initially by public sector share, and then by private investment after 1991.
Over the past few decades, the relations of production in the Indian agrarian economy have slowly evolved from “semi-feudal” towards “capitalist”. The predominant mode of surplus extraction seems to be through the institution of wage-labour, the defining feature of capitalism. Articulated to the global capitalist-imperialist system, the development of capitalism in the periphery has not led to the growth of income and living standards of the vast majority of the rural population. Two main forms of surplus appropriation from producers seem to exist (a) through wage-labour, and (b) unequal exchange value appropriation from petty producers through interlocked markets with monopolistic institutions. The process of class differentiation is slowed down in the long chain connecting Indian economy into the global capitalist system, which sustains a large “informal” production sector, organised by petty commodity production, both of agricultural and non-agricultural commodities. Preponderance of this class impedes development of proletarian class consciousness and complicated the task of revolutionary politics.
Note
1. Summary of Amit Basole and Deepankar Basu, “Relations of Production and Modes of Surplus Extraction in India: Part I Agriculture” Economic and Political Weekly, Vol. 46, Issue No. 14, 02 Apr, 2011.