SPECIAL ARTICLE

Structural Retrogression and Rise of New Landlords in Indian Agriculture: An Empirical Exercise
R Vijay

The Indian rural economic structure is witnessing changes, largely due to economic policies and consequent adjustments in the decision-making process of individual economic agents. The structural change observed is a reduction in the share of households dependent on the farm sector due to a decline in the share of cultivators in the workforce. Correspondingly, the set of non-cultivating peasant households is increasing in importance and its stakes in land are also on the rise. The ncphs have a low incentive to invest in agriculture. This has implications for agricultural growth and brings into focus the constraints to agrarian transformation. National Sample Survey data on household assets and liabilities in India is used to illustrate this structural change in the rural sector with increasing importance of the NCPH. At a second level, data from a primary survey conducted in nine villages in Andhra Pradesh is used to identify the micro-processes strengthening the NCPH in rural areas.

1 Introduction

The author thanks R S Rao for initiating him into this research. Unfortunately, Rao passed away in June last year before the final form of this paper appeared, but the author hopes that some of his concerns on the changing agrarian structure have been expressed therein. The usual disclaimers apply. R Vijay (regvijay@yahoo.com) is with the University of Hyderabad.
Economic & Political Weekly EPW

ural economic structures in India have been undergo ing changes, largely due to various public policies and the consequent changes in the decision-making process of individual economic agents. During the initial phase, the public policy orientation was directed mainly at restructuring agriculture through a series of land reform measures followed by reforms in trade and credit. The attempt was to eliminate the influence of agents who are other than cultivators and who were perceived to have an adverse effect on the cultivating agents. The second phase in public policy was to induce changes in the production function with public provision of the knowledge, the inputs needed in production and purchase of the output produced. This is popularly known as the green revolution phase. The third phase of public policy was to encourage industrialisation and urbanisation. The result of these policy interventions was a growing agriculture sector and the consequent demand for non-farm services in terms of trading of the inputs and output services. This process can be visualised as a growth-induced generation of non-farm activities. At the other end, urbanisation and industry encouraged the formation of the informal sector in the economy, as was modelled in the Harris-Todaro models, leading to part-time temporary migration of rural labour to urban areas generating demand for nonfarm activities. In addition, there are certain non-farm activities like development of dairy and poultry that are gaining in importance. These processes have changed the rural economic structure from the traditional/feudal structure that existed earlier. But is the evolving rural structure conducive for growth or is there a structural retrogression with the rise of a new class of intermediaries in the rural economy? This paper is an empirical exercise attempting to provide evidence of the changing economic structure over time (based on the National Sample Survey Organisation (NSSO) rounds on assets and liabilities and a village study conducted in nine villages in Andhra Pradesh (ap)) with the rise of a new class of intermediaries christened as non-cultivating peasant households (NCPHs), i e, households who own land but do not cultivate land in the rural areas. The rise of the new class of intermediaries necessitates the importance of tenancy as a method for cultivation. Hence evidence on the lease market is also provided. The rural economic structure has two parts: the farm sector and the non-farm sector. The farm sector consists of individuals who take part in the agricultural production process and the non-farm sector consists of individuals who might facilitate production (artisanal community or input traders) or facilitate

february 4, 2012

vol xlvii no 5

37

SPECIAL ARTICLE

transfer of goods over spaces from rural to urban or urban to rural or between rural sector (output traders) or might be rentiers (landlords). The nature of expansion of the non-farm sector and its implications on decision-making in the farm sector are important for the long-term growth of the agrarian sector. For instance, it is important to know whether the agricultural labour households are migrating from the farm sector la Lewis (1954) dual economy models or whether the cultivating households are shifting from cultivation to the non-farm sector. In the first case, migration of labour necessitates a reallocation in the farm sector once the surplus labour is absorbed. This process can generate structures more conducive to growth with the concentration of land in the hands of a market-oriented rich peasantry. If migration is of the second kind, i e, cultivators are diversifying to the non-farm sector, the decisive influence on the structural parameters is whether the cultivators are selling their land and moving to the non-farm sector or continue to own land. If the households sell the land and move to the non-farm sector, there is a reallocation of land resources and potentially the market-oriented rich peasantry can be the purchasers of land. If these households do not sell land, but instead lease out the land, this process strengthens the land-lease market. This set of households form the supply-side of the land-lease market. Given the existence of surplus labour in the labour market, the interest of the agents on the short side of the market, i e, the supply-side, gain predominance. In the classical model of transition from feudalism to capitalism, these segments are referred to as landlords. The policy of land reforms attempted to eliminate the influence of this section on agriculture. The farm sector, in turn, has two parts: cultivators and agricultural labour households (AGl). Agricultural labour households supply labour and form the main component of the supply-side of the labour market. The other segment are the cultivators who form the demand-side of the labour market and the interaction between the segments defines the wage rates, a crucial defining variable which determines the level, nature and extent of production. In case the labour market is not self-correcting and inactive leading to structural unemployment, labour supplying households may prefer to enter the production structure via the tenancy market and become pure tenants. At the other end of the economic structure are the owners of land who own land but do not cultivate it themselves and are part of the non-farm sector who form the supply-side in the lease market. The present empirical analysis is at two levels. At the aggregate level, the NSS report on asset and liabilities is used to present some indicators on the changing rural economic structure over time. These reports provide data for rural and urban households; here data related to the rural is analysed. At a disaggregated level, data from village surveys conducted by Rao and Bharathi (2010) and assisted by the author, focusing on Land and Poverty in nine villages in Andhra Pradesh, is used to analyse the internal composition of the agrarian sector. The NSS reports give some indications of the changing rural structure. In all these rounds, rural households are classified into two major groups. One, the cultivators who are identified as households operating at least 0.002 hectares of land and second,

the non-cultivators who operate no land or operate land less than 0.002 hectares. The non-cultivators are further classified into agricultural labourers, artisans and other households.1 In the above classification the cultivators have a relation with the agricultural labour households as well as with the artisans; in turn, the artisans have a relation with non-cultivators and also cultivators. This relation facilitates current production or future production. The other is a non-descriptive category, which could include different types of agents. They can be traditional landlords, input and output traders, moneylenders, commission agents and urban workers staying in villages. The village survey conducted by Rao and Bharathi enumerated all households in the villages and then classified them into classes based on their interactions in the labour market. This is used to analyse the nature of rural economic structure at a point of time.

2 Changing Structure of Indian Agriculture: State-Level Picture

One of the empirical regularities observed in the developed countries is the decrease in the share of households dependent on agriculture (farm sector) for a livelihood and a decrease in the share of income originating in agriculture as income per capita increases (Kuznets 1966; Chenery and Syrquin 1975). In the Indian context, with an increase in per capita income the share of income originating in agriculture has witnessed a significant decline. But the Indian economy has not witnessed a corresponding decline in the share of households in the agricultural (farm) sector. In this context, there are three issues which are being addressed in this section. First, has there been a trend decrease in the share of households dependent on the farm sector and is the trend consistent over all the states? Second, a decrease in the share of households dependent on the Table 1: Initial Stock and Change in Share of farm sector can imply eiFarm Sector State-wise in the Rural Sector (1981 to 2002) ther a decline in the orga Share of FS Change Change nisers of production (culti in 1981 in FS (1991 in FS (2002 over 1981) over 1991) vators) or a decline in the Andhra Pradesh 84.1 -8.5 -11.7 share of labour supplying Bihar 92.3 -3.3 -6.9 households, or both. The Chhattisgarh Snf Snf implication for growth and Gujarat 90.6 -12.3 -6.1 development will differ acHaryana 69.6 -5.5 1.5 cordingly. An analysis of Jharkhand Snf Snf the changes in the compoKarnataka 88.2 -4.1 -4.9 sition of the farm sector Kerala 95.05 -13.35 -25.5 over time and space is conMadhya Pradesh 89.5 -6 2.2 Maharashtra 83.4 -3 -5 ducted to identify the nature Orissa 92.2 -11.7 -1.8 of households who are Punjab 80.6 -16.8 0.8 migrating out of the sector. Rajasthan 87.5 -2.2 -6.7 A decline in the farm sector Tamil Nadu 84.6 -14.1 -13.1 would imply a change in Uttar Pradesh 87.2 -3.2 -2.3 the non-farm sector and an West Bengal 87.4 -8.4 -7.5 attempt is made to identify All India 87.6 -7.3 -6.2 the occupational groups FS refers to farm sector; 1991 over 1981 figures refer to change in value over the period 1981 to 1991; 2002 in the non-farm sector over 1991 figures refer to change in value between 1991 and 2002; Snf refers to state not formed. which are increasing in Source: 37th, 48th and 59th rounds of NSSO reports importance. on Households Assets and Liabilities in India.
february 4, 2012 vol xlvii no 5
EPW Economic & Political Weekly

38

SPECIAL ARTICLE

According to NSSO (59th round), all the households who are neither operating any land nor supplying labour to the households operating land but residing in the rural sector are identified as the rural non-farm sector. In the year 1981, the farm sector constituted a dominant share of households staying in the rural areas in all the states (Table 1, p 38). At the all-India level, the farm sector constituted 87.6% of the households staying in rural areas and the share in all the states, except Haryana, constituted more than 80% of the rural households. Interestingly, Kerala has the largest share of households in the farm sector (95.05%). Between 1991 and 1981 the share of households in the farm sector witnessed a decline at the all-India as well as at the state level. At the all-India level, the farm sector reduced by 7.3%, with some states witnessing a larger decline, like Punjab (16.8%), Tamil Nadu (tn) (14.1%) and Kerala (13.35%), and all other states witnessing a smaller extent of decline. In the period between 2002 and 1991, at the all-India level the trend of declining share of the farm sector continued. The share of households depending on the farm sector at the allIndia level reduced by 6.2% between the periods 1991 and 2002. But three states show a different trend. In Haryana, Punjab and Madhya Pradesh the farm sector has witnessed an increase during this period. Punjab and Haryana are agriculturally developed states and have witnessed an increase in the share of households in the farm sector. While the formation of a new state, Chhattisgarh, after bifurcating the state of Madhya Pradesh might have implications for the changes in the farm sector of that state. A decrease in the share of households in farm sector might be due to a decline in the share of agricultural labour households or cultivators or both (Table 2). These changes will have different implications on the evolving structure of the rural economy. If there is a decrease in the share of agricultural labour households, these households can either move to becoming cultivators,
Table 2: Initial Stock and Change in Share of Agricultural Labours and Cultivating Households in the Rural Sector (1981-2002)
Share of AGL Change in AGL Change in AGL Share of CUL Change in CUL Change in CUL in Rural Sector (1991 over (2002 over in Rural Sector (1991 over (2002 over (1981) 1981 1991) (1981) 1981) 1991)

Andhra Pradesh Bihar Chhattisgarh Gujarat Haryana Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal All India

18.3 14.9 Snf 11 12.6 Snf 13.2 1.8 9.5 16 8.4 17.3 2.7 15.7 8.8 8.9 11.3

1.5 4.1 Snf 6.9 -4.8 Snf 1.5 1.8 3.2 4.2 3.6 2.8 2.2 10.9 -1.2 5 2.9

1.1 2.6 -2.1 -1.1 7.1 3 6.9 0.2 2.2 -9.2 -0.9 -4 -0.8 1 0.2

65.8 77.4 Snf 79.6 57 Snf 75 93.25 80 67.4 83.8 63.3 84.8 68.9 78.4 78.5 76.3

-10 -7.4 Snf -19.2 -0.7 Snf -5.6 -15.15 -9.2 -7.2 -15.3 -19.6 -4.4 -25 -2 -13.4 -10.2

-12.8 -9.5 -4 2.6 -12 -28.5 -4.7 -5.2 -4 10 -5.8 -9.1 -1.5 -8.5 -6.4

AGL refers to agricultural labour households; CUL refers to cultivating households, 1991 over 1981 figures refer to change in value over the period 1981 to 1991; 2002 over 1991 figures refer to change in value between 2002 and 1991; Snf refers to state not formed. Source: Same as in Table 1. Economic & Political Weekly EPW

implying an increase in the share of households reported as cultivators and relative constancy in the farm sector or they might move to the rural non-farm sector. If the agricultural labour households relocate as cultivators either they have to buy or lease in land. Given that agricultural labour households may need land but do not have the purchasing power, the internal reallocation in the farm sector would result in leasing with its implication for long-term growth. If the labour supplying households move out of agriculture this might generate labour scarcity increasing the wages and also necessitating reallocation of the primary input, land. On the other hand, if there is a decline in the share of cultivating households, these households can join the agricultural labour households or the rural non-farm sector. If there is a systematic decline in share of cultivators and an increase in labour supplying households, this might imply, if exchanges are voluntary, scale advantages for cultivators who want to expand their scale of operation and establishment. This might imply increasing importance of capitalist relations in agriculture if the decline of cultivators takes place with an expansion in the rural non-farm sector; again, there has to be a reallocation of land in the farm sector. The reallocation can be either a sale of land or lease of land. At the all-India level, the share of agricultural labour households in total rural households has witnessed minor fluctuations over time. In 1981, they formed 11.3% of rural households and the share of these households in the total rural households increased to 14.2% by 1991 and marginally to 14.4% by 2002. The share of cultivators in rural households has declined significantly in both the periods. By 1991 there was a 10.2% decline in the share of cultivators and they further declined by 6.4% over the period 1991 to 2002. The decline in the share of households in the farm sector can be attributed to the fall in the share of cultivating households at the all-India level with marginal contribution by agricultural labour households. At the state level, all states excluding Haryana and Uttar Pradesh, witnessed an increase in the share of agricultural labour households between 1991 and 1981. The share of cultivators witnessed a decline in all the states during this period. Between 1991 and 2002, the share of agricultural labour households increased in all the states except Punjab, Haryana, Gujarat, Rajasthan, Uttar Pradesh and Tamil Nadu. The share of cultivating households has declined in all states except Haryana and Punjab. From the trends mentioned above, one can infer that the all-India trend of decline in cultivators is true for all the states except Haryana and Punjab. The decline in the farm sector may not generate labour scarcity in the rural areas as the share of agricultural labour households has increased but the decline in the share of cultivators necessitates a corresponding reallocation of land by either sale or lease. A decline in the share of the farm sector would imply an increase in the share of either artisanal households or an expansion of other households in the rural areas. The artisans and the others form the rural non-farm sector. An expansion of this non-farm sector is seen as an important source for reduction of rural poverty and absorption of surplus labour. In 1981, at the all-India level, the share of artisanal households was

february 4, 2012

vol xlvii no 5

39

SPECIAL ARTICLE

1.6% and the share of other households was 10.8% (Table 3). Over time the share of households in both categories is increasing. The share of artisan households increased by 2.2% by 1991 and further increased by 1.4% by 2002, while households
Table 3: Initial Stock and Change in Share of Artisan and Other Households in the Rural Sector: 1981 to 2002
Share of Change Change ART in Rural in ART in ART Sector (1981) (1991 over (2002 over 1981) 1991) Share of Change Change OTH in in OTH in OTH Rural Sector (1991 over (2002 over (1981) 1981) 1991)

Andhra Pradesh Bihar Chhattisgarh Gujarat Haryana Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal All India

2.9 0.65 0.9 2.7 1.4 0.2 1.19 2.3 0.1 2.4 2.3 2.1 2.1 0.8 1.6

1.3 0.85 0 4 5.3 0 1.3 3.4 2.11 3.5 1.5 3.8 1.4 5.6 0.9 3.5 2.2

4.7 1.2 -1 6.8 2.2 5.8 -1.5 -1.9 1.6 1.7 1.4 4.2 1 -0.2 1.4

12.97 6.99 8.3 27.6 10.4 4.7 9.23 14.3 7.68 17 10.1 13.4 10.6 11.9 10.8

7.23 2.51 0 8.5 0.3 0 2.8 10 3.97 -0.5 10.22 13 0.9 8.4 2.4 4.8 5.0

7.1 5.8 7.2 -8.2 2.7 19.7 -0.7 6.9 0.2 -2.5 5.3 8.9 1.2 7.7 4.9

able to derive any direct evidence on which of the above propositions is true. But studies on agrarian structures by Vyas (2003), Basole and Basu (2011) show that Indian agriculture is not witnessing land concentration but has an increasing share of small and marginal farmers. Nevertheless, a related concern for the study of structure is the impact of the decline in the share of cultivators and corresponding increase in other category on the land resource. Hereinafter one would like to concentrate on the rural non-farm sector and their hold on land and the adjustment in the land market.

3 The Importance of NCPH in Rural Households

The proportion of non-cultivating households has witnessed a systematic increase from 1981 onwards. The non-cultivating households agricultural labour households, artisans and others witnessed a phenomenal increase from 23.7% in 1981 to 40.3% by 2002. In this composite group of non-cultivating households, those classified as others witnessed a phenomenal increase from 10.8% in the year 1981 to 20.7% by 2002 at the allIndia level. These households may own land. One has calculated the proportion of non-cultivating households owning land and also the share in the value of land owned by the non-cultivating households. To the extent these households hold land and do not self-cultivate it, they continue to exert an influence on the land market and the land-lease market and thus the production structure of agriculture. We had christened these households as non-cultivating peasant households (NCPHs). They are noncultivators as they themselves do not cultivate the land but are peasants to the extent that they are moving away from cultivating practices to non-farm activities without completely breaking from their peasant origins. The increase in non-cultivating households implies a simultaneous decrease in the cultivating households. Since the NCPHs hold land but do not cultivate it, for the purpose of operation the group has to depend on the land tenancy market. The lessee can either be a cultivator who owns land and leases in to enhance production or an agricultural labour household who makes a transition to becoming cultivator for reasons of reducing uncertainty in income. Thus the existence of NCPH can lead to an increase either in the pure or the mixed form of tenancy. The mixed tenancy case depends on the expanding output market while the pure tenancy case depends on the labour households and the nature of labour market. At the all-India level, there is an increase in the proportion of non-cultivating households in the rural areas with a major increase in the period between 1991 and 2002 (Table 4, p 41). This trend is true for all the states excluding Haryana and Punjab. Haryana witnessed a consistent fall in the proportion of non-cultivating households while Punjab witnessed an increase in the proportion and then a fall in the proportion. In 1981 Haryana had the highest proportion of non-cultivating households followed by Punjab. But by 2002 Tamil Nadu and Andhra Pradesh had the highest proportion of these households. In the proportion of cultivating households one needs to see the share of these households owning land in the rural areas. Over the three periods one witnesses an increase in the proportion of non-cultivating households owning land, i e, the NCPHs. In 1981 only 19.1% of the
february 4, 2012 vol xlvii no 5
EPW Economic & Political Weekly

ART refers to artisan households; OTH refers to other households; 1991 over 1981 figures refer to change in value over the period 1981 to 1991; 2002 over 1991 figures refer to change in value between 1991 and 2002. Source: Same as in Table 1.

reporting other have consistently increased by around 5% in both the periods. All the states also follow the same trend of increasing share of artisan households and other households by 1991. But in the second period, four states (Gujarat, Madhya Pradesh, Maharashtra and West Bengal) witnessed a decline in the share of artisan households while only three states (Haryana, Madhya Pradesh and Punjab) witnessed a decline in the share of other households. The general trend over the states is a decrease in the share of the farm sector which is principally attributed to the decline in the share of cultivating households who have predominantly moved to the other category. The share of agricultural labour households has not witnessed a major change. The non-farm sector which was seen as a source for the reduction of poverty and absorption of the surplus labour from agriculture might not be playing the role as the share of agricultural labour households are relatively constant in the rural sector and the major source of entry into the non-farm sector are cultivator households. Three states which do not fall in these broad trends are Haryana, Punjab and Kerala. Punjab and Haryana witnessed a fall in agricultural labour households and increase in the share of cultivators, at least in some period. Kerala witnessed a major decrease in cultivators, increase in agricultural labour and correspondingly an increase in other households in the rural sector. The initial conditions are different across states but the evolving structures are isomorphic. A decrease in the share of households identified as cultivators might imply land concentration or land being left fallow or cultivators diversifying out of farm activity. From the NSSO reports on assets and liabilities in India one is not

40

SPECIAL ARTICLE

Keeping in view the specificity of the year 2002-03, let us analyse the % of NC % of NCPH % Value of Land % of NC % of NCPH % Value of Land % of NC % of NCPH % Value of Land nature of land lease arrangements. Owned by NCPH Owned by NCPH in NC Owned by NCPH Andhra Pradesh 34.2 27.3 5.2 44.2 38.1 8.4 57.0 50.8 16.2 Given the constancy in the proportion Bihar 22.6 21.7 1.6 30.2 29.0 5.5 39.5 38.8 8.1 of agricultural labour households, Chhattisgarh snf snf snf snf Snf Snf 24.7 20.9 3.4 they are potential demanders of land Gujarat 20.4 15.7 1.7 39.6 33.8 6.8 43.6 38.8 8.0 in the rental market, in addition to Haryana 43.0 42.5 5.0 42.7 39.3 4.2 41.1 35.8 9.7 landed households who are also Jharkhand snf snf snf snf Snf Snf 23.9 21.1 4.3 potential demanders of land in the land Karnataka 24.9 13.8 4.0 30.7 25.4 7.9 42.6 24.1 9.3 lease market. The NCPHs form the Kerala 6.8 1.5 0.7 21.8 18.0 4.8 50.4 48.1 17.6 supply-side of the lease market. They Madhya Pradesh 19.7 15.7 2.0 29.2 25.5 6.6 33.9 32.1 6.7 determine the rent, extent of land Maharashtra 32.6 24.8 3.3 39.8 31.4 7.4 45.0 38.0 7.5 leased and the form of lease. In the Orissa 16.2 12.8 3.1 31.5 22.9 9.8 35.5 34.0 15.0 classical model of transition from feuPunjab 36.7 35.1 3.8 56.3 54.2 12.4 46.3 44.0 8.4 Rajasthan 15.2 11.8 3.3 19.6 16.4 5.5 25.4 23.5 10.0 dalism to capitalism, these segments Tamil Nadu 31.1 21.7 3.9 56.2 49.9 13.7 65.2 59.5 19.7 are referred to as landlords. The policy Uttar Pradesh 21.6 20.6 5.4 23.6 22.5 7.2 25.1 24.3 6.5 of land reform attempted to eliminate West Bengal 21.6 16.0 3.4 34.8 30.7 8.2 43.4 41.1 14.9 the influence of this section on agriAll India 23.7 19.1 3.8 34.0 29.6 7.5 40.3 36.7 9.8 culture. But before presenting inforNC refers to non-cultivating households; NCPH refers to non-cultivating peasant households; Snf refers to state not formed Source: Same as in Table 1. mation on tenancy, here are some non-cultivating households owned land and this proportion in- broad trends and an explanation of the changes in the extent of creased to 29.6% by 1991 and further increased to 36.7% by 2002. tenancy. The structural changes in the broader economy have an This trend is again true for all the states excluding Haryana and influence on the land rental market. An expanding non-farm Punjab. In case of Haryana there is a consistent trend of decrease sector can allow the landowners to participate in the non-farm in the proportion of NCPHs while for Punjab there is an increase economy without closing the possibility of returning to rural in the proportion of NCPHs and then a decrease in the same. In areas (World Bank 2007). The households who rent out land have terms of value of land, NCPHs own 3.8% of the total value in 1981, a higher level of human capital and are much more likely to and the share in the total value of land increased to 7.5% by 1991 engage in salaried employment (ibid). This would imply that and further increased to 9.8% of the value by 2002.2 with the growth of the economy, households in the farm sector with the required human capital and also investable surplus gain 4 Implication of NCPHs on Tenancy Relations access to non-farm opportunities. The very process which generates At one end of the economic structure are the owners of land who tenancy in the farm sector also generates the non-cultivating own land but do not themselves cultivate it. These households households in the rural sector. can either lease the land or keep it fallow. An increase in fallow For the reference year 1981-82 the land leased in as a proporland either implies that agriculture is unviable for these house- tion to total operated land was 7.18%. This proportion increased holds or the year under consideration is not a normal year. to 8.28% by 1991-92 and decreased to 6.5% by 2002-03. But Table 5 provides information on the net cropped area, gross there is need for caution while interpreting these proportions. cropped area and current fallows for selected years at the Changes in the proportion of land under lease depend not only all-India level. The years for which the data is presented are the on the extent of land under tenancy but also the reported cultireference years 1981-82, 1991-92 and a band of years around vable land in the period. A decrease in the proportion of land under lease in the 2002-03 period could be because of the Table 5: Net and Gross Cropped Areas and Current 2002-03. The net cropped Fallows for Selected Years at the All-India Level area is nearly the same decrease in the extent of land under lease with the cultivable Years Net Cropped Gross Cropped Current Fallows for the years 1981-82 and area being relatively constant or due to larger proportionate de Area (Million Area (Million (Thousand Hectares) Hectares) Hectares) 1991-92 but a decline in crease in the land under lease when compared to a decrease in 1981-82 141.93 176.75 13,173 the net cropped area in the cultivable area. The first represents a case for the resump1991-92 141.63 182.24 14,672 the year 2002-03 is ob- tion of land for self-cultivation by the households and in the 2001-02 140.73 188.29 14,636 served. The year 2002- process provides the cultivators with an incentive for invest2002-03 132.47 175.58 21,694 03 also witnessed a phe- ment on the land. While the second represents the case wherein 2003-04 140.76 190.08 14,277 nomenal increase in cur- there is a larger proportionate decrease in land leased when 2004-05 141.17 191.55 14,428 rent fallow lands. But if compared to cultivable land. 2005-06 141.49 193.05 13,672 one looks at the band of One of the factors for the decrease in the cultivable land could Source: Statistics released by Government of India, Ministry of Agriculture. years starting from 2001- be due to natural conditions. In an agriculturally bad year de02 to 2005-06, the year 2002-03 has the highest extent of land mand for land might decrease in the land lease market leading to under current fallows. So this year may not be a normal year a decrease in the extent of land as land lease is an annual conwhich will influence the choices of individuals with respect to the tract. Between the first and second period the land operated contractual forms of using land. increased by approximately 4.5% and the land under tenancy
Table 4: Importance of Non-Cultivating Peasant Households in the Rural Sector (1981 to 2002-03)
1981 1991 2002 Economic & Political Weekly EPW

february 4, 2012

vol xlvii no 5

41

SPECIAL ARTICLE

increased by less than 1%. While between the second and third period there was a 5.4% decline in the area under cultivation and an approximately 2% decline in the area under tenancy. An expansion in the area under operation leads to an increase in the area under lease but a decline in the area under operation leads to a more than proportionate decline in the area under tenancy. So when there is an increase in the operated land, there is a larger proportion of land under owner operation when compared to lease, but when there is a decline in the area operated, the households operating under lease decline at a higher rate (may be) due to the fact that the owners continue to operate but the lease households might not be demanding land in the market leading to a decline in the proportion of land leased in. But micro village studies show a mixed trend. The studies by Harris et al (2010) find little evidence of tenancy in Iruvelpattu. Village studies on Andhra Pradesh show significant evidence of tenancy in the irrigated, agriculturally developed pockets of KrishnaGodavari districts. The study of the village Ananthavaram (Guntur district) by Ramchandran et al (2010) shows a significant increase in the land under tenancy between 1974 and 2005-06. Tenants as a proportion of all households increased from 18% to 37% and land leased in as a proportion of total land operated increased from 22% to 67%. Subramanyam (2000) studied the extent of land in three villages in Andhra Pradesh. A village under tank irrigation had 29.1% under lease, a village irrigated by canal water had 27.6% of land under lease and a village under pampu reservoir supplemented by borewell had 22.8% land under tenancy. But there exists large inter-state variations in the proportion of land under lease. In the reference period, 1981-82, Haryana has the highest proportion of land (18%) under tenancy followed by Punjab (16%). The lowest proportion of land under tenancy was Gujarat (1.9%) followed by Kerala (2.05%). During the second period also Haryana (33%) and Punjab (18%) have the highest proportion of land under tenancy with Kerala (2.85%) followed by Gujarat (3.34%) having the lowest proportion of land under tenancy. By the third period, the state of Punjab (16%) leads the states with the highest proportion of land under tenancy followed by Haryana (14%) with Rajasthan (2.8%) and Karnataka and Madhya Pradesh (3.6%) having the lowest proportion of land under tenancy. The two states, Haryana and Punjab, have consistently a high proportion of land under tenancy in all the three reference periods. Between these two states, Haryana witnessed large fluctuations in the proportion of land under lease while Punjab has witnessed fluctuations but these are minor. These two states are generally identified as the agriculturally developed states with a large extent of land under tenancy and also the introduction of green revolution in agricultural practices. In the low tenancy states comes Kerala and Gujarat in two periods and Kerala, Karnataka and Madhya Pradesh in one period. Kerala with its lower proportion of land tenancy operation and relatively successful tenancy regulations may be responsible for the lower proportion. Gujarat is generally identified as a non-agricultural state and so may be witnessing a lower extent of land under tenancy. The states which have a larger share of NCPHs like Haryana, Punjab, Tamil Nadu,

West Bengal and Andhra Pradesh are also the states which have the highest share of land under tenancy (Table 6). The outlier in this series is Kerala which has a very high share of NCPHs but a lower extent of land under tenancy. One possible explanation is an alternative adjustment mechanism. The expansion of plantation crops with lower demand for labour could be a substitute mechanism for leasing out land.

Table 6: Proportion of Leased in Area to Operated Area over Time and for Different States States
% of Leased in Area to Total Operated Area 1981-82 1991-92 2002-03

Andhra Pradesh Assam Bihar Gujarat Haryana Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal All India

6.23 6.35 10.27 1.95 18.22 6.04 2.05 3.56 5.2 9.92 16.07 4.31 10.92 10.24 12.34 7.18

9.57 8.87 3.91 3.34 33.74 7.43 2.88 6.3 5.48 9.48 18.83 5.19 10.89 10.49 10.4 8.28

9 5.3 8.9 5.1 14.4 3.6 4 3.6 4.7 13 16.8 2.8 6 9.5 9.3 6.5

Source: 37th, 48th and 59th rounds of NSSO, Government of India, Report Numbers 331, 407 and 492.

5 Agrarian Structure in Nine Villages in Andhra Pradesh

The agrarian sector in AP has been in the news for different reasons. The state has witnessed a substantial number of suicides of cotton farmers. A committee called the Commission of Farmers Welfare was instituted to look into the crisis faced by the farming community. The state happened to be a scene of a series of experiments in changing the forms of agricultural production. The experiment on contract farming with the help of Israel Company is one such experiment. The state is also a witness to a long drawn movement initially by the communist parties and later by the Communist Party of India (Maoist) seeking a change in the agrarian structure. Next only to TN, AP witnessed the highest shift in occupation from cultivators to non-cultivators. The numbers of noncultivating households are 57% and the proportion of NCPHs to total non-cultivating households is 50.8%. They own about 16.2% of the total value of land (Table 4). There is a 4.2 percentage point increase in the proportion of cultivators between 1971 and 1981 but there is a 22.8 percentage point decline in the proportion of cultivators between 1981 and 2002. The census also has a similar story. Between 1991 and 2001 the number of cultivators has declined from an already low level of 27.74% to 25.47%. Interestingly, what are considered to be the most developed districts with a history of 100 years of canal irrigation and provision of double crops shows the lowest proportion of cultivating households. For example, the East Godavari and West Godavari districts recorded 14.90% and 15.06% households as cultivators and this proportion has decreased to 12.92% and 14.20%, respectively by 2001. At the other extreme there are districts like Warangal and Adilabad, which in fact have witnessed an increase in the proportion of cultivators. Given the extreme diversity, an attempt was made to study the agrarian structure by Rao and Bharathi (2010). The results of the survey are presented below. The surveyed villages represent different regions and the method of presentation chosen by the authors was a five-class analysis. Presenting agriculture in terms of class analysis was in vogue during the late 1960s and the 1970s. In a sense the report is a revisit to such a
february 4, 2012 vol xlvii no 5
EPW Economic & Political Weekly

42

SPECIAL ARTICLE

framework and presents a different understanding compared to a land-based classification used in identifying structures. The methodology used in the survey and information on land and land-related institutions are presented below. In this survey a complete enumeration of all households residing in the village was conducted. From these households, those who were directly related to agricultural production were classified into five classes based on their interaction in the labour market. They are: NCPHs, the rich peasantry (RP), middle peasantry (MP), poor peasantry (PP) and AGL.3 Agrarian institutions, including market institutions, have a tendency to undergo changes and transform themselves, and these changes are associated with the level of development of the region and/or subregion. This is more so when the total economy is not well integrated within itself. Possibly, it is common to note the existence of the regions, namely, Telangana, Rayalaseema and coastal Andhra, which can be seen as an illustration of non-integrated regions. However, taking the levels of development, the state is sometimes grouped into five regions. In the scale of development, south coastal Andhra comprising the Krishna- Godavari delta regions, namely the districts of east Godavari, west Godavari, Krishna, Guntur, Prakasam and Nellore, occupies the top place, with a high index of output per hectare. Next in importance comes the region of north Telangana, comprising the districts of Nizamabad, Adilabad, Karimnagar and Khammam. North coastal Andhra comprising Srikakulam, Vizianagaram and Visakhapatnam occupy the third place. Rayalaseema has the fourth place, comprising Cuddapah, Kurnool, Ananthpur and Chittoor and south Telangana comprising Rangareddy, Hyderabad, Mahbubnagar, Medak and Nalgonda, the fifth place. The regional differences are partly historical and partly due to differential public investments and complimentary private investments. As the institutions are likely to undergo changes with different levels of investments and consequent levels of development, and the attempt in the present survey was to distribute the sample villages of 10 across the five regions. The attempt to cover at least two villages in each region succeeded in all regions excluding Rayalaseema. The paper presents the composition of the agrarian sector at the aggregate level and does not dwell on the composition of the sector at the village level. The structure of agriculture, as revealed by Table 7, sends mixed signals. If one goes by the classical peasant differentiation model, the RP should have a dominating influence on agriculture. However, that does not seem to be the case in AP. They form only 4.45% of the total households with an area owned of nearly 16.98% of the total owned land. In contrast, the NCPHs have a slightly higher percentage of households and also a higher share in the land owned. The predominance of PP and agricultural labour households is visible, with 71.44% of the households belonging to this category. In terms of landownership also, it is the PP who have a dominant share of 35.20% of the total owned land. If one looks at the land operated, it is the PP and MP who have increased their share of land operated. Together, they operate nearly 70% of the operated land. The RP only marginally increased its share in the operated land. In other
Economic & Political Weekly EPW

Table 7: Distribution of Households and Land Owned across Class Groups

Number of HH Area Owned (Acres) Area Operated (Acres)

Agricultural labourer (AGL) Poor peasants (PP) Middle peasants (MP) Rich peasants (RP) Non-cultivating peasant households (NCPHs) Total

490 (28.32) 746 (43.12) 322 (18.61) 77 (4.45) 95 (5.49) 1,730(100)

44.13 (1.15) 1,340.49 (35.20) 1,028 (27.01) 646.50 (16.98) 746.20 (19.60) 3,805.85 (100)

49.13 (1.21) 1,642.90 (40.55) 1,189.80 (29.36) 723.00 (17.84) 446.8 (11.03) 4,051.63 (100)

Figures in brackets are percentages of the totals. Source: Rao and Bharathi (2010).

words, in the lease market too, the role of RP is not substantial while a considerable extent of land leased is by poor peasants and middle peasants. Tenancy is important in the surveyed villages. The total leased in land is 675 acres (Table 8), which is 16.66% of the total operated land. If one considers the leased out land, it is 429 acres forming 11.27% of the total owned land. The difference between the extent of land leased in and leased out can be attributed to non-resident households owning land in the villages. These segments of non-resident households were not covered by the survey. The villages witnessing the highest extent of land under tenancy are the irrigated paddy growing districts of the delta region. The two villages in the delta region constituting nearly 45% of the leased in transactions and also the total leased in area. The distribution of leased in and leased out area is presented in Table 8. While the NCPHs are the only net suppliers of land in the lease market, the poor peasants and middle peasants are the net demanders of land in the lease market. While all classes participate in the leasing in and out, poor peasants predominate in the leasing in operation with 50% of the land leased in. Regarding leasing out, NCPHs predominate with 78% of the land leased out.
Table 8: Distribution of Area Leased In and Leased Out across Classes
Leasing in No of Area Leased Transactions in (in Acres) Leasing out No of Area Leased Transactions Out (in Acres) Net Lease in Area*

AGL PP MP RP NCPH Total

6 (2.18) 163 (59.27) 82 (29.81) 21 (7.63) 3 (1.09) 275 (100)

11.5 (1.70) 339.15 (50.23) 191.50 (28.35) 99.5 (14.73) 675.1(100)

7 (5.73) 31(25.40) 7 (5.73) 5 (4.09) 122 (100)

6.5 (1.51) 36.74 (8.56) 29.70 (6.92) 23.00 (5.36) 332.90 (77.62) 428.84 (100)

+5.5 +302.75 +161.8 +76.5 -299.4 +246.26

33.5 (4.96) 72 (59.01)

(1) *Net leased in area is defined as (Area leased in area leased out). (2) Figures in brackets are percentages of the total area (leased in or leased out) or total number of transactions. Source: Rao and Bharathi (2010).

There is another feature worth mentioning (Table 7). The survey recorded 605 families that do not own any land, who normally should have been recorded as AGL. However, 115 of 605 households, i e, 19% of the households lease in land and operate as pure tenant cultivators. 77.39% of pure tenant households are poor peasant households. Another 16.52% of the pure tenants are middle peasants while 1.73% are rich peasants. The amount of land operated under pure tenancy by poor peasant works out to nearly 70%. In the two delta villages, 52.68% of the households do not own any land. Among the non-landowning households, 38.85% of the households operate as pure tenant cultivators and most of them are poor peasants. The non-landowning potential agricultural labour households join the production structure as

february 4, 2012

vol xlvii no 5

43

SPECIAL ARTICLE

pure tenants, a path that the households choose to Mixed Tenants Pure Tenants hedge against uncertain No of Area No of Area Contracts (Acres) Contracts (Acres) ties in income (Table 9). AGL 1 1.0 5 (4.34) 10.50 (3.98) Thus the agrarian strucPP 69 133.50 89 (77.39) 183.65 (69.69) ture of AP presents two MP 57 121.85 19 (16.52) 61.80 (23.45) segments outside the RP 18 87.80 2 (1.73) 7.50 (2.84) production structure but NCPH 3 33.5 0.0 (0.0) Total 148 377.65 115 (100) 263.50 (100) play ing a dominant role in the production strucFigures in brackets are percentages of the totals. Source: Compiled from Rao and Bharathi (2010). ture. The NCPHs with their command over land and the landless labour households with their command over labour, through the operation of lease market, play an important role within the production structure. If one sees the dynamics of the system, given that the rich peasants do not have a leading role, the NCPHs possibly assume the lead role. The survey has fragmentary data on the land market for a period of five years. The data is presented in Table 7. Assuming that the data is reasonably representative, the area sold is more than the area purchased. While 175 acres were sold, the purchases were only 106 acres. It may not be far-fetched if one presumes that the difference between the sales and purchase is accounted for by non-resident households. If one takes the net purchases, all classes record a negative net purchase, while NCPHs records a positive net purchase, i e, during the five-year period, it is the NCPHs, which are accumulating additional land while other
Table 9: Distribution of Area Leased in by Pure and Mixed Tenants across Classes

Table 10: Distribution of Land Transacted in Land Market across Classes

Sale No of Transactions Area Transacted (Acres) Purchase Net Purchase (Area No of Area Purchased Area Transactions Transacted (Acres) Sold)

AGL PP MP RP NCPH Total

41(37.27) 44(40.00) 14 (12.72) 11 (11.00) 110 (100)

43.64 (24.94) 62.30 (35.61) 23.48 (13.42) 45.53 (26.02) 174.95 (100)

24 (38.70) 24 (38.70) 3 (4.83) 11(17.74) 62 (100)

19.79 (18.67) 27.55 (26.01) 6.4 (6.03) 52.25 (49.29) 105.99 (100)

-23.85 -34.75 -17.08 +6.72 -68.96

1 Net purchase = area purchased area sold. Source: Compiled from Rao and Bharathi (2010).

classes have experienced land alienation. The major purchases of land continue to be those by NCPHs and they have purchased nearly 50% of the land transacted in the market (Table 10). The NCPHs are the net purchasers of land while all the rest of the classes are net sellers of land. In other words, the market as a process is facilitating land transfer to the NCPHs from the cultivating households.

6 Conclusions
From the above analysis one can opine that the rural economic structure is witnessing a change. Firstly, there is decline in the share of households in the farm sector. Secondly, this decline is due to a decrease in the share of cultivator households and an increase in the share of other households in the rural sector. Thirdly, the NCPHs are increasing in importance, both in terms of their share of households and also share of land owned in the

Economic Reforms and Growth in India

Essays from Economic and Political Weekly
Edited by

PulaPre Balakrishnan
This volume investigates the nature of economic growth in India, its pace over time, its relationship to changes in the policy regime and the role of the external sector, and uses data to evaluate the policies that have implicitly underpinned the changes. Presenting a range of approaches, views and conclusions, this collection comprises papers published in the Economic and Political Weekly between the late 1990s and 2008 that are marked by an empirical awareness necessary for an understanding of a growth history. The articles reflect a certain groundedness in their approach in that they privilege content/context over methodology. This volume is an important addition to the literature on post-liberalisation economic growth in India. It will be useful to students and scholars of economics and management. Contributors include Deepak Nayyar Rakesh Mohan Atul Kohli Arvind Panagariya Kunal Sen Neeraj Hatekar Jessica Seddon Wallack Pulapre Balakrishnan Ravindra Dholakia Ramesh Chand R. Nagaraj Montek Ahluwalia Shashank Bhide Amit Bhaduri Pranab Bardhan

Readings on the Economy, Polity and Society

This is the first book in a new series jointly published by EPW and Orient Blackswan. The series is being published as part of a University Grants Commission project to promote teaching and research in the social sciences in India. The project (2010-12) is being jointly executed by the Tata Institute of Social Sciences, Mumbai, and the Economic and Political Weekly. The series is meant to introduce university students and research scholars to important research that has been published in EPW in specific areas. The readers draw on the EPW s archive of published articles.

Pp xiv + 454

ISBN 978-81-250-4271-6

2011

Rs 445

Orient Blackswan Pvt Ltd

www.orientblackswan.com Mumbai Chennai New Delhi Kolkata Bangalore Bhubaneshwar Ernakulam Guwahati Jaipur Lucknow Patna Chandigarh Hyderabad Contact: info@orientblackswan.com
44
february 4, 2012 vol xlvii no 5
EPW Economic & Political Weekly

SPECIAL ARTICLE

process influencing the production structure. This trend is true for nearly all states.4 It may be noted that the data on assets and liabilities in India used for analysis is based on household surveys in its classification, therefore, households owning land in rural areas are only the rural households. Urban households who own agricultural land are not included in this characterisation leading to an underestimation of the land owned by NCPHs. Fourth, an increase in share of land owned by NCPHs would imply an increase in land under tenancy but at an all-India level there is evidence of a decrease in land under tenancy which is counterfactual. One reason proposed was that the year 2002-03 for which data on tenancy is provided was not a normal year. Even assuming a decrease in the share of land under tenancy, the states with a larger share of NCPHs have a greater extent of land under tenancy. Fifth, the village survey shows that NCPHs form 5.49% of the households in the farm sector and own 19.6% of the land. These households are the major players in the land lease market. The share of these households in total land leased out is nearly 77%. These households are also the net purchases of land in the village. The economic structure is changing with an increasing importance of NCPHs who influence decisions related to the production structure. A question that naturally arises in this context, but which was not addressed in the paper, is the process that generates NCPHs in the agricultural sector. Here some speculation on the conditions for the generation of NCPHs is presented. One explanation for these trends could be derived from the existence of certain nonfarm sectors in the economy, which provide higher rates of return on investment, higher when compared to agricultural sector. Such sectors are a result of the already achieved high growth in
Notes
1 The 26th and 37th rounds were based on the major source of income of the household during the 365 days preceding the date of survey. In the 48th and 56th rounds the sub-classification is done in terms of principal occupational code of the household as obtained in the survey. The estimate of percentage NCPHs and percentage of value of land owned by NCPHs will be an underestimate of the actual as households owning land but residing in urban areas are not captured here. Details of the method of classification are provided in Rao and Bharathi (2010). The only exceptions are the agriculturally developed states like Punjab and Haryana, which show no systematic trend.

agriculture or with increased levels of urbanisation/industrialisation. The possibility of investment other than in agriculture can lead to an occupational shift in cultivators. The presence and increasing importance of NCPHs with substantial interest in land indicates such a possibility and also a contradiction. The contradiction is that the cultivator chooses non-farm activities while retaining his interests in land, i e, the cultivator chooses to diversify into instead of shifting to other activities. This could be because of higher levels of uncertainty in the returns on investment in the non-farm sector. Higher returns on investment with a higher uncertainty in the non-farm sector compared to lower returns on investment with lower uncertainty in agriculture could mean that investing in non-farm activities is akin to diversification in a portfolio. The cultivators diversify but continue to own land. The certain income of NCPHs in farm activity is made possible by the demand for land within the agricultural sector, particularly from the agricultural labour households. The relative constancy in the share of agricultural labour households and their need to hedge against the uncertainties of living makes land lease a very active market. Since the demand for land is reasonably high from this segment, the rent is also likely to be high, making sure that the income of NCPHs from agriculture is not unreasonable. This explains the decline in cultivators and the concomitant increase in NCPHs and the stable proportion of agricultural labour households. The above hypothesis, if considered a reasonable explanation of the changes in Indian agriculture calls for a different approach to dealing with the agrarian crisis. It raises the possibility of either going back to land reform kind of measures or finding a mechanism of displacing the NCPHs through market interventions like corporate farming.
Villages in Andhra Pradesh (New Delhi: Tulika Books). Rao, R S and M Bharathi (2010): Comprehensive Study on Land and Poverty in Andhra Pradesh: A Preliminary Report in Mudunuri Bharathi (ed.), In Search of Method, published by B-1 Collective and Centre for Documentation, Research and Communication, Hyderabad. Subramanyam, S (2000): Agricultural Tenancy in India: Growth Promoting or Growth Retarding, Artha Vijnana, Vol XLII, No 4, pp 360-66. Vyas, V S (2003): Indian Agrarian Structure, Economic Policies and Sustainable Development: Variation on a Theme (New Delhi: Academic Foundation). World Bank (2007): India: Land Policies for Growth and Poverty Reduction (New Delhi: Oxford University Press).

3 4

National Sample Survey Organisation (1986): House holds Assets and Liabilities in India (as on 30 June1982), 37th round. (1986): Some Aspects of Operational Holdings 198182, NSS 37th round, Report number 331. (1996): Operational Holding in India 199192: Salient Features, 48th round, Report 407. (1998): Households Assets and Liabilities in India (as on 30 June 1991), 48th round, Report No 419. (2005): Households Assets and Liabilities in India (as on 30 June 2002), 59th round, Report No 500. (2006): Some Aspects of Operational Land Hold ings in India, 200203, NSS 59th round, Report No 492. Ramchandran,V K, Vikas Rawal and Madhura Swaminathan (2010): SocioEconomic Surveys of Three

References
Basole, Amit and Deepankar Basu (2011): Relations of Production and Modes of Surplus Extraction: Part I Agriculture, Economic & Political Weekly, 2 April. Chenery, H B and M Syrquin (1975): Patterns of De velopment, 1950-70 (London: Oxford University Press). Harrris, J, J Jayaranjan and N Nagaraj (2010): Land, Labour and Caste Politics in Rural Tamil Nadu in 20th Century, Economic & Political Weekly, 31 July. Kuznets (1966): Modern Economic Growth (New Haven: Yale University Press). Lewis, W A (1954): Economic Development with Unlimited Supplies of Labour, The Manchester School of Economics and Social Studies, Vol 22, No 2, pp 139-91.
Economic & Political Weekly EPW

For the Attention of Subscribers and Subscription Agencies Outside India

It has come to our notice that a large number of subscriptions to the EPW from outside the

country together with the subscription payments sent to supposed subscription agents in India have not been forwarded to us. We wish to point out to subscribers and subscription agencies outside India that all foreign subscriptions, t ogether with the appropriate remittances, must be forwarded to us and not to unauthorised third parties in India. We take no responsibility whatsoever in respect of subscriptions not registered with us. Manager
vol xlvii no 5

february 4, 2012

45