India After Independence: 1947-2000 (61 page)

The improvement in the poverty situation was helped by the fact that the government increased the overall expenditure on Social Services and Rural Development since 1993-94—from 7.8 per cent of total government (Central) expenditure in 1992-93 to an average of nearly 10 per cent between 1993 and 1998. Real agricultural wages, which had decreased by 6.2 per cent in 1991-92, grew in the next two years at over 5 per cent per year and by 1993-4 surpassed the pre-reform level. After the low of 1991-2, additional employment generated in the total economy rose to 7.2 million in 1994-95, averaging about 6.3 million jobs every year between 1992-3 and 1994-95, considerably higher than the average annual increase of 4.8 million in the eighties. Moreover, inflation, which hurts the poor the most, was kept under control. The annual rate of inflation, which touched a high of 17 per cent in August 1991, was brought down to below 5 per cent in February 1996.

But this does not complete the picture. Though on the whole the reform initiatives look quite successful, there is still a long way to go. Continued political instability, aggravated by no clear majority emerging in parliament of any political party, has made it difficult for any government to move away from populist measures and take tough but necessary decisions.

That is why no serious efforts were made to increase public savings and reduce government expenditure and the problem of high fiscal deficits has continued. The public saving-investment gap remained at a very high average of 7.1 per cent of GDP between 1992-96. The foodgrain subsidy actually increased from Rs. 28.5 billion in 1991-92 to Rs. 61.14 billion in 1996-97 (revised estimate). The fertilizer subsidy also increased from Rs. 32.01 billion in 1988-89 to 45.42 billion in 1989-90 and Rs. 62.35 billion in 1995-96. The huge subsidies contributed towards a tendency for real investment in agriculture to fall because of lack of resources. C.H. Hanumantha Rao, the eminent agricultural economist, noted in 1992, ‘the annual subsidy on fertiliser alone amounts to nearly as much as the annual
outlay on agriculture by the centre and states put together.’
⁶
A similar example was the government subsidy on diesel, kerosene and cooking gas amounting to Rs. 93.6 billion in 1995-96. The oil-pool deficit (dues owed to oil companies by government which partly enabled the huge subsidy) in 1996-97 was Rs. 98 billion making the cumulative deficit in that year about Rs. 155 billion. The result was that the oil companies wore unable to make the absolutely necessary investments in the oil sector.

Similarly, little has been achieved with regard to reform of the public sector, particularly state-owned utilities like electricity, transport, etc. While the Punjab government has gone to the absurd limit of actually distributing electricity and water free to the farmers, several other states are not much better as they charge rates which cover only a small fraction of the costs. Therefore, state electricity boards and transport corporations run at huge losses at a time when availability of power and proper transport infrastructure threaten to be critical bottlenecks, slowing down the projected rate of growth of the economy.

Also, there has been no significant move towards reform of the labour market and creating possibilities of exit for loss-making enterprises. After the few years of initial success, the tempo of economic reform in India seems to be waning. Moreover, the economy has been witnessing a downturn in recent years, since 1997. The GDP growth rate has decelerated significantly to 5 per cent in 1997-98, down from 7.8 per cent in 1996-97. Exports, which were growing at over 20 per cent, slowed down for the third year in succession since 1996 and were negative in 1998-99 (April-December). There was a slowdown in industry since 1995-6 and it has been growing at less than half the rate achieved that year over the next three years. Very importantly, there has been a slowdown in the critical infrastructure sector, which is emerging as a major bottleneck. Flows of external capital, both FDI and portfolio investment, declined sharply, the latter turning negative in 1998-99 (April-December).

One of the most dangerous reversals is in the sphere of fiscal deficit, where the primary deficit which had been brought down to 0.6 per cent of GDP in 1996-97 (0.5 per cent in the new series data used in Economic Survey of 1998-99) more than doubled to 1.3 per cent in 1997-98 and for the Centre and states together it was estimated to be 2.4 per cent (revised estimate). The selective acceptance of the Fifth Pay Commission recommendations by the United Front (Gujral) government in 1997, whereby the government expenditure on salaries was to increase very sharply without any compensatory savings, as the measures suggested by the Commission to achieve such savings were not accepted, put further pressure on the fiscal deficit. The situation reached a point where, ‘given the serious fiscal slippage’, even the Economic Survey of the Government of India of 1998-99 was constrained to argue, ‘the time has perhaps come to reconsider the issue of
constitutional limits
on the deficit.’
⁷

The slowing down of the economy since 1996-97 was partly because of the East Asian crisis, with Japan in recession and South Korea, Indonesia, Thailand and others, showing negative growth rates. Other
parts of the world such as Russia and Brazil were also facing crisis situations. There was a slowing down of world growth and particularly world trade growth in 1998. The crisis adversely affected world flows of capital, and exports, partially explaining the fall in Indian receipts of foreign investment and Indian exports. However, the fact that the deceleration in Indian exports was greater than that of the ‘developing countries’ as a whole is indicative of the failure of the reform process in addressing some structural factors which inhibit Indian exports such as poor infrastructure (power, transport, port facilities, etc.), archaic labour laws, continued trade restrictions and so on. It is this which has enabled China and not India to occupy the space vacated by Korea, Taiwan, Hong Kong, etc., in the sphere of exports of labour-intensive goods, as labour costs in the latter countries rose.

Also, the economic sanctions imposed on India because of the nuclear tests (which the BJP government hurried into with clearly an eye on the domestic political scene) had a dampening effect on the economy. Political instability, opportunistic coalition governments with partners having widely divergent world views, the BJP’s ‘double face’ in economic matters, as in politics, with the RSS, their mother organization, talking of ‘Swadeshi’ which inhibited India’s reforms and participation in the globalization process, while the BJP continued to swear by reform, all partially explain the tardy progress of reform.

Yet, it is a positive development of enormous significance in a democracy, that there is a broad consensus among all political parties from the right to the left (barring the extremists at both ends) that the reform process must continue, a consensus reminiscent of the one around the Nehruvian programme at independence.

The consensus is suggestive of the fact that economic reform or liberalization did not mean a change of goals set at independence by the Indian people, such as rapid growth, industrialization, self-reliance, removal of poverty and so on. Liberalization and participation in the globalization process was not the ‘final surrender’ to international capital or imperialism or the IMF-World Bank combine as has been argued
ad infinitum
by sections of the orthodox left. On the basis of the experience with various controls and state intervention at home, of changes occurring in the world such as the collapse of the Socialist bloc, the new globalization process after World War II and the experience of various fast-growing economies in the recent past, the aspiration towards the same goals set out at independence required an altering of strategy.

However, this is not to say that the earlier ‘Nehruvian’ strategy was wrong. That strategy had its historical significance. As we saw, it gave the Indian economy a certain depth and spread, increased its bargaining power and independence, and lent the Indian economy and society the dignity it did not possess after the colonial experience. But, over time, certain negative features developed. That, and the response to the changed world conditions, required a shift in strategy for the achievement of the same goals. To give just one example, if self-reliance and rapid growth
in the fifties, required import substitution, today capital and technology flows, and through that, keeping up efficiency or productivity levels is the route to self-reliance and rapid growth.

It is no accident that so many of the very people who created, outlined or subscribed to the earlier strategy over time saw the necessity of reform. We have, for example, apart from Indira Gandhi herself, the radical economist of the Nehruvian era K.N. Raj, the Marxist economist Lord Meghnad Desai, the Nehruvian Narasimha Rao, left economists late Sukhamoy Chakravarty, C.H. Hanumantha Rao, Arjun Sengupta and Nobel laureate Amartya Sen, and practicing Communist and chief minister for the longest tenure since independence, Jyoti Basu, all implementing or arguing for economic reform involving liberalization and participation in the globalization process, though with different approaches and in varying degrees. Even the BJP, despite the strong resistance of the RSS-supported Swadeshi Jagran Manch, is essentially committed to pressing on with reforms.

There is, in other words, a growing recognition in India of the imperative to be responsive to the external changes and internal experience and change strategy so that this great country is able to come into its own and realize its enormous potential rather than fritter away the considerable achievements made since independence. It is this which gives hope that India shall enter the new millennium ready to meet her ‘tryst with destiny’, strengthened by the journey since independence so dramatically started by the people of India with Nehru in the lead.

The process of land reform after independence basically occurred in two broad phases. The first phase which started soon after independence and arguably continued till the early sixties focussed on the following features: 1) abolition of intermediaries—zamindars, jagirdars, etc., 2) tenancy reforms involving providing security of tenure to the tenants, decrease in rents and conferment of ownership rights to tenants, 3) ceilings on size of landholdings, 4) cooperativization and community development programmes. This phase has also been called the phase of institutional reforms. The second phase beginning around the mid- or late sixties saw the gradual ushering in of the so-called Green Revolution and has been seen as the phase of technological reforms. The two phases are not to be divided in rigid watertight compartments. In fact, they were complementary to each other and there was a fair degree of overlap in the programmes followed during these phases. In the following chapters therefore we shall not strictly follow the chronology of the two phases and will often discuss programmes which cut across them.

Within a year or two of independence, i.e. by 1949, zamindari abolition bills or land tenure legislation were introduced in a number of provinces such as U.P., Madhya Pradesh, Bihar, Madras, Assam and Bombay with the report of the U.P. Zamindari Abolition Committee (chaired by G.B. Pant) acting as the initial model for many others.

In the meantime, the Constituent Assembly was in the process of framing India’s Constitution. There was, however, widespread apprehension, including among Congress leaders deeply committed to zamindari abolition like Jawaharlal Nehru, G.B. Pant and Sardar Patel, that the zamindars could try to stymie the acquisition of their estates by moving the courts, raising issues like the violation of right to property or ‘unjustness’ of the compensation. After prolonged discussion the relevant provisions of the Constitution were framed in a manner that the leaders felt assured that the zamindari abolition bills pending in the state assemblies would go through
on the basis of compensation recommended by the state legislatures as these recommendations were made non-justiciable, requiring only presidential assent which meant ultimately the support of the Union Cabinet. The compensation recommended by the legislatures was of course expected to be small and reasonable from the tenants’ point of view. It is significant that there was a wide consensus on giving the legislatures the authority to prescribe principles of compensation on expropriation of the zamindars. The acquisition of commercial or industrial property continued to require an entirely different set of principles.

However, belying the expectation of the framers of the Constitution, the zamindars in various parts of the country challenged the constitutionality of the law permitting zamindari abolition and the courts, as for example, the Patna High Court upheld the landlords’ suit. The Congress government responded by getting constitutional amendments passed. The 1st Amendment in 1951 and the 4th Amendment in 1955, were aimed at further strengthening the hands of the state legislatures for implementing zamindari abolition, making the question of violation of any fundamental right or insufficiency of compensation not permissible in the courts. Though the zamindars continued to make numerous appeals to the High Court and Supreme Court, if for no other purpose but to delay the acquisition of their estates, yet, the back of their resistance was broken by the mid-fifties. It may be reiterated that, contrary to a view often put forward, the framers of the Constitution, including the so-called ‘right wing’ were not participating in a design to stymie land reforms but were in fact trying to complete the process within a democratic framework.

A major difficulty in implementing the zamindari abolition acts, passed in most provinces by 1956, was the absence of adequate land records. Nevertheless, certainly by the end of the fifties (though essentially by 1956) the process of land reform involving abolition of intermediaries (the zamindars of British India, and jagirdars of the princely states now merged with independent India) can be said to have been completed. Considering that the entire process occurred in a democratic framework, with virtually no coercion or violence being used, it was completed in a remarkably short period. This was possible partly because the zamindars as a class had been isolated socially during the national movement itself as they were seen as part of the imperialist camp. But reforms which threatened the interests of sections of the upper peasantry who were very much part of the national movement and had considerable societal support were far more difficult, and sometimes impossible to achieve, as we shall see later.

The abolition of zamindari meant that about twenty million erstwhile tenants now became landowners. The figures for area and number of households under tenancy are highly unreliable partly because in many areas a very large proportion of tenancy was ‘oral’ and therefore unrecorded. Yet, scholars agree that there was some decline in tenancy after the reforms started, one rough estimate being that area under tenancy decreased from about 42 per cent in 1950-51 to between 20 to 25 per cent
by the early sixties. However, the decline in tenancy and the considerable increase in self-cultivation was not a result only of tenants becoming landowners but also of eviction of existing tenants by landowners, as we shall see presently.

The compensation actually paid to the zamindars once their estates were acquired was generally small and varied from state to state depending upon the strength of the peasant movement and consequent class balance between the landlords and the tenants and the ideological composition of the Congress leadership and of the legislature as a whole. In Kashmir, for example, no compensation was paid. In Punjab, the occupancy tenants of Patiala were paid nothing and even the inferior tenants given a negligible amount, often just the first installment of the total compensation to be paid over a number of years. Most states followed a variation of the model worked out in U.P., where, very significantly, the compensation paid was inversely related to the size of the land which came under a zamindar. The small zamindars (they were often hardly distinguishable from the well-to-do peasants; land reform initiatives were quite consciously not directed against them) who used to pay land revenue of upto Rs 25 were to receive about twenty times their net annual income as compensation whereas the big zamindars who paid land revenue ranging between Rs 2,000 to Rs 10,000 were to receive merely two to four times their net annual income. Moreover the payment of compensation, was to stretch over a long period, in some cases forty years. It is estimated that the big zamindars who did receive compensation found that their incomes from alienated land, through compensation, would fetch them only one-fortieth of their earlier income.

Out of a total due of Rs 6,700 million, the compensation actually paid till 1961 was Rs 1,642 million, a small figure considering that India spent, by one estimate, more than six times the amount, Rs 10,000 million in just food imports between 1946-53.

There were however certain important weaknesses in the manner in which some of the clauses relating to zamindari abolition were implemented in various parts of the country. For example, in U.P., the zamindars were permitted to retain lands that were declared to be under their ‘personal cultivation’. What constituted ‘personal cultivation’ was very loosely defined ‘(making) it possible for not only those who tilled the soil, but also those who supervised the land personally or did so through a relative, or provided capital and credit to the land, to call themselves a cultivator.’
¹
Moreover, in states like U.P., Bihar and Madras, to begin with (i.e., till land ceiling laws were introduced) there was no limit on the size of the lands that could be declared to be under the ‘personal cultivation’ of the zamindar. This, despite the fact that the Congress Agrarian Reforms Committee (Kumarappa Committee) in its report of 1949 had clearly
stipulated that ‘only those who put in a minimum amount of physical labour and participate in actual agricultural operations’ could be said to be performing ‘personal cultivation’. Also, the committee had envisaged a limit or ceiling on how much land could be ‘resumed’ for ‘personal cultivation’, under no circumstances leading to the tenant’s holding being reduced to below the ‘economic’ level.
²

The result in actual practice, however, was that even zamindars who were absentee landowners could now end up retaining large tracts of land. Further, in many areas, the zamindars in order to declare under ‘personal cultivation’ as large a proportion of their lands as possible often resorted to large-scale eviction of tenants, mainly the less secure small tenants. (This was to be followed by further rounds of evictions once the land ceilings and tenancy legislations came into being, cumulatively leading to a major blot in the record of land reforms in India.)

Many of the erstwhile essentially rent-receiving zamindars however did actually begin to manage the lands declared under their ‘personal cultivation’. They invested in them and moved towards progressive capitalist farming in these areas, as this was indeed one of the objectives of the land reform.

Retaining large tracts under ‘personal cultivation’ was only one way through which the landlords tried to avoid the full impact of the effort at abolition of the zamindari system. Several other methods were used to resist the bringing in of zamindari abolition legislation and their implementation. Since such legislation had to be passed by the state legislatures, the landlords used every possible method of parliamentary obstruction in the legislatures. The draft bills were subjected to prolonged debates, referred to select committees and repeated amendments were proposed so that in many states like U.P. and Bihar several years passed between the introduction of the bills and the laws being enacted.

Even after the laws were enacted the landlords used the judicial system to defer the implementation of the laws. As we saw earlier, they repeatedly challenged the constitutionally of the laws in the courts, going right up to the Supreme Court. In Bihar, where the landlords put up the maximum resistance, they tried to block the implementation of the law even after they lost their case in the Supreme Court twice. They now refused to hand over the land records in their possession, forcing the government to go through the lengthy procedure of reconstructing the records. Further, implementation of the law was made difficult and, as much as possible, skewed in favour of the zamindar, by the collusion between the landlords and particularly the lower level revenue officials. Such collusion was helped by the fact that in zamindari areas many of the revenue officials were former rent-collecting agents of the zamindars. At all levels involving the legislative, judicial and executive arms of the state, the landlords put up resistance.

The Congress responded by repeatedly reiterating its resolve to complete the process of zamindari abolition as quickly as possible. This resolve was seen in AICC resolutions (e.g. that of July 1954), in the
conference of the chief ministers and presidents of provincial congress committees (April 1950), in the First Plan document and most of all in the Congress election manifestoes. Democracy with adult franchise on the one hand reduced the political weight of the zamindars, and on the other increased the urgency of meeting the long-standing demands of the peasantry. The Congress itself had over the years mobilized the peasantry to make these demands. The Congress also took necessary administrative and legislative steps, such as getting the constitutional amendments of 1951 and 1955 passed by parliament, which would meet the challenge put up by the landlords.

Despite the resistance of the landlords, the process of zamindari abolition was essentially completed, as noted earlier, except in certain pockets of Bihar, within a decade of the formation of the Indian Republic. The typically large ‘feudal’ estates were gone. While the big landlords, who lost the bulk of their lands, were the chief losers, the main beneficiaries of zamindari abolition were the occupancy tenants or the upper tenants, who had direct leases from the zamindar, and who now became landowners. Such tenants were generally middle or rich peasants who sometimes had subleases given out to lower tenants with little rights, often called ‘tenants at will’.

The issue of continuing tenancy in zamindari areas, oral and unrecorded, therefore remained even after abolition of zamindari was implemented. Such tenancy existed in the lands of the former zamindars now said to be under their ‘personal cultivation’ as well as in the lands sub-leased by the former occupancy tenant who now became the landowner. Moreover, at independence only about half the area was under zamindari tenure. The other half was under ryotwari where the problems of landlordism and an insecure, rack-rented tenantry too were rampant.

The second major plank of the land reforms envisaged was, therefore, concerned with tenancy legislation. The political and economic conditions in different parts of India were so varied that the nature of tenancy legislation passed by the different states and the manner of their implementation also varied a great deal. Yet, there were certain commonly shared objectives of the various legislations and over time some common broad features emerged in the manner of their implementation in most parts of the country. It is an examination of only these common aspects rather than of the myriad differences that is possible within the scope of this study.

Tenancy reforms had three basic objectives. First, to guarantee security of tenure to tenants who had cultivated a piece of land continuously for a fixed number of years, say six years (the exact number of years varied from region to region). Second, to seek the reduction of rents paid by tenants to a ‘fair’ level which was generally considered to range
between one-fourth to one-sixth of the value of the gross produce of the leased land. The third objective was that the tenant gain the right to acquire ownership of the lands he cultivated, subject to certain restrictions. The tenant was expected to pay a price much below the market price, generally a multiple of the annual rent, say eight or ten years’ rent. For example, in parts of Andhra Pradesh the price he had to pay was eight years’ rent, which was roughly 40 per cent of the market price of the land.