Political Economy of

Globalisation, Green Revolution

and Food Security

A. Venkateswarlu

Swarajya Bharati Publications

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Political Economy of Globalisation, Green Revolution and Food Security
By Dr. A. Venkateswarlu

First Published in January 2001

Copies:1000

Price: Rs.30/-

Published by
Swarajya Bharati Publications,
11-2-218/6, Wyra Road,
KHAMMAM-50701
A.P., INDIA

Printed at:
Spandan Printers,
Wyra Road,
KHAMMAM

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 To
My Teacher and Supervisor
Prof. G.K.Chadha,
Dean, School of Social Sciences,
Jawahrlal Nehru University,
New Delhi.

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 Preface

In the post-World War-II period, Keynesian revolution worked well to revive the demand
deficient economies. Further, Keynesianism gave birth to Development Economics, which
showed a way to underdeveloped countries to develop themselves by adopting planning, inspired
by achievement in the USSR. First, Keynesianism was questioned, by 1961, after inflationary
trends appeared in the developed countries. But due to Phillip’s curve that expressed a stable
relation between inflation and unemployment, it could survive for some more time. But again it
became questionable after stagflation, a new economic phenomenon, observed during oil shock in
1973 and later. Turbulence in Economic theory led to failure of Brettonwoods Institutions, IMF
and World Bank. But, those twins could rise to the occasion, in the interest of advanced capitalist
countries, by shifting the burden of structural changes required in their own economies to the
developing countries in the name of Structural Adjustment Programmes (SAP) by early 1980s.
The Brettonwoods twins imposed liberalisation agenda, by SAP, on the developing countries, as
they approached them (IMF and World Bank) for loans.
By the time of collapse of the East European and the USSR socialism, IMF and World
Bank began to sing the song of globalisation, under the uni-polar world with the US hegemony,
by early 1990s. This globalisation agenda became reinforced after GATT turned into World
Trade Organisation (WTO).
In India also the ruling classes endorsed globalisation project, in1991, under the prime
ministership of Sri P.V. Narasimha Rao. Since then, any ruling party coming to power is
implementing the globalisation policies, with great loyalty and enthusiasm.
It is in this context, this book, which critically examines the pros and cons of
globalisation, becomes important, in a limited way. It runs into four chapters. Chapter-I
delineates the two phases of economic liberalisation, attributing globalisation to the second phase
of economic liberalisation. Chapter-II describes the genesis of the agenda of globalisation under
the direction of IMF and World Bank; and also the preconditions for liberalisation policies in
India and it portrays some reflections on implementation. Chapter-III deals with the alternative
explanation of traditional agriculture in the developing countries, opposed to T. W. Schultz’s
diagnosis and how his prescription of transforming traditional agriculture of developing countries,
through green revolution, has the double mission (anti-communist and business interests).
Chapter-IV analyses the impact of globalisation on the food security of developing countries and
India.
Only I am responsible for the views expressed in this book.
I thank Swarjya Bharati Publication for publishing this book.

A. Venkateswarlu

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 Chapter -I
TWO PHASES OF ECONOMIC LIBERALISATION

Liberalisation basically conveys the meaning of freedom in all walks of life. As far as
economic liberalism is concerned, it is related with laissaiz faire policy, in favour of state’s non-
intervention in economic affairs. In the modern period there are two phases of economic
liberalisation.
1. First Phase of Liberalisation
In the first phase, Adam Smith argued in favour of laissaiz faire, as he opposed
mercantalist state intervention. The entire classical economics was in its favour. This liberalism is
associated with competitive markets. No surpluses and no shortages are there and all markets,
both of product and factor, get cleared without anybody’s interference and the equilibrium is
brought about by invisible hand. To reinforce this law of invisible hand, Say’s law of markets has
been useful. This is what is being taught in every text of economics particularly in Micro
economics. Thurow says:
Every market is a price-auction market that clears based on competitive bidding within a
framework of supply and demand. Accordingly, any market is always in equilibrium,
having no unsatisfied bidders, and every individual is a maximiser in his decisions to
consume and produce. … The economy would be operating at an optimum optimorium...
The only intervention called for are those flowing not from economics, but from the
ethical principles governing income distribution and initial endowment of resources.

This phase of liberalism culminated in the colonial and semi-colonial exploitation and the
development of monopoly capitalism, as was described by Marx and Lenin. The imperialist
capitalist powers were in search of markets, though the world was already divided by them and
there was scope only for re-division of markets, which was possible only by wars among the
imperialist powers. The impending and imminent world war-I was forecast two years in advance
at the Basle conference of the Second International (of Communists). As the USSR, the first
socialist state, took its birth during World War-I, the Capitalist world became somewhat sceptical
of their economic theory. Further scepticism was reinforced by the Great Depression, which
prolonged for nearly for 5 years, during 1929-33. Thus the hollowness of the main stream
economics became transparently clear and the law of markets and the law of invisible hand were
questioned in a big-way.
1.1 Keynesian Revolution
As a reaction to the great depression, Keynes’s book General Theory came and
revolutionised the economic science. Keynes gave a call that capitalists could not retain both (i)
the right to property, the sacred basis of capitalism, and (ii) the laissaiz faire economy. He
advised them to renounce the latter. Further, Keynes could convince the capitalist world that
state’s intervention would bring revival from the ups and downs in the market economy.

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 Keynes, having studied the planning models of Soviet Russia, in 1925, (going to Russia,
staying there for six months) could understand the importance of state’s role in socialist economy;
and suggested that state’s intervention is a must for the capitalist economy, as the profit-oriented
private enterprise would not bother to invest to increase effective demand, to reduce
unemployment and increase purchasing power of the society. In fact, Keynes wanted socialisation
of investment, for which the state, that has no profit-motive, has to actively intervene. But he did
not favour socialisation of means of production, as he upheld right to property.
The Keynesian Revolution flourished even after the World War-Il. But this war also had
been an outcome of the struggle among the imperialist powers for the re-division of the markets
of the colonies or semi-colonies. This War gave birth to Communist China and the East European
socialist countries. The main thrust of Keynesian economics was to ease the conditions in the
developing countries so that they should not revolutionise with communist appeal to choose the
path of China or USSR. Thus, state’s interference was recommended and followed.
Since the General Theory was published in 1936, Keynes became very popular, causing
Keynesian revolution, in solving unemployment problem of the developed countries. Even after
the War, Keynes’s theory worked well, giving scope for golden age during 1950’s and 1960’s
giving scope for the rise of Development Economics. When inflation came on the agenda of
economic problems, monetarists attacked Keynesianism first. Yet, it-could survive for some
more time, because of Phillip’s curve, that showed a stable inverse relation between
unemployment and inflation, and this discovery was treated as a great theoretical achievement, by
Tobin, in the quarter century after Keynes’s book. But, the so-called trade-off between
unemployment and inflation of Phillip’s curve got evaporated by stagflation after the oil shocks
of 1973 and thereafter (Rentov).
2. Second Phase of Liberalisation
Since the stagflation, the capitalist world was entangled in a crisis of theory, as Worswick
and Trevithick noted in the year of Keynes’ birth centenary (1983):
The world economy is now experiencing the worst set-back since the Depression of
1930’s. …… The international order of Brettonwoods has crumbled not to be replaced
by some superior system, but to give way to no system at all. Turbulence in the real
world is matched by turbulence in economic theory.

Even in 1972, Nixon claimed “We are all Keynesians.” But in a decade after that, the
conditions changed in the developed capitalist countries, because of changed conditions in the
socialist bloc countries, as first reflected in Poland. These conditions brought back and revived
market-oriented free trade economics stressing the Supply-side economics in contradistinction to
Demand-side economics of Keynes. In this connection, Thurow notes, how this new wave of
liberalisation has reemerged:
the currents of thinking began to shift back toward the price-auction conception to
explain both macro and micro-economic behavior. Monetarism. supply-side economics
and rational expectations. … all rely on the primacy of the price-auction model. In sum,

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 the classical, price-auction economics of the 1920’s was replaced during Great
Depression by Keynesianism, which was in turn supplanted by the new classical
economics of the 1980’s.

3. Critique
The premise of neo-liberal and neo-classical economics is based on market system, free
trade, with no place for state intervention. Ghosh says that the functioning of markets depends on
the nature of the state, which depends on historical evolution of property relations. These property
relations, which is the same as Marx’s production relations, determine the distribution of social
product. Further, Bhabatosh Datta, as quoted in Ghosh (1992), says:
The competitive solution has never been fully realised in real life anywhere in the world.
Actual competition has always been imperfect. In theory, competition is the anti-thesis
of monopoly; in practice, it means the freedom to turn the market forces to the advantage
of powerful economic groups. …. Secondly, investment dependent on market forces or
market signals will move towards areas where profits are high.

References
Ghosh, Arun (1993): “Economic Development and the Market System’, Economic and Political
Weekly, November 27.
— (1992): “Planning versus Market Oriented Investment Production-Indian Dilemma”, Economic and
Political Weekly, October 17.

Rentov, R. (I 984) “The Rule and Fall of the Phillip’s Curve”, Problems of Economics, February.

Thurow, L.C. (1983): Dangerous Currents - State of Economics, Oxford University Press, London.

Worswick, David and James Trevithiek (eds) (1983): Keynes and Modern World, Cambridge
University Press, London.

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 Chapter - II
POTICAL ECONOMY OF GLOBOLISATION:
SOME REFLECTIONS ON INDIA

1. Globalisalion Process
Globalisation has been the new economic policy, professing more liberalisation of the
economy, beyond the borders of nation-state at a particular phase, since early 1980s. Thus it is
neo-globalisation.
Globalisation is not a new phenomenon. It began in 15th century, through conquest and
exploitation of Asia, Africa and Latin America. It is associated with imperialism. Globalisation,
in the past, was confined to selected geographical areas and small populations (Petras and
Polychroniu, 1997). In the past, it is related with the phase of internationalisation of capital,
where nation-state has some independence in regard to economic activities. But, at present the
Globalisation of capital has undermined the control area of a nation-state. Now, TNCs have also
to be recognised as constituent units, in addition to nation-state (Kurien).
The main theoretical aspects Globalisation are (i) Rolling back of state intervention in
economic activities (i.e. doing away with dirigisme), (ii) Competition through marketisation, (iii)
Export-orientation, (iv) Import liberalisation. Here, we have to keep in mind, the history of
economic theory, with regard to changing role of state intervention.
In mercantilism, the state’s intervention and export-orientation were stressed. With the
advent of classical economics in 1776, the era of laisaiz fäire policy (nonintervention of state)
was dominant. By 1870s, marginal revolution came in by undermining the objective basis of
economics (production) giving primacy to subjective basis (utility) and allocative efficiency. By
1936, Keynesian revolution got upper hand, as it stressed state interference in Demand
management. By 1950, the Development Economics joined hands with Keynesianism. By 1960s,
Keynesianism was subjected to criticism because of inflationary trends in the developed
economies; but Philip’s curve extended life for some more years up to mid-1970, when Phillip’s
curve failed to maintain its stable negative relation between unemployment rate and inflation
leading to a new economic phenomenon - stagflation; the other strands of marketist and non-
interventionist economic theories arose, such as Supply-side Economics (Thurow), New Political
Economy (Dasgupta, 1997a)
During the period of dominance of Keynesian economics, the developed capitalist
countries supported state-intervention for industrialisation (through planning process) and also
involved in solving the food problem of the developing countries through the export of food
grains for some time and later by the export of green revolution (Nanda). It seems, all this was
done as a strategic compulsion, for the fear that the developing countries might fall into the orbit
of socialist bloc, if the people got revolutionised by communist ideology. But interestingly, now
nonintervention of state is being advocated for Globalisation.

8
1.1 The Genesis of Structural Adjustment Programme (SAP)
By early 1980s the Western Europe and the US were affected by stagflation; and in Poland
and East European countries, the internal contradictions were being blown up. In the former
countries, there had been severe recession during 1980 and 1981 and further projections showed
slower rates of growth for these countries. But, slower rates of growth were insufficient to
sustain (i) high standard of living of their people and (ii) social security system there. In the US
also, there was decline in the productivity and decline in the competitiveness, fuelled by cold war
and the cult of deterrence (Dubey).
Thus, the stage had come for Structural Adjustment in their own economies of the
developed countries. But instead of this, the developed countries imposed the structural
adjustment on the developing countries, as they were suffering from the debt crisis, through the
Bretton Woods Institutions (BWI), viz. World Bank and IMF.
Exactly in this background, the Uruguay Round of GATT conceived as a way out. BWI,
even before the finalisation of Uruguay Round of GATT started implementing the SAP package
in the developing countries.
The avowed objective of the SAP was to restore macroeconomic balance, increase the
efficiency or resource use and create conditions for sustainable growth (Bhalla). As per Norton,
quoted by Bhalla, SAP has five aspects: (i) aggregate demand management, (ii) resource
reallocation (iii) increasing foreign savings, (iv) increasing domestic savings and (v) increasing
efficiency in the use of resources. The last 4 of these 5 refer to the Supply-side economics, so far
that it was called Reagonomics. BWI also worked under the guidance of the US and
implemented the SAP in the developing countries.
Though the SAP was initiated in the developing countries, for the benefit of the developed
countries; the chorus, being sung by the BWI, is that it is for the benefits of the former countries.
In this regard, Sobhan has the following to say:
The BWI argued that the problems of debt, imbalances, economic inefficiency all derived
not from the impact of the Global recession of the l980s, but due to long-term structural
distortions in these countries, which had been debilitating them presumably over the last
two decades and now needed fundamental structural reforms if these economies were to
move to a sustainable growth path.

1.2 The Rise of Globalisation

The dominance of supply-side economics, the second phase of liberalisation, got reinforced
due to lack of alternative, when the USSR and East European socialism had fallen down, by the
late 1980s. The transformation has followed from the absence of the threat of communism,
which was a constant fear in the past. Now the US and other developed countries came forward to
implement the SAP, through BWI, more aggressively than ever in the post War period. World
Trade Organisation (WTO) was formed in place of GATT, with all the clauses necessary to
reduce the bargaining power of the developing countries. WTO has begun to govern in services

9
(instead of goods under GATT) and in agriculture, subjecting them to TRIPS and TRIMS. This
makes developing countries position in international trade more vulnerable because of cross-
retaliation condition.
At this juncture came globalisation, on the agenda of liberalisation. The advanced capitalist
countries are imposing globalisation on the developing countries, when they approach BWI for
loans and help. While giving loans, BWI attach conditionalities to liberalise imports of the
developing countries and devalue their currencies to facilitate the entry of the MNCs or foreign
companies into their territories to capture their markets and exploit their natural resources. This
is in the name of competition (Dasgupta, 1997b). Involvement in international trade is prescribed
as panacea for all the problems of the developing countries.
1.3 Global Economy and Ultra-imperialism
The international economy emerged in 1940s, through BWI, had transformed into Global
economy by 1980s, “the transnationalisation or globalisation of the capital market of the 1980s
has certainly been an unprecedented development, and its impact will be seen in the 1990s and
the decades to come” (Kurien).
The phase of international economy gave scope for the unity of imperialist powers of the
capitalist world, as against the socialist bloc countries, with a threat of communist alternative.
This collusion of imperialist capitalist powers was called Ultra-imperialism by Kautsky, at the
beginning of this century. Lenin opposed the thesis of Kautsky. But it became a reality soon after
the World War-II, though Lenin’s thesis of imperialism held correct till that time.
Somewhat less aggressive and hesitating collusion of imperialist powers, has been further
strengthened by the downfall of socialist bloc countries. Exactly, at this time, the globalisation
process assumed its full blood and global finance capital has been dictating terms to the
developing countries of the world, through BWI, UNO and other international fora.
The global economy led to the formation and progress of Transnational Corporations
(TNCs). The number of TNCs shot up from 7000 in the early l970s to 37000 in the early l990s.
The top 100 TNCs account for (i) about a sixth of the world’s productive assets (Kurien) and (ii)
one third of the total FDI ($660 billion out of $2000 billion). Further, one third of the world
exports in goods and non-factor services today take the form of intra-firm trade between the
parent firm and their foreign affiliates (Roy).
The unity of the advanced capitalist countries, produces a greater disunity in the third
world, with tendencies towards separatism, divisiveness and disintegration. This undermines the
nation-states, as the fluidity of finance across the countries undermines the capacity for
intervention; also because the scope for intervention today is limited by the collapse of all
interventionist ideological trends in the wake of globalisation, as part of neo-liberalism (Patnaik,
1995; Kothari, 1995).

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1.4 Critique
The imperialist capitalist countries want to exploit the third world in the name of free trade,
competition and globalisation. But the former countries, as disproportionately large partners
would capture the markets of the later countries, putting their development in jeopardy.
Free trade is advocated on the basis of comparative cost advantage. But, it is a myth,
because even since the day of Ricardo, the international trade was decided by military and
diplomatic measures. Utsa Patnaik (1996) cogently depicted how naval bullying and military
violence played central role for confining Portugal to specialise in wine with acceptance to
exchange it for cloth, thereby England’s obtaining dominance in slave trade and taking slaves
from Portuguese West Africa to Spanish South America. As regards the limit to competition,
Ricupero, the Secretary General, UNCTAD, has the following to say:
The problem is to define what should be the limit to competition from the development
point of view. I would suggest that the answer lies in the differences in the stages of
development, the differences in the capacity to compete. Competition requires rules. And
one of the basic rules of any game is that if you want to compete with some chance of
winning, you have to be more or less equalised. If you do not have possibility of
competing on equal footing, and equal footing requires treating differently different
stages of development. If you do not have that. you will be crushed by competition.

If the competition is a real life phenomenon, why the US should dictate Japan to reduce
export surplus with the US. Further, the TNCs that enter the fields of power and infrastructure in
the developing countries insist for the guaranteed rate of profit and price-escalation clauses, like
Enron in Maharastra - why? The developed countries practise protectionism, not allowing the
exports of developing countries or by imposing quotas, as in multi-fibre.
If we look at the results of SAP package, it did not show any favourable achievement, as
reflected in growth rate of GDP, growth rate of fixed investment, growth rate of exports and
inflation rate, as shown by Sobhan. Nanda and Utsa Patnaik, in their articles pointed out how
developed countries are exploiting the agricultural sector of the developing countries by undoing
green revolution.
So long as the fear of communist ghost was there, the green revolution and planning,
through the Keynesian tool of state intervention, were fed and supported. Once that fear had been
out of sight, the state intervention is attributed inefficiency, and rent-seeking. The developed
capitalist countries insist that the developing countries have to depend on the export of
agricultural commodities. In this connection, Ghosh says:
But green revolution has, now, more or less exhausted itself; and now suddenly, the focus
appears to have shifted to agrarian exports. Every school boy knows, however, that the
more developed a country; the more its exports tend to be of manufactured products. with
significant value addition. The advantage of a large country - with a potential surplus of
agricultural products - can be translated with a real advantage only by getting its
agricultural production attuned to supply the materials required for the export of
manufactures; and that principle applies equally to mineral resources. Export of primary

11
 products have always characterised (colonial) developing countries all through the 19th
and the 20th centuries.

In the globalisation process, the real sector transactions are declining relatively when
compared with currency transactions. The ratio of foreign exchange transactions to the volume of
world trade in goods and services has jumped from 10:1 in 1983 to 60:1 in 1993 (Tulpule). Thus
speculative trade in currency (hot money) has risen. George Soros. an individual who can move
the markets in currency trade challenged to destabilise East Asian Tigers and also did it.
The capital imported into the developing countries as FDI, generally does not go into the
100 percent EOUs. Such units gradually confine to indigenous markets leading to de-
industrialisation of the existing industries in the developing countries (Patnaik, Prabhat).
2. Indian Political Economy and Globalisalion Experience
Since India’s Independence, the strategy of mixed economy was followed for rapid
industrialisation. Public sector acted as a stimulus and complemented private sector growth. The
big business houses flourished under the import substitution strategy with monopolistic trends,
because of the sheltered markets due to import restrictions. The Licensing policy had worked to
the advantage of big business houses. Licensing was insisted to produce indigenously for 400
goods but for the import of those same goods there was no restriction. This is an example for the
superficiality of the Licensing policy, as made clear by Jain ex-president of FICCI.
Liecensing policy led to rampant corruption of Babu-Neta class (as Prof. Rajkrishna used
to say). By mid-60s the industrial stagnation crept in due to compression of public investment.
Private investment being a function of public investment, began to grow slowly at lower rates.
Added to this, there arose food problem, by early 1966. Exactly at that time (January, 1966),
Indira Gandhi became Prime Minister. She was misled by the US experts that by devaluation of
rupee, export oriented growth was possible due to under utilised capacities in some industries.
Rupee was devalued in February, 1966, as it was linked upto with import of Green Revolution
Techonology. But exports had not risen as aspired and expected. However, green revolution
could be successful. By 1974, the Indian economic scene was grim and bad: (i) Railway men’s
strike, which was shaking the foundations of ruling class, was suppressed cruelly. (ii) Political
discontentment led to different movements, including Total Revolution movement of Jai Prakash
Narayan. All this led ultimately to clamping of internal Emergency in June 1975.
Since emergency, due to compulsions, the economic scene was bettered. But, in 1977,
there was change of ruling class, under Janatha Party. By the time, it began to implement its
promises the party was divided and it went out of power in January 1980.
Again Indira Gandhi came to power in 1980. Since her coming back to power, she began
to go for more populist measures, because of emulation with the promises made by the previous
government. These populist measures culminated in going for the loan from IMF in 1982. Thus
started a wave of debt-raising; and the internal and external debt began to rise continuously and

12
exponentially. Not only at centre, but in almost all the states, the same type of political process
has continued. In this connection Bardhan (1986) says:
Regional and sectarian pressures for increased claim to federal money also build up.
While from time to time a significant number of crumbs have to be thrown at those
clamoring groups banging at the gates just outside the periphery of dominant coalition... ..
….. The democratic machine of Indian politics with its well defined network of
distribution of spoils in exchange of support, its highly centralised organisation
responsive to pressure from important interest groups at different levels in the political
system, its institutionalised procedures of transaction, which lend it a degree of
legitimacy as well as moderation, and its way of absorbing dissent and coopting leaders
of the subordinate classes has impressed many a political scientist.

In Indian political structure, there is a lot of scope for political sinecures, political
gerrymandering, pork-barrel politics and log-rolling arrangements, for the above reasons laid
down by Bardhan.
2.1 First Phase of Liberalisarion - Opening Gates for Globalisalion
After Indira Gandhi’s assassination, her son Rajiv Gandhi became Prime Minister (October
31,1984). Exactly at that time, Reagon in U.S.A. and Thatcher in Britain were practising the
supply-side economics. In India, Rajiv Gandhi also began to follow the same, by (i) cutting tax
rate (New Fiscal Policy), (ii) import liberalisation (new exim policy), (iii) regularising the excess
capacity utilisation of firms, (iv) raising the limit of MRTP firms from Rs.20 crores to Rs.100
crores to the utmost surprise in the industry. For this, he was called Indian Reagon. In his period,
1984-89, the economy picked up in its growth, despite the growth in the debt burden. The
average growth rate upto 1984 was the so called Hindu rate of growth of 3.5 percent per annum,
had risen to greater than 5.0 percent. The increased growth rate is called borrowed growth rate,
because, it is generated by internal and external loans. The growth, thus, was achieved according
to the targets.
Later in 1989 change of government under V.P.Singh’s reign followed the same policies.
Another change of government in November 1990, under Chandrasekhar’s Prime Ministership,
took place, which could not function because of loss of creditworthiness in international market.
Gulf War resulted in (i) NRls demand to pay back deposits (ii) Foreign Exchange shortage (iii)
Overdues of installments to IMF and World Bank. Gold was to be mortgaged in the Bank of
England to tide over the difficult situation. Added to this, mid-term poll in May/June 1991 was
held.
2.2 Second Phase of Liberalisalion - Globalisation Process
In June 1991, when Congress party formed government under P.V.Narasimha Rao’s Prime
Ministership with Finance Minister, Man Mohan Singh, India had to go for IMF loan to
overcome foreign exchange crisis. The IMF compelled India to adopt ‘Structural Adjustment
Programme’ (SAP), by devaluing rupee twice. Though there was possibility to go for low

13
conditionality loan from IMF, India did not choose, because the ruling class circles could openly
act against socialist rhetoric, as there was downfall of socialism in USSR and East Europe.
Under SAP tariff rates were substantially cut and quantitative restrictions were removed.
License permit Raj was ended and MRTP and FERA became defunct. Dereservation in 9 out of
17 sectors and disinvestment in public sector were undertaken.
2.3 Critique
Import liberalisation was thought to improve the competitiveness. But, the industrial
houses that enjoyed sheltered markets could not dare to face the competition. Merger and
Acquisiton took place on large scale. Some companies sold their brands to foreign companies
just as Parle company sold its soft drink industry to Coca Cola company. This type of tendencies
lead to domestic deindustrialisation (Chandrasekhar). Import liberalisation might have been
beneficial, if capital goods are imported. But, there has been no such scope and consumer
durables (of luxury consumption) are being imported.
Direct Foreign Investment (DFI) is also not pouring into 100 percent Export Oriented Units
(EOUs). This also leads to domestic deindustrialisation. Further, even this is also not coming at
expected levels, wheras China is getting more and more.
Export orientation is also not much encouraging, as the growth rate of exports is always
less than the growth rate of imports. Even the exports are import-intensive. Thus, every year,
negative trade balance goes on increasing. It is a fact, from 1950-51 onwards. In 1950-51, 60-61,
70-71, 80-81, 90-91, 95-96 the trade deficit is 3; 475; 318; 5838; 10,645; 15,182 crores (rupees)
respectively. Only for one year 1976-77, there was positive trade balance of Rs.3 16 crores.
Not only DFI, but portfolio investment also comes to India to exploit the stock market
operations, because prime lending rates in USA and Japan are only 6 percent and 2 percent
respectively.
Further in India, deceit of indigenous exporters and importers by underinvoicing of exports
and overinvoicing of imports respectively leads to non-repatriation of funds to the tune of $6.00
billion per annum as estimated. Gold import policy also leads to waste of Foreign exchange
reserves. In the first 3 years afier 1991, there was loss of $2.00 billion for maintaining foreign
exchange, pegging rupee to Dollar, as per Ranjit Sau.
Of all, the advantageous situation that has worked favorable to the ruling classes since
1991, is more than satisfactory performance of agricultural sector, despite sluggishness in the
industrial sector. Interestingly the favorable growth performance of agriculture has to be
attributed to the good monsoons regularly every year for the past decade (Patnaik, Prabhat). Had
such performance of agriculture not been possible, the Indian ruling classes would have been
entangled in a great crisis.

14
 Alarming debt-burden and corresponding rise in interest payments by central government
can generate problems at any lime. For the time being, the ruling classes are throwing debt-
burden on the future generations to satisfy the present generation for vote banks.
To imitate East Asian success is untenable, because they had completed some initial
requisite reforms (like land reforms), internal liberalisation first and then proceeded with export-
oriented approach. They were successful because of the market access provided by developed
capitalist countries, for strategic reasons (Patnaik. Prabhat).
More over, the reforms both in internal and external libera1isation were implemented, like
Abracadabra, as pointed out by Krishna Kumar. Malcom Adiseshaiah cautioned Indian
government that it must be vigilant to stop investments in pharmaceutical and other industries
where environmental pollution is possible, because such industries are not given permit in the
West. It is easy to assess that government, yearning for investments, may not be so vigilant.

References
Bardhan, Pranab (1986): The Political Economy of Development in India, Oxford University Press,
Delhi.
Bhalla, G.S. (1993): Agriculture During the Nineties - The Impact of Structural Change and Integration, Institute
for Studies in Industrial Development, New Delhi.
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Vedlka.
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— (1993b): “Public Goods and Rush for Privatisation”, Economic and Political Weekly, October 9.

15
— (1993c): “It is a Time We Reread Keynes”, Economic and Political Weekly, October 17.
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Weekly, August 19

16
— and C.P. Chandrasekhar (1995): “Indian Economy under Structural Adjustment”, Economic and
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17
 Chapter-III
POLITICAL ECONOMY OF TRANSFORMING TRADITIONAL
AGRICULTURE THROUGH GREEN REVOLUTION

The agricultural technology in most of the less developed countries had been traditional till
the late 1950’s. Explanations for their backward agricultural technology had been offered by
several economists. Schultz1 is one of those economists, with a profound influence on planners
and academicians. His commitment was to transform traditional agriculture of developing
countries through export of green revolution technology from the developed countries
(particularly from the U.S.A.) for strategic reasons, on the one hand, and business interests, on the
other.
1. Schultz’s Characteristics of Traditional Agriculture
Traditional agriculture is that in which the farming is carried on by the factors of
production that have been used by farmers for generations2. In such agriculture the marginal
productivity of labour and capital are very low and consequently, there are weak incentives for
more work and saving. To invest capital in some more traditional factors of production, the rate
of return is low. There are two interesting features for this agriculture: (i) There is efficient
allocation among all the factors of production, so that no expert in farm management can discover
any major inefficiency, (ii) The doctrine of agricultural labour of zero value does not apply to
traditional agriculture as all the workers, capable of working, are employed. All these
characteristics lead to a stationary equilibrium, for which the critical conditions laid down are3:
(1) the state of the arts remains constant, (2) the state of preference and motives for
holding and acquiring sources remains constant, and (3) both of these states remain
constant long enough for marginal preferences and motives for acquiring agricultural
factors as sources of income to arrive at an equilibrium with the marginal productivity of
these sources viewed as an investment in permanent income streams and with net savings
approaching zero.

1.1 Schultz’s Prescription for Transformation

To bring the farmers out of this stagnant traditional agriculture the problem is of
investment in modern material inputs and human skills. The new inputs should prove to be
profitable, before farmers get convinced of their investing in such inputs, because “the
profitability depends on the price and the yield. Nor will it suffice to examine only the relative
increases in yield. The absolute increases in yield are what pay the costs and a profit.”4 In such a
case, to supply high-pay-off inputs to the farmers at relatively cheap prices is the problem again.
Although the modern material inputs and the scientific knowledge are available in the developed
countries, they can not be used as such (without any change) in traditional agricultural conditions.
Those inputs should be made adaptable to the biological and other conditions of these countries.
As regards the supply of those new inputs, the non-profit firms and government have to
complement the profit firms, so that inputs may be available to farming community at relatively

18
cheap rates. Further, the farmers should be educated and trained to become efficient demanders
of those inputs.
1.2 Critique of Schultz Analysis
Originally Dandekar5 took up Schultz’s critique on two main issues. Firstly, Schultz does
not count population growth and its consequences in the form of disinvestment, leading to a
continuous deterioration6. Secondly, if supply of and demand for capital remains constant as per
Schultz, the question arises as to what part of the economy in what direction becomes the initiator
of new factors of production, with high rates of return. For this Dandekar divides traditional
agriculture into two sectors of which one is a surplus sector and the other, a subsistence sector.
Dandekar’s main critique lies in the fact that society does not consist of uniform farming
households, in other words, social classes have been introduced into the model as it was neglected
by Schultz.
At this point that Dandekar, indirectly, approaches Marxist class analysis, whereby
capitalist primitive accumulation is possible within feudal or semi-feudal society. Marx’s
identification of three kinds of rent in the transition of feudalism to capitalism is important here:
they are labour-rent, rent-in-kind and money-rent. The transformation of the first to third type of
rent gives scope for differentiation of the peasantry. This would create home market for non-
agricultural goods from the well-to-do sections of the farmers. Again, the rich farmers acquire
capability to accumulate capital and even to transform themselves into future capitalists. Rahman7
says in this connection:
Therefore, a possibility of differentiation is there in rent-in-kind system. The possibility
or germs (as Lenin would call it) can develop only under the next form of rent, which
represents a mere change in the form of rent-in-kind.

Further, Dandekar says Schultz’s negation of the doctrine of agricultural labour of zero
value was of no avail and his treatment of empirical evidence was unscientific that did not
deserve scientific attention8.
Mishra9 expresses his disagreement with Schultz in respect of efficient allocation of
resources and seems to be in agreement with the demolition of the doctrine of agricultural labour
of zero value. Deshpande10 attributes different modes of production as bases for Schultz and
Dandekar. For Schultz it was capitalist farming based on family labour (without hired labour).
But in Schultz’s book it was nowhere explicitly stated, but it is understandable from his stress on
economic explanation, he is pulling forward his thesis from capitalist perspective only. And
Deshpande’s attributing only family farming to Dandekar is as incorrect as Mishra’s attributing
Dandekar’s bi-sector model analysis to feudalism.
2. An integrated Approach of Traditional Agriculture
As has been observed from the preceding section, Schultz’s analysis of traditional
agriculture missed important aspects. Among them are: (i) The process of evolution of less
developed countries from pre-capitalist relations of production. (ii) The de-industrialisation

19
process of those countries, by subjecting them to colonial exploitation. (iii) The population
growth, which was pointed out by Dandekar in his critique of Schultz. (iv) The adoption of
capital intensive technology in industrial sector that has low labour-absorbing capacity, thwarting
transfer of agricultural surplus population to non-agricultural sectors. If these four aspects are
seen as a combined whole, we get an integrated approach of traditional agricultural technology or
for its slow transformation.
2.1 Pre-Capitalist Production Relations
Most of the less developed countries were agricultural ones and were evolving out of the
feudal or semi-feudal relations of production. In such conditions, the exploiting feudal/semi-
feudal land-owners extract surplus through extra-economic coercion, use this for unproductive
investment or conspicuous consumption and keep the technology unchanged11. Further, the
tenurial conditions are disincentive-ridden, as most of the surplus of tenants is exploited through
rackrenting. Tenants and peasantry would not only be exploited in land market but other markets
such as credit, labour and product markets, as there is interlocking of markets12. Thus, there are
classes in such societies as well. Schultz treats the social structure of farming community as
undifferentiated, as if the family peasant farms do not depend on hired labour and they are on par
with Chayanovian family farms13. Whatever the forms of pre-capitalist relations of production in
the less developed countries, it is acceptable that they had traditional technological conditions, as
the exploiting classes in rural areas were opposed to development of agricultural technology.
2.2 De-industrialisation as Reinforcement of Pre-capitalist Relations
Further, the existing pre-capitalist relations in those countries were reinforced by the de-
industrialisation, which was again the result of colonial exploitation14. Marx expected a double
mission of British colonialism in India, viz. (i) Destruction of old forms of production, mainly
traditional industries (handicrafts etc.,) causing miseries to masses, (ii) Rejuvenating new
productive forces for the development of industrial capitalism. First mission was accomplished,
leading to de-industrialisation in India; whereas the second mission was neglected, as no factory
industries were established to absorb the de-industrialised masses (leaving aside the absorption of
depeasantised proletariat, just as in Europe). Such people were also compelled to depend on
agriculture. Despite the potentialities for independent development of industrial capitalism in
such countries, it was blocked by the colonial plunder by the import of industrial products for
marketing and the drain of export of raw materials and agricultural products at cheaper rates.
Thus, the colonial exploitation, for the development of the centre, caused under-development to
the colonies or semi-colonies keeping them more agrarian, dependent on traditional technology.
Bagchi rightly points out in respect of India15.
India ceased to be a leading manufacturing country of the precapitalist era and was
reduced to the position of supplier of agricultural goods and raw materials to
industrialising economies of the west, particularly British. The de-industrialisation of
India along with government policies relating to land and land revenue led to a structure
of society which has often been characterised as semi-feudal.

20
 Though China was not completely colonised. the conditions were reduced to the same
16
status. In these two vast countries of the world, the national liberation movements emerged. In
China, the Communist party could mobilise peasant masses, under the leadership of Mao-Tse-
Tung to overthrow semi-feudal domination within the country and semi-colonial exploitation
outside. This is, more or less, in line with Marx’s prognostication that the social revolution
begins when the existing production relations (feudal/semi-feudal) become fetters on the
productive forces. In China of 1920’s and 1930’s, the experience of Rockfellar Foundation led
to the view that to stabilise the countryside and to undercut growing peasant revolution, food
production increasing technology was to be coupled with institutional changes (land reforms)17.
But it was in vain. In India also, peasant struggles grew in their dimension. The efforts of
imperialists in pacifying peasant movements did not operate. In 1947, India became independent
and in 1949 China was liberated. The loss of China (to capitalist bloc) was a gain to communist
bloc and a defeat to imperialism. It became important for the imperialists after 1949, to do
something for the newly independent bourgeois dominated Asian countries, for otherwise would
accelerate peasant movements there, induced by communist ideology18.
This recognition led many of the new Asian Governments to join the British-American -
sponsored Colombo Plan in 1952 which explicitly set out to improve conditions in rural
Asia as a means of defusing the communist appeal. Rural development assisted by
foreign capital was prescribed as a means of stabilising the country side.

2.3 Population Growth

After first World-War, population has started growing at relatively higher rates, in the less
developed countries. This growth is attributed to biological control of deaths. The discoveries of
sulfa drugs and antibiotics and other means of combating disease-carrying parasites caused the
decline of mortality rate. Most dangerous endemics and epidemics were controlled, leading to
lengthening of life span, that improved fecundity and decreased sterility. This process of
population growth became independent of economic development19. As these countries were
mainly agricultural ones, based on traditional agricultural technology, the increase has occurred in
agricultural (rural) sector. Thus, the problem of relative and absolute surplus population has been
added to the two aspects of traditional agriculture dealt previously. This population growth as a
third aspect reinforced traditional agricultural conditions of the less developed countries till the
late 1950’s. This problem led to disguised unemployment which is still persisting in those
countries. Nurkse explains disguised unemployment as follows20:
The term disguised unemployment is not applied to wage labour. It denotes a condition
of family employment in peasant communities. A number of people are working in farms
or small peasant plots, contributing virtually nothing to output, but subsisting on a share
of their family’s real income. … The people may all be occupied and no one may
consider himself idle. Yet the fact remains that a certain number of labour force on the
land could be dispensed with, without making any difference to the volume of output.

21
 The disguised unemployment discourages technical advancement of agriculture, as no need
to displace labour, for the labour is available at cheap rate and no capital is invested, as no surplus
is left after consumption. This is also the combined effect of other two aspects.
2.4 Capital-intensive Technology in Industrial Sector
The problem of low labour absorption capacity of industrial sector, due to capital-intensive
technology belongs to the stage after the countries became independent by late 1940’s. Since the
early 1950’s most of these countries have adopted planned development. In industrial sector, due
to heavy industry strategy, the ready-made technology has been imbibed, borrowing from the
developed countries. But such industrial technology has limited labour-absorbing capacity and in
industries of forward and backward linkages also this development creeps in. This is unlike in
West Europe, where the technological progress took place in step-wise phases extending over a
prolonged period21, so that the depeasantised proletariat could simultaneously be absorbed in
urban industries22. In that period, the industrial technology developed gradually from several
phases of labour-intensive technology to labour-displacing capital-intensive technology in the
industrially developed countries. But, this is not so in the less developed countries as Maitra aptly
says23:
In the third world, the industrialisation process today has skipped over the first phase of
an extensive growth using human resources more productively and thereby creating the
conditions for the emergence of an intensive phase.
Growth of non-agricultural employment is important for the improvement of agricultural
technology, to displace the surplus agricultural population once the technology in agriculture gets
modernised. But, in the developing countries, where the population has been growing at rapid
rate, the absorption of rural surplus labour in non-agricultural sectors gets delayed. Thus, there is
a relation between the growth rate of population and the growth rate of non-agricultural
employment. In this connection, Dovering deals with the time profile that takes for reducing the
share of population in agricultural sector. As per Dovering24, if the share of agricultural
population in an economy is 70.0 percent and the population grows at 2.0 percent per year and
that share is to be brought down to 40.0 percent; the time taken for this process is 35, 50 and 70
years when the non-agricultural employment grows at 4.0, 3.5 and 3.0 percent respectively. In
this connection, Khusro25 has the following to say:
The non-absorption of many millions of small-farm population in nonagricultural
employment, in the next one or two generations, will leave a seething mass of humanity,
ever growing in numbers, to seek its fortune in agriculture. …. Now, an abundance of
a depressed wage-seeking mass of population, much in excess of demand, is the greatest
drag on the improvement of technique, on inventiveness, on the use of machines and on
productivity.
3. Double Mission of Schultz’s Prescription of Transforming Traditional
Agriculture
The colonial exploitation till the World War-Il and imperialist domination in the post
World War were mainly responsible for the persistence of traditional agricultural technology in
most of the less developed countries. As far back as 1951, UNO had insisted that those countries
were in urgent need of institutional changes in land relations, as technological changes would
follow automatically. Further, Colombo plan of 1952 supported the nascent governments of

22
newly independent Asian Countries in carring forward rural development measures with the aid
and help of developed countries. All these efforts of ex-colonial and new imperialist masters
were to downgrade or pacify the rousing communist sentiments of the rural masses of the less
developed countries that would otherwise take the path of Chinese revolution.
As a result, most of the less developed countries undertook land reforms. But, they failed
miserably in some respects, as there had been lack of political will. Further, the ruling elites were
more vocal in their radical ideology, but they were proved reactionary in their programme while
implementing land reforms. For example, in India abolition of zamindari was somewhat
successful, but tenancy laws were full of loopholes, whereby the onus probandi would lie with
the tenant. Further, ceiling laws that were enacted by the middle of 1960’s were full of
exemptions, the ceiling limit being very high. As a consequence, land acquired and distributed
was quite less.
Further, by the mid 1960’s, the population of the less developed countries was increasing
rapidly and feeding growing population became a problem. The hope of rising agricultural
productivity and production after the so called land reforms had not materialised and food
shortages were the order of those days. In India, in 1966, more than 10 million tonnes of cereals
were imported from USA.
Thus, the Governments of the less developed countries drew their attention to technological
changes in agricultural sector from the point of view of provision of food to the growing
population. In this spirit only, Mellor 26 says:
The argument that adoption of new agricultural technology to increase food production
should be delayed until needed but uncertain institutional changes, such as radical
redistribution of land have occurred may be harmful to the poor.

Exactly at this historical juncture, by mid-1960’s Schultz’s prescription of exporting new

agricultural technology (Green Revolution) to the less developed countries came. This
prescription of Schultz had double mission: (i) To export green revolution technology to those
less developed countries so as to meet the food needs of their growing populations, which
ultimately would appease their peasantry and rural masses thereby preventing them from
choosing the path of Chinese revolution; (ii) To carry on business in biological-chemical
technology and mechanical technology in respect of fertilisers, pesticides, tractors, harvesters etc.
These two missions were required by the imperialist interests at that particular point of time.
4. Conclusion
Schultz’s diagnosis of traditional agriculture and his prescription for its transformation
were in consonance with the imperialist interests at that juncture. His explanation missed the
important aspects that caused traditional agriculture, particularly colonial exploitation, population
growth, low labour absorbing capacity of industrialisation in developing countries, besides the
persisting pre-capitalist agrarian relations. His prescription served the imperialist anti-
communist agenda and their business interests: (i) In defusing communist radicalism in the

23
developing countries due to food crisis and (ii) in carrying on business by exporting green
revolution technology. But, by late 1980s, their strategy began changing towards undoing of
green revolution as clearly depicted by Nanda27, particularly after Uruguay Round of GATT. It
is in their interest again to discourage foodgrain production in the developing countries by
imposing conditionalities such as cutting subsidies on agricultural sector.
Notes
1. Theodre W. Shultz (1970)
2. Ibid. p.3
3. Ibid. p.30
4. Ibid. p.168
5. V.M.Dandekar (1966 a)
6. Dandekar was criticised for this by Tara Shukla (1966). Deterioration in capital/labour and capital/land
ratios, due to population growth, was not historically held correct and thus Dandekar’s view was incorrect.
However, his second issue, relating to division of agrarian economy into surplus and subsistence sectors,
would have thwarted such deterioration.
7. Atiur Rahman (l986), p.16
8. V.M.Dandekar (1966b)
9. S.N.Mishra (1966)
10. S.H.Deshpande (1977)
11. Ashok Rudra (l982),p.404
12. Amit Baduri (1983), p.6-10, says that small peasants in backward economy are exploited in all the markets,
though each is an undeveloped market. The merchant’s and money-lender’s capital as also land-ownership
may be united in land-owners, who can extend exploitation over product, credit and land markets
respectively. Thus, actual tillers remain technologically backward. Krishna Bhardwaj (1974) also
expressed similar views.
13. A.V. Chayanov (1987). He says “Most Peasant farms in Russia, China, India and most non-European and
even many European states are unacquainted with the categories of wage labour” (p.1). The difference
between Schultz and Chayanov is of time, the former dealt with early 1960’s and the latter dealt with early
1920’s.
14. This was not even referred to by Schultz. Further, UNO (1951) notes simply “In many of the under-
developed regions of the World, tribal or feudal institutions still form the social framework, even though
under European influence the economic and political basis of tribal and feudal society has changed” (p.5).
This goes against our interpretation here. Further, England’s racial policy caused investment only in white
colonies to develop them, while the countries within non-white populations were neglected, see A.K.
Bagchi (1972).

15. A.K.Bagchi (1982), p.82.

16. Ibid, p.101 & 102
17. H.M.Cleaver, Jr. (1982), p.268.
18. Robert S. Anderson and M.Morrison (l982), p.3
19. Shrley Faster hartley (1972), p.59.
20. R. Nurkse (1980), p.33.

24
21. Mao-Tse-Tung (1978). In 1960 he was asked whether 50 years time was enough for China’s development
and its emulation with developed countries, he reminded that the developed capitalist countries took 300
years to reach such levels of development.
22. Utsa Patnaik (l972), and see Priyatosh Maitra (1986) who refers this aspect several times.
23. Priyatosh Maitra (1986), p.5
24. Folke Dovering (1964), p.5
25. A.M. Khusro (1973), p.100
26. Mellor (l986), p.22
27. Meera Nanda (1995)

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Chayanov, A.V. (1987): On the Theory of Peasant Economy, Oxford University Press, Delhi.
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Hartley, Shirley Faster (1972): Population, Quantity vs Quality, Prentice Hall Inc., New Jersey.
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Mao-Tse-Tung (1978): “Democratic Centralism -III,” Frontier, September 23.
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Oxford University Press, Bombay.
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Schultz-I”, Economic and Political Weekly, December 24.

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Nanda, Meera (1995): “Transnationalisation of Third World State and Undoing of Green Revolution”,
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26
 Chapter-IV
POLITICAL ECONOMY OF FOOD SECURITY IN INDIA

The major hallmark of the new agricultural technology is that India could achieve self-
reliance in the foodgrain production, overcoming the painful memories of the agrarian crisis of
mid-Sixties. Foodgrain production rose substantially since late Sixties enabling India to maintain
a fairly comfortable stock of food for running the public distribution system. But after
liberalisation programme of 1991, the position seems to have given rise to food insecurity.
However, as far back as 1985, Bhalla, as Chairman of Agricultural Prices and Costs
Commission, portrayed the grim picture of tough agricultural situation going to be faced by 2000
in India. As it took 35 years to increase foodgrains from 50 to 150 million tonnes (during 1950-
85), and the requirement of foodgrains by 2000 to meet food needs of population of 100 crores,
was 220 million tonnes, the question posed was how to achieve additional foodgrain production
of 70 million tonnes in a span of 15 years. In fact, as forecast by Bhalla, the achievement fell
short of foodgrain production, though population rose to 100 crores. He also took note of
regional disparities, as the 70 percent of additional foodgrains production came only from 4 states
viz., Punjab, Haryana, Western U.P. and A.P (Bhalla,1985).
It is time that we can take stock of the position as to how, in India, the food security was
built up and how the food insecurity has been induced. We first deal with the former aspect and
then the latter.
1. Food Security through Green Revolution
In this section, we explain the preconditions for opting for green revolution in the context
of national and international conditions and then its impact on food needs of India.
1.1 Preconditions for Green Revolution
Soon after independence, the ruling class in India recognised the importance of increasing
food production for industrialisation and for meeting food needs of growing population. In that
direction, agrarian reforms engaged first attention. Side by side, government also invested in
medium/major irrigation projects, on the one hand, and on the other, introduced institutional
changes in the form of cooperative credit, marketing and extension services. But no major
upsurge was there in agricultural production. The dependency on imports of foodgrains had
grown year after year till the mid-Sixties. From 2.3 million tonnes in 1947- 48, it increased to
4.7 million tonnes in 1951-52. During the First plan, there was some reduction in it. Again, in
1956, the net import of cereals was 1.39 million tonnes and thereafter it went up regularly,
reaching peak level import of 10.34 million tonnes in 1966. Thus by the middle of 1960s,

27
an agrarian crisis had precipitated in the country. In this connection, Sen says:
Under the (first) two five year plans, the improvement in agricultural technique was too
inadequate to ensure an upsurge in agricultural production and that institutional changes
were too inadequate to rouse the productive initiative of the peasant masses (Sen, 1962).

For increasing (maximising) foodgrains output in India, land redistribution came on the
agenda, after the FMS of mid-1950s, as the small farm efficiency acquired considerable impetus,
by early 1960s. But, ceiling laws enacted during 1960-65, being ineffective, could not result in
rising foodgrains production. Then, the attention of the ruling class fell on the improvement of
agricultural technology to raise food production in the country. In this connection, Rao has the
following to say:
If the existing structure of land ownership is not to be disturbed, then the introduction of
mechanised processes would become necessary for a more effective utilisation of land, as
this would lessen the supervising and managerial bottlenecks among larger farmers.
(This) seems to be gradually developing in many regions of the country (Rao, 1965).

1.2 US Support for Green Revolution as a Policy of anti-Communist Stance

Indian government, while importing food grains under PL 480 from USA (including peak
level import of 10.34 million tonnes) invited agricultural experts from USA regularly. Now, the
question arises as to why USA could come to the rescue of India by supplying foodgrains up to
mid-1960s and later by exporting green revolution technology.
By early 1950s, after the Chinese Communist Party swept over China, setting up a new
government; the new or reestablished political authorities in the rest of Asia feared that their own
exploited peasantry would demand redress on lines of China, because by that time, radical and
communist encouraged rural guerilla movements flared up in the Philippines, Indonesia,
Malaysia, Vietnam and India. The imperialist masters through UNO (UNO, 1951) professed for
land reforms with a view to maximise output in underdeveloped countries to appease the peasant
masses. Those masters, under US-British leadership, began to propagate other peasant
appeasement methods on the international fora, as there was fear that the Asian peasantry might
take radical path on Chinese lines, influenced and induced by communist ideology. That is:
It was recognised internationally that the peasantry was incipient revolutionaries, and if
squeezed too hard could be rallied against the new bourgeois dominated governments in
Asia. This recognition led many of the new Asian governments to join the British-
American sponsored Colombo Plan in 1952 which explicitly set out to improve
conditions in rural Asia as a means of defusing the communist appeal. Rural development
assisted by foreign capital was prescribed as a means of stabilising the countryside
(Anderson and Morrison, 1982).

As an ongoing process of anti-communist strategy, US government and agencies began to

help India in meeting food needs, first by exporting food grains and latter by exporting green
revolution. During the days of exports of food grains, the Ford Foundation team visited India in
1959, and recommended a highly area-selective strategy of agricultural growth. As a result,
Intensive Agricultural District Programme (IADP) was launched in India, in 1960-61, first in

28
seven districts and latter extended to cover eight more districts. However, this programme could
not significantly reduce the imports of foodgrain. Thus, it became evident to the Indian
government in 1966, headed by the very newly became Prime Minister, Mrs. Indira Gandhi to go
in for new agricultural technology - Green Revolution - in a big way through the introduction of
HYVs, chemical fertilisers and machinery. The then Prime Minister was very much interested in
solving the Indian food problem and she had to accept for devaluation of rupee, in February 1966,
with the conditionality of import liberalisation, in the name of increasing Indian exports. In fact,
devaluation was linked up with the export of green revolution (Raj, 1966 and 1976).
Thus, there was business interest for the American agencies to export green revolution
technology to India. But, at the same time, they wanted to defuse the peasant radicalism by
feeding hungry stomachs, as otherwise would lead to the internal communist movement in the
situation of war and agrarian crisis in India, as by 1964 there was split in the CPI, giving birth to
CPI (M), which took on a more radical mantle.
Further, Rockfellor Foundation, having experimented in the 1950s, with HYV seeds of
wheat and corn, acted in collusion with the Ford Foundation to establish IRRI in Philippines in
1960 to develop HYV rice, as it is staple food in most of Asian countries, to ease food supply
situation in Asia (Anderson and Morrison, 1982).
1.3 Adoption of New Agricultural Technology and Self-reliance in Food grain
Production
By mid-1960s the rural poverty was on the increase, added to drought and war-affected
conditions, and in 1966, the import of food grains from USA reached peak level of 10.34 m.
tonnes. At that time, the import of green revolution, through import of bio-chemical technology
(HYVs, CFs, pesticides) and mechanical technology (tractors, harvesters etc.), therefore, became
both urgent and imperative on the part of Indian ruling class, as was stressed by Mellor.
The argument that adoption of new technology to increase food production should be
delayed until needed but uncertain institutional changes, such as radical redistribution of
land, have occurred may he harmful to the poor (Mellor, 1986).

Thus, new agricultural technology was adopted at a rapid speed. It is clear from the fact
that total availability of four-wheel tractors was doubled and their domestic production increased
fourfold in the decade 1966-67 to 1976-77 and the peak-level import of 12,032 tractors was in
1970-71 (Byres, 1982). Further, the introduction of the green revolution technology entailed
considerable costs which kept on increasing almost incessantly in 1970s and 1980s. For example,
per hectare irrigation cost under major/medium projects increased from Rs.1200/- under First
plan to Rs.21,515 in the Sixth plan and crossed Rs.44,000/- in the Seventh plan. The government
has to spend huge sums on fertiliser subsidy, in addition to committed expenditure on extension
services, agricultural universities and so on. Thus, agriculture has become high cost economy, but
it is an unavoidable cost, says Bhalla:
Less costly, more appropriate, small and beautiful technological alternatives seem to exit
in the imagination of some messiahs. In actual practice, the hard facts are that it is the

29
 modem package of irrigation and seed fertiliser technology which has yielded the results
and also that this is an inevitable cost that has to be paid in an economy where population
is growing at the rate of 2.1 percent per annum (Bhalla, 1979).

As a result of the adoption of green revolution technology, food grain production rose to
152.4 m. tonnes in 1983-84 and to nearly 200 m. tonne in 1999-2000. It is noteworthy that this
has been achieved, while area under cultivation since early 1970s has remained constant around
140 million hectares, and declining in per capita terms. An interesting feature, therefore is that
the growth of yield has been compensating for the slow or negligible growth of cropped area. The
contribution of yield expansion to output growth increased from 49 per cent in the pre-green
revolution period to 81 per cent in the post-green revolution period (Bhalla, 1987).
In unison with the good growth performance of foodgrains production, the government has
been gradually rising the buffer stock of food grains, and by now, it has crossed 40.0 million
tonnes. These stocks have been used in regulating the free market prices of food grains. The PDS
(Public Distribution System) in food grains could be run smoothly. As a result absolute poverty
levels have come down in the states, over a period due to expansion of new technology, the
highest decline being experienced in agriculturally advanced regions. However, there have been
biases in regard to adoption of green revolution technology, i.e., region-bias, crop-bias and
class-bias. By 1989, the lagging regions were also catching up, as noted by Rao:
The recent experience, therefore, suggests that the disparities in growth between the
irrigated and rain-fed or dry areas may not be as sharp as in the early years of green
revolution. It is also heartening to find that many of the states where poverty is wide
spread and where the growth of foodgrains output had slowed down in the first decade of
green revolution, e.g., Assam, Bihar, Orissa, Madhya Pradesh and West Bengal have
shown a much better performance in the last decade (Rao, 1989).

2. Food Insecurity in Developing Countries and India

Having looked in to the national and international conditions that caused India to build up
food security regime, we now deal with the pros and cons of the food insecurity regime induced
and influenced by the liberisation initiated in India since 1991.
2.1 The Decline of US Hegemony
As a part of Marshall Aid of US to European countries, surplus agricultural commodities
were to be bought from US for subsidised sales in Europe, in the reconstruction of Europe after
World War-II. By early 1960s, during the reconstruction of Europe, the surpluses were directed
to the Third World as part of PL 480 food aid, as those countries were suffering from food
shortages and if such help was not rendered, they might be dominated by communist ideology.
This provided Third World governments a way to keep their food prices low without having to
improve their domestic food production. It led to establish US hegemony in Third world
countries (Nanda, 1995). During the Eurodollar phase (1960-1973), the US faced sharp
competition form West Europe and Japan, and they, the latter, could manage surplus in their
balance of payments (BOP). Further, the decline of US hegemony and challenge from Germany

30
and Japan came to the open in trade leading to collapse of Brettonwoods, with abandonment of
gold standard and the floating of currencies in 1971. Exactly at this period, the US encouraged
the developing countries to import green revolution technology for meeting their food needs,
which served some business interests of the US, in countering Germany and Japan.
The 1973 oil shock mainly hit US and West Europe, because of oil price hike by OPEC.
But OPEC countries had to depend on US and West Europe for military and strategic purposes.
Therefore, petro-Dollars flowed into Western International Banks, and they were flush with funds
and searched for borrowers. But, after Reagon’s monetary policy of 1981, the interest rates were
raised and at that time general global recession had set in. Thus the debt burden of the Third
World countries rose and they had to borrow even to pay interest. The Banks now became
gloomy and pessimistic and wanted to get back their loans along with interest (Dasgupta, 1997).
Then, the Brettonwoods twins, IMF and WB, acted as debt collectors for the International Banks,
by offering loans to the developing countries to ensure repayment of loans to those Banks.
In fact, the structural changes were required in the domestic economies of the developed
countries because of continuous recessionary conditions around 1980, but they could not take up
for the political and institutional climate, i.e., (i) high standard of living of their people, (ii)
social security system and (iii) political pressure groups. But, instead of this, the developed
countries imposed the structural adjustment on the developing countries, as they were suffering
from debt crisis, through Brettonwoods institutions (BWIs), viz., World Bank and IMF (Dubey,
1992). IMF and WB, while offering loans to the developing countries imposed conditionality of
implementing Structural Adjustment Programme (SAP) in those economies, putting liberalisation
and globalisation on the agenda.
2.2 Structural Adjustment Programme - the Undoing of Green Revolution in
Developing Countries
The Structural Adjustment Programme (SAP) was intended to pry open the markets of
developing countries, through external liberalisation of those economies, started by early 1980s
by the IMF and World Bank. By mid-1980s, the international economy rose to the stage of
global economy. Now, the food policies imposed by the developed countries on the developing
countries, led to serious consequences, causing food insecurity in the latter countries. These
policies were quite opposite to those of the phase of Green Revolution.
During green revolution, though there was self interest for the US and two Foundations
(viz., Ford and Rockfellor), the third world governments also actively participated. It belonged to
an era of economic nationalism. It was deliberate and planned state involvement, in collaboration
with international research in agricultural development. As a result, most of developing countries
achieved self sufficiency in their foodgrain production.
But, the conditions now are reversed by undoing of green revolution in those countries.
The developed countries have temperate land, unsuited to all crops year round, whereas
developing countries have tropical or sub-tropical lands where topography is such as to provide
land at varying elevations, giving scope for a highly diversified product-mix. The developed
countries require agricultural products, such as beverages like coffee, tea, cocoa; fruit juices;
vegetable oil (like safflower and sunflower); vegetables and fruit in fresh, frozen and canned

31
forms; lean meat; fish and sea food; cotton-textiles; pharmaceutical cosmetics and so on. All
these products are wanted for the healthy life style of the people of developed countries and they
have to be obtained from the developing countries at cheap prices, by imposing conditionalities
while offering SAP loans to them. If by some reason, the exportables from developing countries
are stopped, the high living standards of West Europeans and North Americans drop to medieval
levels (Patnaik, 1996).
Now the developing countries are compelled to specialise in the crops, required for the
developed countries, displacing cropped areas of food grain crops. But, the developed countries,
like the US, specialise in the foodgrain crop such as wheat only, in their temperate lands. The US
has been dominant in world food grain market. At present, the US has surplus food grains of 189
million tonnes after their needs of 125 million tonnes. In fact, the World food grain market
requires only 100 million tonnes (Patnaik, 1993). But, in US alone nearly 7,000 items, found in
raw and processed form in super market shelves (60 percent of 12,000 items), are of tropical or
sub-tropical origin.
The land use and cropping pattern of tropical counties are changed as per the needs of
developed countries. If the tropical crops are to be raised in the developed countries, the products
become costlier. But the same crops are producible more cheaply in developing countries. TNCs
involve in importing all such products to get high profits. So, developed countries gain, but
developing countries lose as the exporters require diversion of land and investment away from
domestically consumed goods whose availability falls. In this process, aquaculture, being export-
oriented, has been adopted in coastal districts in some states, leading to environmental pollution
and ecological imbalance.
Further, the developing countries are subjected to exploitation on two fronts: (i) export
orientation compels them to produce agri-products domestically not required, setting in food
insecurity for them and (ii) the prices of exportables fall, as most of the developing countries
compete in similar, agri-products in the international market (due to glut) i.e., unfavourable terms
of trade for their agri-products.
The US, thinking that it has been placed in advantageous position, stressed for inclusion of
agriculture also in the Uruguay round of GATT, in addition to TRIPS, TRIMS and GATS. Now
the WTO also upholds the strategy of developed countries to undermine the interest of the
developing countries. In fact, after formation of WTO, the Bretttonwoods twins became
Brettonwoods trinity. The WTO insists to reduce subsidies, to do away with quantitative
restrictions, to import 3-5 percent of total consumption of agricultural commodities and to
confine PDS only to vulnerable sections by suitably targeting.
SAP started in an international environment when anti-socialist waves were on the
advance. The conditions were conducive and ambient for its continuance and sustenance
particularly after the collapse of socialism in Poland, in the early 1980s. The reunification of
Germany, the downfall of socialism in the East European countries and in the USSR, gave a big

32
fillip to the SAP policies of BWI. Now, in the uni-polar world, only the US hegemony is at the
top of the imperialist countries, as no fear of communist ghost haunting the US.
2.3 Food Insecurity in India after Liberalisation since 1991
The Indian ruling class vehemently opted for liberalisation in 1991 as the East European
and Soviet Union socialism collapsed, for the simple reason that there was foreign exchange
crisis. The pseudo socialist thinkers of the ruling party (Congress) completely showed their real
‘Avatars’, in the name of ‘there is no alternative (T1NA).”
To get SAP loans from the Fund-Bank the ruling class sold out the self-reliant policy
followed so far, by accepting for liberalising the Indian economy. As a part of that, agricultural
sector also has been subjected to liberalisation.
The first attempt was to cut fertiliser subsidy and then to reduce investment in irrigation.
Further, agricultural sector was opened up, as if it has potential and can compete in the world
market. On the other hand, industrial sector was to allow imports from outside, so as to become
competitive in the world market.
2.3.1 Effect of Cutting Subsidies and Investments in Agriculture
Immediately after going for liberalisation, in the very first budget, the fertiliser subsidy
was cut, leading to rise in fertiliser price, as Rao says:
There was a sudden rise of 30 per cent in the prices of nitrogenous fertilisers and a
doubling of the prices of phosphatic and potassium fertilisers following their decontrol in
the early 1990s. This led to sharp decline in the growth rate of fertiliser consumption
from around 8 per cent per annum during the 1980s to only about 2 percent per annum in
the first half of 1990s. What is more ominous, there has been an absolute decline in the
consumption of phosphatic and potassic fertilisers resulting in an adverse NPK ratio
which may have reduced the productivity of fertilizers, apart from causing damage to the
soils (Rao, 1998).

Further, investment in irrigation also is nearly stagnant between 1985-92 and 1992-97, the
figures being Rs.49,326 crores and Rs.51,523 crores respectively. However, 2.1 million hectares
under major/medium irrigation and 5.8 million hectares under minor irrigation have been
recorded.
As regards the performance of agricultural sector, the compound growth rate of food grains
production dropped to 1.66 per cent per annum during 1990-98 from the peak level of 3.54 per
cent per annum during 1980-90, and the average growth rate of gross value of output of
agriculture at 1980-81 prices in the post-reform period was lower at 3.1 per cent per annum than
that during the earlier period at 4.3 per cent (Thamarajakshi, 1999).
2.3.2 External Liberalisation of Agriculture - its Effects
As regards the dependence on export market, we are not going to gain much as export
prices show sharp year to year fluctuations. For example, price of rice was below Rs.7,000 per
tonne in 1991-92 and 1992-93 and then rose to Rs.9,459 in 1993-94, but the subsequent year, it

33
dropped by more than 20 per cent. In regard to rice and maize, domestic wholesale and farm
level prices would rise, if we go for export market (Chand, 1999). Thus, trade in agricultural
commodities is undependable. In this connection, Ghosh says:
Every school boy knows, however, that the more developed a country the more its
exports tend to be of manufactured products, with significant value addition. The
advantage of a large country with a potential surplus of agricultural products can be
translated into a real advantage only by getting its agricultural production attuned to
supply the materials required for the export of manufactures; and that principle equally
applies to mineral resources (Ghosh, 1996).

Bhalla (1993) also questions why the external trade policies should discriminate against industry
favoring agriculture.
In the last 3 years, it is reported that nearly 800 farmers committed suicide for having not
got remunerative prices for their crops, particularly cash crops such as chilly and cotton. In the
very recent past, the foodgrain crops are also not getting remunerative prices. This is the impact
of the imports of foodgrains, both cereals and pulses, and also the imports of edible oils.
2.3.3 Poverty Implications
SAP policies in respect of Indian agriculture led to the higher rise of retail prices than the
wholesale prices. Further, the share of rural nonagricultural employment in the total rural
employment has gone down, as per NSS. These two together aggravated the poverty levels in
India. As calculated by S.P.Gupta, quoted by Patnaik (1999), the rural poverty by head count
ratio in 1989-90 was 33.7 per cent. It rose to 35.04 per cent in 1990-91, then to 41.7 per cent in
1992 and decreased to 38.03 per cent in 1994-95, and in 1997 it was at 38.6 per cent. In this
connection, Patnaik says:
Empirical studies have shown that rural poverty in India is strongly correlated with three
(not necessarily mutually independent) factors: the rural developmental expenditure by
the government, the ratio of the cereal price index to the wholesale price index, and the
proportion of nonagricultural work force. In the nineties all three factors have moved in a
manner that aggravates rural poverty, and each of these movements is associated with the
structural adjustment programme (Patnaik, 1999).

Further, Dev points out that real wages for agricultural labourers in India shows the decline
in the post reform period, though there was significant growth in the 1970s and 1980s. Price
index for agricultural labourers increased by 50 per cent between 1991 and 1994, in which part of
the increase was due to increase in administered procurement prices by the government due to
devaluation. But the rate of increase in procurement was higher than needed because of farm
lobbies (Dev, 2000).
2.3.4 Role of public Distribution System
Some economists argue that the maintenance of buffer stock of foodgrains by government
is costlier and so it is better to shift to variable levies on external agricultural trade in such a way
as to keep price within the price band (Srinivasan and Jha, 1999).

34
 The Public Distribution System (PDS) is mainly confined to 8 states, viz., Andhra Pradesh,
Gujarat, Jammu and Kasmir, Karnataka, Kerala, Maharastra, Tamil Nadu and West Bengal. It is
disquieting to note that exclusion of backward states such as Bihar and Uttar Pradesh from the
PDS net work has been there till recently.
A 25 per cent increase in cereal prices in 1990-91 in contrast to a 12 per cent inflation rate
could only indicate the failure of the government mechanism to release stocks to vulnerable areas
and thus to regulate the speculative behaviour of traders.
More significant, foodgrains stocks held by the government have been increasing despite a
lower growth rate of foodgrain production, during the last few years as compared to its historical
growth rate. In this connection, Radhakrishna notes:
A greater role for grain markets than has been allowed hitherto is desirable. However,
one should not lose sight of the fact that the market alone does not take us very far,
particularly in providing food access to the poor. An overreaction to past failures of
excessive and inappropriate government intervention should not lead to the other extreme
of a passive role for the government, whereas, in reality, intervention of a different type is
needed. The failure to act may carry the food insecurity into the next decade
(Radhakrishna, 1996).

3. Conclusion
In the mid-1960s, the US under its patronage, exported green revolution technology to
Third World Countries and India, when they were suffering from food shortages, because they
might take the path of China influenced by communist ideology, if not helped. That is, the US
was under the threat of communist ghost and helped the developing countries. But, by the early
1980s, the SAP was imposed on the developing countries and it was reinforced by the end of
1980s, as East European and USSR Socialism collapsed. By this time, US and West European
people, being health conscious, began to import tropical or sub tropical crops - vegetables, fruits,
vegetable oils, flowers etc., from developing countries. Now the developing countries are asked
to specialise in those crops and thus, they are subjected to face food insecurity because they are
displacing foodgrain crops for non-food crops. This is imposed on them under the threat of IMF
and WB and now a days WTO too. Now the US, being uni-polar, having lost fear of communist
ghost can dictate terms to the developing countries. Exactly at that time, India also became a part
of this process.

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 About the Author

Dr. A. Venkateswarlu, B.Sc.,M.A., M.Phil., Ph.D, has good

academic record. He received his double graduation and Master’s
degree from Osmania University. He joined as Research Scholar, at the
Centre for the Study of Regional Development (CSRD), Jawaharlal
Nehru University, New Delhi and got M.Phil and Ph.D degrees in 1984
and 1992 respectively.
For his Ph.D, he worked under the supervision of Prof. G.K.
Chadha, presently the Dean of School of Social Sciences, Jawaharlal
Nehru University, New Delhi.
He worked jointly with Prof. G.K. Chadha in the Project of
United Nations Centre for Regional Development, (UNCRD), Nagoya,
Japan, entitled “Community Asset Formation through People’s Efforts:
Case of Pindiprolu, Andhra Pradesh”, during 1993-94.
He is the author of the books Developing agricultural
Technolog: (A Study of Andhra Pradesh Agriculture from Rawat
Publications, Jaipur; and Land reforms in Poland till Solidarity
Movement from Swarajya Bharati Publications, Khammam.
He has been teaching Economics in Government Degree
Colleges, affiliated to Kakatiya University, A.P., since 1987; presently
working at S.R & B.G.N.R Government College, Khammam, A.P,
India.

38