Shaping India: Economic Change in Historical Perspective 9781138659971, 9780415678049

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Table of contents :
Half Title
Title Page
Copyright Page
List of Abbreviations
List of Tables
List of Figures
Paradox of Development
Rising Growth and Disparity
Decline of Agriculture
Poverty Reduction
History and Institutions
Part I Land and Agriculture
1. Evolution of Land Rights in India
2. Structural Changes in Land Distribution and Their Implications for Improving Access to Land
3. Changing Agrarian Structure in India: Reflections on Pre-independence Ideology and Post-independence Reality
4. Population Pressure and Labour Intensification: An Indian Historical Perspective
5. Institutional Strangleholds: Agricultural Science and the State in India
Part II Entrepreneurship and Industry
6. Revisiting Indian Capitalists in Colonial India: Some Critical Reflections
7. From Merchants to Multi-national Enterprises: European Trading Firms in South India’s Plantation Sector
8. Fiat or Trust? A Story of Indian Banking (1857–2007) with a Regional Perspective
9. Six Decades of Industrial Development: Growth of the Manufacturing Sector in India from the 1940s
Part III Demographic Trends
10. Fertility in India since Independence: An Overview
11. Mortality Trends and Patterns in India: Historical and Contemporary Perspectives
12. A Long Haul: Revisiting International Migration from India during the 19th and 20th Centuries
Part IV A Critical Theoretical Perspective
13. Pathways to India’s Economic Past
About the Editors
Notes on Contributors
Recommend Papers

Shaping India: Economic Change in Historical Perspective
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Contents a i


Contents a iii

SHAPING INDIA Economic Change in Historical Perspective



iv a Shaping India First published 2011 in India by Routledge 912 Tolstoy House, 15–17 Tolstoy Marg, Connaught Place, New Delhi 110 001 Simultaneously published in the UK by Routledge 2 Park Square, Milton Park, Abingdon, Oxfordshire OX14 4RN First issued in paperback 2015 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2011 D. Narayana and Raman Mahadevan Typeset by Star Compugraphics Private Limited 5, CSC, Near City Apartments Vasundhara Enclave Delhi 110 096

All rights reserved. No part of this book may be reproduced or utilized in any form or by any electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording, or in any information storage and retrieval system without permission in writing from the publishers. British Library Cataloguing-in-Publication Data A catalogue record of this book is available from the British Library ISBN-13: 978-1-138-65997-1 (pbk) ISBN-13: 978-0-415-67804-9 (hbk)

Contents a v

Contents List of Abbreviations List of Tables List of Figures Preface

vii ix xiii xv

Introduction 1 Paradox of Development/Rising Growth and Disparity/Decline of Agriculture/Poverty Reduction/History and Institutions Part I Land and Agriculture 1. Evolution of Land Rights in India S. Neelakantan


2. Structural Changes in Land Distribution and Their Implications for Improving Access to Land K. N. Nair and Arindam Banerjee


3. Changing Agrarian Structure in India: Reflections on Pre-independence Ideology and Post-independence Reality A. Vaidyanathan


4. Population Pressure and Labour Intensification: An Indian Historical Perspective N. Krishnaji


5. Institutional Strangleholds: Agricultural Science and the State in India Rajeswari S. Raina


Part II Entrepreneurship and Industry 6. Revisiting Indian Capitalists in Colonial India: Some Critical Reflections Raman Mahadevan


7. From Merchants to Multi-national Enterprises: European Trading Firms in South India’s Plantation Sector 149 Tharian George K.

vi a Shaping India

8. Fiat or Trust? A Story of Indian Banking (1857–2007) with a Regional Perspective D. Narayana 9. Six Decades of Industrial Development: Growth of the Manufacturing Sector in India from the 1940s C. P. Chandrasekhar



Part III Demographic Trends 10. Fertility in India since Independence: An Overview K. Srinivasan


11. Mortality Trends and Patterns in India: Historical and Contemporary Perspectives K. Navaneetham and C. S. Krishnakumar


12. A Long Haul: Revisiting International Migration from India during the 19th and 20th Centuries S. Irudaya Rajan and Prabhat Kumar


Part IV A Critical Theoretical Perspective 13. Pathways to India’s Economic Past K. T. Rammohan


About the Editors Notes on Contributors Index

348 349 353

Contents a vii


Agricultural Research Service Agricultural Scientists Recruitment Board Below Poverty Line Crude Birth Rate Crude Death Rate Effective Couple Protection Rate Consultative Group on International Agricultural Research Couple Protection Rate Department of Agricultural Research and Education Emigration Clearance Required Area under Food Crops Govind Ballabh Pant University of Agriculture and Technology Gross Cropped Area Gross Cropped Area per Person Gulf Cooperation Council Gross Domestic Product General Fertility Rate Human Immunodeficiency Virus/Acquired Immunodeficiency Syndrome High-Yielding Variety International Assessment of Agricultural Knowledge, Science and Technology for Development Integrated Area Development Programme Indian Agricultural Research Institute Indian Council of Agricultural Research Indian Civil Service Infant Mortality Rate Index of Industrial Production Indian Veterinary Research Institute Kerala Research Programme for Local Level Development Life Expectancy at Birth Land–Person Ratio Multi-national Corporation

viii a Shaping India


Minimum Support Price Male Agricultural Workers National Dairy Research Institute National Family Health Survey Non-resident Indian Net Reproduction Rate Net Sown Area Net Sown Area per Person Net State Domestic Product National Sample Survey Organization of Petroleum Exporting Countries Per Capita State Domestic Product Panchayats (Extension to the Scheduled Areas) Rural Banking Enquiry Committee Research and Development Royal Commission on Agriculture Registrar General of India State Agricultural University Special Economic Zone Science and Technology Sample Registration System Technology Cooperation Mission Total Fertility Rate United Nations Development Programme United Nations Children’s Fund Uttar Pradesh Agricultural University United States Agency for International Development Wild Life Protection Act World Trade Organization

Contents a ix

List of Tables 2.1 2.2 2.3 2.4 2.5 4.1 4.2 4.3 4.4 4.5 5.1

Gini Coefficient for Landownership Percentage Distribution of Owned Area by Size Classes Percentage Distribution of Owned Area by Household Groups: Various Rounds State-wise Percentage Distribution of Owned and Operated Area by Household Groups, 1961–62 and 2002–03 Share of Households and Area Affected by Land Reforms across States

48 51 53 54 58

Gross Cropped Area per Person (GCAP in acres), 1891–1941 91 Averages of Area and Population Variables in 1891 and 1931 among Districts Classified by Changes in Population and Net Sown Area per Person 94 Weighted Averages of Different Ratios in 1891 and 1931 among Districts Classified by Changes in Population and Net Sown Area per Person 95 Linear Regressions of Response Variables to Changes in Net Sown Area per Person 96 Variations among Districts Ranked by Net Sown Area per Person in 1891 97 Trend Growth of Inputs in Agriculture (1999–2000 Prices; %)


7.1 7.2 7.3 7.4

Major Trade-Related Developments, 1833–69 Evolution of Volkart Brothers, 1851–1947 Evolution of the James Finlay Group Evolution of Harrisons & Crosfield

154 159 162 164

8.1 8.2

Growth of Banking Deposits in India, 1870–1936 Expansion of Branch Offices of Banks in India, 1916–2006 Regional Distribution of Towns Served and Not Served by Commercial Banks Distribution of Commercial Bank Branches by Bank Group and State, 1969


8.3 8.4

186 189 191

x a Shaping India

8.5 Distribution of Branch Offices of Commercial Banks by Region, 1948–2006 8.6 Share (%) of Southern and Western India in Total Loans and Advances of Scheduled Commercial Banks, 1949–2006 8.7 Distribution of Banking Centres and Offices by Region, 1970–2006 8.8 Growth of Agricultural Loan Accounts of Commercial Banks, 1969–2005 8.9 Distribution of Banks by Year and Region of Registration in India, until 1969 8.10 Evolution of the Banking Structure in India, 1941–69 8.11 Deposit and Credit Accounts per 1,000 Population across the Regions of the Country, 2005 9.1 Annual Trend Rates of Growth of Output (%) 9.2 IIP-Based Rates of Growth of Manufacturing Production (Use-Based Classification), 1994–95 to 2004–05 9.3 IIP-Based Growth in 17 Major Industry Groups, 1994–95 to 2003–04 9.4 Growth and Share of Personal Loans in Total Bank Credit (%) 10.1 Desired Demographic Goals: India, 1962–2007 10.2 Distribution of Indian States by CEP in 1975, 1990 and 2005 10.3 Current Fertility Levels according to NFHS and SRS 10.4 Trends in Total Fertility Rate (TFR), India and Major States 10.5 Trends in Total Fertility Rate (TFR), India and Major States (Rural and Urban) 10.6 Path Coefficients and R2 Values 10.7 States and Districts Falling in the Lowest and Highest Deciles of Index Values A1 Trends in Effective Couple Protection Rate A2 Selected Indicators on Marriage, Family Planning and Fertility at State Level, 2005–06 A3 Data on Selected Indicators at State Level, 2001

194 195 196 198 199 200 203 207 223 224 226 240 243 244 246 247 253 257 261 262 264

List Contents of Tables a xi

11.1 Influenza Mortality Rates, Incidence Rates and Case Mortality Rates: Province and Jail Population, India, 1918 11.2 Increase in Disease Mortality, 1872–1921 11.3 Area under Crops, Foodgrains, Irrigation, British India, 1891–1921 (5-Year Moving Averages, in Millions of Acres) 11.4 Increases in All-Crop Output (Per Capita, %), 1891–1921 11.5 Official Mortality Rates for Individual Diseases in India, 1922–41 (per 1,000) 11.6 Per Capita Availability of Foodgrains Annually (in Tons) 11.7 Estimates of Mortality Parameters in India, 1951–81 11.8 Transition in Life Expectancy at Birth in Indian States, 1970–75 and 1997–2001 11.9 Broad Phases of Mortality Transition in India over the Period 1872–2001 A1 Life Expectancy at Birth in Rural India A2 Life Expectancy at Birth in Urban India 12.1 Total Import of Indentured Labourer Immigrants, Showing Origins in Regions of the South, Classified by Destination, 1831–1920 (in Thousands) 12.2 Estimated Total Migration to and from India, 1834–1937 (in Thousands) 12.3 Migration from India to USA, Canada and UK, Selected Years, 1951–2003 12.4 India’s Share in Total Immigration to USA, Canada and UK 12.5 Immigration from India to USA by Major Occupation Group, 1971–90 12.6 Immigration from India to Canada by Major Occupation Group, 1971–90 12.7 Estimates of the Indian Migrant Population in the Middle East (in Thousands) 12.8 Number of Emigration Clearances Granted by Countries of Destination, 1990–2001 12.9 Workers Granted Emigration Clearance, by Major States of India, 2004–09

271 271 272 273 275 275 276 279 289 293 294

299 307 308 309 310 311 314 315 316

Contents a xiii

List of Figures 2.1 9.1 9.2 9.3 10.1 10.2 11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9 11.10 11.11 11.12

Lorenz Curve for Ownership Distribution of Land, All-India, 1961–62 and 2002–03


Growth Rates in Manufacturing Trends in Housing Loans Month-on-Month Rates of Industrial Growth, 2008–09


Total Fertility Rates in India and Four States, 1941–51 to 2003–05 Path Diagram

249 252

Trends in Mortality Rates in India, 1892–1919 Trends in Mortality Rates, 1920–44 Trends in Life Expectancy at Birth by Place of Residence and Gender, India Box Plots Showing Variation in Life Expectancy at Birth, States of India Trends in the Probability of Dying in India, Age Group 0–4 Trends in the Probability of Dying in India, Age Group 5–14 Trends in the Probability of Dying in India, Age Group 15–59 Trends in the Probability of Dying in India, Age Group 60–69 Variability in Probability of Dying across States, Age Group 0–4 Variability in Probability of Dying across States, Age Group 5–14 Variability in Probability of Dying across States, Age Group 15–59 Variability in Probability of Dying across States, Age Group 60–69

222 226

269 274 278 280 281 283 284 285 286 287 287 288

Contents a xv

Preface As

the late Professor K. N. Raj often remarked, ‘history, theory and data are the pillars of research at the Centre for Development Studies’ (CDS). This unique blend has been the hallmark of much of the research work carried out at CDS since the 1980s. It is this attribute that has provided CDS with a distinct identity and enabled it to emerge as a premier social sciences research institute. This volume epitomizes in many ways the concerns close to Professor Raj. The volume itself is the outcome of a national seminar, ‘Indian Economy: Historical Roots and Contemporary Development Experience’, held at CDS during 31 March–1 April 2007. The seminar was sponsored entirely by the Indian Council of Social Science Research (ICSSR) as part of the commemoration programme for the 150th anniversary of the First War of Indian Independence. The seminar was inaugurated by Hon’ble Justice Mr K. G. Balakrishnan, Chief Justice of India, followed by the release of the book Institutions and Markets in India’s Development: Essays for K. N. Raj. Professor Kaushik Basu delivered the Joan Robinson Memorial Lecture, titled ‘Performance of the Contemporary Indian Economy and Its Historical Roots’, on this occasion. The general view at the end of the seminar was that the papers would make for a valuable volume. The seminar evoked a positively overwhelming response from some of the tall figures in Indian economic scholarship. Our decision to give shape to this volume was encouraged by the content of the presentations and the supportive attitude of the presenters. In particular, Professors Krishnaji and Vaidyanathan, part of the group of six who were closely associated with the birth of CDS, were a source of strength and encouragement in our endeavour to take on this onerous responsibility. Thus, the volume began to take shape. Almost all the papers presented at the national seminar have been included here, after substantial revision, of course. Four papers presented at the seminar could unfortunately not be included, either because they were not revised satisfactorily, or because they did not fit in with the overall theme of the volume. Three separately

xvi a Shaping India

commissioned papers were included to fill in some major gaps so as to develop an interesting theme which has hitherto not been dealt with in any systematic manner. The volume can claim to have opened a window for looking at regional development patterns, the slackening agricultural growth of recent decades and disparate poverty reduction across the regions of India. Above all, it underscores the importance of a longue durée historical approach to understanding the complex process of development. The volume would not have become a reality but for the generous financial support of ICSSR and the commitment and encouragement of Dr K. N. Nair, Director, Centre for Development Studies. We would also like to take this opportunity to thank the staff, faculty and students of CDS for extending the necessary support at all stages of the creation of this volume. We would further like to thank the two referees for taking time off to read the entire manuscript and offer valuable comments and suggestions. Lastly, we would like to thank Routledge for reposing faith in this study. D. Narayana Raman Mahadevan

xviii a Shaping India Emerging Regions of India

Source: Prepared by the editors. Note: All efforts have been made to ensure the accuracy of the image.

Evolution of Land Rights in India a 1

Introduction D. Narayana and Raman Mahadevan Modern India is a country where economic history is important, where current issues and problems and many of the institutions and systems that shape the contemporary economy itself are closely linked to the legacy of the past. (Tomlinson, 1993, p. 1) India’s developmental experience cannot be studied without referring to the historical fact of protracted colonial domination and the way the mechanism of imperial exploitation affected the different segments and regions of the economy. (Bharadwaj, 1998, p. 190)

These perceptive observations underscore the importance and the validity of adopting a long-term historical perspective for understanding and unravelling the complexities inherent in the process of economic development. So far, historians have usually been wary of extending their gaze beyond 1947, the year of India’s independence, which is seen as marking the end of colonial hegemony. This is despite the largely political nature of the transfer of power. In the economic sphere, however, 1947 may not have been as much of a watershed. Sixty years have passed since independence and the developments since then are part of our contemporary history. This volume attempts to bridge the divide between the colonial and post-colonial period in our understanding of the overall process of economic transformation. The structuring of a colonial economy was a protracted and uneven process characterized by the gradual integration of large parts of greater India into the international commodity market through trade and investment. The process of development that colonialism spawned was varied and uneven, with some regions being better integrated with the market than others. Regional differentiation, characterized by some regions being somewhat more developed than others with respect to agrarian structure, commercialization and market integration, was a structural feature integral to the very process of colonial commercialization and the outward orientation of the economy. The story of commercialization of the Indian

2 a D. Narayana and Raman Mahadevan

economy in the colonial phase with its attendant outcomes is fairly well documented, and the storyline hardly bears repetition. The foundations of an ‘imperfect’ and ‘unevenly developed’ modern colonial economy had been firmly laid by 1947. To what extent this was a drag on the process of economic development in post-independence India is an issue that still engages debate and discourse. Ironically, despite the overpowering exposure to forces of globalization and colonial commercialization for close to 200 years, the Indian economy in 1947 remained underdeveloped, poor and largely agricultural. In so far as overall economic development was concerned, the period from the end of the First World War up until 1947 can best be described as one of comparative stagnation, fuelled largely by the stagnation in agricultural growth. This had to do with the sheer weight of agriculture in the overall economy. The facts that the share of agriculture in the national income was almost 50 per cent, and that it accounted for 72 per cent of the total workforce at the time of independence, put it beyond doubt that colonial India was preponderantly agricultural. The stagnant state of Indian agriculture for almost four decades preceding independence stands out as a prominent and much-debated feature of the Indian economy. The population of India rose from 306 million in 1926 to 389 million in 1941. However, this demographic growth was not accompanied by growth in agricultural output, which grew at a tardy 0.37 per cent for the period from 1891 to 1946. Particularly disturbing in this context was the stagnation in the output and the declining yield of foodgrains. The obvious implication was falling per capita food availability, with serious consequences for the health and life of poor and marginalized people. Somewhat in contrast, though not surprisingly, non-foodgrain or commercial crop output during the same reference period registered a fairly significant growth. Some of these were exportoriented crops, groundnuts and tea being cases in point. The other notable trend was the significant regional variation in agricultural growth. Despite stagnation at the aggregate level, some regions and pockets tended to do better than others. Punjab and the southern region fell by and large in this category. The organized, large-scale industrial sector, which had taken root in the second half of the 19th century, was still relatively small,

Introduction a 3

thinly and unevenly spread, skewed and narrowly based at the time of independence. It was nowhere close to being an engine of growth. Thus, around the time of independence, mining and manufacturing contributed only 17 per cent of the national income. Factory employment was relatively minuscule, with the industrial sector providing employment to just 2.65 million workers, which represented less than 2 per cent of the total labour force in India at the time of independence. The industrial structure itself was rather narrowly based, characterized by the predominance of agro-based consumer industries with textiles (inclusive of jute and cotton) accounting for the bulk of investment and employment. Industrial production itself was concentrated largely in and around Calcutta and Bombay. The port enclave pattern of industrialization, with limited dispersal effects and the absence of any linkage with agriculture, rendered the industrial structure weak and vulnerable. The beginnings of the reversal of this trend are noticeable in the 1930s and 1940s in parts of south India. The rise of Coimbatore is representative of this nascent, agriculture-led industrialization. One of the significant features of the industrialization process in colonial India is the space that emerged for the rise, over time, of a particularly assertive indigenous entrepreneurial class from within the ranks of the merchant capitalists in eastern, northern and western India. Between 1930 and 1940, these entrepreneurs had managed to entrench themselves in the manufacturing sector, a position that provided them the much-needed clout and bargaining power vis-à-vis both the colonial and the emerging state. This class played a very critical role in influencing the structuring of the postcolonial development state through the planning process and the import-substituting industrialization path that the state chose to follow until the 1980s.

Paradox of Development In recent decades, India has emerged as one of the fastest-growing economies of the world. India’s economic growth, which was barely above its population growth for about three decades after independence, began showing a remarkable increase after the early 1980s. This acceleration of growth has been marked by three distinct characteristics. First, the higher growth has been accompanied by its greater dispersion across the states of India. Unlike the initial decades after independence when growth was led largely

4 a D. Narayana and Raman Mahadevan

by centrally allocated public investment across the states, recent decades have seen private and foreign investment taking the lead and choosing their destinations. Second, the remarkable vitality of the agricultural sector from the late 1960s, which brought about India’s highly acclaimed self-sufficiency in food, has seen a reversal since the mid-1990s. The period from the mid-1990s onwards has seen hardly any growth of the agricultural sector in per capita terms. Third, the proportion of population below the poverty line has not come down significantly over this long stretch of time, and this is especially so in the last two decades of growth acceleration. This volume explores the possible linkages between these features of the Indian growth story, through its essays on population, land, manufacturing and entrepreneurial development. In addition, it examines some of the historical roots of contemporary development, given that path-dependency is an essential aspect of growth.

Rising Growth and Disparity India’s per capita income, which grew by about 20 per cent between 1960–61 and 1980–81, more than doubled between 1980–81 and 2000–01, and the high growth has continued into the 2000s. However, the higher growth has come with much greater dispersion of growth across the states. In 1960–61, Orissa’s per capita state domestic product (PCSDP) was about 40 per cent and that of Bihar about 60 per cent of the all-India average (in constant 1980–81 prices). By 1980–81 this variation had hardly changed, with the PCSDP of Bihar about 45 per cent lower and that of Orissa and Rajasthan about 20 per cent lower than the all-India average. But by 2000–01, the PCSDP of Bihar had dropped to 36 per cent, that of Assam to 50 per cent, and that of Orissa and Uttar Pradesh to about 55 per cent of the Indian average. The growth dispersion has continued into the 2000s, with Assam, Bihar, Madhya Pradesh and Uttar Pradesh all reporting PCSDP well below 50 per cent of the Indian average in 2007–08 (at 1999–2000 prices). The PCSDP of Rajasthan is hovering at around 60 per cent of the Indian average (RBI, Database on Indian Economy). Thus, six of the 10 major states that had per capita incomes between 10 and 20 per cent below the national average in the early 1960s have slid in their relative positions. The four states that have improved their relative

Introduction a 5

positions over the last four decades are the south Indian states of Andhra Pradesh, Karnataka, Kerala and Tamil Nadu. At the upper end, while Haryana and Maharashtra reported PCSDPs of over 125 per cent of the Indian average in 1960–61, Gujarat, Punjab and West Bengal had PCSDPs of about 110 per cent of the national average. By 1980–81, while Haryana, Maharashtra and Punjab were reporting PCSDPs of 145 to 165 per cent of the Indian average, Gujarat and West Bengal were showing only slight improvements in their positions. By 2000–01, Gujarat and Maharashtra had improved their positions further and Haryana and Punjab had lost ground, with West Bengal just about maintaining its position. The period 2000–01 to 2007–08 saw Haryana improve its position, Gujarat and Maharashtra maintain their positions, and Punjab lose its growth momentum. In PCSDP terms, West Bengal had moved below the all-India average income, Kerala and Tamil Nadu had moved above it, while Andhra Pradesh and Karnataka hovered at around the all-India figure. Thus, the Indian growth scenario in the beginning of the 21st century is one of remarkable dynamism in the southern and western parts of the country and around Delhi and Haryana, and relatively lower growth in the rest of the country. An indication that the south and the west have been driving the Indian growth may also be seen in the distribution of special economic zones (SEZ). Of the 574 formally approved SEZs, 358 (over 60 per cent) are located in south India (including Goa and Pondicherry), 158 (over 25 per cent) in Gujarat and Maharashtra and 56 (about 10 per cent) in Delhi–Haryana–Punjab. Of the 353 notified SEZs, 178 (50 per cent) are in south India, 88 (25 per cent) in Gujarat and Maharashtra and 34 (10 per cent) in Delhi– Haryana–Punjab. The SEZs currently account for about 30 per cent of Indian exports, and are the hubs of information technology, information technology enabled services (IT/ITeS) and biotech industries. The large movement of private investment into the south and the west explains the higher growth of PCSDP in these regions. There are also signs of more equitable growth within the states in southern and western India. The available estimates of district incomes for the mid-2000s suggest that in Punjab, Haryana, Himachal Pradesh and Kerala, 59 of the 62 districts reported per capita district incomes above the national average. In Andhra Pradesh,

6 a D. Narayana and Raman Mahadevan

Karnataka, Maharashtra and Tamil Nadu, 52 of the 114 districts reported similar incomes. However, in the rest of the country, only 36 of the 355 districts reported incomes above the national average. In all, 75 per cent of the districts reporting incomes above the national average are located in south India and Maharashtra and in the Punjab, Haryana and Himachal Pradesh belt. Further, in the high-income states of Punjab, Andhra Pradesh, Kerala and Tamil Nadu, the inter-district variation in income is also low; the ratio of highest to lowest district income is well below 3 in these states, whereas it is above 4 in Bihar and Uttar Pradesh. The presence of large variations in growth across the regions and relatively equitable growth within the high-income states is confirmed further by the data on commercial bank deposits and advances. When the 620 banking districts of the country are sorted by the size of deposits and loans advanced, and the top 10 per cent of these districts (62 in number) is examined, it is found that they accounted for 81 per cent of all deposits and 93 per cent of all bank credit (as of 2008). These districts accounted for just 22 per cent of the population of the country. Of these 62 districts, 22 districts are entirely urban—large metropolitan cities—spread all over India, and 16 districts had rural populations of 40–60 per cent, but with a city of at least one million located within them. That there is a large concentration of bank deposits and credit in urban India is all too evident. While the top 22 districts are spread all over India, the next 16 districts are located largely in the central, western and northern parts of the country, with one exception in the east. The remaining 24 districts are largely rural—over 60 per cent—and are located entirely in south India. If we include the large cities from the 22 top districts, then 28 of the 62 top districts, or 45 per cent, are to be found in south India, which accounts for just 22 per cent of India’s population. In addition to the urban–rural divide, the concentration has a definite regional dimension as well. The south is zooming ahead at a rapid pace. Going one step further and taking a view from the bottom, it may be seen that no south Indian district is to be found in the bottom 40 per cent of the 620 districts. In the middle 20 per cent of the districts (124 in number), only seven south Indian districts may be found (three from Tamil Nadu and four from Karnataka); the rest of the south Indian districts are all in the top 40 per cent. Thus, the concentration of economic power

Introduction a 7

in urban areas and in south India is too striking a characteristic to be missed in the Indian growth story of recent years.

Decline of Agriculture Along with overall gross domestic product (GDP) growth, Indian agriculture too witnessed a healthy growth in the 1980s. Agricultural GDP grew at an annual compound growth rate of 3.29 per cent from 1980–81 to 1990–91, and at a rate of 3.69 per cent from 1990–91 to 1996–97. But growth decelerated sharply to 1.65 per cent in the next decade (1996–97 to 2004–05) despite the prevailing low productivity of agriculture in India. Further, the decline covered all sub-sectors of agriculture, and the growth rate was lower than the growth rates of the rural population and the workforce employed in agriculture. Such a fall in the growth rate meant that agricultural incomes were in fact declining in per capita terms (Chand, Raju and Pandey, 2009). From 1984–85 to 1995–96, most Indian states reported a trend growth rate in agricultural net state domestic product (NSDP; at 1993–94 prices) of over 3 per cent per annum; the exceptions were Orissa, Bihar, Assam, Himachal Pradesh and Jammu and Kashmir. Maharashtra, Gujarat, Tamil Nadu and Haryana recorded annual growth rates of 4.5 per cent or above. The next decade showed a drastic reduction in agricultural growth in almost all states except Bihar, Himachal Pradesh and Jammu and Kashmir. The decline was especially drastic in those states that had recorded high growth during the previous decade. It needs to be noted that the fortunes of agriculture took a beating in the same states where liberalization-driven private investment had boosted industry, trade and services. While in industry and services these states could carve a path for themselves, in agriculture they too followed the general pattern of decline. What is the force that made for such a uniform push down the slope in agriculture?

Poverty Reduction Over 50 per cent of the Indian population was below the poverty line (BPL) in the early 1970s. The only states reporting lower poverty ratios were Punjab and Haryana (21.5 per cent), Assam (48.2 per cent), Gujarat (43.9 per cent) and Rajasthan (47.5 per cent).

8 a D. Narayana and Raman Mahadevan

The period of low growth till the mid-1980s witnessed a low reduction of poverty in India. Assam, Bihar, Haryana, Orissa, Uttar Pradesh and West Bengal saw hardly any reduction in poverty during this period. Punjab reported a rapid decline in poverty of over 40 per cent. Tamil Nadu and Maharashtra brought poverty down by about 15 per cent. But the other states in south and west India reported reductions of over 30 per cent (Ghosh, 2008). Consequent to such diverse rates of reduction in poverty across the states, by the early 1980s differentials in poverty ratios by region became discernible. While Punjab and Haryana had poverty ratios of below 20 per cent and the southern states (except Tamil Nadu) and Gujarat had ratios of below 40 per cent, the rest of the major states reported poverty ratios of between 43 per cent and 68 per cent. Regional concentration of poverty had begun taking shape in India. The period of high growth since the mid-1980s further deepened these differences in poverty ratios across states. Between 1983 and 2004–05, poverty ratios declined by less than 30 per cent in the low-growth states, such as Bihar, Madhya Pradesh, Orissa and Uttar Pradesh. Rajasthan and Assam did slightly better, but the performance of West Bengal was the best as the reduction was of the order of 60 per cent. The high-growth and relatively high per capita income states such as Haryana, Maharashtra and Punjab reported declines in poverty ratios of 25 to 35 per cent during this period. Gujarat did slightly better, recording a decline of 37 per cent. But all the southern states recorded massive declines in poverty, of the order of 60 per cent, the exception being Karnataka, which showed a reduction of only 45 per cent. Overall, low economic growth and low poverty reduction are related; high economic growth and large poverty reduction are also related. But there are exceptions, such as West Bengal, which achieved large poverty reduction at moderate rates of economic growth, and Maharashtra and Gujarat, which recorded low poverty reduction at higher rates of economic growth. Obviously, there is more to poverty reduction than economic growth. Overall, whether in terms of economic growth or poverty reduction, the different states do not behave alike. In effect, one could call this a ‘two-India’ phenomenon, one that has been a persistent theme of research in recent years. Subramanian (2008) views the growing disparity in economic performance between peninsular

Introduction a 9

and the rest of India as a disturbing trend over the last two decades. Banerjee and Iyer (2005) have a different interpretation: they compare two sets of districts that had two different systems of land tenure in the past, showing significant differences in yield levels and infant mortality rates. The better-performing districts are found to be located largely in peninsular India, Maharashtra and Gujarat. Jayaraj and Subramanian (2005) construct an index of generalized deprivation using six basic facilities—public transport, tap water, health care, electricity, metalled roads and clean fuel for cooking—and find that the population living in districts south of the Vindhyas is relatively better served with basic amenities than the populations living in the north. While only 6 per cent of the districts in the south are highly or very highly deprived, in the north the corresponding proportion is 72 per cent. However, some of the northern states—Punjab, Haryana and Gujarat—are better served with basic amenities. The picture of India that emerges from this discussion of poverty, banking and agricultural decline is one of a collage of myriad development patterns. What explains the diverse growth and poverty reduction trends in India?

History and Institutions Since the late 1990s, economists have shown renewed interest in questions of whether and how the historical pattern of institutional development affects economic performance. This has been studied through analyzing property rights institutions (Acemoglu, Johnson and Robinson, 2001), distribution of historical property rights (Banerjee and Iyer, 2005; Engerman and Sokoloff, 2005), the colonial legal system (Berkowitz and Clay, 2004; La Porta et al., 1998a, 1998b) and colonial investments in health and education (Huillery, 2009). By the same logic, institutions that have come into existence during the last 60 years should also be making a difference to development outcomes. In the Indian context, the studies of Iyer (2008) and Banerjee and Iyer (2005) are instructive. Iyer compares the long-term outcomes of areas under direct British colonial rule with those that were under indirect rule (the native states). The latter enjoyed autonomy in internal administration before 1947. The foreign office in 1910 recognized about 680 native states. While varying considerably in size, legal powers, systems of administration and revenue collection, there was hardly any difference between the native states

10 a D. Narayana and Raman Mahadevan

and British India as regards land tenure systems; the former had 63 per cent of all districts under cultivator-based systems compared to 62 per cent for British India. However, the development indices for the year 1991 of the areas that fell within the erstwhile native states reveal that they had a higher proportion of workforce in manufacturing, a higher number of schools and educational institutions in per capita terms, lower infant mortality rates and lower poverty ratios. Post-colonial institutions did not contribute to these differences; they may have, in fact, mitigated them, suggesting the persistence of the effects of some historical institutions. What these are and what their effects have been are issues not discussed in any great detail. The land revenue system introduced by the British over 150 years ago, though now defunct, still casts its long shadow over the countryside. Banerjee and Iyer (2005) show that the districts under the erstwhile zamindari system underperformed systematically, as compared to the districts that were under the non-zamindari system. Average yields of wheat were 23 per cent higher and infant mortality was 40 per cent lower in non-zamindari districts. The gap between districts that had been under these two systems widened after 1965. Poverty reduction between 1972 and 1987 was 7 percentage points higher in non-landlord districts. Interestingly, among the major Indian states, Andhra Pradesh, Karnataka, Tamil Nadu, Maharashtra and Gujarat had non-landlord systems of land tenure in over two thirds of their total number of districts. In most areas of Madras and Bombay presidencies, the raiyatwari system was adopted, where the individual cultivator had the legal title and the land revenue was a share of output. Punjab and Haryana too fell in this category as they had a village-based system of tenure (mahalwari). Banerjee and Iyer (2005) admit that they are unable to establish the channels through which the historical land revenue system continues to have a bearing on the present agrarian situation. They hint at some possibilities: landlord districts had developed an elite class divorced from cultivation in contrast to the non-landlord districts. A more unequal distribution of land was evident in landlord districts. States with a higher proportion of landlord districts had lower public development expenditures during 1950–80, leading to gaps in health, education and agricultural technology. The authors are inclined to attribute this hiatus to the political environment.

Introduction a 11

Iyer (2008) and Banerjee and Iyer (2005) point to some correlations between historical institutions and current performance indicators, and hint at a few of the links. The channels that carry these effects need to be explored in greater detail, which requires a longer view. The need for detailed historical analysis of land rights, land reform legislation, land markets and inequality in landholdings is only too evident. This volume of essays is a contribution to the growing interest in the historical and regional dimensions of economic growth. India, given its sheer size and heterogeneity, turns out to be an interesting case because of the differential impact of the overarching effects of 200 years of colonialism across the states. The British Raj laid the basis for a modern (colonial) economy through various institutions, some of which—the judiciary, civil service, banking and currency, and infrastructure—imparted uniformity and favoured integration, but some others seem to have acted almost obversely. This is reflected best in the outcome of economic processes in regions under the system of differing land tenures, namely, raiyatwari in some regions and zamindari elsewhere. Further, even in the postindependence period, both centralization (and central control) and decentralization seem to have operated in conjunction. An example of the former is the agricultural research system, and of the latter, the industrial policy. These too have varied over the last 60 years. This volume presents a few of these institutions and some foundational trends that we believe could explain the observed pattern of economic growth, agricultural decline and poverty across the Indian states. One of the fundamental institutions appearing in almost all the recent debates on institutions and development is land rights. The volume begins with an essay on the evolution of land rights in India (Chapter 1). It describes the land tenure systems in existence before the coming of British, what was introduced by the British administration, which classes or castes were dispossessed of their rights, and what the long-term impact has been. Any discussion of land rights is incomplete without an elaboration of the inequality in landholdings. Chapter 2 examines what has happened to inequality across the Indian states in area owned and operated, and the extent of land redistributed on account of land reforms legislation. The Indian story of landholding and inequality cannot ignore the caste composition of landowners and

12 a D. Narayana and Raman Mahadevan

dispossession through the operation of the land market (Chapter 3). Although dealing largely with the case of Tamil Nadu, this discussion is illustrative of trends elsewhere in India as well. Such a shift in landholding from upper castes to middle and lower castes has implications for agricultural institutions. Part of the crisis of Indian agriculture is owing to the dismantling of old institutions entrusted with the task of maintenance of water infrastructure, water control and common pool resources, and the lack of emergence of new institutions in their place. The small size of holdings and the lack of employment and earning opportunities meant eking out subsistence from the limited land by applying more labour, or labour intensification (Chapter 4). If more land were available, then the ‘adjustment’ of labour intensification would be muted, generating a pattern of inverse relationship between the land–person ratio and labour intensification across the districts of India. Ideally, the celebrated green revolution technology, or agricultural system, should have come to the rescue of the poor peasant in marginalized areas. But the centralization of the agricultural research system over the last 40 years has sapped its strength to respond to the needs of the diversified agricultural environment of India (Chapter 5). The essays in Part I go a long way towards explaining the current Indian reality with regard to landholding, inequality in land distribution, the transition of landownership from the upper castes to the middle and lower castes, the intensification of labour and the agricultural research system. They throw light on the current agricultural decline and the poverty trends across the Indian states. Simultaneously, they provide a glimpse of the rural market in India and the constraints on its expansion. It is no coincidence that the greater part of southern and western India that came under the raiyatwari tenure during the colonial period comprise precisely the regions that have experienced relatively better growth in the post-independence period, and where a larger proportion of the population has benefited from land reforms. The better performance of poverty reduction programmes in these regions may not be unrelated to larger processes hinging on the nature of landownership. These were also the regions where agricultural growth and agrarian surpluses were channelized into non-farm enterprises, thus spawning a unique pattern of entrepreneurial development and modern industrialization. It has been

Introduction a 13

argued that the relatively weaker control of merchant capital over product markets in some of these regions, in conjunction with an agrarian structure that allowed relatively greater surplus generation and productive investment in agriculture, may well have influenced a certain trajectory of capital accumulation that was somewhat more broad-based and heterogeneous. Some parts of southern India and western India do clearly provide evidence of this trend even as early as the 1930s, a trend which only gained in strength in the post-independence period (Chapter 6). Though the process of growth of the Indian entrepreneurial class under colonial conditions was in many respects quite complex and exceptional, as described earlier, yet colonial India, like all other colonial regions, also witnessed fairly significant inflows of foreign capital in the sphere of trade, manufacturing and plantation agriculture. However, compared to many other colonial regions where plantation agriculture was the principal and dominant form of production organization, and one which was effectively controlled by foreign capital, plantation agriculture in India, though it remained an enclave and limited spatially to select areas, displayed features that were unique and varied. Thus, even within plantation agriculture in India, one notices significant inter-regional variations. As compared to the mono-crop focus of plantations in north-east India (principally tea), those in south India dealt with a much wider variety of crops and products (pepper, cardamom, rubber, tea and coffee). In contrast to the north-east, there was greater participation and involvement by the local peasantry and sections of agro-commercial capital in the production of these crops in southern India, and hence exposure to the volatility of the international market. Equally interestingly, it has been observed that, coinciding over time with the changing profile and nature of the global market structure, there were significant changes and mutations in the nature and forms of foreign capital. Thus, while the pioneering European coastal trading firms gave way to the large British managing agencies and subsequently to large trans-national trading firms, there were also significant changes in the market structure, in the form of the buyer-driven commodity chain making way for a producer-driven chain, which has in turn given way to a buyer-driven value chain controlled by multicommodity mega-conglomerates. The recent structural changes in the production and marketing sector reflected in the ascendancy

14 a D. Narayana and Raman Mahadevan

of smallholder systems and commodity futures has had the effect of weakening producer control over the commodity chains, thus rendering the region even more vulnerable (Chapter 7). The development of the credit market was integral to the process of colonial commercialization. While India had a long tradition of indigenous banking, and one which survived, adapted and flourished under colonial rule, modern banking as we know it today took root following the establishment of British rule. It was geared essentially to financing import–export trade, and its spatial sphere of activity was limited to port towns as reflected in the establishment of the presidency banks. The amalgamation of the latter in 1921 into the Imperial Bank of India was a reflection of the need felt by the colonial state for rationalizing the organized credit structure such that it could extend its reach to the hinterland in order to subserve the state’s vital commercial interests more efficiently. The branch expansion programme that followed was symptomatic of this trend. Likewise, the developments in postindependence India, namely, the takeover of the Imperial Bank in 1955 and its reincarnation as the State Bank of India and the nationalization of banks in 1969, were essentially efforts at rationalization with a view to expanding credit outreach to rural India as a catalyst for growth. Interestingly, however, what is discernible almost as a pattern underneath these largely state-sponsored initiatives, in both the colonial and the post-colonial periods, is a distinctly southern phenomenon. This is reflected best in the mushrooming and survival of small banks during the 1930s and 1940s, as well as in the exceptional performance of the southern banks in the post-1991 reform period. Though far removed in time from each other, these developments are suggestive of the importance of factoring in certain region-specific conditions favouring buoyancy and institutional innovation (Chapter 8). At the time of independence, Indian manufacturing accounted for only a small share (17 per cent) of the national income, largely in the unorganized sector, confined to the traditional industries. The period of dirigisme boosted national savings, investment and growth under all-round protection. The narrow domestic market and the deceleration in the growth of public expenditure after the mid1960s affected manufacturing growth adversely, a trend that could be turned around only in the 1980s. Fiscal stimulus and import liberalization following the favourable international environment

Introduction a 15

saw manufacturing growth pick up. The fiscal stimulus financed by the rising deficits created the conditions for the crisis and the economic reforms of the 1990s. There are signs that the post-reform growth is being led by private consumption demand and export growth. Confirmation of this would have to wait for India to come out of the global crisis and the fiscal stimulus (Chapter 9). The analysis of economic growth, or the discussion of inequality in landholdings and the trends in holding size or intensification of labour, takes population as the numeraire. Hence, a discussion of population trends becomes pertinent. Demographic transition is both affected by and affects economic growth and poverty. Unlike the analysis of institutions, discussion of fertility and mortality trends is seriously hampered by data limitations, as the population census began in India only in 1871. Thus, demographic analysis has a much shorter history in view. The discussion in Chapter 10 of fertility change is confined largely to the post-independence period. Birth control strategies hardly ever met their goals, and fertility decline came to have a distinct regional pattern, with the rapidly growing states of the south achieving replacement level of fertility by 2005, and some of the other states rapidly approaching that goal. But the poorer states have a long way to go. Mortality trends, too, seem no different, as described in Chapter 11. Certain common trends are observable across all the states, such as fall in mortality rates, narrowing gap between mortality by sex and fall in infant and child mortality. But there are also striking differences: mortality decline has been much faster in the south, a fact largely accounted for by infant and child mortality reduction. These regional patterns further confirm the relation between poverty and economic growth mentioned earlier. The story of international migration (Chapter 12) over the long stretch brings out a few other dimensions. During colonial rule, indentured labour and the kangani system saw labour being moved from India to meet the needs of colonial expansion elsewhere in the world, for instance in Mauritius, Fiji, Natal and the West Indies. Free migration of largely skilled labour to the United States of America, Canada, the United Kingdom and Australia was not very large for a long time after independence, but recent years have seen some large migration. The opening up of the Middle East following the oil price spike of the mid-1970s saw large numbers of unskilled labour leaving the country. Again, a distinct regional

16 a D. Narayana and Raman Mahadevan

pattern has been observable, in that initially the bulk of the migration was from Kerala while recent decades have seen large numbers moving from Tamil Nadu and Andhra Pradesh. Interestingly, economic growth, poverty reduction, fertility and mortality reduction, and international migration all seem to go together. A volume seeking to find explanations for current trends in the persistent influence of institutions introduced in the past cannot end without reference to historiography. The focus of Chapter 13 is on critically analyzing the development of the discipline of the economic history of modern India over the last four decades. It not only subjects to critical scrutiny the dominant theoretical paradigms with respect to their epistemological lineages, analytical concerns and methodologies, but sheds interesting light on the possible, meaningful directions of future research. Above all, it helps in locating the essays in this volume within the larger context of emerging methodological and conceptual trends, and is a useful pointer to the way forward in economic history. The central grid, or the overarching thematic framework, of this volume is geared to capturing the long-term dynamics of growth and development across sectors over a period spanning over 60 to 70 years, i.e., from the late colonial period to the present. There has been a conscious effort in most cases to capture the influence of colonial economic structures and processes in shaping the trajectory of growth and development in the post-independence period. However, many essays also go beyond this to capture the discontinuities. A notable and distinctive feature of this volume is its sensitivity to the regional dimension of growth and development. In short, it is also an exercise in breaking free from the exclusively macro-centric accounts of the Indian economy. In contrast to some recent studies, which tend to depoliticize economic change and see no major structural break between the colonial and the post-colonial, the present volume underscores the importance of structural breaks in influencing the direction of the development process. This volume may be a benchmark study in the nascent area of contemporary economic history.

References Acemoglu, D., S. Johnson and James A. Robinson. 2001. ‘ The Colonial Origin of Comparative Development: An Empirical Investigation’, American Economic Review, 91(5), pp. 1369–1401.

Introduction a 17 Banerjee, A., and L. Iyer. 2005. ‘History, Institution and Economic Performance: The Legacy of Colonial Land Tenure Systems in India’, American Economic Review, 95(4), pp. 1190–1213. Berkowitz, D., and K. Clay. 2004. ‘American Civil Law Origins: Implications for State Constitutions’, American Law and Economic Review, 7(1), pp. 62–84. Bharadwaj, Krishna. 1998. ‘Regional Differentiation in India’, in T. V. Satyamurthy (ed.), Industry and Agriculture in India since Independence, New Delhi: Oxford University Press, pp. 189–218. Chand, R., S. S. Raju and L. M. Pandey. 2009. ‘Growth Crisis in Agriculture: Severity and Options at National and State Level’, in Uma Kapila (ed.), Indian Economy since Independence, New Delhi: Academic Foundation, 19th edn, pp. 283–300. Engerman, Stanley L., and Kenneth L. Sokoloff. 2005. ‘Colonialism, Inequality and the Long-Run Paths to Development’, Working Paper Series w11057, Cambridge, MA: National Bureau of Economic Research (NBER). Ghosh, M. 2008. Economic Reforms and Indian Economic Development, New Delhi: Bookwell. Huillery, Elise. 2009. ‘History Matters: The Long Term Impact of Colonial Public Investment in French West Africa’, American Economic Journal: Applied Economics, 1(2), pp. 176–215. Iyer, L. 2008. ‘Direct versus Indirect Colonial Rule in India: Long-Term Consequences’, Working Paper 05-041, Boston, MA: Harvard Business School. Jayaraj, D., and S. Subramanian. 2005. ‘Out of School and (Probably) in Work: Child Labour and Capability Deprivation in India’, Research Paper No. 2005/55, Helsinki: United Nations University, World Institute for Development Research (UNU-WIDER). La Porta, R., Florencio Lopez de Silanes, Andrei Shleifer and Robert Vishny. 1998a. ‘Law and Finance’, Journal of Political Economy, 106(6), pp. 1113–55. ———. 1998b. ‘The Quality of Government’, Journal of Law, Economics and Organization, 15(1), pp. 222–79. Reserve Bank of India, Database on Indian Economy. RBI’s Data Ware House, Annual Series, National Income, Table 9. InfoViewApp/listing/ Accessed on 6 March 2011. Subramanian, A. 2008. India’s Turn: Understanding the Economic Transformation, New Delhi: Oxford University Press. Tomlinson, B. R. 1993. The Economy of Modern India 1860–1970, New Delhi: Foundation Books.

Evolution of Land Rights in India a 19

PART I Land and Agriculture a The institution of property rights, especially rights over land, appears as an important analytical category in numerous discussions of growth and development. But a systematic account of the evolution of land rights in the specific context of India is hardly to be found in the literature. ‘Evolution of Land Rights in India’ by S. Neelakantan fills this important gap. Through most of Indian history, landownership was very unequal, as the upper castes owned the land and the lower castes tilled it for them. The British introduced different systems of land tenure in different parts of India: the raiyatwari system in Madras, Bombay and Berar; the permanent settlement system in parts of Bengal, Bihar, Orissa, Benares and Madras; and the mahalwari system in most of the United Provinces, Central Provinces, Punjab and parts of Agra and Oudh. They also extinguished the traditional land rights of the adivasis, and customary use was deemed a ‘privilege’ and not a ‘right’. Following direct administration in 1858, the British transplanted their principles of jurisprudence into India, which brought transparent and codified legal procedures into the subcontinent. But it also gave pervasive powers to the revenue department over landowners and tenants. The Indian constitution declared the right to property a fundamental right, and the framers of the constitution conferred land rights and land reforms as state subjects. State legislatures passed legislation abolishing intermediary tenures, and raiyatwari became the uniform tenure of independent India. Land reform legislations were also passed by all states, but the operative clauses were difficult to enforce, escalating the transaction costs. Effective land reforms eluded large parts of India as a result of conflicting interests under the democratic process. The caste dimension too played a part: most landlords belonged to non–Scheduled Castes,

20 a Shaping S. Neelakantan India

while the Scheduled Castes were the most significant segment tilling the land. Successful implementation of land reforms would have resulted in land passing into the hands of Scheduled Castes; want of political will prevented this from taking place. Extinguishing the rights of the adivasis and taking over forests as government land meant displacing them from their traditional homes. The government acquired tribal land for the construction of dams, the establishment of industries, extraction of minerals, wildlife protection and so on. It is only in recent years that some attempts have been made to restore their traditional rights to the adivasis, either through the Panchayats (Extension to Scheduled Areas) Act of 1996, or through the Forest Dwellers Restoration of Rights Act of 2006. But the distance between legislation and implementation remains large. The discussion of the evolution of land rights gestures towards the issue of unequal distribution of land in India. This theme of land distribution is taken up for detailed analysis by K. N. Nair and Arindam Banerjee in ‘Structural Changes in Land Distribution and Their Implications for Improving Access to Land’. Concentration of land as measured by the Gini coefficient is high in the Indian states and has increased over the years. Part of the reason for the high concentration is historical—the conferring of land rights on intermediaries by the British—and ecological—the poor moisture regime inhibiting the breaking of land without draught power. The counter-argument has been that concentration did not increase, as population pressure and land subdivision have worked against it. The number of rural households more than doubled between 1960 and 2000, and the average size of ownership holding fell by more than half. The proportion of small and marginal holdings has increased and the share of area owned by the bottom 60 per cent of households has come down. This pattern may be seen in almost all the states, except Kerala. Land reforms have played a role in the changes in land distribution. However, there are significant inter-state differences in the effectiveness of land reforms. While tenancy reforms have been impressive in West Bengal, Gujarat, Maharashtra, Kerala and Karnataka, implementation of ceiling laws has been effective in Andhra Pradesh, Maharashtra and West Bengal. The impact of land reforms in reducing poverty and improving the socio-economic status of the beneficiary households is well documented.

Evolution ofLand Landand Rights Agriculture in India a 21

As land reforms have had limited impact on land redistribution, it is important to focus on the broader socio-economic and political forces that have shaped agrarian relations in India. This is taken up in the chapter by A. Vaidyanathan, ‘Changing Agrarian Structure in India: Reflections on Pre-independence Ideology and Post-independence Reality’. Early settlement reports reveal that landownership was concentrated among the upper and middle castes; the lower castes were either tenants or labourers. This pattern began to change from the early 20th century. As out-migration by the upper castes increased, opportunities were opened for the middle and lower castes to acquire land. These trends are observable in Andhra Pradesh, Tamil Nadu and Kerala. The wider diffusion of landownership among different social groups, and the advent of electoral politics and its extension to local governance, have given greater voice to the underprivileged segments of society. The uneven incidence of benefits of new agricultural technology and the persistent gap between people’s rising expectations and actual improvements have led to caste-centric social tensions. A resolution of these tensions is essential for improving the efficiency and accountability of rural development initiatives. Population pressure on land is associated with falling land–person ratios. At the macro-level, it shows up as the growing number of small farmers, and at the micro-level, that is, at the level of the household, one of the responses has been labour intensification. A synthesis of the Indian experience based on such an understanding is provided in the chapter by N. Krishnaji, ‘Population Pressure and Labour Intensification: An Indian Historical Perspective’. The Indian population has been increasing at 2 per cent per annum since independence, but the net sown area has increased by only 0.2 per cent per annum, leading to considerable falls in holding size. A majority of peasant households cultivating holdings of a size that cannot fully support their families cling to their land by a ‘tightening of the belt’, as well as by supplementing their incomes through wage work. One may also observe an inverse correlation between land–person ratios and land productivity by virtue of the higher use of labour and other means of improving productivity. During the late colonial period as well, some regions experienced pressure on land with substantial declines in land–person ratios. The ‘adjustment’ to such pressure has been labour intensification.

22 a Shaping S. Neelakantan India

The Indian green revolution has been credited as an example of the contributions of science and technology to agriculture. The science and technology establishment, guided by the state over a long period, has come under scrutiny in recent years for its failure to benefit rural populations and the environment. The contribution by Rajeswari S. Raina, ‘Institutional Strangleholds: Agricultural Science and the State in India’, explores the gamut of issues surrounding the agricultural research system in India. State-sponsored agricultural research existed in India much before it emerged in Europe. Several organizational formats and types of interactions continued till the mid-1960s. The initial centralization came about with commodity committees, but a decisive turn was taken in 1966 with the direct responsibility to coordinate and conduct research conferred on the Indian Council of Agricultural Research. With the bulk of funding flowing from the central government, scientific and bureaucratic authority was consolidated. Along with numerous other public sector organizational components, price support and input subsidies, agricultural science became the key to addressing food security. Large farmer lobbies became the economic actors at the centre of this schema. Agricultural science increasingly became centralized, serving as a handmaiden of food security, in the process losing whatever space existed for objective research, as well as losing relevance to the rural agrarian problems of small farmers and highly diversified agriculture.

Evolution of Land Rights in India a 23

Chapter 1 Evolution of Land Rights in India S. Neelakantan Through most of Indian history, upper castes have controlled the land, while the lower castes have tilled it for them. In spite of a surfeit of land reform legislation after independence, inequality in landownership at the national level has not been dented. This is a clear indication of the failure of these legislations. China and Japan also had very unequal distribution of land, but tenancy was widespread in these countries. Land reform legislations there could redistribute ownership successfully to tenants. In contrast, tenancy in India was much less widespread. Cultivation based on bonded or wage labour, dictated by the caste system, has been the norm. In post-independence India, the composition of absentee owners, owner-cultivators, tenants and wage labourers has resulted in a very complex caste–class configuration. The formulation of land reform laws and their implementation became blunted by the free play of conflicting interests that the democratic process allows. Similarly, the centuries-old customary land rights of forest dwellers had been abrogated arbitrarily during British rule. After independence, the democratic process could not restore these right fairly or fully. A major part of this complex situation may be unravelled only by tracing the evolution of land rights in India, the focus of the present article. Land Rights in India before the British Manu’s Hindu code gave ownership rights to the first person who cleared the land for cultivation. The interpreters of Manu’s code prescribed different modes of acquisition for the different varnas (Pal, 1958; Sen, 1918). Succession, gifts of affection and marriage presents were common modes of acquisition for all castes. Special modes of acquisition for Brahmins recognized by the law were the acceptance of free gifts, performance of priestly duties and receipts from disciples; for Kshatriyas, revenue, gains of war and penalties

24 a S. Neelakantan

imposed by law; for the Vaisyas, agriculture, herdsmanship and commerce; and for the Sudras, service to the aforesaid three castes. In the pre-Gupta period, agriculture was a mode of acquisition permitted to the Vaisya varna only. After the 5th century A.D., custom overrode the shastric law and all the four varnas were granted the right to ownership of land. However, only persons belonging to the Sudra varna and avarnas (untouchables) would actually cultivate the land. The other three superior varnas considered it beneath their dignity to soil their hands with manual labour in cultivating land. The avarnas or untouchables had no prescribed mode of acquisition recognized by the law. This vindicates an observation attributed to Veblen: ‘Under serfdom and slavery those who work cannot own and those who own cannot work.’ As a result, a sizeable portion of the actual cultivators of land had no ownership rights. The Hindu law extended rights of inheritance to ancestral property to only the male members of a Hindu coparcenary. The Hindu coparcenary is a unique system of joint property in which the father is restricted by his sons, the brother by his brothers and the women by their successors in the enjoyment of property. Individual property is the rule in the West; corporate property is the rule in the East (Maine, 1953). The Hindu law relaxed its rules in favour of persons whose kulachara (caste occupation) was commerce, and permitted the karta (head) to pledge joint family properties to raise funds; the creditor was presumed to have lent the sum for trade purposes. There existed different systems of succession, such as dayabhaga in Bengal and the adjoining areas, mayukha in Bombay, Konkan and Gujarat, marumakkattayam or nambudri in Kerala and mitakshara in other parts of India. Marumakkattayam laws were relatively the most favourable to women. Mohammedan law also discriminated against females in its rules of succession. In pre-British India, both Hindu and Mohammedan laws declared that the king was entitled to land revenue as recompense for providing protection and for administering justice. But they did not acknowledge the king to be the sole owner of all the lands in his kingdom. Mohammedan rulers adapted the earlier practice in India of permitting intermediaries to collect land revenue from specified regions by investing this responsibility in certain new elements, such as the mansabdars. The principal responsibility of mansabdars was to maintain troops and supply them as and when required

Evolution of Land Rights in India a 25

by the central Mughal authorities, but they were also vested with the right of collecting land revenue from specified regions. These intermediaries were subject to transfer from one region to another. So they attempted to extract the maximum revenue they could collect from the regions under their temporary control. With increasing uncertainty over who would succeed the current ruler, the rates of revenue collected began to increase, reaching about one half of the entire yield. Mohammedan rule did not effect any major changes in the rights of the actual owners of the land, though the persons assigned the right to collect revenue changed frequently. The Marathas, who built their power on the ruins of the Mughal empire, also tampered with the methods of revenue collection without substantially altering ownership rights.

Land Rights in India under the British By the Act of Settlement of 1781, the British preserved the personal laws of the ‘Hindus’ and ‘Mohammedans’ in matters of inheritance, succession and contracts (Setalwad, 1960). The enactment of the Caste Removal of Disabilities Act of 1850 enabled converts to other religions to get their share of their ancestral property governed by their personal laws before conversion. Further, the British introduced different systems of land tenure in different parts of India on a piecemeal basis with the sole aim of extracting the maximum land revenue, unmindful of the ancient rights of the cultivators. They unfairly distorted the land rights of peasants in India. The Regulation of 1793, introducing permanent settlement in India, notified that the zamindars and independent talukdars were the actual proprietors of land, thus elevating the intermediaries as owners and depriving the real owners of their rights (Field, 1885). The various land tenure systems in British India included: (a) the raiyatwari system, under which the owner paid land revenue directly to the state, in Madras, Bombay and Berar; (b) the raiyatwariin-principle system (though not officially thus named) in Assam, Coorg and Burma; (c) the permanent settlement system, under which the owner paid revenue to an intermediary with inheritable rights who transferred a fraction to the state, in parts of Bengal, Bihar and Orissa, Benares and Madras; (d) the temporary settlement system, under which the intermediary’s rights were not inheritable, in Oudh and parts of Bengal; and (e) the system popularly

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known as mahalwari (although not officially so designated) under which the village collective paid revenue to the state, prevalent in most parts of the United Provinces, Central Provinces, Punjab and parts of Agra and Oudh (Baden-Powell, 1974; Bharghava, 1936). In the 19th century, the British in India completed a scientific survey of land that enabled clear demarcation of boundaries and recording of ownership rights. The British recorded the rights of the (supervisory) owners in their revenue records, but left unrecorded the entitlements of the actual cultivators, sharecroppers, tenants and lessees. Recording the rights of those who belonged to the lowest castes and who had never enjoyed any property rights under Hindu law might have led to social unrest, since owners from the higher castes might have resisted such a move. So it was prudent for the foreign rulers to leave the rights of these groups unrecorded. The British took India under their direct administration in 1858. They then quickly transplanted their principles of jurisprudence into Indian criminal, civil and commercial law, including principles such as negotiability, limited liability, ratification of actions done in good faith and limitations of time for which a legal action can subsist. The Code of Civil Procedure (1859), the Limitation Act (1859), the Indian Penal Code (1860), the Code of Criminal Procedure (1861), the Stamp Act (1862), the Indian Registration Act (1866), the Indian Evidence Act (1872), the Contract Act (1872), the Negotiable Instruments Act (1881), the Indian Trusts Act (1882), the Transfer of Property Act (1882) and the Indian Companies Act (1882) were all modelled on English law. The Land Acquisition Act of 1894 gave legal expression to what the Americans called the ‘eminent domain’ doctrine, permitting the state to acquire lands. The transplantation of English laws into India, with the necessary modifications, brought with it both benefits and deficiencies. It brought a transparent, codified, uniform legal procedure applicable throughout the country, thus reducing the transaction costs of bringing about exchanges. Since the laws were enacted in the English language, a host of intermediaries between the common man and the administrators of law emerged to exploit the situation, in the form of vakils, advocates, barristers, solicitors and others. At the village level, the power of the state was exercised through the head of the village and the village accountant (maniagar and karnam in Tamil Nadu), investing these functionaries with both

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prestige and power. The power of the revenue department over the lives of landowners and tenants was pervasive. Rather than employing complicated civil procedures expressed in a foreign language, villagers preferred to complete many transactions such as leases by oral agreement. Many civil cases were settled through arbitration in village panchayats or caste councils. This stabilized the tendency for the Indian village to remain isolated. In the forests of India, which covered more than a third of its territory, land was owned collectively and cultivated jointly by adivasis till the middle of the 19th century. In 1807, the East India Company acquired royalty rights over teak. Teak was considered an excellent substitute for oak in ship building. The British plundered the forests for the construction of railways in India from the middle of the 19th century. In 1846, the East India Company’s sanctioning authority over teak was extended to all forests and forest produce. In 1810, Velu Thambi Dalawai was among the earliest to recognize the East India Company’s attempt to alter ancient land rights and to assert themselves as the absolute owners of waste lands in Travancore state. He rose in revolt against them. The rebellion was suppressed (Nair, 1977). In 1860, British sovereignty was extended to the total area of forest land (Patnaik, 2007). The Forest Act of 1878 extinguished the traditional land rights of the adivasis. The forest department assumed, incorrectly, that all land not actually under cultivation belonged to the state. It asserted that unless it had been expressly recorded in writing, customary use was deemed to be a ‘privilege’, not a ‘right’. Millions of hill dwellers in India lost their ancestral land rights in reserve forests (Guha, 2001). In the Deccan Debt Relief Act of 1879 and other similar acts, the British policy of upholding the freedom of contracts was, in agricultural India, modified so that the preBritish principles of keeping the cultivator in his land could be retained (Gledhill, 1964). During the First World War, forests faced fast depletion for manufacturing war equipment. A satyagraha was launched by the forest dwellers of Kumaon under the leadership of Govind Ballabh Pant. Nearly 60 per cent of the lands that had been declared as ‘forest’ under the colonial Indian Forest Act (IFA, 1927), and that were brought under the jurisdiction of the forest department, did lie essentially in the adivasi-dominated regions (187 districts) of

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the country. They constituted 22 per cent of the total land area in the country. However, the adivasis’ legal rights to these areas have never been recognized or recorded by the state. The British did not intend to entangle themselves in the task of altering the main body of Hindu law. However, they did intervene to change its provisions so as to safeguard their allies, especially in the bureaucracy. The Privy Council judgement in the ICS Officer’s Case, 1928 (ICS Officer’s Case, 1928), held that the gains of learning of a person must be treated as joint family property, if the education had been financed out of joint family funds. The government passed the Hindu Gains of Learning Act of 1930, which reversed that decision. The Hindu Law of Inheritance Act (1929) and the Hindu Women’s Right to Property Act (1937) were other British legislations conferring limited property rights on women. These were direct interventions in the personal laws of the Hindus and contrary to the provisions of the Act of Settlement of 1781. India did not have a written constitution till 1935. The British were fearful that the property of the British ruling class and its supporters might be expropriated after India gained independence. Sections 299 and 300 of the Government of India Act (GoI Act, 1936) were introduced expressly to protect property rights, including those of zamindars and other vested interests, by stipulating that a just equivalent should be paid whenever property was appropriated by the state.

The Caste Dimension of Land Reform on the Eve of Independence Independent India inherited a structure of landholding characterized by heavy concentration of cultivable areas in the hands of relatively large absentee landowners such as zamindars and talukdars, excessive fragmentation of small landholdings, an already growing class of landless agricultural workers, and the lack of any generalized system of documentation of tenancy and even of ownership in many areas. There were many landholdings that were too small to provide a livelihood for a family. Borrowing money against land resulted frequently in the loss of land to a local high-caste moneylender or large landowner. A few perceptive scholars, including Daniel Thorner (1973), have taken note of the deeply entrenched tradition of rural inequality,

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a tradition going back centuries if not millennia. Thorner states that, to a considerable extent, the belief that low castes were born to labour with their hands, and high castes to the fruits of others’ labour, was accepted by the former as well as the latter (1973, p. 212). In Thorner’s estimation, the separation between proprietorship and physical cultivation both drew sanction from and served to reinforce the caste structure of rural society. There was hope that after independence, there would be social and economic freedom along with political freedom. A conference of Congress and Kisan Sabha workers held in Allahabad in 1935 asserted that the ‘only fundamental method of improving village life’ was the ‘introduction of a system of peasant-proprietorship under which the tiller of the soil is himself the owner of it and pays revenue direct to the Government without the intervention of any Zamindar or Talukdar’ (quoted in Appu, 1996, p. 54; emphasis added). But the UP Zamindari Abolition Committee revealed the real grounds why the term ‘cultivators’ in Indian conditions should include those who had not been tilling the land personally: In many parts of the province considerations of social status and caste prejudice prohibit high caste men, Brahmins and Kshatriyas, from engaging in certain kinds of manual work, such as driving the plough which is considered fit only for the lower caste agriculturists or field labourers. All the same, since times immemorial they have been treated as ‘cultivators’. If the performance of manual operations were imposed as an essential condition, a large number of such men, whose livelihood at present depends on land, would be excluded from the definition of ‘cultivators’. (UP Zamindari Abolition Committee Report, 1948, vol. II, p. 364, quoted in ibid., p. 76)

This candid admission about the conditions in the United Provinces was, in fact, a true reflection of the prevailing position in other parts of India as well. The framers of the Indian constitution knew that real land reform in India would require the transfer of land from the highercaste and rich Sudra landlords to the actual tillers of the soil belonging to poor Sudra castes and the Scheduled Castes. In reality, the Scheduled Castes did not own any land until then. But the Sudras ranged from substantial landowners to landless labourers. A majority were small or marginal landholders. At the time of independence, most influential political leaders were unwilling to face

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directly the caste dimension of land reform that would transfer land rights from high-caste (supervisory) landowners to low-caste actual tillers.

The Framing of the Indian Constitution In early 1946, 28.5 per cent of the adult population of the provinces who possessed the required tax, property and educational qualifications elected the members of the Constituent Assembly of India by an indirect procedure (Austin, 1966). Most of the members elected were substantial property holders. The framers of the Indian constitution conferred land rights and land reform as state subjects. By a curious and entangled process, a modified version of Section 299 of the GoI Act of 1936, a section drafted by the British to protect their vested interests in India, was substituted for the original version of Draft Article 24 of the Constitution of India, and was passed as a fundamental right to property in independent India. In the final version, it became Article 31 of independent India’s constitution (Merrilat, 1970). This article declared that private property should not be taken for public use without just compensation. Article 19 (Draft Article 13) granted all citizens the freedom to ‘acquire, hold and dispose of property’ as a fundamental right.

Land Reforms Legislation and the Increase in Transaction Costs The multiplicity of land tenures made it impractical to apply uniform procedures for bringing about land reforms in independent India. The state legislatures passed land reform legislations abolishing intermediary tenures, a process that was commenced in the late 1940s and was completed by the late 1950s. The historical evolution of different kinds of land tenures prevalent in different parts of the country was terminated with the abolition of intermediaries, and raiyatwari became the uniform tenure of independent India. Other legislations for imposing ceilings on landholdings, the protection of tenancy and the consolidation of fragmented holdings followed quickly, and by 1980 almost all the states had completed this important phase of their land reform legislation.

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Land reforms in India started with a bang but ended in a whimper. After an in-depth study of land reforms in India, Appu concludes: Of the three programmes considered in this study, the laws for the abolition of intermediary interests were implemented fairly well. But in the case of tenancy reform and ceilings on holdings, the policies adopted were ambivalent and there were large gaps between policy and legislation and between legislation and implementation. . . . the implementation of the tenancy laws . . . led to the re-distribution of only about 6 per cent of the operated area. This is insignificant. (Appu, 1996, p. 191)

The nascent democracy had to resolve the conflicting interests of absentee landlords, owner-cultivators, tenants and landless labourers. The constitution had given private property rights the status of fundamental rights. Landed interests possessed the political power to influence legislative outcomes in their favour. But tenants and landless labourers were larger in number. A complex caste–class nexus emerged that allowed popular legislation to be passed that promised much but provided little to the actual tillers. Even in states acknowledged to have implemented major land reform programmes, the extent of land transferred to the landless, the land-poor and erstwhile tenants constituted a relatively minor proportion of total land. The free play of divergent and discordant interests ultimately dampened and stultified the proposed and anticipated benefits of most of those legislations. The state’s attempted measures to support the actual tiller through subsidized supply of inputs such as water, electricity or credit were often cornered by owner-proprietors, as the tillers did not have the records to prove their possession. In a property rights regime, exchange is the means by which prevailing property rights affect the allocation of resources. When the owner’s right is complete and legal, the transaction costs (cost of transfer of property rights from one person to another, such as costs of measurement, negotiations, information, contracting, policing and enforcement) involved in exchanging the asset will be low. Thus, the costs involved in an exchange of smuggled goods are likely to be more than the costs involved in a legal exchange. When the owner does not have full legal ownership, or when the legal title to ownership is subject to conditions, the transaction costs of exchange will go up. In India, the lack of a common civil code

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makes personal laws applicable to persons belonging to different religions and different genders. This increases the transaction costs, because the scrutiny of each title has to begin with a probe into the religion or gender to which the title holder is born. Land reform legislation imposed various conditions limiting ownership rights. Every new condition, such as the imposition of uniform raiyatwari land tenure, ceiling on the extent of landownership, or the limitation on the rights of the owner to evict a tenant, actually had to be enforced to become effective. The land reform legislations were enacted with the hidden intent of making the enforcement of the operative clauses very difficult. Political manipulators wanted the laws to sound radical, but desired that they should be ineffective in reality. The resulting legislations reflected this ambiguity. This led to the unintended consequence of an enormous escalation in transaction costs in land transfers in subsequent periods. Land reforms legislation had different effects in different regions of India depending on the relative strength of the composition of absentee owners, owner-cultivators, tenants and wage labourers in those regions and their relative political clout. The land reform laws were made futile by using different stratagems. While the land reform legislation was being deliberated, enough time and scope were given to the landlords to take evasive measures, and the acts were enacted deliberately in a vague manner, granting substantial loopholes for the owners to ‘escape’ their clauses. The procedures were made cumbersome and only knowledgeable officials could interpret them, thus preventing the benefits from accruing to potential claimants. Quite naturally, the vagueness of the clauses of the land reform acts had to be interpreted by the judiciary. Judicial verdicts on the same clauses differed from court to court, differences that had to be settled ultimately by decisions in the Supreme Court. Among the preconditions for making the law effective are the availability of accurate information regarding existing land rights, its accessibility to all affected parties and the creation of speedy and affordable procedures for settling claims and disputes. The fiasco of land reform laws provides the starkest illustration of ‘government failure’. The acts gave enormous discretion to government officials. An unholy alliance of politicians and bureaucrats employed this discretionary power to extract the maximum amount of corruption revenue. Thus, the distribution of lands found

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to be in excess of the ceiling (which in itself was meagre) was reported to have been done by conniving officials in favour of the supporters of the ruling parties, overlooking the claims of more deserving persons. Other things remaining the same, a transfer of ownership to a tenant or hired labourer results in higher bargaining power and rent capture by the cultivator. So it may be noticed that small, owner-cultivated farms relying on family labour exhibit higher productivity. The land market under normal circumstances will not occasion the transfer of land from owner to cultivator, as tenants will not be able to borrow enough to purchase land. Tenancy legislation in all states provided protection against eviction, and in some cases enabled the tenants to purchase the lands they were cultivating by instalment payments. In order to protect tenants from exorbitant rents (often up to 50 per cent of their produce), the states passed legislation to regulate rents. The maximum rate was fixed at levels not exceeding 20 to 25 per cent of the gross produce in most states except Andhra Pradesh, Haryana and Punjab. The frightened landlord class was given advance notice about the impending legislation, and the net result was the eviction of tenants before the acts could come into force. Appu laments this perverse effect: ‘The worst consequence of the reform was the large scale ejectment of tenants-at-will, under tenants and share croppers’ (Appu, 1996, p. 75). In a country full of fragmented holdings, it is difficult even for marginal farmers to personally cultivate all their holdings located in different, distant places. So those who leased out lands were not necessarily big landowners. In the period preceding tenancy legislation, marginal holders leased out their small fragments of land in distant places and leased in lands adjacent to their tiny plots. The tenancy protection legislation created the scare that even marginal holders would not be able to resume personal cultivation of their lands. The facts that an exemption limit had been set down for small farms, and that the acts also allowed for a minimum amount of land that could be resumed for personal cultivation, did not give the necessary assurance to these marginal holders. The cost of approaching the courts for resumption of personal cultivation was itself a big deterrent against continuing with their leasing practices. Oral tenancies had become the norm, and landlords were ready to leave their lands uncultivated rather than allow their tenancies to be recorded.

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Tenancy legislation triggered the replacement of simple lease agreements by complicated forms such as usufructuary mortgages. At the same time, recognition of the high transaction costs involved in litigation made it possible for farmers in some places, for example, in Thanjavur district, to arrive at institutional arrangements to avoid or reduce these costs. When a landlord desired to sell land that was under a tenant who had not had his tenancy rights secured by a registered deed but exercised them by keeping possession of the land, a lump-sum payment was often made to compensate him for his loss of tenancy rights. This worked out to be a cheaper alternative for both parties than going through the costly litigation route. It was also true that a landlord might organize and use muscle power to evict the tenant, if the landlord considered that to be the cheaper alternative! In any case, transaction costs had increased because the legislations were vague and the enforcement was ineffective. There was a lack of political will to enforce the land reform legislation. As pointed out earlier, most landlords belonged to the non–Scheduled Castes. The Scheduled Castes comprised the most significant segment of actual tillers of the soil. Successful implementation of land reform legislation would have resulted in the transfer of ownership from non–Scheduled Castes to Scheduled Castes. The composition of legislatures reflected the relatively low voting power of the Scheduled Castes. Even in cases where the claimants went to the courts to enforce their land rights, huge transaction cost were involved in litigation. Gathering information, collecting evidence and making decisions about the jurisdiction of the court where the case had to be filed were the initial costly steps. The costs of consultation and investigation, including the cost of engaging a lawyer, the cumbersome procedures involved in the filing of cases and the associated costs, and the costs of actual conduct of the case inclusive of the transport and hospitality expenses of litigants and witnesses, were all high. Even after a judgement was delivered, expenses had to be incurred to enforce the judgement. If organizing violence was a cheaper alternative either to defeat or to enforce the legislative intent, that alternative might be pursued. So landlords might organize armies to prevent enforcement of land reforms, and the landless could retaliate by organizing armies to redistribute the lands. Any organization in violation of the law increased transaction costs at

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all margins. Another alternative might be arbitration, which also had its own transaction costs. The social cost of most such attempts would be very much in excess of the private gains of transactors. Unenforced, partially enforced, or whitewashed land reform legislation could have perverse effects. Take, for example, the case of fixation of maximum ceilings on landholdings. The potential targets might have spent resources, even while the law was in a drafting stage, to lobby to dilute its provisions and to insert escape clauses. After the laws were enacted, they would have spent time, effort and resources to avoid the consequences by paper or real partitions of the property among legal heirs. They might have attempted to evade the law by transferring the surplus land in the name of benami (false substitute) holders without actually losing control over their land. However, benami transfers would in turn have their own costs in terms of resources. The landholder would have to select ‘trustworthy’ benami holders. He would have to consult a lawyer to prepare a deed that gave him a chance to evade the ceiling law while simultaneously constraining the future opportunistic behaviour of his benami. The benami deed had to be registered, which also entailed costs. After the ceiling law had been evaded by a benami transaction, the relative bargaining strength of the benami holder vis-à-vis the original landlord would increase. The landlord could not dismiss him from his service at will. The landlord could also not easily increase the share of produce claimed by him from ‘his’ land. With the passage of time, the constraints imposed to prevent any opportunistic behaviour on the part of the benami holder might turn out to be inadequate. To that extent, the power of the landlord would diminish. Ultimately, the benamis might confront the landlord and bargain for better terms for themselves. With increasing uncertainty, there would be no incentive for the landlord to make improvements in his land. The benamis, in turn, would have no such incentive, unless they themselves planned to acquire or capture ownership. In such circumstances, the ceiling laws might produce outcomes that neither the legislature nor the landowners ever intended. Land reform legislation has put the onus on sellers to prove that the lands they are selling are not shielded by the ambit of the land reform legislation. It has put enormous discretion in the hands of bureaucrats and politicians, who demand and get a cut

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for exercising that discretion. Even though much of the land reform legislation was passed between 1950 and 1980, the collection of corruption revenue continues till today. It may continue as long as land in a transaction can be interpreted as falling within the purview of any land reform legislation! The land status situation is thus made more complicated, and the situation varies widely from state to state. This, along with rent-seeking activities, has increased the cost of most agricultural land transfers. However, politicians and bureaucrats very cleverly divert attention away from these issues by blaming the courts for putting fetters on the implementation of land reforms. The interplay of personal laws of succession and inheritance with lax land reform laws, and the resulting mutations in transaction costs, has given rise to some of the most visible features of the Indian agrarian economy, such as unequal distribution of landownership, the predominance of small farms operated mostly by owner-cultivators, a high degree of subdivision and fragmentation of holdings, a relatively low land–man ratio, the limited role of tenancy and high dependence on wage labour for agricultural operations.

The Battle in the Courts about Property Rights The Constitution of India recognizes the right to property as a fundamental right under Articles 19(1)(f) and 31. So the courts have had the power of judicial review over cases relating to property rights. In Kameshwar Prasad v. Bihar—1951, the Patna High Court held the Bihar act abolishing zamindari interests invalid. That act gave high compensation for an acre captured from small zamindars and low compensation for an acre captured from large zamindars. The court held that this violated the ‘equality before law’ criterion of the constitution. This necessitated the passing of the First Amendment to the Indian constitution. Articles 31A and 31B within the Ninth Schedule were introduced with effect from 18 June 1951. The courts were barred from exercising their judicial review prerogative with reference to acts placed in the Ninth Schedule. Since then, 277 acts have been included in the Ninth Schedule of the constitution by 13 amendments.

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The clash between the judiciary and the legislature continued. Whenever the court struck down the expropriation legislation as unconstitutional, the state responded by amending the constitution. The Fourth and the Seventeenth were the earliest amendments. The drastic Twenty-fifth Amendment to the constitution followed in the wake of the court’s striking down the bank nationalization of 1969 on the ground of inadequate compensation. In Keshavananda Bharati v. State of Kerala (1973) 4 SCC 225, a full bench of 13 judges assessed the validity of the new amendment. Eleven judgements were delivered. The majority view upheld all the state amendments related to property rights. However, property right was held not to be a part of the ‘basic structure’ of the constitution, which was declared inviolable (cf. Singh, 2004). The tussle between the judiciary and the legislature over property rights culminated in the passage of Forty-fourth Amendment Act 1978, which removed property as a fundamental right and deleted Article 19(1)(f) and Article 31 from the Indian constitution. Article 300A, which states that ‘no person shall be deprived of his property save by authority of law’ (bearing a close resemblance to S.299[1] of GoI Act, 1936), was introduced as a statutory right. The unanimous Supreme Court judgement of 11 January 2007 reiterated the Keshavananda Bharati decision and undid what was done in 1951. In other words, it gave the Supreme Court the power to strike down any law, including land reform laws, on the ground that it violated the basic features of the constitution.

Tribal Land Rights in Independent India In 1998–99, the government and the forest departments owned 95.65 per cent of the recorded forest area of the country. Sixty per cent of forest lands lay essentially in the adivasi-dominated regions of India. The Constitution of India contains several articles devoted exclusively to the cause of the Scheduled Tribes. These include Articles 244, 244A, 275(1), 342, 338A and 339. The Fifth Schedule of the constitution provides for the administration and control of Scheduled Areas and Scheduled Tribes. Similarly, the Sixth Schedule also contains specific provisions for the administration of tribal areas in the states of Assam, Meghalaya, Tripura and Mizoram.

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The entire way of life of tribal communities is intertwined with nature. They live in harmony with it and preserve it by all possible means. This has resulted in less favourable social and physical infrastructure in the tribal areas. The failure of the state to endow and enforce tribal land rights provides another stark illustration of government failure. Despite the constitutional guarantees, the rights of tribals over their traditional landholdings in the forests have not been properly recorded. They are gradually getting extinguished in spite of much legislation in support of them. The government acquired tribal land for the construction of dams, the establishment of industries, extracting minerals and felling timber. It gave protection to wild animals, but failed to protect the rights of the tribals who inhabited these areas along with the wild animals. Much worse, the bureaucracy and the forest authorities employed their discretion in order to use every means to deny the legitimate rights of the tribals and to allow non-tribals to grab their lands (Drèze, 2005). The Wild Life Protection Act (WLPA, 1972) was passed for the formalization of national parks, wildlife sanctuaries, conservation reserves and community reserves. It accorded protection to habitat and wildlife within the premises of such protected areas. It provided for the development of the National Board for Wildlife and State Boards for Wildlife for the identification of future protected areas. But it left the rights of the original tribes that inhabited those areas in an ambiguous state. For the Fifth Schedule areas, the Government of India passed the Panchayats (Extension to the Scheduled Areas) Act (PESA Act, 1996) to enable tribal societies to assume the power to preserve their traditional rights over natural resources. The PESA act requires state governments to bring their existing laws into conformity with it. Most state governments are reluctant to make laws and rules that conform to the spirit of PESA. They have amended existing laws that do not confirm to PESA. There is no clarity or certainty about the laws applicable to tribal lands, and these are imperfectly enforced. The discretionary power of the bureaucracy and the politician is large. The net result has been a huge increase in transaction costs. Large-scale privatization of common property resources takes place through: (a) state appropriation of common lands for ‘public purposes’, mainly for the construction of dams and development projects, and for commercial and industrial use; (b) encroachments

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by big landholders and powerful vested interests at the village level; and (c) distribution to poor landless and agricultural labourers, most of which lands are subsequently purchased by the rich. The National Policy on Resettlement and Rehabilitation for Project Affected Families (2003) compensates only assets, not livelihoods. Compensation is given only to persons with undisputed legal titles. Loss of access to community assets like grazing lands and forests is not considered liable for compensation. Inadequate rehabilitation of the displaced tribals compounds their woes, making them asset-less, unemployed and trapped in debt bondage. The constitutional provisions have not done much good to tribal communities. The romanticists from the outside world plead for the preservation of tribal life. But the tribals who get an opportunity to walk out of the quagmire of tribal life vote with their feet and leave. The dilemma regarding the right tribal policy still persists. After acrimonious debate for over a year (Kothari and Pathak, 2005), the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act (2006) was passed. The act grants legal recognition to the rights of traditional, forest-dwelling communities and makes a beginning towards giving these communities and the public a voice in forest and wildlife conservation. A forest dweller under this law should be primarily a resident in forests and should depend on forests and forest land for livelihood (‘bona fide livelihood needs’). No one gets rights to any land that they have not been cultivating prior to 13 December 2005, and that they are not cultivating right now. Those who are cultivating land but do not have the documents can claim up to 4 hectares, as long as they are cultivating the land themselves for a livelihood. Biodiversity conservation is envisaged in the act through the preservation of existing habitats and the creation of new critical wildlife habitats in sanctuaries and national parks. (Ministry of Tribal Affairs, 2006). In the case of the forest act, too, the rules have been delayed while tribals have faced evictions in several states. Powerful lobbies find spaces to subvert the will of parliament by narrowing or expanding the scope of the act, virtually rewriting certain sections. Three issues came up in the majority of the states: (a) the kind of gram sabhas that would be called; (b) the role of forest rights committees; and (c) community rights to manage, protect and conserve forests. The debate continues between conservationists, who believe that the act will destroy India’s forests and affect

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wildlife protection adversely, and pro-tribal-rights activists who believe it will finally settle the long-delayed issue of tribals’ rights in India. It is too early to comment on this controversial piece of legislation. Guha’s (2007, p. 3305) perceptive comment that ‘adivasis as a whole have gained least and lost most from six decades of democracy and development in India. . . . The failure of the state and of the formal political system have provided a space for Maoist revolutionaries to move into,’ is also applicable to the failure of the state to delineate the land rights of tribal people since independence.

Gender Discrimination In the past, family assets were apportioned almost exclusively to men (an exception being the marumakkattayam system) and, in Hindu law, women had absolute ownership only over stridhan (property gifted voluntarily by parents and relatives at marriage and on other occasions). The framers of the constitution took note of the discrimination against women in Indian society. Section 6 of the Hindu Succession Act (1956) broke the ancient rule that property should devolve by survivorship among the male members of a Hindu coparcenary. However, the retention of the mitakshara coparcenary without including females in it meant that females could not inherit ancestral property as males did. Five states in India, namely, Kerala, Andhra Pradesh, Tamil Nadu, Maharashtra and Karnataka, in various years between 1975 and 1994, took cognizance of that fact and adopted remedial action. In a major blow to patriarchy, the Hindu Succession (Amendment) Act of 2005 abolished discrimination between sons and daughters in the matter of succession to coparcenary property throughout the country. It conferred the right to inherit property on Hindu women on par with their male counterparts. The act has the potential to bring forth a mammoth transformation in the asset ownership structure of the genders. Whether this act will be enforced or will suffer the same fate as land reforms is now a matter for conjecture.

Eminent Domain The much-amended Land Acquisition Act of 1894 conferred power on the government to compulsorily acquire land for public purposes

Evolution of Land Rights in India a 41

or for a company on payment of compensation. Planned development, education, health and other schemes are included as illustrations of ‘public purpose’. Section S.23 of the act specifies the principles for computing compensation. A ‘solatium’ of 15 per cent of the market value of the land acquired is required to be added to the compensation in view of the compulsory nature of the acquisition. The act makes no reference to rehabilitation. Since compensation is granted only to persons with a legal title, tenants, sharecroppers and wage labourers become ineligible. Is it right for the state to expropriate land to advance private sector development through schemes such as special economic zones (SEZs) in order to correct India’s ‘infrastructure deficit’? There is mistrust that such schemes may do more for their promoters than for the country. The widespread opposition to the expropriation of poor farmers in Singur and Nandigram stemmed from a felt sense of inequity. The process of land acquisition by the state for ‘public purposes’ is increasingly under challenge for working in an arbitrary way. The compensation paid is considered to be meagre. The government’s utter neglect of the imperative of ensuring the rehabilitation of those who lose land and livelihoods in the process has been under attack. Unless conversion of agricultural land for industrial use is permitted, all industries would be located only in deserts and desolate places! Normally, it is not necessary for the state to acquire private land and transfer it to private industry. The market is the proper channel for this. The state should interfere only in special circumstances. Sections 23 and 24 of the Land Acquisition Act specify the principles for determining the amount of compensation. Section 23 states that ‘increase in the value of land due to the new use’ should not be taken into account. This is manifestly unfair, since the sellers expect a substantial windfall after the setting up of major industrial projects on their lands. Land granted for SEZs undergo enormous increases in value that go to the promoters, while the farmers who lose their land get no portion of this gain. A frequent suggestion is that the expropriated farmers should be granted equivalent land. This is impractical. If equivalent land were available with the state, then this itself could be developed into SEZs and the like. Any practical compensation package for the owners should contain cash compensation, a right to retain a portion of their land or equivalent land in the project (so that they may reap the benefits of future windfall gains at least partly)

42 a S. Neelakantan

as well as guaranteed access to educational and health care institutions. Cash compensation should be paid for a major portion (say, four fifths) of their lands to meet the landowners’ immediate obligations. They should be allotted an equivalent area of the balance of land (say, one fifth) in the developed portion of the project area. That would give the landowners an opportunity to obtain a share in possible future windfall gains. The promoters invest huge sums in these projects. They should be obligated to invest at least 5 per cent of the total project cost in the construction of educational and health facilities to which the affected farmers and their children should have privileged access. In this way, the future health and educational needs of the farmers’ families would be taken care of, and their children would grow up to be employable anywhere (cf. Sau, 2007).

Conclusion Hernando de Soto argues persuasively that the formal property systems of the West allow their citizens to generate capital. In developing countries, houses and land are ‘dead capital’: ‘dead capital exists because we have forgotten (or perhaps never realized) that converting a physical asset to generate capital—using your house to borrow money to finance an enterprise, for example— requires a very complex process’ (de Soto, 2001). In the West, the formal property system begins to process assets into capital by describing and organizing the most economically and socially useful aspects of assets, preserving this information in a recording system—as insertions in a written ledger or a blip on a computer disk—and then embodying it in a title. Security of rights improves the incentives to save and invest. Land and capital can be rented out to more efficient users, so inefficient internal uses are avoided. More importantly, the assets can be used as collateral to borrow and expand one’s business. Much of the marginalization of the poor in developing and former communist nations arises from their inability to benefit from the effects that formal property generates (ibid.). De Soto’s plan is, quite simply, to make homeowners out of the world’s poor squatters and landowners out of the world’s tenantsat-will. He argues for formalizing the vast, extra-legal world of squatters and tenants-at-will by assigning each of them with individual, legal property titles. When that process is completed, de

Evolution of Land Rights in India a 43

Soto expects that the poor will have access to credit, loans and investment, as their dead assets are magically transformed into live capital (Gravois, 2005). Land reforms could have converted the actual tiller’s rights into live capital. But we have let the opportunity. China has only now embarked on the process of formalizing its property rights. India has the advantage of a formalized property system backed by civil law for over a century. Our problem is the enormous increase in dead wood in the laws relating to land rights. Unenforced land reform laws affecting titles make assets ‘dead’ and cause enormous damage to the development process. The time is ripe for India to initiate a fresh look into the issues of land reforms and tribal land titles. All the laws cluttering the statute books but remaining a dead letter in reality must be trimmed. They create confusion and uncertainty regarding ownership rights. Clarity and certainty are the hallmarks of secure land rights. Timmer (1988) asserts that the declining importance of agriculture is uniform and pervasive. The relative status of landlords is falling rapidly even in villages. Surveys indicate that the landless from lower classes and Scheduled Castes are purchasing small pieces of land in Tamil Nadu and Kerala. The state can now act as a catalyst to bring in agricultural transformation by encouraging this trend. In future, it would be economical for the state to appropriate land from big supervisory landlords by paying compensation to them and then redistributing it to the actual tillers. The state can grant a right of pre-emption to the actual tillers to purchase those lands with bank loans at low rates of interest, which they should be permitted to repay in easy instalments. The resulting fall in transaction costs and increase in agricultural productivity would be likely to enhance the overall benefit by many times the cost involved. This would be simultaneously just, more practical, more creative and more fruitful than the state appropriating land and transferring it to industrialists as it is doing now.

References Appu, P. S. 1996. Land Reforms in India, Delhi: Vikas. Austin, Granville. 1966. The Indian Constitution—Cornerstone of a Nation, London: Oxford University Press. Baden-Powell, B. H. 1974. The Land System of British India, Delhi: Oriental Publishers.

44 a S. Neelakantan Bhargava, Brijkishore. 1936. Indian Peasant Proprietorship, Bombay: D. B. Taraporewala. De Soto, Hernando. 2001. ‘The Mystery of Capital’, Finance and Development, 38(1). htm. Accessed on 9 May 2009. Drèze, Jean. 2005. ‘Tribal Evictions from Forest Land’. http://pmindia.nic. in/nac/concept%20papers/evictions.pdf. Accessed on 9 May 2009. Field, C. D. 1885. Landholding and the Relation of Landlord and Tenant, Calcutta: Thacker, Spint and Co. Gledhill, Alan. 1964. The Republic of India, London: Stevens and Sons, 2nd edn. Gravois, John. 2005. ‘The De Soto Delusion’. 2112792. Accessed on 9 May 2009. Guha, Ramachandra. 2001. ‘The Prehistory of Community Forestry in India’, Environment History, 6(2), pp. 213–38. ———. 2007. ‘Adivasis, Naxalites and Indian Democracy’, Economic and Political Weekly, 52(32), pp. 3305–12. ICS Officer’s Case. 1928. Gokul Chand Vs. Hukum Chand, 48. I.A. (1928) 162. Kothari, Ashish, and Neema Pathak. 2005. ‘Forests and Tribal Rights’, Frontline, 22(11). stories/20050603001508800.htm. Accessed on 30 August 2009. Maine, John D. 1953. Treatise on Hindu Law and Usage (ed. N. Chandrasekara Aiyar), Madras: Higginbothams, 11th edn. Merrilat, H. C. L. 1970. Land and Constitution in India, New York: Columbia University Press. Ministry of Tribal Affairs. 2006. ‘The National Tribal Policy—Draft: A Policy for the Scheduled Tribes of India’, New Delhi: Government of India, Ministry of Tribal Affairs. Nair, Sankarankutty T. P. 1977. A Tragic Decade in Kerala History, Thiruvananthapuram: Kerala Historical Society. Pal, Radhabinod. 1958 [1930]. ‘The History of Hindu Law’, Tagore Law Lectures, Calcutta: University of Calcutta. Patnaik, Sanjoy. 2007. ‘PESA, the Forest Rights Act, and Tribal Rights in India’, Proceedings, International Conference on Poverty Reduction and Forests, 3–7 September, Bangkok. Sau, Ranjit. 2007. ‘Second Industrialisation in India: Land and the State’, Economic and Political Weekly, 42(7), pp. 571–77. Sen, Priyanath. 1918 [1909]. ‘The General Principles of Hindu Jurisprudence’, Tagore Law Lectures, Calcutta: University of Calcutta. Setalwad, M. C. 1960. The Common Law in India, London: Stevens and Sons.

Evolution of Land Rights in India a 45 Singh, Jaivir. 2004. ‘(Un)Constituting Property: The Deconstruction of the “Right to Property” in India’, CSLG Working Paper Series CSLG/ WP/04-05-, New Delhi: Jawaharlal Nehru University. Supreme Court Judgement. 11-01-2007. jan/11spec.htm. Accessed on 9 May 2009. Thorner, Daniel. 1973. ‘Peasant Economy as a Category in Economic History’, in Theodore Shanin (ed.), Peasants and Peasant Societies, London: Penguin, pp. 202–18. Timmer, Peter. 1988. ‘The Agricultural Transformation’, in H. Chenery and T. N. Srinivasan (eds), Handbook of Development Economics, Amsterdam: North Holland, vol. 1, pp. 275–331.

46 a S. Neelakantan

Chapter 2 Structural Changes in Land Distribution and Their Implications for Improving Access to Land K. N. Nair and Arindam Banerjee On the basis of the pattern of land distribution, the emerging agrarian structure in India today presents a grim picture of diminishing size of landholdings coupled with the dominance of marginal and unviable smallholdings. Typically, these structural features are considered barriers to rapid agricultural transformation. Given this situation, it has become increasingly difficult for marginal and smallholders to earn their livelihood exclusively from agriculture. Consequently, they are compelled to seek livelihood opportunities outside agriculture. Moreover, and somewhat paradoxically, in the post-reform period from the 1990s, the pace and pattern of growth of the economy in general and of the non-agricultural sector in particular have been of the kind least conducive to absorbing these marginal and smallholders productively. Under these circumstances, they are left with little option but to continue to cling on to their small pieces of land. Further, the process of marginalization of landholding also poses organizational challenges for the efficient utilization of land, water and other inputs, as well as for the diffusion and adoption of various technologies including agro-mechanical technology. In this context, it becomes important to discuss the issue of the scope for improving access to land for landless and marginal farmers (who constitute the bulk of the rural poor) as a means of improving their livelihood. Many prescriptions have been offered by policy-making bodies at the national and international levels and, though some of these policies have been adopted and implemented, they have not translated into any noticeable gainful result. We argue that, for any meaningful intervention in the sphere of land redistribution, it is imperative to examine critically the evolution of property rights in land and how

Structural Changes in Land Distribution a 47

this has shaped the pattern of land distribution. This article is an attempt at providing some insights into this rather complex issue. This chapter is structured so as to address a set of three broad issues. The first section touches upon the historical roots of land concentration. This is followed by an analysis of the changes in the pattern of land distribution, including the processes shaping these developments. The last section highlights the implications of the growing inequality in landholding for access to land for the landless and the land-poor.

Concentration of Land and Its Historical Roots Nation-wide land and livestock surveys conducted at periodic intervals from the mid-1950s onwards have generated a vast amount of data for assessing the pattern of and trends in the distribution of land. A significant finding revealed by analysis of this data is the very high concentration of landownership, as evident in the estimated values of the Gini ratios (see Table 2.1), both for the country as a whole as well as for the states. The estimated value of the Gini coefficient was 0.709 in 2002–03 for the country as a whole, and it varied from 0.60 to 0.80 across the states. With the exception of Kerala and Orissa, where there has been some decline over time in the Gini ratio, in most other states the concentration of land, as Table 2.1 reveals clearly, has increased quite significantly over the four decades from 1961–62 to 2002–03. Large increases in concentration of land have been reported by Gujarat, Punjab and Tamil Nadu, some of the states where concentration was high even in the 1960s. Two possible explanations for the pronounced concentration of land are worthy of consideration. While the first would fall under what can be categorized broadly as historically influenced conditions, the second relates to a set of conditions bordering on the ecological. As a means of appropriating greater rural surplus through land revenue, the British Indian colonial state introduced, from the late 18th century, a series of new land tenurial systems, the most notable of which was the zamindari or the permanent settlement of 1793. The erstwhile zamindars, who were no more than the revenue collectors of the Mughal state, were perceived

48 a K. N. Nair and Arindam Banerjee Table 2.1 Gini Coefficient for Landownership States Andhra Pradesh Bihar Gujarat Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal All-India



0.751 0.684 0.628 0.587 0.719 0.602 0.652 0.662 0.717 0.611 0.683 0.615 0.631 0.686

0.757 0.702 0.720 0.662 0.601 0.630 0.667 0.625 0.800 0.652 0.779 0.623 0.645 0.709

Change 0.006 0.018 0.091 0.074 –0.118 0.029 0.015 –0.036 0.083 0.040 0.095 0.008 0.014 0.023

Source: Calculated by the authors based on NSS Land and Livestock Survey, 17th round (Report No. 144) and 59th round (Report No. 492).

by colonial administrators as owners of land and vested with private property rights over land (see Neelakantan, this volume). Traditionally, the zamindars or revenue farmers were from the forward castes. While the tenants who cultivated these lands belonged mostly to the intermediate castes, those who worked on these lands belonged to the backward and the Scheduled Castes. Thus, there existed a hierarchical relationship between landownership and caste. The creation of the private right in land enabling individuals and families to purchase and sell, including leasing in and leasing out, gave land all the characteristics of a commodity. This process resulted in the concentration of land in the hands of the forward and intermediate castes. The second explanation, which is not entirely unrelated to the first, has to do with the natural, agro-climatic conditions specific to tropical regions. Given the quantum of rainfall and its distribution, and the consequent moisture conditions of the soil, it is difficult to crack the soil and prepare it before the onset of the monsoon with human labour alone. This requires command over at least a pair of bullocks, which is beyond the capacity of households at the bottom end of the social structure or the economic ladder to acquire (see Vaidyanathan, this volume). Consequently, even if land is abundant, it is beyond the means of poor households to render it fit for cultivation. Such households would remain labour households.

Structural Changes in Land Distribution a 49

Interestingly, this would also explain partly why the incidence of tenancy has been low in India compared to South-East Asian countries. The question as to whether there was an increase in the concentration of land during the colonial period has been the subject of debate among economic historians. The context in which this issue has been examined pertains to the impact of the expansion of irrigation, the commercialization of agriculture and the development of land, labour and credit markets on the concentration of landholding. Available studies from different parts of British India suggest that the price of land did increase over time. More specifically, the price of irrigated land with commercial crops (including wheat) increased at a much faster rate than that of unirrigated land. However, hardly any evidence exists to support the view that the process resulted in the concentration of land. A number of regional studies show that very little change occurred in the concentration of landownership. Dharma Kumar, who estimates land concentration for the Madras presidency for the period 1853–54 to 1950–51 using revenue data for landholdings, notes only insignificant changes for the presidency as a whole. Her estimates at the district level even showed a reduction in concentration in a few of the districts. There are, of course, errors and biases in the data, but in the absence of land reform there was no reason for deliberate underestimation of large holdings. Moreover these findings are supported by individual village surveys. The reason why concentration did not grow was that both large and small holdings have been subdivided as population grew, and in some districts the holdings of the rich appear to have been broken up faster, especially after 1900. (Lal, 1988, pp. 165–66)1

Similar findings were reported for Greater Bengal (Ray and Ray, 1973), and also for Gujarat. In his analysis of agrarian change in the United Provinces, Stokes (1978) highlights the factors behind the changes in the distribution of land, even when the land concentration remained the same. Lal (1988) summarizes the findings of Stokes as follows: population pressure led to the fragmentation of holdings but not to any large increase in pure landlessness. There was a large increase in the number of small landowners, but the number of great zamindars at the top of the pyramid who were protected by primogeniture remained stable. It was the smaller non-cultivating landlords who lost ground

50 a K. N. Nair and Arindam Banerjee because of the tenancy legislation protecting the rights of tenants instituted in the later period of British rule. The main beneficiaries of the commercialization of agriculture were the middle peasants. (ibid., p. 166)

It appears from historical studies available from different parts of India that, though land concentration remained fairly stable over time, there have been changes in the distribution of land owing to the outcome of a combination of demographic changes, state intervention and the market process. Studies available on the size distribution of landholdings during the post-independence period reveal the existence of a process of downward mobility in the structure of landholding.

Changes in the Pattern of Land Distribution The National Sample Survey (NSS) Land and Livestock Surveys are an important data source on the size distribution of ownership holdings, and are available for every 10 years from 1961–62. This source also provides data on the pure landless category. For the purpose of the present analysis, we refrain from examining the patterns of change by size groups since this has already been commented upon in a number of existing studies and reports. The estimated number of rural households for the country as a whole in the early 1960s was about 64 million, increasing to 148 million by early 2000 (NSS Land and Livestock Survey, 17th round, Report No. 144, and 59th round, Report No. 491). The number of rural households increased at a much faster rate in the 1980s and 1990s. The percentage of rural households without land has declined over the last four decades, but in absolute numbers it has increased due to increase in the number of rural households. The average size of ownership holding, excluding the landless, declined from 1.99 ha in 1961–62 to 0.73 ha by 2002–03 (ibid.). In the early 1960s, 55 per cent of the holdings belonged to the marginal size group, increasing to nearly 80 per cent by 2002–03 (ibid.). The distribution of owned area by size category of holdings revealed a trend different from the number of holdings; while the share of the owned area of the medium and large holdings showed a decline, the percentage share of small and semi-medium size classes increased from 33 to 42 and that of the marginal from less than 8 to 23 (see Table 2.2).

7.6 12.4 20.5 31.2 28.2 100.0

1961–62 (17th round) 9.76 14.68 21.92 30.73 22.91 100.0

1971–72 (26th round)

Source: NSS Land and Livestock Survey, various rounds. Note: For the 59th round, the data is for the kharif season alone.2

Marginal Small Semi-medium Medium Large All

Size class of holding 12.22 16.49 23.58 29.83 18.07 100.0

1981–82 (37th round)

Table 2.2 Percentage Distribution of Owned Area by Size Classes

16.93 18.59 24.58 26.07 13.83 100.0

1991–92 (48th round)

23.05 20.38 21.98 23.08 11.55 100.0

2002–03 (59th round)

Evolution of Land Rights in India a 51

52 a K. N. Nair and Arindam Banerjee

In order to understand the manner in which the changes noted in the size categories have shaped distribution, we estimated the share of the bottom 60 per cent, middle 30 per cent and top 10 per cent in the total owned area for the period from 1961–62 to 2002–03 for the country as a whole. The figures were obtained by fitting the Lorenz curve and deriving the respective shares (see Figure 2.1).3 It may be seen that the shares of different groups remained fairly stable from 1961–62 to 1991–92 (Table 2.3). In the subsequent period, the percentage share in area of the bottom 60 per cent of households declined from 10.8 to 8.3. The percentage share of the middle 30 per cent also decreased marginally from 37.7 to 36.5, whereas the share of the top 10 per cent of households increased from 51.5 to 55.2. We also examined distributional changes at the state level by deriving similar landownership and operated area shares for two Figure 2.1 Lorenz Curve for Ownership Distribution of Land, All-India, 1961–62 and 2002–03

Source: Based on landownership data for 1961–62 and 2002–03, NSS Land and Livestock Survey.

Structural Changes in Land Distribution a 53 Table 2.3 Percentage Distribution of Owned Area by Household Groups: Various Rounds Household group Bottom 60% Middle 30% Top 10%






10.8 37.7 51.5

10.8 38.2 51.0

10.5 38.5 51.0

11.0 38.0 51.0

8.3 36.5 55.2

Source: Estimated by the authors from the Lorenz curves.

points in time, namely, 1961–62 and 2002–03. The results (Table 2.4) show that in all states except Kerala (+7.3), Orissa (+2.1) and Bihar (+1.4), the share of the bottom 60 per cent of households declined; in Kerala, the share increased at the expense of the middle 30 per cent. However, even in Kerala, we observed an increase in the share of the top 10 per cent of households. In fact, the share of the top 10 per cent increased in all states except Orissa (moderate decline) and Andhra Pradesh (unchanged). But the latter had reported one of the highest shares for the top 10 per cent already in 1961–62. The increase in the share of the top 10 per cent was particularly large in states like Gujarat (+11.5), Punjab (+10.8) and Tamil Nadu (+12.5). In all these states, this concentration of land in the hands of the top-most stratum of households occurred mainly at the expense of the bottom 60 per cent. The share of the bottom 60 per cent in 2002–03 was only 7, 2 and 2 per cent in Gujarat, Punjab and Tamil Nadu, respectively. The middle landholding households in Gujarat and Punjab also lost ownership of land significantly. Turning to the distribution of operational holdings, it may be seen that the general tendency is for a decline in the share of the bottom 60 per cent, stagnancy at the middle 30 per cent, and a slight increase in the share of the top 10 per cent. There are exceptions to this general trend, with Kerala showing a large increase in the share of the bottom 60 per cent from 14 per cent to 24 per cent, and Gujarat (–9.0), Punjab (–18.6) and Tamil Nadu (–9.3) showing large declines. The share of the top 10 per cent has either stagnated or shown a marginal increase in all states, with the exception of Gujarat, Punjab and Tamil Nadu; the increases in the shares of the top 10 per cent in these states are 10.4, 21.0 and 8.2 percentage points, respectively. It may be observed that the magnitude of the increase in the share of the top 10 per cent of operated holdings




Madhya Pradesh∗





Andhra Pradesh


Year 1961–62 2002–03 1961–62 2002–03 1961–62 2002–03 1961–62 2002–03 1961–62 2002–03 1961–62 2002–03 1961–62 2002–03 1961–62 2002–03 1961–62 2002–03

6.5 4.5 10.1 11.5 13.5 7.0 18.0 11.5 12.2 19.5 16.5 15.5 12.0 10.5 12.0 14.1 6.1 2.0

Bottom 60% 34.4 36.5 40.4 38.0 43.0 38.0 40.0 39.8 33.6 23.7 41.0 40.0 42.5 42.0 39.5 40.9 43.4 36.7

Middle 30%

Distribution of owned area 59.1 59.0 49.5 50.5 43.5 55.0 42.0 48.7 54.2 56.8 42.5 44.5 45.5 47.5 48.5 45.0 50.5 61.3

Top 10%

15.8 18.0 19.2 17.9 22.5 13.5 22.5 18.9 14.2 24.3 22.2 20.5 19.1 20.2 23.5 22.5 23.5 4.9

Bottom 60%

47.5 45.8 42.0 41.5 37.8 48.2 39.3 43.0 49.3 47.8 37.9 40.3 39.6 39.5 38.6 36.0 33.5 54.5

Top 10%

(Table 2.4 Continued )

36.7 36.2 38.8 40.6 39.7 38.3 38.2 38.1 36.5 27.9 39.9 39.2 41.3 40.3 37.9 41.5 43.0 40.6

Middle 30%

Distribution of operated area

Table 2.4 State-wise Percentage Distribution of Owned and Operated Area by Household Groups, 1961–62 and 2002–03

54 a S. Neelakantan

1961–62 2002–03 1961–62 2002–03 1961–62 2002–03 1961–62 2002–03 1961–62 2002–03

Year 16.0 13.4 10.8 2.0 15.5 14.0 13.5 12.8 10.8 8.3

38.5 36.9 39.7 36.0 40.5 40.7 42.7 38.2 37.7 36.5

Middle 30%

Distribution of owned area Bottom 60% 45.5 49.7 49.5 62.0 44.0 45.3 43.8 49.0 51.5 55.2

Top 10% 20.0 15.0 23.5 14.2 23.4 18.1 26.8 21.0 18.0 14.5

37.5 37.0 38.9 40.0 40.2 41.6 39.4 40.3 37.5 37.1

Middle 30%

42.5 48.0 37.6 45.8 36.4 40.3 33.8 38.7 44.5 48.4

Top 10%

Distribution of operated area Bottom 60%

Source: Estimated by the authors from the Lorenz curves for each state. Note: Bihar, Madhya Pradesh, Uttar Pradesh and Punjab include Jharkhand, Chhattisgarh, Uttaranchal and Haryana, respectively. While Haryana was formed in 1966, the other three states were formed in 2000.


West Bengal

Uttar Pradesh∗

Tamil Nadu



(Table 2.4 Continued )

Evolution of Land Rights in India a 55

56 a K. N. Nair and Arindam Banerjee

corresponds well with the increase in the share of owned area for this group in these three states.

Factors and Processes The distributional changes noted for the country as a whole and across the states could be due to the net effect of transfer of land that has taken place through partition of households, distribution of land by the state through land reform measures, and the market process. Turning to the partition of households, one would expect the rate of partition among households to increase with increase in size of landholding. This is because of the positive relation between size of the household and size of landholding, under the assumption that the probability of partition will be the same across different size groups. However, there could be some distortion in this pattern if larger holdings tend to delay partitioning due to reasons of economies of scale or other factors that bind them together as joint households (Krishnaji, 1980). Increase in the number of households in the bottom group and decrease in the higher size classes of landholding indicate the consequences of partition for the downward mobility of households across size groups of landholdings. Changes in landownership as a result of the implementation of land reforms might have contributed to the changes in land distribution. In this context, one of the important measures implemented in the 1950s was the abolition of intermediaries. As a result of this and subsequent struggles by tenant farmers for land rights, some 20 to 25 million tenants in the zamindari areas in West Bengal and the former state of Uttar Pradesh became owners of land. This part of land reform also resulted in the transfer of ownership of vast tracts of forest and waste land to the state. Another important measure implemented was the distribution of surplus land above the ceiling limit to the landless. During the early years of the implementation of the ceiling law, progress was very slow, and this provided opportunities to landowners to circumvent the provisions of the act and evade the redistribution of their surplus land. Though attempts have been made towards the speedy implementation of the act in recent decades, the extent of land redistributed so far is about 5.4 million acres, distributed to about 5.6 million households (World Bank, 2007).

Structural Changes in Land Distribution a 57

Regarding the implementation of tenancy laws, security of tenure and the associated terms and conditions varied across states as per the different legislations. The key provisions of the tenancy laws, relating to the circumstances in which landowners can resume leased-out land for own cultivation, and the payment of compensation to landowners in return for ownership of land, have been the basis for many litigations in civil courts, resulting in delayed or inadequate implementation of land reform measures. A recent study of land policies in India summarizes the effectiveness of various land reform measures as follows: Overall, land reform constituted a major effort that resulted in the transfer of almost 10 million hectare–2.5 million ha under programmes to redistribute ceiling surplus land, and 7.35 million ha under tenancy legislation. . . . Although the magnitude of accomplishments is put somewhat into perspective if the share of land and population are considered, land reform in India was undoubtedly a major historical event, especially if the amount of land distributed under abolition of intermediaries is added to these figures. (World Bank, 2007, pp. 56–57)

For the country as a whole, it is estimated that the amount of land distributed through tenancy reform accounted for 5.45 per cent of the land area, involving 5.35 per cent of the population. The amount of land transferred through the ceiling provision amounted to another 4.41 per cent of the land area and 2.27 per cent of the population (Table 2.5). There are significant interstate differences in the effectiveness and coverage of land reforms, as is evident from the area and population affected. While in a few states, namely, West Bengal, Gujarat, Maharashtra, Kerala and Karnataka, the effectiveness of tenancy reforms has been impressive, in other states the effectiveness of implementation has been dismal, as evident from the low coverage in terms of area and population. Turning to the implementation of ceiling laws, Andhra Pradesh, Bihar, Maharashtra, Uttar Pradesh, Rajasthan and West Bengal are the states where some progress has been achieved. Only West Bengal has recorded notable achievements in both measures. It may also be noted that after the progress made in the 1970s and 1980s, the implementation of both these measures has slowed down in all states in recent years. The impact of land reforms on the rural economy has been studied by researchers in the context of specific states. These studies

58 a K. N. Nair and Arindam Banerjee Table 2.5 Share of Households and Area Affected by Land Reforms across States Tenancy



Area (%)

Prop. (%)

Area (%)

Prop. (%)


3.48 0.00 15.00 0.51 0.16 15.38 8.47 2.15 27.01 0.15 1.89 0.00 3.65 0.00 6.41 5.45

0.75 0.00 11.20 0.01 3.19 5.29 12.49 0.61 10.68 1.43 0.04 0.16 3.23 0.00 10.80 5.35

8.34 4.42 1.95 1.26 0.06 1.71 1.30 2.69 7.74 2.24 1.50 6.63 2.47 5.81 14.91 4.41

3.81 4.00 0.31 0.26 0.05 0.30 1.04 0.71 1.08 1.28 0.25 0.75 1.24 3.68 19.73 2.27

Source: Kaushik (2005), extracted from World Bank (2007).

reveal the positive impact of land reforms in reducing poverty and in improving the socio-economic status of the beneficiary households. A nation-wide survey spanning the period 1982–99 attempts to assess the impact of land reforms on physical and human capital growth, and examines how this impact has evolved over time.4 The results of this survey show that households in those states with higher levels of land reform effort saw their welfare and investment improve more than households in states where land reform implementation remained lacklustre. The results of this survey also indicate that the benefits of land reforms have been declining over time. An important reason for this could be the inability of households to retain their landholding due to division among family members or sale and the consequent downward mobility in the size of landholdings. The agrarian crisis that precipitated in the 1990s, particularly in export-oriented commercial crop cultivation (Patnaik, 2002; Reddy and Mishra, 2009), also reduced the profitability and the scope of investment in agriculture and led to the emergence of high indebtedness among agricultural households, thereby nullifying some of the earlier gains

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of land reforms. Whatever the underlying causes, an in-depth understanding of the process of land transfer is necessary to understand the linkages between the structural changes in land distribution and their implications for development. As noted earlier, a constraint in undertaking this task has been the absence of reliable data to evaluate the relative importance of the various factors shaping land distribution. In the absence of such data, we attempt to provide some insights into the factors and processes that have shaped the distribution of land by drawing on the evidence available from some village-level studies. In the late 1990s, a number of villages in southern India were studied by a village resurvey project coordinated and implemented by the Centre for Development Studies (CDS), Thiruvananthapuram. These were villages that had been studied earlier as part of the 1961 village survey monographs prepared by the Census of India, or that were surveyed by other scholars in the 1960s. The principal aim of these resurveys is to capture the processes of change that have overtaken the rural economy, especially with respect to the caste and economy nexus. The studies analyze data on the changes in the distribution of land, covering roughly a period of 40 years. While intensive studies of this nature are available for two villages each from Kerala, Tamil Nadu and Andhra Pradesh, a few more restudies have also been undertaken using qualitative research methods from each of these states.5 Some of the insights from these studies are briefly summarized in what follows. Though the Kerala case is exceptional, as indicated earlier, yet it may not be out of place to summarize the general trends discernible from the study of the villages resurveyed. These are: (a) a reduction in the concentration of landownership; (b) acquisition of land by the bottom size groups through purchase; (c) significant reduction in landless households due to the allocation of house sites to the landless from within the ceiling-surplus land; and (d) the conclusion that land reforms as such had very little impact in changing the distribution of land. In all the three villages in Kerala, households belonging to the intermediate castes, namely the Ezhavas and Muslims, increased their share of land, while the share of the forward castes declined. Though this was partly due to the effect of land reforms, the purchase of land by the intermediate castes has also contributed significantly to this trend in recent years. Migration to the Gulf

60 a K. N. Nair and Arindam Banerjee

and the consequent flow of remittances has also facilitated these communities in improving their access to land by purchase. The Scheduled Castes, which constituted the bulk of agricultural labour, did not benefit from the various modes of land transfer. The studies of two villages in Tamil Nadu conducted by Jeyaranjan for Illuppakorai and by Rukmini for Arkavadi during 1998–99 show the inter-relation between agrarian changes on the one hand and changes in land distribution on the other (draft project reports, Kerala Research Programme for Local Level Development [KRPLLD], CDS). In the first village, which falls in the Thanjavur delta, agricultural production based predominantly on the paddy crop faced a serious crisis in the 1970s due to water scarcity arising out of the Cauvery water dispute; besides this, there were also problems arising out of the monopoly procurement of paddy by the state and increasing militancy among agricultural labourers. In response to the severe constraints experienced in the cultivation of paddy, farmers started shifting to crops like sugarcane and banana that did not require flooding the fields. By the 1980s, about 70 per cent of the area in the village was under these two crops. In the subsequent two decades there was some improvement in paddy cultivation because of the improvement in irrigation systems, increase in the mechanization of agriculture and decline in labour militancy. The expansion of area under sugarcane and banana required more capital in order to cultivate such crops, and the degree of risk and uncertainty involved with regard to marketing arrangements and prices was also higher. The impact of these changes on the structure of landholding was mainly the following. During the period 1975–85, a substantial weakening of the smaller size classes of landholders occurred. This is evident from the fact that 18 of the 59 households which possessed less than 2.5 acres of land became landless during this period. On the other hand, those who owned more than 5 acres of land retained their status. In the subsequent period (1985–98), a complete reversal of this process took place. The number of landed households increased from 40 to 59, and the extent of land operated by them increased from 222 acres to 264 acres. The top size class of landholding, which operated more than 10 acres of land and accounted for about 60 per cent of the total owned area in the village, lost about 50 per cent of its area and moved down in the scale

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of landholding. The latter period also witnessed the strengthening of the medium size of holdings in terms of number as well as area. However, unlike the medium holdings, the average size of smallholdings decreased due to either sale or partitioning. The study also reveals that those who lost land in the first period and acquired it subsequently purchased it in the neighbouring village, where Brahmin households were moving to urban centres. Though the study by Jeyaranjan (1999) does not analyze the relationship between caste and landownership, the second study for Tamil Nadu provides more insights into this aspect. Rukmini (1999) demonstrates the consolidation of their landholding position by the Vanniars, who belong to the list of backward communities in Tamil Nadu. Simultaneously, internal stratification grew within the same community. The Vanniars purchased most of their land from the Reddiars, who belong to the forward castes. The study traces the risk associated with the development of well irrigation in a low rainfall region as the main reason for the loss of land by some households, while some others were able to cope with the situation and acquire more land. The village studies conducted in Andhra Pradesh provide ample evidence on the changing pattern of caste and land relationships (Rao and Reddy, 2008). They reveal clearly the unleashing of the process of shift in landownership from upper castes to intermediate castes: [from the] 1950s onwards, a slow but a steady process of land transfers from the dominant Reddy and Kamma castes to the less dominant FCs (Kapus) and OBCs such as Yadavas, Goudas, Toorpu Kapus, Koppula Velamas, Kalingas, Munnuru Kapus/Telagas . . . had taken place. With this came the altered inter caste economic balance in favour of the hitherto less dominant castes and an overall less iniquitous agrarian structure. However, the process of land transfers from the dominant cultivating castes like the Reddys and Kammas is a much slower process compared to the earlier phase of land transfers from the Brahmins to the Reddys and Kammas. (ibid., p. 50)

A study on occupational change and landownership in Palanpur for the period 1957–93 also provides insights into the process of land transfer (Drèze, 2002). Unlike other studies cited here, this village was resurveyed four times at periodic intervals, the last survey being conducted by Jean Drèze. According to his findings,

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in the short term, changes in landownership and distribution are shaped by the process of inheritance and partition. However, in the long run, some changes are attributable to land sales and purchases that resulted in inter-caste transfer of land. Drèze also concludes that even in the longer period, land transfer through the market process has had only a secondary influence in comparison with the processes of inheritance and partition.

Implications for Improving Access to Land From the preceding analysis, it may be argued that though land concentration has remained stable over a long historical period, landownership has become more widespread and diffused. However, it is also to be noted that the large majority of the bottom size groups (the bottom 60 per cent) account for only a very small percentage of the total owned and operated area, which has declined in all the states (except Kerala) since 1961–62. Since access to land has a positive impact on reduction in poverty and improvement in household well-being, the question that confronts us at the policy level is the nature and direction of the reforms needed to improve access to land on the part of poor households. Prevailing discussion on the subject outlines three possibilities for realizing this: (a) proper verification of land records, identification of the surplus above the ceiling laws and distribution of the surplus to the land-poor; (b) reforming the land lease market by removing the existing restrictions on lease cultivation; and (c) providing financial support to the poor to acquire land. As far as proposition (c) is concerned, it is unlikely to be viable for implementation. Any large-scale financing of land purchases may result in pushing up land prices and, if the interest on land is also included in the cost of cultivation, such farming activity is unlikely to become viable. Further, relevant experience is not available either from India or from abroad that might be harnessed to understand the nature of the problems involved in the implementation of such a policy. Regarding (a), there may be some scope for recovering surplus and public land for redistribution, but this is contingent on the implementation of a programme of verification and modernization of land records by the state governments.

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Coming to the prospects for tenancy reform, it is to be noted that the percentage of operated area leased in and the percentage of owned area leased out, and the percentage of households involved in leasing in and leasing out, have been declining sharply over the last few decades. This might be due to the under-reporting of the incidence of leasing due to legal restrictions, and might also be due partly to the shift in tenancy contracts from long-duration to seasonal or annual contracts, or due to the leasing in and leasing out of land taking place between close relatives. Certain microlevel studies seem to suggest that the incidence of tenancy is much higher than reported in the official surveys. In order to assess the extent to which leasing of land modifies the access to land for households with smaller sizes of holding, we need only look at Table 2.4. It may be noted that, in comparison with the share of owned area, the share of operated area is higher for the bottom 60 per cent of households; this is due to the leasing in of land. The loss in the share of this group between 1961–62 and 2002–03 has been the gain of the top 10 per cent, as a consequence of reverse tenancy. Across states, except in Kerala and Andhra Pradesh, the share of the bottom 60 per cent has declined, and the share of the top 10 per cent has increased. In other words, in most parts of the country, the lease market has shifted in favour of the larger size of holding. The pattern of and trends in the distribution of operated area are a clear indication that any process of reform contributing to the removal of restrictions on the lease market is likely to work more in favour of the larger size of holdings compared to the smaller size of holdings. This is what one would expect in a rural economy, where there exists indivisibility in the ownership of complementary assets to land, like agricultural machinery and equipments and bullocks, which are crucial for carrying out agricultural operations. An analysis of the data from the various rounds of the Land Holding Surveys conducted by the NSSO are indicative of the following broad trends: (a) ownership of agricultural machinery and implements and cattle tends to increase with increase in landholding; and (b) over time, the proportion of households with these assets has been declining (especially in the bottom size groups), with downward mobility of landholding and increase in the proportion of marginal and smallholdings. Given this situation, those who have a ‘surplus’ of such assets would attempt to

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increase their utilization by increasing the scale of their cultivation through leasing in land. Organizationally, it may be possible to support marginal holdings to overcome such limitations through various group initiatives. However, such attempts in the past have not yielded positive results. It appears that the policy measures just cited would not contribute to significant improvement in access to land for a large majority of the bottom 60 per cent of rural households. The number and proportion of this category in the structure of landholding is likely to increase in future under the weight of both demographic and non-demographic factors. This process could further accentuate the structural barriers to agricultural growth. From the longterm perspective of sustaining agricultural growth, it is necessary to place restrictions on the marginalization of landholdings. Two policy initiatives need to be initiated in this context: (a) fixing a minimum size of holding based on the economic viability of farming; and (b) placing restrictions on the inter-generational transfer of land from households with cultivation as their main occupation to others. As far as (a) is concerned, this was an idea discussed by agricultural economists in India in the 1960s and 1970s (Minhas, 1970; Raj, 1975), and the idea has now assumed more importance than in the past. As far as (b) is concerned, the agrarian history of western Europe provides examples of such restrictions imposed on the transfer of land in the post–Industrial Revolution period. a

Notes 1. Deepak Lal’s observations based on Kumar and Krishnamurthy (1981). 2. This does not create much inconsistency, as almost all the land operated in the rabi season is cultivated in the kharif season also. For instance, in the 48th round, 96 per cent of the operational holdings and 99 per cent of the entire operated area was cultivated in the kharif season. 3. The disaggregated state-level data on landownership by size classes for 1961–62 and 2002–03 have been used for the purpose of drawing the Lorenz curves. For each state, we have a set of Lorenz curves as shown in Figure 2.1 for all-India. The data for both rounds consisted of 13 intervals. For all-India, the Lorenz curves were constructed for the intermediate (26th, 37th and 48th) rounds also (not shown in Figure 2.1).

Structural Changes in Land Distribution a 65 4. The nation-wide NCAER ARIS-REDS survey covered 5,000 rural households and was conducted in 1982 and 1999 (World Bank, 2007). 5. Two volumes synthesizing the results of the studies conducted in Kerala and Andhra Pradesh are available in published form, and the papers prepared for Tamil Nadu are available for reference. See Rao and Reddy (2008) and Nair and Menon (2007).

References Drèze, Jean. 2002. ‘Palanpur, 1957–93: Occupational Change, Land Ownership and Social Inequality’, in Vandana Madan (ed.), The Village in India, New Delhi: Oxford University Press, pp. 203–21. Jeyaranjan, J. 1999. ‘Some Aspects of Change in Illuppakkorai Village’, Draft Project Report, Kerala Research Programme on Local Level Development, Thiruvananthapuram: Centre for Development Studies. Kaushik, A. 2005. Nature of Land Market Interventions in India, Noida: Institute for Sustainable Development. Krishnaji, N. 1980. ‘Agrarian Structure and Family Formation: A Tentative Hypothesis’, Economic and Political Weekly, 15(13), pp. A38–A43. Kumar, D., and J. Krishnamurthy. 1981. ‘The Evolution of Labour Markets in India 1857–1947’, Mimeo, Washington, D.C.: Employment and Rural Development Division. Lal, Deepak. 1988. The Hindu Equilibrium, Oxford: Clarendon Press, vol. 1. Minhas, B. S. 1970. Rural Poverty, Land Redistribution and Development Strategy: Facts and Policy, Washington, D.C.: Economic Development Institute, International Bank for Reconstruction and Development. Nair, K. N. and Vineetha Menon (eds). 2007. Social Change in Kerala: Insights from Micro Level Studies, New Delhi: Daanish Books. National Sample Survey (NSS). Land and Livestock Survey, various rounds, Government of India, National Sample Survey Organization. Patnaik, Utsa. 2002. ‘Deflation and Déjà vu: Indian Agriculture in the World Economy’, in V. K. Ramachandran and M. Swaminathan (eds), Agrarian Studies: Essays on Agrarian Relations in Less-Developed Countries, New Delhi: Tulika, pp. 111–43. Raj, K. N. 1975. ‘Agricultural Development and Distribution of Land Holdings’, Indian Journal of Agricultural Economics, 30(1), pp. 1–13. Rao, G. N., and D. N. Reddy (eds). 2008. Rural Transformation: Perspectives from Village Studies in Andhra Pradesh, New Delhi: Daanish Books. Ray, R., and R. Ray. 1973. ‘The Dynamics of Continuity in Rural Bengal under the British Imperium: A Study of Quasi-stable Equilibrium in Underdeveloped Societies in a Changing World’, Indian Economic and Social History Review, 10(2), pp. 103–28.

66 a K. N. Nair and Arindam Banerjee Reddy, D. N., and Srijit Mishra. 2009. ‘Agriculture in the Reforms Regime’, in D. N. Reddy and Srijit Mishra (eds), Agrarian Crisis in India, New Delhi: Oxford University Press, pp. 3–43. Rukmini, R. 1999. ‘Socio Economic Changes in the Village of Arkavadi’, Draft Project Report, Kerala Research Programme on Local Level Development, Thiruvananthapuram: Centre for Development Studies. Stokes, Eric. 1978. The Peasant and the Raj: Studies in Agrarian Society and Peasant Rebellion in Colonial India, Cambridge South Asian Studies Series 22, London: Cambridge University Press. World Bank. 2007. India: Land Policies for Growth and Poverty Reduction, World Bank, Agriculture and Rural Development Sector Unit, South Asia Region, New Delhi: Oxford University Press.

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Chapter 3 Changing Agrarian Structure in India: Reflections on Pre-independence Ideology and Post-independence Reality A. Vaidyanathan Failed Tenancy Reforms Radical

land reforms have long been recognized, in accordance with the most fundamental principle of democracy, as essential for redressing gross inequalities and highly exploitative social and economic relations in the country. Abolition of zamindari and other forms of intermediary tenure, protecting tenants from arbitrary eviction and high rents and ensuring that they get secure rights of ownership and cultivation over the lands they cultivate, imposition of ceilings on landownership and redistribution of the surplus to achieve a more even distribution of this resource among the rural population, feature prominently both in the academic literature and in the rhetoric of political parties. The pre-independence period saw attempts by several states to legislate tenancy reforms. Some of the elected governments under the 1935 constitution went as far as contemplating measures to eradicate feudal land relations and provide land to the landless. However, by all accounts, these measures had limited impact. These became much more active issues of public policy in the post-independence period. Legislation abolishing zamindari and similar forms of land tenure was passed in the face of strong political resistance to their enactment. Implementation was delayed considerably by prolonged litigation on the legality of these acts. The process was largely, but not wholly, successful. There are numerous instances—of which Bihar is a notable example—of large landowners evading the law and managing to retain control of their lands. Efforts to bring about tenancy reforms have been limited largely to the sphere of legislations (some fresh, and some by way

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of amendments to extant laws). Available data from the National Sample Survey suggest that from the early 1960s through the early 1990s, the proportion of landless rural households showed no significant change. The number of land-operating households grew somewhat faster than the number of ownership holdings. But both the proportion of operating households that lease in land and the proportion of leased-in to operated area, barely 11 per cent in the 1960s, have declined progressively to stand at 6.5 per cent at present. Inequality in the distribution of operated area has increased. It is a moot question as to whether this is the result of effective implementation of tenancy reforms or an indication of the growing disinclination of owners to lease out land and other extraneous factors. From all accounts, implementation of tenancy reforms has been weak except in Karnataka, Kerala and West Bengal. These states succeeded in actually enforcing the law to confer ownership rights to a large number of tenant cultivators. But the extent of land thus transferred constituted too small a proportion of the total area to make a significant difference to inequality in land distribution. Attempts to regulate the terms in favour of tenants have not been particularly effective. There are large variations in the forms and terms of tenancy across different parts of the country; this is reflected in the strong shift from share tenancy to fixed tenancy, or from kind to cash rent. Reverse tenancy has also been observed in some parts of the country. These changes are the outcome of extra-legal factors. Of late, a growing body of opinion has it that existing tenancy laws are too restrictive and inimical to the spread of technology and the achievement of faster growth. The record of attempts to redistribute land through legal limits to landownership shows unmitigated failure. The opposition to this approach has been much wider than the support for it, and has been effective in thwarting legislation or diluting it so as to make it ineffective. The quantum of land declared surplus has generally been much less than the law would seem to imply; the amount of surplus land actually taken over is far smaller, and the extent distributed quite minuscule. It is therefore important to focus not only on land reform but on the broader socio-economic and political forces that have shaped the changes in agrarian relations in India, which is what this chapter sets out to do. While the design and implementation

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failures of land reforms legislation have often been blamed for the poor results, what is generally overlooked is the role of the caste– class composition of landholding, the distribution of ownership and agrarian relations in contributing to the failure of land reforms in India. The agrarian structure, in a sense, has tended to influence the path of agrarian transformation taken by India: where legal measures have failed to break the hold of the upper castes over large tracts of land, the market has played a crucial role over the long stretch. The passing of landownership to the middle and depressed castes, however, has been contingent on the movement of the upper castes to non-agricultural vocations, including services, trade and manufacture. The conditions for such movement have varied across the different regions of the country, depending on both extant rights of ownership and the penetration of the market. The changing locus of landownership by caste and size of holdings has had implications for collective action to maintain common pool resources, which are essential for sustainable agriculture. Institutions that functioned under a regime of landownership by upper castes have either disappeared or have become dysfunctional with the shifting locus of landownership by caste. The state has not been able to institute alternative mechanisms or to reshape these institutions so as to face the new challenges.

Land Reforms in India and China A comparison with China is quite revealing in this regard. Prereform Chinese agriculture was tenant-centred, whereas tenancy had only an insignificant place in India. Abolition of feudalism, giving land to the tiller and reduction in inequality of ownership and cultivation figured prominently in the reform agendas of post-independence India and post-revolutionary China. But land reforms in China succeeded in transferring nearly 50 per cent of the land to tenants and effecting a nearly egalitarian distribution of holdings by size. In India, in contrast, the proportion of land redistributed through reforms in the post-independence era was much lower (under 10 per cent according to one estimate), and, furthermore, there has been no significant reduction either in inequality of ownership or in operational holdings by size (see Nair and Banerjee, this volume).

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The conventional explanation for the varying responses links them to differing political structures and processes. Thus, China, with its centralized state structure under the control of the Communist Party, which wielded unchallenged power and supremacy, was well placed to push through land reforms speedily and meet with least resistance to their implementation. In sharp contrast, the post-independence state structure in India was the product of a largely non-violent freedom struggle representing a loose coalition of differing socio-economic interests. It was not driven by any ideology of radical transformation of society and, consequently, opted for a democratic and gradualist path towards change. This is best reflected in the Constitution of India, which, while declaring its resolve to eliminate socio-economic inequality and discrimination as enshrined in the directive principles of state policy, also provides sufficient safeguards to private property through fundamental rights, which has acted as a deterrent to any attempts to push through radical reforms. Also of importance in this context are the striking differences between the two countries with respect to social ordering and agrarian organization. By all accounts, Chinese society has been relatively more homogeneous in terms of ethnicity, religion, language and other social characteristics compared to India, which is marked by great diversity in all these aspects, with caste being a strong and pervasive basis of stratification both socially and economically. Those on the lowest rungs of the caste hierarchy were precluded from owning or cultivating land; they contributed to agriculture essentially as labourers. Landless workers have thus been an important segment of agricultural workers in India. In China, on the other hand, the incidence of wage labour in agriculture has traditionally been rather insignificant. Most farm work was done by tenant cultivators using family labour. Given the highly skewed pattern of ownership of land, as was the case in pre-revolutionary China and remains so in India, a mismatch obtains between the distribution of labour requirements for cultivation and that of availability of household labour across ownership holdings of different sizes. This mismatch has to be managed either through land-abundant households leasing out land to tenants, or through mobilizing the labour power of landless or land-poor households in various ways. In China, tenancy was the predominant mechanism for this, while in India tenancy has

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been far more limited and hired labour of various forms, bonded, attached or free, has become the dominant form. This asymmetry between the two countries is only partly accounted for by caste in India and its absence in China. (The following argument is elaborated in a paper by Vaidyanathan and Jose [1977].) Agro-climatic conditions are also of consequence in this regard. In India, the timing and duration of cultivation are shaped crucially by the unpredictable monsoons. The bulk of rainfall in most parts of the country is limited to three to four months, preceded by long, hot and dry summers that leave the land hard and dry. Efficient and timely preparation of land with the onset of the monsoons is not possible without using considerably more draft power than manual work can provide. This situation renders ready access to animal power essential, as is evident from the near-universal ownership of draft animals among cultivators of all sizes. The fact that landless and land-poor households do not have the resources to acquire and maintain animals is arguably an important factor, besides caste, that has limited the role of tenancy as the means of adjusting the land–labour distribution mismatch. The situation is very different in China, where agro-climatic conditions and the access of large parts of the cultivated area to perennial streams and rivers, harnessed through centuries of community and state collective effort, permitted manual land preparation and the widespread use of hoes, and little or no use of animal power. The conditions were thus favourable for extensive use of tenancy rather than wage labour for cultivation. While ownership was highly skewed, cultivation was done by a huge number of relatively small tenants. This made for a sharp polarization between landowners and tenants as the principal axis of political mobilization during the revolution. The existence of wage labour, the importance of caste and the bewildering variety of their combinations make political mobilization for land reform and land distribution far more difficult in India. It is significant that political struggles for tenancy reform have been weak and limited largely to a few states. Kerala, Karnataka and West Bengal went through prolonged and often violent agitations in the face of strong opposition and legal challenges from landowners, before the state could initiate and implement some measures of land reform. As a consequence, the

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quantum of land transferred comprised only a small fraction of the total land available for redistribution, and in the long run it did not make much difference to the inequality in the distribution of land.

Agrarian Changes in India and China Since the mid-20th century, the agrarian economies of both India and China have experienced major changes. A broad overview of their differing trajectories of growth and development is both instructive and revealing. Both countries have pursued active policies to enhance land productivity through expansion of irrigation and technological improvements. As a result, output has increased at historically unprecedented rates. Agriculture has become more diversified and market-driven; production for subsistence has also given way to increasing commercialization. The rapid growth of non-agricultural and urban-based activities has had the effect of reducing dependence on agriculture as a means of livelihood in relative terms. These changes have impacted agrarian organization, production relations within agriculture as well as the relationship between agriculture and the rest of the economy. However, these changes have followed different trajectories in the two countries as well as in different regions within each country. Post-revolutionary China witnessed the abolition of private property in land, followed by an egalitarian redistribution of use rights, collectivization and tight regulation of production and distribution both in agriculture and in the rest of the economy. The problems experienced during this period and the resulting political turbulence led eventually to the radical shift since the early 1980s towards liberalization, the relaxation of restrictions on private enterprise and trade in the agricultural sector, the opening of the rest of the economy to foreign investment and the import of technology, and a phenomenal pace of export-driven overall economic growth. The upshot of these changes has been the rapid diversification of employment, out-migration from rural to urban areas and significant changes in the regulation of access to and use of land in rural areas. These processes are well acknowledged and need not detain us any further. India has also experienced historically unprecedented technological change and growth in agriculture, though the pace of

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change during the last two to three decades has been slower compared to China, as reported in their official statistics. However, the distribution of ownership remains more or less as skewed as 50 years ago. Reported tenancy incidence has come down. Inequality in operational holdings has actually risen. Rural employment has become more diversified in relative terms, but in absolute terms the number of people dependent on agriculture has declined only marginally. The proportion of rural workers dependent on wage labour has in fact increased. However, the social composition of landownership and cultivation and of wage labour and its utilization has changed in important ways, and has shaped the political and social dynamics of India in recent times.

Changing Locus of Landownership in Rural India Given the importance of caste in India, the social composition of landownership and cultivation is of special interest for understanding the dynamics of agrarian relations. Systematic investigation of this aspect is of relatively recent origin. Several anthropological studies and early settlement reports reveal clearly that, in the 19th and early 20th centuries, landownership was concentrated among the upper and middle castes. The lower castes were largely either tenants or labourers. This pattern showed some signs of change in the first half of the 20th century. There is now growing evidence that this process of change has become stronger and wider in recent decades. Several studies document this phenomenon and the factors that have contributed to it in the context of south India. Notable among these are studies of the changing caste composition of landownership in Tamil Nadu based on data from successive revenue settlement reports starting 1880. (Notable among these are Athreya, 1984; Gough, 1989; Guhan, 1983; Guhan and Mencher, 1982; Naidu, 1995a, 1995b; Sundari, 1991; Vaidyanathan and Janakarajan, 2004; and Yanagisawa, 1989, 1996.) These studies show that in the late 19th century, the dominant landowning class consisted mostly of the numerically small upper castes. For instance, Gough’s (1989) study of greater Kumbapettai showed that in 1897, 61.1 per cent of the land was owned by the Brahmins and 7.3 per cent by the Vellalas resident in the village. Yanagisawa’s (1996) study of

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villages in the wet and intermediate zones of Tiruchirapally district reveals that, in the late 19th century, Brahmins and Vellalas, who constituted about 18 per cent of the population, owned nearly 60 per cent of the lands. In most of the tank ayacuts of the Palar basin studied by scholars from the Madras Institute of Development Studies (see Vaidyanathan [2002] for references), it was observed that ownership of wetlands in the late 19th and early 20th centuries was concentrated among Brahmins and the highcaste Hindus who cultivated their lands with tenants and labourers. Being socially and economically dominant, they could decide and enforce the terms of tenancy and labour relations. The composition of landownership started changing from the early 20th century as members of dominant landholding castes began to move out of the villages to take up government jobs, enter professional occupations and establish businesses in urban areas. These trends intensified with the increasing diversification into urbanized occupations that accompanied the spread of education. Initially, dominant landholding castes continued to be locally powerful, and could rely on their kin networks to supervise cultivation and collect rent from tenants. For instance, Gough (1989) observes that in 1952, 32.2 per cent of the land in Kumbapettai was held by residents and 24.5 per cent by non-resident Brahmins. ‘Most of the land belonging to the absent Brahmans was leased on favourable terms called ul-kuthak(a)i (“inside tenure”) to Brahman intermediaries within the village, who re-leased it on cultivating tenures (kuthakai) to Non-Brahmans or Harijans or, more commonly, had it cultivated by labourers’ (ibid., p. 273). But as out-migration from this class increased, and their numbers in villages dwindled, their ability to ensure efficient cultivation of their lands weakened. As their economic stake in agriculture declined, more and more of them were inclined to dispose of their lands. This opened up opportunities for middle and lower castes to acquire land. In the Palar basin in the early 1990s, Janakarajan (1993) found the Naickers emerging as one of the major landowning groups, and in several places Harijans were also acquiring land to a significant extent. In some cases, as noted earlier, political struggles that led to tighter tenancy laws and stricter enforcement of these laws also contributed to this process of change. The very existence of laws that sought to check eviction and control rents may also have

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strengthened tenants’ bargaining power. Their ability to avail of these opportunities became stronger with the spread of education, the growing social and political assertiveness of these groups, and the fact that a sizeable and increasing number of them could procure the means to acquire land through government jobs as a result of reservations, growing urban employment opportunities and, more recently, migration to the Middle East. The land-poor and the tenants also benefited, though only to a limited extent, from tenancy reform and preferential allotment of government lands to Scheduled Castes. The process, it needs to be underlined, was by no means smooth or free of conflicts. Implementation of ceiling and tenancy laws has been strongly, and in large measure successfully, resisted by landowners. The latter became less willing to lease out land even under conditions of labour shortage. Leases were not registered, and many of them were for short durations—less than one year— so as to prevent tenants from claiming rights. It is believed that the recorded and reported incidence of tenancy understates its true extent. Neelakantan, a keen observer of rural transformation, is inclined to believe that with the broadening of the labour market, the growing diversification of employment opportunities and rising wage rates, owner-cultivators have found it difficult to manage cultivation. Supervision of hired labour has also become more difficult because of erratic and uncertain supply of electricity, forcing well-owning farmers to irrigate their lands at night. A combination of these factors, he suggests, has led to a situation where land belonging to owners at the upper end of the spectrum is either being left uncultivated or being switched to the cultivation of tree crops. These arguments are plausible, though impressionistic and in need of careful investigation. The relative importance of the different means (outright sales, conferring ownership rights to tenants, distribution of ceiling surpluses and government land to the socially underprivileged, etc.) by which this diffusion has taken place is, however, far from clear. In any case, it is significant that this process has made hardly any difference to the inequality in landownership or cultivation in terms of holding size. Clearly, transfers of land to middle and lower castes must have benefited mainly those sections of these groups that commanded ample resources and/or influence. We do know, however, that even in the most successful cases of tenancy reform,

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a substantial part of the transferred land benefited tenants with medium-sized holdings. The quantum that small and marginal tenant cultivators got was quite small. The process of wider diffusion of landownership across castes is taking place in other southern states as well. The village resurveys sponsored by the Kerala Research Programme for Local Level Development (KRPLLD) recently found similar trends in Andhra Pradesh, Tamil Nadu and Kerala (Rao and Reddy, 2008; Village Studies, This tends to confirm the assumption that the process has quickened and become more widespread. Scattered studies of this phenomenon in other states suggest similar changes taking place in other parts of the country. These changes have larger ramifications for society and politics. But their nature and extent, the forces driving them and their impact are likely to differ from region to region. Given the wider social and political ramifications of these changes, research on land relations and agrarian structure in the context of these differences is surprisingly meagre and needs to be intensified. The changing social composition of landownership and cultivation has come at a time when demographic pressure on land is increasing rapidly. The average size of both ownership and operational holdings has declined steadily. With inequality in land distribution remaining pretty much unchanged, the proportion of rural households depending on wage labour for their livelihood— consisting mostly of landless and land-poor households—has grown. The social composition of wage labour, which consisted mostly of Scheduled Castes and castes on the lowest rungs of the caste hierarchy—has become more diversified. Patterns of wage employment have also changed: the incidence of ‘attached’ labour and regular employment for a season or on an annual basis has declined sharply. Most wage labour in rural India now comprises casual labourers. Systems of wage payment have also changed: payment of wages in kind has given place to cash wages; the importance of group contracts at piece rates has increased. Labourers are now free to work for employers of their choice within the village and also to take up employment outside the village. The incidence of villagers taking up outside employment, by commuting, migrating seasonally and even on a long-term basis, has increased.

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Overall employment opportunities in agriculture have increased along with the growth of agricultural production. But the supply of wage labour has been increasing relative to that of family labour in rural farm and non-farm enterprises. Several elements of the new technology use much less labour than traditional techniques. The apprehension that this would lead to increased unemployment and lower wages for labour households has been belied. Rural wage labour has benefited from the relatively faster expansion of non-agricultural employment opportunities both within and outside villages. Increased bargaining power due to unionization in some regions and, more generally, increasing assertiveness on the part of the rural under-class, have together contributed to this situation. Rural wage rates have been rising in real terms, and farmers’ complaints of the shortage and high cost of labour are widespread.

Implications of Changing Landownership The wider diffusion of landownership among different social groups and the growing economic, social and political interaction between villages and urban areas have greatly enlarged livelihood opportunities for all sections (including the landless and the land-poor) and enabled them to take advantage of these opportunities. The advent of electoral politics and its extension to local governance have given greater voice to the underprivileged segments of society in the political process. Massive government programmes to expand basic social services and transport networks and to raise the productivity of land have made a major contribution to this process. These are clearly liberating, and therefore welcome, changes. Their impact (in terms of incomes, employment and human development indicators), however, has been uneven. In all respects, rural–urban and regional disparities remain large, and may even be increasing in some respects. Within rural areas, the incidence of income and nutritional poverty remains at unacceptable levels. There is considerable evidence that irrigation, technological improvements and institutional credit have, in a relative sense, benefited larger farmers more than small and marginal ones. Average literacy levels, educational attainments and health status indicators are much below accepted standards. In all these

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respects, the condition of the poorer segments, comprising mostly underprivileged social groups, is far worse than the average. State policies to address these problems through affirmative action and development programmes are meant specifically to benefit these groups. Dissatisfaction with the persistent gap between people’s rising expectations and actual improvements, and between the promise and performance of state policies, is widespread. It finds expression in numerous protests and agitations in the public space and through the media, civil society organizations and political parties. With growing political consciousness and participation, Other Backward Classes, Scheduled Castes, Scheduled Tribes and minorities, who comprise the bulk of the poor, have become more active in venting their frustrations and more assertive in pressing for redress. The growing voice and influence of these groups in politics at all levels is to be welcomed as a sign of vibrant democracy. At the same time, it has increased caste-centric, as distinct from class-centric, social tensions. This makes the task of forging a democratic consensus more complicated and difficult. This is evident at the village level. For instance, numerous instances may be cited of upper castes resenting the acquisition of land by those belonging to Scheduled Caste and Muslim communities. Other traditionally landed castes find it difficult to accept this reality and to incorporate these groups into the hierarchy. It is important that we understand this process, as it has a significant impact on community control over land. The changing social composition of land control, increased interactions with the wider economy and polity, the greatly enhanced developmental and regulatory roles of government and its bureaucracy and the advent of electoral politics have led to significant changes in local governance and power structures. In the past, there was greater congruence between landholding and social hierarchies, and dominant landholders had effective power to make and enforce conventions on many aspects of community life, such as the conventions governing access to and use of common lands, maintenance and management of water sources, temples and other common facilities, the role and functions of the various castes, labour relations and the resolution of disputes. All this has changed dramatically. The caste locus of local power has shifted and become more diffuse. Many of these activities have

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passed to the jurisdiction of government functionaries and local members of state and national parties. Many local facilities—primary schools, primary health centres, drinking water and roads—are meant to serve a community of users. Increasing the production potential of land and irrigation water, both of which are in the nature of common pool resources, calls for integrated planning and collective management. Their effectiveness is crucially dependent on building a tightly knit, transparently run set of institutions based on clearly defined rules and mechanisms for deciding the entitlements of different uses and users and their obligations for the maintenance and upkeep of these facilities either directly or by contributing to the costs, and effective mechanisms to ensure compliance with rules. Such institutions did exist for local irrigation works, village temples and festivals and the regulation of access to and use of common lands, and functioned effectively under traditional local power structures. But these have become weakened and conflict-ridden, with governments taking little interest in reshaping such institutions in the changed context (Vaidyanathan, 2002, 2006). While electoral politics has given greater voice to the landless and the land-poor from the lower castes, neither they nor traditional local leaders have much of a role in the choice of local development schemes, their implementation and continuing management (Narayana, 2007). They can only seek to influence these matters by petitioning and cajoling local officials or by seeking to influence decisions by appealing to higher levels of bureaucracy or through party channels. The 73rd and 74th constitutional amendments seeking to empower elected panchayats with the resources and authority to decide and implement local-level development programmes have made little difference to the situation. Mandatory elections are not always held according to prescribed schedules. The power to decide on what projects to take up and how they are to be implemented remains with the bureaucracy. The elected representatives have little effective say in these matters or in ensuring that the facilities created are managed well and deliver services to beneficiaries. The fragmentation of developmental functions across several line departments, the huge scope for corruption in their implementation and the near-total lack of accountability for their results have become notorious features of rural development programmes and the quality of social services.

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Elected panchayati raj representatives are aware of these deficiencies and are increasingly becoming impatient with the reluctance of state- and national-level politicians to implement the spirit of the constitutional amendments. They have been voicing their demands at numerous forums for the effective transfer of power and authority to panchayati raj institutions. Some recent initiatives of the centre seek to address this problem by rationalizing various centrally funded programmes and making panchayati raj institutions effectively responsible for their planning and implementation. But states still resist this move, which is intensifying the palpable and growing tension between political leaders at the sub-district and village level and upper-tier politicians. An intensification of this tension and contests over this issue could give further impetus to the struggle to carry the process forward. It is essential both for improving the efficiency and accountability of public development programmes and for deepening democracy.

Conclusion The abolition of zamindari and other forms of intermediary tenure, the protection of the rights of tenants, ceilings on landownership and the redistribution of surplus towards achieving an even distribution of land among the rural population have been subjects of debate and legislation in India since pre-independence days. Except for the abolition of zamindari and land reforms legislation in a few states in the post-independence era, the story of land reforms in India has been rather dismal on the whole. Where legislation has failed, the market has played a crucial role in influencing the transfer of landownership from the upper castes to the middle and depressed castes, as is evident from studies of Tamil Nadu based on revenue settlement reports starting 1880. The process of wider social diffusion of landownership has not only intensified in the course of the 20th century, but has spread beyond Tamil Nadu to the other southern states as well. The relative importance of the different means by which landownership passed from the upper castes to the middle and lower castes is an issue that has received less attention and notice than it deserves. This changing locus of landownership by caste and size of holdings has far-reaching implications in the larger context of sustainable agriculture. The upward mobility of the intermediate and lower castes and their growing assertiveness have led to rising

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caste-centric social tensions. The loosening of the relationship between landholding and social hierarchies has led to the creation of a vacuum in institutions of maintenance and management of water resources and common pool facilities. Authority over many of these activities has passed to government functionaries, who function poorly despite the constitution of local self-governments, leading to growing tensions between political leaders at the village level and the ‘upper-tier’ political class. A resolution of these tensions is essential for improving the efficiency and accountability of public development programmes. This assumes particular significance in the context of the present agrarian crisis.

References Athreya, V. B. 1984. ‘Vadamalaipuram: A Resurvey’, Working Paper No. 50, Chennai: Madras Institute of Development Studies. Gough, Kathleen. 1989. Rural Change in Southeast India: 1950s to 1980s, New Delhi: Oxford University Press. Guhan, S. 1983. ‘Palakurichi: A Resurvey’, Working Paper No. 42, Chennai: Madras Institute of Development Studies. Guhan, S., and Joan P. Mencher. 1982. ‘Iruvelpattu Revisited’, Working Paper No. 28, Chennai: Madras Institute of Development Studies. Janakarajan, S. 1993. ‘In Search of Tanks: Some Hidden Facts’, Economic and Political Weekly, 28(26), pp. A53–A60. Naidu, Chandrasekara V. 1995a. ‘Enathimelpakkam Revisited 1993–94’, Working Paper No. 127, Chennai: Madras Institute of Development Studies. ———. 1995b. ‘Verkadu: A Resurvey’, Working Paper No. 129, Chennai: Madras Institute of Development Studies. Narayana, D. 2007. ‘Participation of the Poor and Excluded in Local Governance: The Indian Decentralization Experience’, in A. Vaidyanathan and K. L. Krishna (eds), Institutions and Markets in India’s Development: Essays for K. N. Raj, New Delhi: Oxford University Press, pp. 360–93. Rao, G. N., and D. N. Reddy (eds). 2008. Rural Transformation: Perspectives from Village Studies in Andhra Pradesh, New Delhi: Daanish Books. Sundari, T. K. 1991. Caste and the Agrarian Structure: A Study of Chingleput District, Tamil Nadu, South India. New Delhi: Oxford/IBH and Thiruvananthapuram: Centre for Development Studies. Vaidyanathan, A. 2002. Tanks of South India, New Delhi: Centre for Science and Environment. ———. 2006. India’s Water Resources: Contemporary Issues on Irrigation, New Delhi: Oxford University Press.

82 a A. Vaidyanathan Vaidyanathan, A., and S. Janakarajan. 2004. ‘Water Management and Agriculture in the Palar and Parambikulam–Aliyar Systems in Tamil Nadu’, Monograph Series 3, Chennai: Madras Institute of Development Studies. Vaidyanathan, A., and A. V. Jose. 1977. ‘Absorption of Human Labour in Agriculture: A Comparative Study of Some Asian Countries’, Working Paper No. 56, Thiruvananthapuram: Centre for Development Studies. Village Studies. Accessed on 15 July 2009. Yanagisawa, Haruka. 1989. ‘Mixed Trends in Land Holding in Lalgudi Taluk: 1895–1925’, Economic and Social History Review, 26(4), pp. 405–35. ———. 1996. Century of Change: Caste and Irrigated Lands in Tamil Nadu, 1880s–1970s, New Delhi: Manohar.

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Chapter 4 Population Pressure and Labour Intensification: An Indian Historical Perspective N. Krishnaji Population pressure on land can be associated unambiguously with

falling land–person ratios. But the consequent agrarian change may be many-sided, involving multiple cropping, technological improvements for raising the productivity of land and labour, shifts to high-value crops and so on. This chapter does not pursue this complex process in its totality; instead, it focuses on one of the underlying factors, namely, labour intensification. This partiality of focus needs explanation. The proliferation of households with small landholdings has been a characteristic feature of Indian agriculture since independence. The persistence of this feature and its obvious connection with demographic change have not attracted as much scholarly attention as has the inverse relationship between farm size and productivity, noticed from the early 1960s, with distinctly higher levels of output per unit of land in smaller holdings. This well-documented inverse correlation has been the subject of much economic analysis: higher use of labour (especially family labour) has been identified as a key causal factor. It is possible to regard both these empirical findings—the growing number of small farms, and the intense use of labour in them—as two, inter-related aspects of the same long-term dynamics associated with population pressure under changing economic conditions: one manifesting itself at the macro-level, and the other at the household level. This chapter is an attempt at a synthesis of the Indian experience based on such an understanding. The next section contains a brief review of some relevant theoretical perspectives. It considers first the theories of Malthus and Boserup, which refer directly to the effects of population growth and pressure. It then moves on to review Marxist formulations of the persistence of the small peasant economy set out in the

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general context of the development of capitalism. However, the influence of demographic factors hardly ever finds a place in these formulations. Subsequent sections present some statistical analyses of the post- and pre-independence periods, respectively. This reversal of the chronological order in presentation is useful, because for the period after independence we need only to present the substance of the extensive literature on the subject, which provides a retrospective point of view for analyzing the sparse data of the earlier period.

Relevance of Theories Theories based on models portray conditional truths; they cannot explain historical change over the long period. Hence, the conditions that qualify models, and their possible relevance to observed changes in given periods of time, need to be examined. Malthus (1961) does not consider population pressure as we do here in terms of worsening land–person ratios. In his analysis, unchecked population growth combined with diminishing returns to land produces declines in food production (per head), which in turn lead to famines and high death rates. Thus, mortality is the most important and inevitable means of population adjustment to given resources. Malthus also considers the other side of the relationship, which describes how population change occurs in response to resource use. In his view, improvements in the supply of the ‘necessities of life’ promote early marriage and more children among the poor. Malthus’s ideological and moral background, which led him to this reasoning, and his stand on the ‘poor-laws’ in England, do not concern us here; more important and relevant are his model and the prognosis for humanity he derived from it. In this context, the questions to be asked are: whether population growth leads inevitably to worsening food supplies and whether such shortage leads to famines and excessive mortality. It is possible to regard declines in food supply per head as a reflection of population pressure; the question then is whether such declines bring about famine deaths. Malthus has proved to be a false prophet—a fact acknowledged even by those who talk about the population bomb in the modern context. Consider recent history. On a worldwide scale, population has expanded at unprecedented rates (2 per cent per annum or

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more in many countries) during the latter half of the 20th century, but food production has not lagged behind. For example, the growth in foodgrain production outstripped that of population in the Third World countries as a whole during this period. Moreover, the growth rates in foodgrain production have in general been higher in the so-called less developed countries than in the developed ones (Dyson, 1996; Paulino, 1986; Sen, 1994). However, in several poor countries—notably Bangladesh and some countries in the sub-Saharan region—as also in sub-regions within certain countries, such as Kerala and the eastern region in India, foodgrain production has lagged behind population in certain sub-periods. It must be emphasized, though, that the decline in per capita production and the consequent emergence of chronic food scarcities have nothing to do with the rapid rise in population these regions have experienced mainly due to the continuously falling death rate. Domestic food supplies are restricted by the patterns of land use, which are determined both by internal factors, such as the extreme inequality in landownership, and by external factors leading to the dependence of poor economies on the cultivation of exportable produce: fruits, cocoa, groundnut, palm oil, etc. In a number of Third World countries, political independence has not led to a weakening of the external links forged by colonial dominance, which continue to influence cropping patterns. One clear lesson from this historical experience is that checks to population growth through high mortality have not emerged, as they should have in accordance with the Malthusian model. True, since the time of Malthus, there have been many famines that have taken a heavy toll on human lives. For the most part, however, famines have been local rather than global in their occurrence, rare and short in duration; moreover, it has been argued convincingly that many famines—including the great Bengal famine of the 1940s—were caused not so much by the decline in food availability as by ‘entitlement failures’, in particular the erosion of purchasing power among the poor (Sen, 1981). It is clear that famines and epidemics are sui generis, and the factors behind excess famine deaths need to be investigated separately in each case. Hindsight enables us to see that the failure of the Malthusian model arises from the fact that it is essentially a closed model. If the extent of land is given, the scope for increasing yields limited, and both migration on a big scale and external trade are ruled out,

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then population increases produce declines in food production and supply per head in accordance with the model. But we know now that technological change has been taking place continuously, productivity of land has been increasing and populations getting redistributed—more in some regions and periods and less in others, but nevertheless significantly over the long period and in global terms. Above all, countries and regions within countries do not constitute closed economic entities; trade and other types of transfer play an important role in food supplies. The anti-Malthusian argument derives from the capacity of human beings to adapt and innovate in response to changes in the environment. Ester Boserup’s historical analysis of technological change in agriculture—ranging from long fallow systems to the intensification of land use, with associated changes in the use of inputs—is relevant, not only as a fairly accurate description of history, a history made by human beings in adapting to the changing environment, but also because in many Third World countries these different systems coexist in varying proportions. For example, in India shifting cultivation still takes place in the north-east, while ‘modern’, intensified agriculture is practised in the Punjab and other regions. The technologies for raising the productivity of land are known, and the scope for raising the yield per unit of land in India as a whole, as in a number of other poor countries, must certainly be very significant. The scope is not limited directly by population growth and density but by other factors, such as the pattern of landownership, public investment and support of various kinds, and so on. Boserup’s (1965, 1981) discussion of innovation as a response to population growth refers essentially to a situation where the land frontier has been reached. However, her analysis can be seen to be useful even in the context of economies where land extension is still possible. For example, as in colonial India, small peasants— in large numbers—may have limited or no access to additional land (under different forms of tenure). Agricultural intensification (encompassing all types of change to garner subsistence, including increases in family labour use) on small landholdings can then emerge as a distinct phenomenon, independent of changes induced by feudal and colonial interests. We discuss this in the Indian case later in this chapter.

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Marxist discussions of the survival of the small peasant economy under conditions of developing capitalist relations in agriculture and the emergence of technologically superior, large-scale farming refer explicitly to the factors underlying such survival. Marx himself wrote briefly about the non-applicability of the profit calculus to the economics of peasant farming: For the peasant owning a parcel, the limit of exploitation is not set by profit of capital . . . . The absolute limit for him as a small capitalist is no more than the wages he pays to himself, after deducting his actual costs. So long as the price of the product covers these wages, he will cultivate his land, and often at wages down to a physical minimum. (Marx, 1974, pp. 805–6)

Sen (1962) reframes this proposition with reference to the conditions of Indian agriculture in the period immediately following independence, characterized by a large peasant economy coexisting with markets for wage labour. Simply stated, Sen’s theory suggests that a peasant can push his family labour to the limit irrespective of wage rates, while a capitalist employs hired labour only up to the point where the marginal product of labour equals the wage rate. Lenin (1964) developed a coherent model of the process of capitalist penetration into the agrarian economy. Based on earlier Marxist writings (including, notably, those of Karl Kautsky), the model identifies the development of capitalism with the progressive alienation of the direct producers from the means of production, and the consequent emergence of the classes of labourers and capitalists at polar extremes. The separation of peasants—the direct producers—from land converts them into wage-dependent labourers. At the same time, the process creates home markets on an increasing scale for both consumer goods and those required for agricultural production, hitherto produced by the peasants themselves. The model is thus an integral one, embracing the development of land, labour and commodity markets. What, however, is the process through which the peasantry is alienated from land? The question is not usually raised in this stark fashion, but in Marxist studies repeated reference is made to the inability of the small peasant to survive under developing market conditions that establish the superiority of large-scale production, presumably operating with a variant of the big-eats-small jungle law. This leads

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to a chicken and egg problem with regard to how markets penetrate into agriculture and dissolve the peasantry, further developing the markets. We can ignore this in the context of the history of colonialism that played a significant role in the development of markets. The qualifying conditions in Lenin’s model relate to the ability of small peasants to survive under emerging capitalist agriculture. Lenin says that the existence of a small peasantry in every capitalist society is due not to the technical superiority of small production in agriculture, but to the fact that the small peasants reduce the level of their requirements and tax their energies to the limit (Lenin, 1964). Further, even if the ‘technical superiority’ of largescale production is established, the small peasant may get involved increasingly in commercial cropping, and thereby gain greater ‘staying power’. Thus, the development of commodity markets attending the dissolution of the peasantry must be distinguished clearly from the growing entry of small peasants into such markets. Such a process retards land alienation; it may fail to lead to an ever-increasing concentration of land in the hands of a few, even as income inequalities grow. It may simply produce increasing numbers of wage workers and small peasants, the two categories overlapping and becoming indistinguishable. For a fuller discussion of the small peasant question, see Chandra (2002).

The Post-independence Period Since independence, the Indian population has been growing at over 2 per cent per annum. On the other hand, the increases in net sown area have been minimal, the growth rates for India as a whole being less than 0.2 per cent per annum after the 1960s (Bhalla and Singh, 2001). There is a certain amount of spatial variation in these different rates; nevertheless, land–person ratios have been falling everywhere. Thus, one can associate the entire post-independence period with a country-wide experience of population pressure on land. The impact of this pressure is reflected clearly in the changing distribution of landholdings. The periodic data from the National Sample Surveys and the Agricultural Census exhibit clearly a continuous increase in the number of smallholdings, in terms of both ownership and actual cultivation (operation) by households. These trends in the distribution of land are related no doubt to the ability of small peasants to hold on to their small parcels of land under changing conditions, favouring capitalist agriculture.

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Let us consider, in this context, the growth of agricultural labour. Even if the precise spatial and temporal contours of this growth cannot be mapped, given certain statistical difficulties (involving changing concepts in data), the growth itself—reflected in a declining cultivator–labourer ratio—cannot be denied if one takes the whole period after 1950. Further, data generally show the existence of ‘landed’ labourers in significant proportions, as distinct from ‘landless’ labourers. In interpreting these statistics, it must be remembered that the distribution of ‘hutment’ land under land reforms has converted some of the ‘landless’ into the ‘landed’. But in any case, landholding data show very conclusively the existence of a majority of peasant households cultivating holdings of a size that cannot fully support their families. These households earn wage incomes in addition to the subsistence derived from farming. For a detailed discussion of the role of the demographic factors in the growth of agricultural labour, see Krishnaji (1992). The Leninist model does not set an exact time-frame for the processes of market development and the dispossession of the peasantry to work themselves out. Still, the lack of dramatic changes in the distribution of landholdings over the post-independence period needs an explanation. In terms of surface areas, there is no great change in relative inequalities, although one can discern some reduction in the proportion of large holdings as well as in landlessness at the bottom end. While land reform, however poorly implemented, might have contributed to this type of observed change, there is no doubt that under-reporting of large landholdings and/or their spurious subdivision through benami transfers must also be responsible for the observed changes. Add to this the fact that large holders have generally been able to exploit technical conditions and favourable market conditions more than small peasants have, and the picture that emerges is certainly one of growing inequalities in income. One must then ask the question why such economies of scale as have actually emerged have not promoted a perceptible dissolution of the small peasantry. A clear inference from the data is that the small peasants have been able to cling to their land not only by the suggested ‘tightening of the belt’ and by taxing their energies to the limit, but also by supplementing their incomes through wage work, entering into markets as sellers of produce and so on. (In recent decades, both the development of education and the

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increase in employment opportunities in the rural non-farm sector must also have contributed to the ability of peasant families to retain ownership of land.) The persistence of the peasant sector and the intense use of labour in small farms are thus the result of a complex process in which demographic factors have also played a part through the subdivision of landholdings. It is interesting to note in this context that the inverse relationship between farm size and productivity of land holds under spatial aggregation. To explain: small household holdings are more productive by virtue of higher use of labour and other means of improving productivity of land everywhere at the village level. An aggregation of holdings across villages may not reproduce the inverse correlation between the size of holdings and productivity in terms of averages at the aggregated level for the simple reason that the mean size and the distribution of holdings vary much across villages. In fact, however, such an inverse correlation—between land–person ratios and land productivity— has been observed consistently across districts for the period after the 1960s (Bhalla and Singh, 2001; Krishnaji, 1992). The following section examines the implied positive association between population density and labour intensity.

The Pre-independence Period Census data available regularly since the 1870s show that population growth in India began to accelerate from the 1920s. Earlier decades were marked by high rates of fertility and mortality under which the population grew haltingly and at very low rates. Thus, during the half century preceding 1921, the population of the Indian subcontinent (including the areas now in Bangladesh and Pakistan, and the regions not under direct British rule) grew by a mere 20 per cent from 255 million to 306 million, implying a simple annual average growth rate of 0.4 per cent. During three decades of this period, viz., 1872–81, 1891–1901 and 1911–21, the population levels were virtually stagnant (Visaria and Visaria, 1982). This pattern of unsteady growth, under a regime of unchanging high fertility, was the result of normally high mortality rates combined with the heavy toll on life that famines and epidemics took periodically in different parts of the region. The decade 1921–31 registered an unprecedented, high growth rate of over 1 per cent per annum. This was no doubt because of the low population base

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in 1921 that was the result of the influenza pandemic of 1918–19; excess deaths caused by the flu led to much population loss in several parts of the subcontinent. The growth during the 1920s is remarkable nevertheless, because the region as a whole has been experiencing high rates of population growth ever since. Famines and epidemics causing excess mortality have tended to be local and region-specific, never country-wide in their spread. This meant that population levels fluctuated a lot at the province level, more so than they did in British India as a whole. Thus, there were occasional population declines over certain decades: for example, during 1901–11 and 1911–21 in the United Provinces, and in 1891–1901 and 1911–21 in Bombay–Sind and the Central Provinces (Visaria and Visaria, 1982). Let us turn now to the expansion of areas under cultivation. Table 4.1 presents the trends in gross cropped area per person (GCAP) in the British Indian provinces for the period 1891–1941. Greater Bengal experienced a continuous fall in GCAP. Apart from this, the data exhibit fluctuating trends over the period 1891–1921 and steady declines thereafter. The erratic levels of the former period arise obviously from unsteady trends in population numbers. For example, in the United Provinces, the area per person increased from 0.74 acres in 1901 to 0.83 acres in 1911; this was actually the result of a decline in population and a less-thanproportionate decrease in the gross cropped area. During that period, population declines resulting from excess mortality were generally associated with heavier death tolls among children and the old-aged; such a pattern of mortality leads to an increase in the proportion of adults in the population. On the other hand, if the Table 4.1 Gross Cropped Area per Person (GCAP in acres), 1891–1941 Province







Greater Bengal United Provinces Madras Greater Punjab Bombay–Sind Central Provinces British India

0.72 0.61 0.69 0.94 1.28 1.50 0.81

0.67 0.74 0.70 0.83 1.17 1.52 0.79

0.63 0.83 0.68 1.12 1.25 1.50 0.84

0.60 0.83 0.68 1.11 1.29 1.43 0.82

0.54 0.78 0.64 1.20 1.24 1.38 0.77

0.49 0.72 0.58 0.80 1.11 1.23 0.70

Source: Blyn (1966); Census Reports.

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deaths among adults are proportionately higher for whatever reason, there is the possibility that children and the old-aged would be pressed into agricultural work. These are the reasons why cultivated areas may not decline in proportion to population losses. In general, when population levels change and the area under cultivation does not change proportionately or in the same direction, such fluctuations in land–person ratios (LPRs, as exhibited by the GCAP here) will emerge. On the whole, it is difficult to associate the wide fluctuations at the province level with population pressure, mainly because population growth rates were low during the period 1891–1931. However, provinces were very large entities in terms of area and population size, and we can with good reason expect fairly steady population growth and consequent significant declines in net sown area per person (NSAP) at least in some districts. A district-level regional analysis would then provide us with insights into the adjustments that occur in response to population pressure on land. Indeed, district-level data (discussed later in this chapter) show that in as many as 20 districts out of 96 in British India, population levels decreased over the four decades; while at the other extreme, 24 districts experienced growth of over 20 per cent, 15 of them more than 30 per cent. The data we use here are compiled from official publications by Reddy (1996); they refer to 96 districts covering about 85 per cent of the total population (as also of total cropped area) in British India. A few districts could not be included because of difficulties in matching population data with agricultural statistics, given the changing boundaries of districts. These area statistics for the period 1891–1931 cover net sown area (NSA), gross cropped area (GCA) and area under food crops (FA); the corresponding census data refer to population size (P) and the number of male agricultural workers (MWA), comprising cultivators and labourers. Populations in which the majority eke out a bare subsistence from land respond in many different ways to declines in LPRs. In colonial India, the direct producers, labourers and tenants, had probably a very limited control over land. Therefore, any observed changes in patterns of land use must take into account the land and labour relations specific to each region. This applies to commercial farming in particular; the conditions under which crops like groundnut, sugarcane or cotton were grown and how they shaped subsistence among small tenants varied across space and time. The present study is, however, purely statistical in nature,

Population Pressure and Labour a 93

providing summaries of changing patterns; it cannot explain the changes. To give an example: in a subsistence economy that is integrated to some extent with markets—internal and external— and in which the direct producers fully control the use of land and its products, a continuous decrease in the LPR may lead to either a fall or a rise in areas under food. The outcome will depend on a number of factors such as the relative prices of food and commercial crops, the possibilities of importing food, etc. The outcomes will be even more unpredictable when the direct producers have no control over land use. Nevertheless, the observed changes following a steady population growth can be summarized usefully in terms of: (a) migration; (b) changes in the productivity of land; (c) cropping intensity (the ratio of GCA to NSA, reflecting the use of land for raising more than one crop in a year); (d) cropping patterns (in particular the distribution of land between food and non-food crops); and (e) labour intensity (measured by the number of workers employed per acre of land). Consider migration first. There is no evidence of large-scale migration of rural populations within India (during the colonial period) in search of land for cultivation, in response to population pressure or otherwise. Migration for recruitment to plantations, mines and industry has of course altered the economies of the regions from which the recruits were drawn. But, by and large, migratory flows have not been significant enough to alter the regional variations in land scarcity, especially when the regions considered are large, such as districts. In any case, this study looks at land–person ratios; migratory flows, big or small, leave their imprint on these ratios through overall population change, including migration, over the long period. Consider productivity growth next. It is not easy to compile the relevant data at the district level. Most of the debates about Blyn’s analysis (Blyn, 1966) refer to the reliability of the productivity data. Estimates of productivities at the district level can be built up in the Blyn fashion, but their reliability will obviously be problematic. This leaves us with cropping intensity (GCA/NSA), cropping patterns (measured unsatisfactorily by the area under food in the total, FA/GCA) and work intensification (measured by the number of male workers per acre: MWA/NSA) as the only means of adjustment to population pressure that we can look at in this study. In other words, the attempt is to see to what extent these three

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characteristics of agrarian change respond to declines in the LPR (measured in what follows by the net sown area per person, NSAP). We begin the district-level analysis with the observation that population growth by itself does not bring about ‘pressure’ if farming can be extended to hitherto uncultivated areas. It is only when such extension reaches the frontier that we can talk about population pressure on land. Likewise, a fall in net sown area per person need not necessarily be a consequence of population growth: even declines in populations may bring about more-thanproportionate decreases in cropped areas (through, for example, a severe loss in the adult population). Accordingly, population pressure can be said to operate when areas per person fall sharply as population grows. Tables 4.2 and 4.3 present a two-way classification of 91 districts of British India (for which all the relevant data are available) by the growth rates of population across the rows and the extent of decline in the land–person ratio (measured by NSAP) along Table 4.2 Averages of Area and Population Variables in 1891 and 1931 among Districts Classified by Changes in Population and Net Sown Area per Person Decline in NSAP (%) Below 6 Population growth (%) Below 10 NSA (’000 acres) GCA (’000 acres) P (’000) FA (’000 acres) MWA (’000) (n)

6 and above Change (%)



Change (%)



797 925 1095 807 251

819 957 1082 832 264 35

2.76 3.46 –1.29 3.10 5.70

1292 1529 1526 1306 341

1204 1508 1623 1295 382 12

–6.81 –1.37 6.36 –0.84 12.02

1598 1731 1376 1439 325

2029 2247 1701 1694 372 10

27.01 29.83 23.64 17.71 14.54

1619 1835 1517 1441 364 34

1599 1851 1880 1381 422

–1.12 0.01 23.92 –4.16 15.93

Population growth (%) 10 or above NSA GCA P FA MWA (n)

Notes: NSA stands for net sown area, GCA for gross cropped area, P for population, FA for area under food crops, MWA for male workers and (n) for the number of districts in each cell.

Population Pressure and Labour a 95 Table 4.3 Weighted Averages of Different Ratios in 1891 and 1931 among Districts Classified by Changes in Population and Net Sown Area per Person Decline in NSAP (%) Below 6 Population growth (%) Below 10 NSAP GCA/NSA FA/GCA MWA/NSA (n)

6 and above





0.78 1.18 0.87 0.32 35

0.81 1.17 0.86 0.33

0.95 1.20 0.86 0.26 12

0.84 1.26 0.85 0.32

1.31 1.13 0.84 0.25 10

1.37 1.15 0.78 0.23

1.17 1.16 0.79 0.27 34

0.93 1.19 0.76 0.33

Population growth (%) 10 and above NSAP GCA/NSA FA/GCA MWA/NSA (n)

Notes: See notes to Table 4.2. The weights used are the denominator values in each case.

the columns. In both cases, we use the median values of the variables as the cut-off points for classification. We thus have, in the top left cell, 35 districts that experienced both low rates of population change (less than 10 per cent in four decades) and low declines in the NSAP (less than 6 per cent during 1891–1931). On an average, these districts in fact registered a marginal fall in population levels and a slight increase in the NSAP; simultaneously, there were no significant changes in the response variables, namely, cropping intensity, areas under food in the total and labour intensity (Table 4.3). These districts present an almost static picture of population and agrarian change. Consider now, in contrast, the 34 districts in the bottom right cell, with high rates of growth and sharp declines in NSAP. On an average, these districts recorded a population increase of close to 24 per cent, a marginal decline in the net sown areas and hence a large decline in the areas per person of 22.5 per cent. It is possible to see in these districts the operation of processes of adjustment to population pressure. Table 4.3 shows that in these districts, the average cropping intensity did not change much, while there was a decline in the proportion of areas under food crops; but by far the most significant

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change is in the labour intensity. The number of male workers per acre increased from 0.27 to 0.33 (by over 22 per cent). The top right cell refers to 12 districts that experienced a fall in NSAP associated with low rates of population growth. Even here, the most prominent ‘response’ was in terms of a significant increase in labour intensity. In contrast, the bottom left cell presents the interesting case of 10 districts that (on an average) recorded a slight increase in the NSAP, despite a high rate of population growth, thanks to expansion of net sown areas. This reflects no doubt the availability of land for extension in these regions; one can see that here the changes in the response variables were minimal. To see whether the relationships suggested by Tables 4.2 and 4.3 hold across all districts, we carried out simple regressions of the changes in the different response variables on the changes in land–person ratios over the period 1891–1931. Table 4.4 shows that the most prominent adjustment to declining land–person ratios was an upward one in labour intensity, with unit elasticity. (Since the regression variables are represented by percentage changes, the coefficients in Table 4.4 give us estimates of the corresponding elasticities.) Regressions estimated for each decade separately (not presented here) exhibit similar results, showing perhaps that a decade is long enough to produce the suggested upward adjustment in labour intensity. This is further confirmed by variations among districts classified into deciles by land–person ratios in 1891 shown in Table 4.5. Districts with low (high) land– person ratios are characterized by high (low) labour intensities— obviously as a result of a continuous process in operation during a long period of insignificant technological change. Table 4.4 Linear Regressions of Response Variables to Changes in Net Sown Area per Person Response variable (% changes in)


Standard error

R square


Cropping intensity (GCA/NSA) Food in total area (FA/GCA) Labour intensity (MWA/NSA)

–0.143∗ –0.007 –1.061∗

0.045 0.059 0.117

0.1047 0.0002 0.4789

91 91 92

Notes: Here the independent variable is % change in NSAP over 1891–1931 in the regressions of GCA/NSA and FA/GCA; in the case of labour intensity the % changes refer to 1901–31.

Population Pressure and Labour a 97 Table 4.5 Variations among Districts Ranked by Net Sown Area per Person in 1891 NSAP













1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

0.48 0.57 0.65 0.72 0.79 0.83 0.90 1.08 1.65 2.24

0.47 0.56 0.58 0.67 0.68 0.73 0.74 0.86 1.63 1.89

1.27 1.25 1.21 1.16 1.23 1.12 1.17 1.14 1.10 1.02

1.37 1.20 1.22 1.15 1.28 1.16 1.24 1.16 1.13 1.03

0.86 0.88 0.87 0.86 0.83 0.86 0.84 0.84 0.79 0.73

0.86 0.86 0.85 0.82 0.85 0.83 0.83 0.83 0.74 0.67

0.43 0.39 0.35 0.34 0.30 0.28 0.28 0.22 0.14 0.11

0.47 0.41 0.43 0.33 0.34 0.30 0.33 0.27 0.14 0.12

Notes: The table refers to 91 districts ranked by levels of net sown area per person in 1891. Each decile group has nine districts, except the last one that has 10 districts. For definitions of variables see notes to Table 4.2.

Conclusion The experience of the post-independence period stands in marked contrast to that of late colonial India. After independence, the state played a decisive role in agricultural development through the expansion of irrigation, the introduction of new technologies and so on. Several related policy measures, including, notably, intervention in markets for the provision of various kinds of subsidies, promoted a rapid capitalist transformation that, nevertheless, did not lead to a progressive dissolution of the small peasant economy. Instead, they led to ever-increasing numbers of wage-dependent semi-proletarians getting integrated into commerce. These changes were, however, region-specific, unlike population growth, which was fairly uniform. So, the persistent labour intensification must be interpreted as a means of survival for peasants everywhere under conditions of land scarcity. The late colonial period, on the other hand, was one of agrarian stagnation and decline. Despite the low rates of population growth during this period, some regions experienced pressure on land with substantial declines in land–person ratios. Our limited analysis shows that the ‘adjustment’ to such pressure took place largely through labour intensification, so prominently that, over

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the long period, regions with low land–person ratios continued to be characterized by high labour intensities. The analysis, does not, however, cover the question of how colonial and feudal interests influenced this process through their hold on the peasantry.

References Bhalla, G. S., and Gurmail Singh. 2001. Indian Agriculture—Four Decades of Development, New Delhi: Sage. Blyn, George. 1966. Agricultural Trends in India, 1891–1947: Output, Availability and Productivity, Philadelphia: University of Pennsylvania Press. Boserup, Ester. 1965. The Conditions of Agricultural Growth, London: Allen and Unwin. ———. 1981. Population and Technology, Oxford: Basil Blackwell. Chandra, Nirmal Kumar. 2002. ‘The Small Peasant: Marxist Tradition and Chayanov’, in Sujata Patel, Jasodhara Bagchi and Krishna Raj (eds), Thinking Social Science in India: Essays in Honour of Alice Thorner, New Delhi: Sage, pp. 31–45. Dyson, Tim. 1996. Population and Food: Global Trends and Future Prospects, London and New York: Routledge. Krishnaji, N. 1992. Pauperising Agriculture: Studies in Agrarian Change and Demographic Structure, Mumbai: Oxford University Press. Lenin, V. I. 1964. The Development of Capitalism in Russia, in V. I. Lenin, Collected Works, Moscow: Progress Publishers, vol. 3. Malthus, T. R. 1961 [1798]. Essay on the Principle of Population, London: J. M. Dent and Sons, 2 vols. Marx, Karl. 1974. Capital, Moscow: Progress Publishers, vol. 3. Paulino, Leonardo A. 1986. ‘Food in the Third World, Past Trends and Projections to 2000’, Research Report No. 52, Washington, D.C.: International Food Policy Research Institute. Reddy, C. Rammanohar. 1996. ‘Data Appendix’, in N. Krishnaji, Population Pressure, 1891–1981: Regional Variations and Consequences, Calcutta: Orient Longman, pp. 27–45. Sen, Amartya K. 1962. ‘An Aspect of Indian Agriculture’, Economic Weekly, 14(Annual Number), pp. 243–46. ———. 1981. Poverty and Famines: An Essay on Entitlement and Deprivation, Oxford: Oxford University Press. ———. 1994. ‘Population: Delusion and Reality’, New York Review of Books, 41(15). htm. Accessed on 6 March 2011. Visaria, Pravin, and Leela Visaria. 1982. ‘Population’, in Dharma Kumar and Meghnad Desai (eds), The Cambridge Economic History of India, Cambridge: Cambridge University Press, pp. 463–532.

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Chapter 5 Institutional Strangleholds: Agricultural Science and the State in India Rajeswari S. Raina The Blame Game The Indian green revolution is considered the best example of the

contributions of agricultural science and technology to enhancing agricultural production and productivity. Yet, increasing evidence of hunger and malnutrition, agricultural and rural distress heralds the 21st century in India. Without doubt, food production has increased; crop and animal productivity too, keeping pace with population growth rates. While this is a significant achievement for a country celebrating 60 years of independence, this success is singed by the fact that 48 per cent of Indian children under 5 are malnourished (UNICEF, 2008), almost half the arable land is classified as problem soils, and a few thousand farmers have been driven to suicide every year since the mid-1990s. India, dubbed the ‘republic of hunger’ (Patnaik, 2007), takes pride in hosting one of the largest agricultural research communities in the world.1 People and ecosystems in rural areas seem to have gained little over 60 years of independence from a robust agricultural research system built, supported, legitimized and celebrated by the nation-state as its answer to ensuring food security. For the first time since the successes in production and productivity during the 1960s–1970s, the state seems to be concerned about its science and technology (S&T) system. It demands institutional changes to ensure that agrarian and rural populations and the environment stand to gain from scientific research. The Eleventh Five Year Plan (2007–2012), focusing on inclusive growth, makes a specific demand on the agricultural research system: to change the research content and direction it has followed thus far, and to provide evidence of the impact of S&T on poverty, hunger, malnutrition and the environment:

100 a Rajeswari S. Raina It is necessary to take a comprehensive view of the functioning of the agricultural research system and make systemic changes in the course of the Eleventh Plan. Thus far, research has tended to focus mostly on increasing the yield potential by more intensive use of water and bio-chemical inputs. Far too little attention has been given to the long-term environmental impact or on methods and practices for the efficient use of these inputs for sustainable agriculture. These features are widely known but efforts to correct them have not been adequate; at any rate they have not made much of a difference. (Government of India, 2008a, p. 13)

There is little doubt that the agricultural S&T establishment was guided by and received legitimate accolades from the state for this very research that focused on yield potential using water and chemical inputs at the cost of sustainability. Today the state wants to make systemic changes in agricultural research. How are the goals of rural livelihoods and sustainability different from the explicitly stated food security goals of the state? Should agricultural S&T be indicted for input-intensive agriculture, a massive indigent rural population and degraded ecosystems? Given the role that the state and its decision-makers play in shaping the agricultural research system—its organization and, more importantly, the rules and norms that govern research—there is a need to be vigilant here and to revisit our contemporary history. What is the story of agricultural S&T in independent India? The story of agricultural S&T in India is often presented as the history of agricultural research organizations. Flourished with the chronology of technologies released, growth rates of crop production/ productivity and an estimation of impact as rates of return to investment in agricultural S&T, this narrative is structured to focus exclusively on the ‘technologies’ or artefacts (crop varieties, fertilizers, pesticides, tractors, etc.) generated by research. This celebration of organizational might, important scientists or scientific achievement, agricultural production (its successes or failures), excludes discussions of why and how certain types of knowledge are generated, or some forms of knowledge ignored or given relatively low priority. Most importantly, such a narrative obscures the evolution of science—of the ways in which scientific research changes its objectives, its methods and tools and thereby its results, and also learns and speaks about new knowledge.

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This chapter explores the evolution of agricultural research in India, using an institutional economics framework that focuses on the rules and norms that govern the organization and conduct of science. Such an understanding of the norms of scientific research is crucial if the state is to enable the generation of a different type of knowledge (not merely input-intensive, yield-increasing technologies) to address different goals (not merely food security but food security with social and ecological sustainability) and enable utilization by different farming communities (for instance, dryland farmers excluded from the green revolution and driven to suicide in recent times). But this demands a state that is willing to listen to research results; it also requires a research system that conducts objective scientific research to advance knowledge and enable relevant applications. The following section discusses the origin and evolution of agricultural science in the colonial era, driven by commercial interests and also a desire for the advancement of knowledge. It argues that the transmutation of the state–science relationship was not significant in the 1950s, though the state itself had changed from a colonial regime to an independent sovereign state. Though many precedents of centralization and state control are evident in the colonial period, the immediate post-independence period does not deprive agricultural science of the space for local relevance, accountability and support. The relationship changes drastically during the mid-1960s to mid-1970s, as described in the third section of this chapter. With food security and population explosion becoming the key drivers, the consolidation of the line of control and authority of the state over agricultural research characterizes the state–science relationship in this period. By the 1980s, the norms of control put in place by the state, focusing on food security, took a toll on agricultural science; stagnation and frustration marked both science and the state’s goal of food security (along with increasingly desperate measures to sate the medium- and large-farm lobbies in irrigated tracts with subsidies and price incentives). Having taken overall the constitutionally assigned state-level responsibilities for agricultural science and development, the central government begins to distance itself from, review, and recommend reforms for, the Indian Council of Agricultural Research (ICAR) and the norms of agricultural research it created, as described in the fourth section. The fifth section

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presents a brief overview of the current distress expressed by the state. The lacklustre performance of agricultural S&T, especially in the face of escalating agrarian, rural and environmental problems, is an outcome of the heavy hand of centralization and bureaucratization of scientific research. To what extent should the state direct and control science? The concluding section describes a current, somewhat bizarre replay of the 1960s when a crisis-driven change in agricultural research did occur. Science has to find its way out of the current institutional stranglehold. It has a few partners who appreciate the need for scientific expertise to address agricultural production and environmental goals, valuing the multiple roles and functions of agriculture.

The Orchestration of Formal Agricultural Science The history of agricultural science glosses over the fact that statesponsored scientific research existed in India and other colonies long before it did in Europe. In effect, the utilitarianism of the colonial era characterizes agricultural science till date. Formal agricultural research in India began in 1809 with a small camelbreeding station for the cavalry of the East India Company, graduated to research for colonial commercial interests (cotton, to begin with), and was accompanied by the development of organizational forms of scientific inquiry popular in Britain, such as botanical gardens and agri-horticultural societies.2 Some experimental stations established by the provincial governments and the central department of agriculture followed in 1881, along with several agricultural and veterinary colleges at the turn of the century. The Imperial Agricultural Research Institute in Pusa (Bihar), established in 1904, was the first central research organization with an all-India mandate. The Cotton Committee (1917) was granted, by the Cotton Cess Act (1923), its own research organization and funding from the very crop it studied. This was followed by several new central research institutes focusing on specific commodities or animals, as well as by commodity committees for cotton, lac, tobacco and oilseeds. The Royal Commission on Agriculture’s (RCA, 1928) critique of the narrow commodity committee model led to the establishment of the Imperial Council of Agricultural Research in 1929. Following

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partition and independence, the Government of India inherited 12 national (central) research institutes, 21 agricultural and veterinary colleges and eight commodity research institutes (under their respective private or quasi-private commodity committees), besides the ICAR and several provincial research institutes. Multiple models of research and education organizations marked the 1950s. The Project for Intensified Regional Research on Cotton, Oilseeds and Millets (PIRRCOM, which later became the AllIndia Coordinated Research Project of the Indian Council of Agricultural Research), and the Technical Cooperation Mission (TCM) for collaboration with US universities (which culminated in the establishment of state agricultural universities [SAUs]), were the two important additions during this phase. All these research organizations and coordinated research projects were consolidated under the ICAR in 1965, transforming the multiple research models, funding sources and accountabilities into a single, central government department. Several organizational formats and types of interactions in agricultural knowledge had existed till the mid-1960s, right from the time the provincial governments established the initial, statesponsored experiment stations starting in the 1860s. Even when the central department of agriculture was organized in 1881, with agricultural inquiry as one of its mandated functions, the colonial regime looked for ways to organize provincial departments for conducting agricultural enquiry, agricultural improvement and famine relief, reinforcing the responsibility of the provinces to conduct agricultural experiments and promote research results locally (RCA, 1928). Thus, cotton in the Central and United Provinces and Bombay presidency, groundnut and sugarcane in parts of Madras presidency, winter rice and fruit in Assam and wheat and rice in the Punjab were researched and legitimized specifically by local provincial governments. With increasing investment in and the production of graduates from the agricultural colleges in the presidencies (the first to be established being in Saidapet, 1876, in Madras presidency, and in Pune, 1879, in Bombay presidency), enough trained manpower was available to feed into the new cadres of the Imperial Agricultural Research Service in the early 20th century. The colonial government commissioned John Augustus Voelcker to produce a report on the ‘Improvement of Indian Agriculture’, and also set up the Famine Commission (in 1901), but focused almost exclusively

104 a Rajeswari S. Raina

on changes in the Imperial Department of Agriculture so as to coordinate and guide the work done at the provincial research stations. Both the Indian Agricultural Research Institute (IARI) and the Imperial Department failed to play the coordination and guiding roles that were expected of them. Provincial experiment stations and education organizations were of considerably high standards even as early as 1910, and, with the Montague–Chelmsford reforms, the provinces were to handle agricultural improvement works and research.3 Though organizationally the early attempts at centralization did fail, substantively, in terms of organizing scientific enquiry, analysis and outreach, the commodity committees brought in a different form of centralization. What was till then scientific inquiry conducted under or by different disciplines (chemistry, economic botany, mycology, microbiology, entomology, etc.) was transformed into inquiry focused on the production of a particular commodity. This was soon to become the global norm, accepted unquestioningly till date. Strengthening locally relevant research for food production was a prime concern in the 1950s. The TCM was meant to improve the physical, administrative and professional features of the agricultural colleges, to coordinate teaching, research and extension, and to produce manpower requirements for Indian agricultural growth.4 These developments were widely acclaimed by the Indian political and bureaucratic elite (ICAR, 1960; Lele and Goldsmith, 1989). Several recommendations were made by the First and the Second Joint Indo-American Committees on Agricultural Research, in 1950 and 1955, respectively, to strengthen research capacities in the states of the Indian union and reorganize agricultural research.5 In the early 1960s when the first SAUs were established, and the Ford Foundation–led Integrated Area Development Programme (IADP) was implemented (84 per cent of the districts chosen were in the regions under the jurisdiction of these agricultural colleges, which became the first SAUs), there were good results on the productivity front. As a new democracy with a rapidly growing population and increasing urban (manufacturing sector) demand for food, India was the locus of many international experiments and aid programmes on food production. The package approach (irrigation, fertilizers and pesticides, with varieties bred selectively for higher yields) of the Ford Foundation–supported IADP, increasing import

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of fertilizers and chemicals from the USA and the administration of fertilizer distribution,6 increasing support for agricultural research from the United States Agency for International Development (USAID), and education in the agricultural colleges and new SAUs, were the major experiments in the organization of ways and means for food production. In the midst of these attempts to strengthen locally relevant research and make the local experimental stations more responsive, came increasing concerns about the quality of research and personnel problems in the research institutes under the ministries, along with awareness of the need for a coordinated research strategy. An international scientific breakthrough—the identification and successful trials of the Mexican rust-resistant dwarf wheat varieties—was another event of significance in the 1950s. During the 1950s, the state governments contributed a significant share (varying between 60 to 75 per cent) of the national research and development (R&D) resources, including scientific manpower and expenditure. With the launch of the PIRRCOM in 1957–58, they accounted for almost 90 per cent of the national agricultural research expenditure; the ICAR and the institutes under the central ministry were even less important for the coordination and conduct of research. The ICAR, starved of funds and coordination capacity, registered as a society but functioning as an office attached with the department of agriculture, had to compete with the three national research institutes (the IARI, the National Dairy Research Institute [NDRI] and the Indian Veterinary Research Institute (IVRI) directly under the Ministry of Agriculture, till the Agricultural Produce Cess Act of 1940 gave the council a boost in resources and significantly reduced its dependence on the central government. The council’s share was only 4.20 per cent of the total central funding for agricultural research in 1965–66. In many ways, the period till 1965 marks the first phase of the state–science relationship in India. There existed norms of local relevance, criteria of funding were sought by interest groups (industry, trade, international donors or educational organizations), certain processes of legitimization and support were in place at the provincial level and diverse research organizations had been set up for catering to different problems in science and agricultural production. Overall, the state made fewer demands on research organizations than the research organizations did themselves to

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seek a local legitimization from industry, trade or provincial governments. Even after independence, with increasing research on staple foodgrains and coarse cereals, land reforms (giving ownership to the tiller) and tenancy reforms, the setting up of the central fertilizer committee and the building of major dams and canal works for irrigation, agricultural research continued along ‘a laissez-faire approach’ (Sivaraman, 1991, p. 295). By the 1960s, central administrative and political actors had decided that this had to change substantially if agriculture was to expand rapidly and India was to become self-sufficient in food.

Tethering Science for Food Security India’s agricultural research system was reorganized in 1966. The ICAR was given direct responsibility to coordinate and conduct research with a focus on foodgrain production, with a six-fold increase in funding granted directly by the central government, as well as control over all the research institutes under the ministries of agriculture and animal husbandry.7 In 1974, the ICAR was transformed into a separate, well-funded Department of Agricultural Research and Education (DARE), consolidating scientific and bureaucratic authority and expanding the number and range of research organizations and programmes under it. From a council that received hardly any support from the central government (other than its own Agricultural Produce Cess Fund) till 1965, the ICAR became the national agricultural science leader, with central government funds accounting for 95 per cent of its receipts by 1974–75. In the national agricultural science budget, the shares of central and state governments shifted from 28 and 72 per cent, respectively, in 1965–66, to 60 and 40 per cent, respectively, in 1974–75. Further, 95 per cent of the central share went to the council. Besides this financial weight, in 1974, the council established its own Agricultural Scientists’ Recruitment Board (ASRB), which manages personnel affairs under the Agricultural Research Service (ARS), a professional service distinct from the Union Public Service Commission (UPSC). The colossal presence of a council that was once nearly demolished, and the increasing investment by the centre, brought about major changes in the relationship between state and science. The need for modern technology to shift the production frontier, a felt

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need in the 1950s and 1960s, demanded that ‘far-reaching central authority and a clear line of command and execution alone could meet the challenge of growing more food’ (Agricultural Production Team, 1959, p. 6). Having made a political commitment to food security, the central government decided to engage directly with modern technology and the provision of inputs and incentives to sustain food production. When the Marion Parker Review Committee recommended the abolition of the ICAR (Ministry of Agriculture, 1964), the leadership of the council along with the minister and the secretary (Ministry of Agriculture) decided to reorganize the council (Raina, 1992; Subramaniam, 1972)—this was the ideal mode to achieve the central authority and clear line of command desired. The engagement of the state with science must be seen in the context of the national concern for food security and the differentiation of the peasantry. It is part of official history that the political, administrative and scientific actors (both domestic and international) effectively steered in the green revolution, with import of Mexican wheat seeds only when the US government threatened to cut the PL 480 shipment of food to India (Sivaraman, 1991; Subramaniam, 1972; Swaminathan, 1993, 2006). But some crucial decisions, especially about the adoption of high-yielding varieties (HYV) of wheat, depended on the middle and large farmers and their acceptance of the varieties–fertilizer–irrigation package. When the imported Mexican seeds were distributed for cultivation, the state governments of Bihar (which returned two railway wagons of seed) and Gujarat did not approve them for official release in these states for rabi 1966. At the centre, the secretary of the Ministry of Agriculture used the Bharat Krishak Samaj and the Young Farmers’ Forum to distribute the seeds in Gujarat and Bihar/Madhya Pradesh, respectively, arguing in the face of a ‘stymied state director of agriculture’ that these were autonomous bodies of the farming community and were free to distribute anything they wanted (Sivaraman, 1991). The relationship of the state with small and marginal farmers was in direct contrast to its relationship with middle and large farmers. Charan Singh’s ‘kulak budget’ of 1979 represents perhaps the high point of a politically empowered and articulate landowning class, and of the state’s commitment to encouraging the use of modern technology—biological, chemical, mechanical—by them

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(Byres, 1982). The state needed the large and middle farmers (in Bihar and Madhya Pradesh they were members of the Young Farmers’ Forum) to use modern technologies. The 1970s rang surreal. Heated debates about the mode of production and the size–productivity relationship in India’s food production tracts coexisted with a systematic administrative consolidation from knowledge generation to food processing and storage. Beginning in the early-to-mid-1960s, the state put in place all the public sector organizational components for addressing food security. The Fertilizer Committee, Agricultural Prices Commission, the Public Distribution System, the Food Corporation of India, the National Seeds Corporation, the State Trading Corporation, the Central Water Commission, including schemes to promote tube-well irrigation, and the Agricultural Produce Market Committees and regulated markets were among these components—all institutional innovations of the central government. Minimum support price (MSP), subsidies, credit (including loan waivers every now and then), irrigation and electricity costs and procurement prices and processes (especially for rice and wheat) became key issues addressed by the central government and the large farmer lobbies. Land reform, wage parity and agricultural employment were the demands of rural India that were left to the state governments to enact, plan and implement. It was, however, with its control over agricultural education that the central government finally consolidated its ‘central line of authority and control’ over all aspects of agricultural knowledge. The nature of rural education in India was debated widely (ICAR, 1955, 1960; UEC, 1950). Ralph W. Cummings, Director of the Rockefeller Foundation’s Indian Agricultural Research Programme, at the instance of the Government of India and on invitation from certain state governments, examined the proposals, resources and legislations for the establishment of agricultural universities (Naik and Sankaram, 1972). Only those states with institutions of higher education and research that met the Land Grant ‘integration’ criterion, had an applied research orientation, and demonstrated ‘responsiveness to the needs of the State’s residents’, received approval for establishing agricultural universities (Busch, 1988, p. 11) and assistance from the central government and USAID. After the first six SAUs were established (the first one being the Uttar Pradesh Agricultural University, later renamed the

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Govind Ballabh Pant University of Agriculture and Technology),8 the Ministry of Agriculture and its newly reorganized and consolidated council adopted the Model Act (1966) as the centrally approved act for the legislation of SAUs. The Model Act negated the need for participation of the farming community and for ‘responsiveness to the needs of the State’s residents’. The University Education Commission (UEC) believed that the philosophy of US Land Grant Colleges could be applied to India in developing this network of rural universities. When transferred by USAID, ‘its expressed goal was to effect rapid social change in developing countries by working with elites in a top–down fashion’ (Busch, 1988, p. 24). This was far from the participatory rural development mission through research and education in rural universities envisaged by the UEC. By the end of the 1960s every state had at least one agricultural or veterinary college. Many argue that the hope of securing substantial funds from the centre was a chief motivation for the states to establish SAUs (see, e.g., Naik and Sankaram, 1972). Since the Model Act, till date, the major source of research revenue for most SAUs has been the funding from the centre (the ICAR). The price paid by the SAUs for such support has been conforming to the standard education and examination patterns, research evaluations and curricula set by the ICAR. This goes to the extent of collaborating with ICAR in international research projects and seeking its approval for international travel for SAU faculty involved in these projects. By the mid-1970s, agricultural science had become one of the administrative inputs locked into India’s food security goals by weeding out the variety of organizational formats and sources of funding and eulogizing the achievements of the green revolution. In the process, the constitutional and historical prerogatives of agricultural administration and scientific research at the state level were violated. It was a system akin to bonded labour. Agricultural S&T was no longer conducted or evaluated for the advancement of knowledge about Indian agriculture or any of the associated disciplines of science. It was an instrument for producing results that could sustain the state’s economic interests—achieving food security. Scientific inquiry—including the topics, methods, partners and stakeholders chosen—was proscribed by these structural features of agricultural universities, which were designed to work with elites in a top–down fashion and geared to the centrally administered modernization of the middle and large farmers.

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The state demanded few insights from its scientific research organizations; looking back at this phase (mid-1960s to mid-1970s), the state seemed to hold agricultural science in contempt or pity at best. Contradicting all the tributes paid to this branch of science, the contempt is evident in the writings of the architect of India’s green revolution, the secretary of the Ministry of Agriculture, B. Sivaraman. In 1965, the secretary was ‘amazed to find that in all the other (12) trials, the two dwarf varieties [had] done badly against the local varieties’ of wheat (Sivaraman, 1991, p. 303).9 Despite his demand that the agricultural commissioner give him a detailed report on each trial in all these 12 stations, and his threat to take disciplinary action against the national coordinator of the wheat trials, the secretary knew from his ‘experience in Orissa’ that ‘the results were unreliable in many stations.’ First, notes the secretary, ‘the worker could never follow the time routine of operations, . . . secondly, the inputs may not have been available in time and in the quantities recommended.’ Most importantly, ‘research workers vied with each other for recognition of their work and no holds were barred. Invariably a research station would release its own best variety!’ (ibid.). The new dwarf varieties were therefore beaten squarely in all stations ‘except at IARI and Ludhiana, where there were American experts closely monitoring the trials and no fudging was possible’ (ibid.). This account may sound like institutional heresy and anarchy, but the reforms did eventually achieve the desired results of self-sufficiency in food production (through the sheer coordination or symphony of all the organizations, inputs and farmers). Till date, there is no evidence that the Indian state trusts and accepts the results of the scientific research system it so proudly presents to the world as the creator of the most successful green revolution ever. Since the 1980s, the relationship between the state and science has been fraught with tensions and ill-conceived legitimization exercises, sometimes supported by estimates of stunning rates of return to agricultural research investment.

Reforming Centralized Science Over the five decades from the 1960s, by taking over research on every crop and commodity and drawing quality personnel from the SAUs, the ICAR has pre-empted the SAUs from directly addressing

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production problems relevant to their own agro-ecosystems. In effect, ‘the ICAR has systematically decimated research capacity in the States’ (Jha, 2002b). Organizationally, the ICAR maintains the national agricultural information system, conducts examinations (for 15 per cent of the seats) for undergraduate admissions in SAUs and hosts Krishi Vigyan Kendras (Farmers’ Science Centres) to train extension workers and farmers. It funds SAUs, supports collaborative research (mainly through the All-India Coordinated Research Projects [AICRP]) and also strengthens ‘the institutional capacity of the SAUs to improve the quality of education being provided by them’ (DARE, 2007, p. 1). Today, the ICAR is the saviour of the SAUs.10 Several external reviews and reform committees have criticized the council for repetitive and ritualistic applied research, weak basic research, publications for career advancements (over 80 per cent in non-refereed and often in-house journals) as well as rigid and bureaucratic research administration (a travel permission or a request for lab equipment takes months/years to be sanctioned) and heavy administrative load. These bureaucratic procedures lead to an erosion of expertise and authority within the research organizations (NAAS, 2002; Raina, 1999). ‘Any scientist in ICAR will endorse that bureaucracy and associated evils are the root cause of inefficiency. Obstructive rules and procedures, complete absence of accountability, stifling centralisation, lack of performance-based incentive system and monitoring and evaluation processes are some examples’ (Jha, 2002a, p. 4600). The rules of closure against pure science graduates in order to maintain the professional identity and job opportunities of agricultural science graduates, the norms of association, such as seeking bureaucratic salaries and the patterns of assessment, the rules of the Model Act to which all SAUs have to conform, including, for instance, the pressures and incentives of funding for research, and so on, are all designed for central control. Among the many recommendations made for decentralization of research, only those interpreted as delegation of administrative and financial powers to directors of research institutes and research project leaders have been taken up (Mruthyunjaya, 2002). The substantive intent and content of decentralization, namely, creation of strong organizations and research networks at the state level, were against the interests of the ICAR (Jha, 2002b).

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The 1990s brought many new actors and opportunities in agricultural R&D. Many of the new private R&D actors are in seed technology, plant breeding and genetics, biotechnology and genetic engineering (note the massive growth of seed firms and research labs in Jalna, Maharashtra), and also in agro-processing, market- or trade-related research. Despite new rules encouraging consultancy, public–private partnerships (especially in plant breeding, genetics and biotechnology) and collaborative or sponsored research projects, there is limited formal engagement of ICAR and SAU scientists with these new private sector actors (personal interview, Dr B. D. Agarwal, Monsanto India, July 2007). Following the acquisition of licences to import seeds and seed material, including genomes, the private sector has little need to interact with these public sector actors. Food security was an achievement of the central government, including the modern technologies supplied by the research system it sponsored and the prices and incentives it offered India’s farming communities.11 The selective perception of large and medium farmers, along with the centralization and consolidation of control over science and technology, distanced agricultural research from the object of generating useful knowledge for small farmers or dryland agriculture. That agrarian structure, production conditions and markets were different for these farmers and regions seemed to be beyond the radar of the productionist agricultural research agenda that the state demanded. A spate of recommendations for institutional reforms and organizational changes in the ICAR and SAUs highlights the institutional impediments to the conduct of agricultural research and its effective performance in the sector (Busch, 1988; Government of India, 2000, 2006; ICAR, 1988, 1998; Jha, 2002a, 2002b; NAAS, 2002; Raina, 1999, 2003b; Raman, Anwer and Gaddagimath, 1988; World Bank, 1990). But recommendations are unlikely to help. The disheartening fact is that scientists themselves have little to offer on the topic of evaluation and the need for something more fundamental over and above organizational changes—new rules and norms. The capacity of science to cater to the local farming communities, respond to different biotic and abiotic stress, and foresee and warn the state and stakeholders (industry, traders, commercial farmers or small peasants, banks, etc.) about possible risks and ambiguities has been minimized. In effect, the rules

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and norms that govern public sector agricultural research have squashed its capacity to play the role that science ought to play in society and national development.

Science under Siege India, despite a successful green revolution, has over 300 million living below the line of abject poverty, mainly in rural areas. About 86 per cent of the farms are smaller than 2 hectares and are largely unviable due to increasing input costs (Acharya and Jogi, 2007), technology fatigue with increasing input prices and declining factor productivity (Swaminathan, 2005), increasing soil and water problems (in terms of both quantity and quality), and limited rural employment opportunities (NCEUS, 2006). The demand for the state to step in and ease out any stress with subsidies or doles has led to the state and peasantry painting themselves into a corner of increasing indigence, mutual dependence and desperation.12 Food security in the country now depends crucially on giving up the ‘1970s model of agricultural development’, based exclusively on cereal production, agricultural research to test and release varieties (especially of wheat and rice) and subsidies and price supports that encourage mindless exploitation and degradation of natural resources (Raina and Sangar, 2002; Sinha, 2001). But the contingent politics of the state, of gratifying large farm lobbies and the input industry, cannot allow this change. The blame game (see the indictment from the plan document cited at the beginning of this chapter) has always focused on nonS&T organizations and policies as all failing to achieve national food security goals. These organizations and policies include agricultural extension, the Food Corporation of India and the Public Distribution System, state- and national-level schemes for rural employment and poverty alleviation, input subsidies, rural credit, irrigation policy and international trade (Bhatia and Drèze, 2002; Dev, Kannan and Ramachandran, 2003; Ghosh, 2005; World Bank, 2008). Few notice that among all the inputs that go into agricultural production, it is the knowledge inputs (taken here as yield potential of new crop varieties) that have stagnated since the mid-1990s (Table 5.1). The research system seems to be unable to do even the limited job of releasing new varieties of a few crops with high yield potential. History tells us that perhaps even on the eve of

114 a Rajeswari S. Raina Table 5.1 Trend Growth of Inputs in Agriculture (1999–2000 Prices; %)

Agricultural inputs Credit supply Nitrogen Phosphorus Potassium (NPK) use Electricity consumed in agriculture Technologya Cropping intensity Public sector net fixed capital stock Private sector net fixed capital stock Total net fixed capital stock Terms of trade Total cropped area Net sown area Gross irrigated area

1980–81 to 1990–91 3.7 8.2 14.1 3.3 0.5 3.9 0.6 2.0 0.2 0.4 –0.1 2.3

1990–91 to 1996–97

1996–97 to 2005–06

7.5 2.5 9.4 2.8 0.4 1.9 2.2 2.1 1.0 0.4 0.0 2.6

14.4b 2.3 –0.5c 0.0 0.1 1.4b 1.2b 1.3b –1.7b –0.1 –0.2 0.5b

Source: Government of India (2008b). Notes: a. Yield potential of new varieties of paddy, rapeseed/mustard, groundnut, wheat, maize. b. Up to 2003–04. c. Up to 2004–05.

the green revolution, a resolute administration was aware that the green revolution had to be launched despite weaknesses in science and technology; we know that the Indian green revolution was more an administrative feat using research results from the West than an achievement of Indian agricultural research. The research system does deserve credit for the repetitive maintenance research it has done from the early 1970s till date. Within the research system there is little discussion about the relationship between the slowing growth rates of fertilizer use, electricity consumption and irrigated area, and the negative trends in growth of net sown area. Is the consumption of electricity and chemical fertilizer slowing down because of lack of availability, limited affordability, or the lack of crop response to increasing application of irrigation and chemical fertilizers? Agricultural growth in the post-reform period (after 1991) has slowed down (Chand, Raju and Pandey, 2007).13 The most notable changes in cultivation patterns and input use are the increasing trend of cultivation of low-value, low-risk crops, a decline in the rate of growth of fertilizer use, irrigation and energy use in agriculture in

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most states and a stagnation and real decline in some (Chand, Raju and Pandey, 2007). In parts of the country, farmers are shifting towards low-value crops (ibid.).14 Few are alarmed at the lack of objective space for science to question or learn about what is happening in Indian agriculture. Only a few interrogate agricultural research and the emerging challenges that must be addressed through reform within the agricultural R&D establishment (Jha, 2002a; Raina, 2003a; Vaidyanathan, 2000). The report of the International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD, 2009) that demands changes in the ‘business as usual’ approach in agricultural S&T, which was approved and accepted by the Government of India (and 59 other governments), has never been discussed within the Ministry of Agriculture or its departments—DARE (ICAR) or the Department of Agriculture and Cooperation (DoAC). The state seems unwilling and unable to engage with the poor capacity of the agricultural research system to comprehend agricultural production problems ranging from resource-degrading subsidies to the need for increasing research on drylands, mountain ecosystems and coastal systems. A state that patronizes science and legitimizes the economic and social relevance of its outputs has the liberty to accuse science of not delivering the public goods it desires. The social construction of science and technology is evident in the choice of research topics, in the methods used in S&T and in its research findings and the communication of the same. When there is evidence of social and political influence even in the content of Newton’s Principia, considered basic science, it must be taken for granted that social and political interests will shape a field of applied research like the agricultural sciences. Yet, what distinguishes science (basic or applied) from other human endeavours that are socially shaped is the way it strives to maintain an objective space for the conduct of scientific research (Chalmers, 1990). Since science is a quest for advancing knowledge, it is argued that scientists who are engaged in this quest find ways or new standards, methods or norms whereby they can pursue this quest, when existing rules or standards obstruct the pursuit of knowledge or are found wanting. The state has a legitimate political right to influence science to produce or aid the production of desirable development goods by organizing

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appropriate scientific research. But the relationship between the state and science is always threatened by this capacity of science to question political goals or the nature of specific development goods, using new evidence about externalities, environmental or social impact, low-cost or more efficient alternatives to current development goods, etc. The history of Indian agricultural science tells us that science becomes ineffective when it loses this capacity to maintain its space for objective research. It is the responsibility of agricultural scientists in both the natural and the social sciences, and of other stakeholders who desire the advance of knowledge and the generation of utilizable knowledge, to initiate the processes necessary to reclaim the space for objective scientific research. Within the agricultural research establishment in India, the loss of an objective space for scientific research is a grave issue and is the root cause of several problems that besiege science. Some of them, such as the limited faith that the state has in its own research results, the paucity of scientific excellence, the willing acceptance of American or any Western agricultural research results, repetitive and ritualistic research (some programmes have been running for over 35 years without change!) and the lack of relevance to the real agrarian problems in the country, continue to plague agricultural research. In the ‘republic of science’, where the scientist makes her/his own choice of research problems and uses the valid, rigorous theories and methods of the times, science advances by the spontaneous coordination of independent initiatives (Polanyi, 1962). These may be driven by the local problems addressed, the depth sought in argumentation, proof of concept or falsification of theoretical frameworks, or the devising of entirely new disciplinary alignments. When a Bernalian shaping of the direction and content of science is sought by a state, it needs a vision, a policy for the advancement of science that goes hand in hand with the economic goods that it intends to derive from the science it supports. The former, a policy for the advancement of science and for nurturing an objective, creative space for science, has never been part of Indian agricultural science. More importantly, the selective perception of development policy-makers has now compelled scientific research to address the production problems of the landed in irrigated tracts. Agricultural science must find its way out of this siege.

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Something Foreordained?15 In the relationship between agricultural science and the state in India, science has always sought legitimization from the state (colonial or sovereign democratic), while the state has evolved in its perception of science from faith, to euphoria, to scepticism and discontent. From leading proponents of knowledge for agricultural development, the state governments have now become non-entities in legitimizing and funding research. Given that both central and state governments indulge in populist, resource-degrading subsidies and concessions that no longer guarantee a corresponding increase in agricultural productivity, is it fair for the state to accuse agricultural science of failing the cause of sustainability? Given that the state has moved on from land reform and concern for the tiller to land acquisition for SEZs and other non-agricultural purposes, and is wooing investors to export-oriented agriculture and food retail, the epistemology of sustainability and food security within our government is confusing. Does the state have the capacity to take a ‘comprehensive view of the agricultural research system’? (Government of India, 2008a, p. 13). First, do capabilities for systemic change reside in the central government, which controls agricultural knowledge? After 60 years of independence, can the state governments claim and effectively fulfil their constitutionally sanctioned responsibility to support and utilize scientific knowledge for agricultural development? It is likely that agricultural science can win the support of the state governments again, if it addresses problems relevant to the states’ own production systems and establishes excellence in science. It can break the anti-constitutional stranglehold of central government rules and norms. Second, if there was indeed something foreordained about the impending food crisis and what was accomplished in the mid-1960s, then it looks like Indian agriculture is at another tipping point, facing a combination of state indifference, market failures and impacts of climate variability and change. For the small/marginal peasantry, the costs of adjusting to global changes in resource efficiency and climatic variables will be difficult to meet and will cause heavy losses (Bass and Steele, 2006; Brown and Funk, 2008; Ghosh, 2005; WCSDG, 2004). The problem now is that many of the frontier scientific questions and the technological alternatives

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are under-researched in developing countries, and are no longer public goods offered to them by Western national and international agricultural research systems.16 As in the 1960s, there are new partners in domestic and international S&T organizations outside mainstream agricultural S&T. Civil society organizations, coalitions of alternatives in agriculture (organic agriculture movements, community food systems, gender and water challenge programmes of the Consultative Group on International Agricultural Research [CGIAR], pesticide action networks, small producer coalitions, etc.) and donor agencies committed to capacity development (and not just transfer of technology) can be willing partners this time round, taking the place of the erstwhile international philanthropic organizations (Ford, Rockefeller and Kellogg Foundations) and USAID. Finally, there is an emerging axis of research and knowledge administration for food security that is entwined with research and administration of sustainable environments and rural livelihoods; this is finding acceptance within scientific research and political circles (IAASTD, 2009). There are ways to make the shift from production-enhancing technologies to expertise that understands and caters to environmental and production goals. It is possible when the state perceives farmers not as mere producers but also as managers of the ecosystem, and grants significant economic and political values to the multiple roles and functions of agriculture. This change in the politics of knowledge will bring about a new agricultural knowledge, science and technology system in India. a

Notes 1. India now hosts a public research system with more than 20,000 scientists. Currently, the research establishment of the Indian Council of Agricultural Research (ICAR) comprises 48 central institutes, five national bureaux, 12 project directorates, 32 national research centres and 62 all-India coordinated research projects, along with 39 state agricultural universities (SAUs) and some experimental research stations under the state departments of agriculture, animal husbandry, fisheries or engineering in a few states. 2. This discussion draws on Raina (1992).

Agricultural Science and the State a 119 3. Let us recall that hybrid sugarcane varieties, branded the Co varieties, were already being produced in Coimbatore and commercially used for cultivation or as parent material in India and many other countries from the 1910s through to the 1940s. 4. The TCM completed arrangements for five American universities to assist 40 agricultural and veterinary colleges and two research institutes in India (ICAR, 1960). 5. The First and the Second Joint Indo-American teams (ICAR, 1955, 1960), constituted with and through the ICAR, demanded greater power for the ICAR to effectively coordinate research. Autonomy of state research stations was considered essential. Regional research networks were to be developed. It was suggested that the central research institutes should not establish new or branch stations but should situate their scientists in state research stations under the administrative control of the states, especially so when the state organizations were capable of handling the problem. 6. Imports accounted for half or more of the total consumption of plant nutrients in the country during the 1950s and 1960s (see Raina, 1992, Table 6.5). 7. Only the research organizations under the Ministry of Commerce, for tea, coffee, rubber and spices, remained outside the control of the ICAR. 8. The blueprint for establishing an agricultural university was submitted in 1956 to the Uttar Pradesh government. The Government of India agreed to the proposal submitted by the state (headed by Pandit Govind Ballabh Pant) in 1956, and promised one SAU on an experimental basis during the following plan period. Based on this, the UP Agricultural University Act (UP Act XLV of 1958) was passed by the state legislature (Naik and Sankaram, 1972). 9. Let us note here that the secretary does not question why Dr Chalam ‘showed him only the results from IARI and Ludhiana’ and hid the results from the other 12 research stations in other wheat-growing tracts, of the trials conducted in the 1964 rabi season. 10. The council in 2007 earmarked Rs 2,536 crores for implementing stringent norms for faculty and new ‘market-driven’ agricultural and allied sciences syllabi in ‘India’s archaic agricultural universities’ and some deemed universities, including ICAR institutes like IARI, NDRI, etc. (Singh, 2007). 11. Krishnaji (1993) points out that the central government pays scant attention to the cost of cultivation and price estimates provided by the Agricultural Prices Commission (APC, now the Commission on Agricultural Costs and Prices). It fixes prices as it wishes, mainly to appease large farmers in irrigated tracts. 12. The share of subsidies for fertilizer and electricity and for support prices for cereals, water and credit in the public expenditure on agriculture has

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increased steadily since the mid-1970s, to become four times the share of expenditure on public investments (agricultural R&D, irrigation, rural roads, etc.) (Chand, Raju and Pandey, 2007; World Bank, 2008). The recent spurt in agricultural growth rates spurred by populist minimum support price (MSP) hikes is a temporary gain in a highly volatile national and global market. While further investigation is needed to assess whether this is due to water constraints or increasing market risks, it is revealing that the majority of India’s farms do not have the risk-bearing capacity and technological support needed to invest in high-value production. This may seem an anomaly in a country that is increasing its share in the global trade in vegetable, fruit and cereal products (raw and processed). The contract farming systems involving small farmers (such as Calypso Foods and Morarka Foundation), medium and large farms (Reliance, Bharti-Rothschild, A. P. Todd, SAB Miller India or even the public sector PAICO), or region-specific cooperatives, constitute less than 7 per cent of Indian farms. I borrow this subtitle from B. Sivaraman’s (1991) narration of the green revolution, and of the manner in which the administrative, financial and technological ways and means were put together in the 1960s. This article avoids the discussion on the international agricultural research system and its roles and functions with respect to Indian agricultural research, for want of space and also to focus its attention on the state–science relationship in India.

References Acharya, S. S., and R. L. Jogi. 2007. ‘Input Subsidies and Agriculture: Future Perspectives’, in V. Ballabh (ed.), Institutional Alternatives and Governance of Agriculture, New Delhi: Academic Foundation, pp. 95–118. Agricultural Production Team. 1959. Report on India’s Food Crisis and Steps to Meet It (sponsored by the Ford Foundation), New Delhi: Government of India, Ministry of Food and Agriculture and Ministry of Community Development and Cooperation. Bass, S., and P. Steele. 2006. ‘Managing the Environment for Development and to Sustain Pro-poor Growth: Challenges and Risks to Development in Asia’, Paper presented at the Conference on Asia 2015: Promoting Growth, Ending Poverty. Accessed on 15 July 2009. Bhatia, Bela, and Jean Drèze. 2002. ‘Still Starving in Jharkhand’, Frontline, August 16. Brown, Mary E., and Christopher C. Funk. 2008. ‘Food Security under Climate Change’, Science, 319(5863), pp. 580–81.

Agricultural Science and the State a 121 Busch, Lawrence. 1988. ‘Universities for Development: Report of the Joint India–US Impact Evaluation of the Indian Agricultural Universities’, AID Project Impact Evaluation Report No. 68, Washington, D.C.: United States Agency for International Development. Byres, Terence. 1982. ‘ The Political Economy of Technological Innovation in Indian Agriculture’, in Robert S. Anderson, Paul R. Brass, E. Levy and Barrie M. Morrisson (eds), Science, Politics and the Agricultural Revolution in Asia, AAAS Selected Symposium 70, Boulder, Colorado: Westview Press, pp. 19–76. Chalmers, Alan. 1990. Science and Its Fabrication, Milton Keynes: Open University Press. Chand, Ramesh, S. S. Raju and L. M. Pandey. 2007. ‘Growth Crisis in Agriculture: Severity and Options at National and State Levels’, Economic and Political Weekly, 42(26), pp. 2528-2533. Department of Agricultural Research and Education (DARE). 2007. DARE/ ICAR Annual Report 2006–2007, New Delhi: Government of India, Ministry of Agriculture, DARE. Dev, Mahendra, K. P. Kannan and Nira Ramachandran (eds). 2003. Towards a Food Secure India: Issues and Policies, New Delhi: Institute of Human Development and Hyderabad: Centre for Economic and Social Studies. Ghosh, Jayati. 2005. ‘ Trade Liberalization in Agriculture: An Examination of Impact and Policy Strategies with Special Reference to India’, Human Development Report Office Occasional Paper 2005/12, New York: United Nations Development Programme. Government of India. 2000. National Agriculture Policy, New Delhi: Government of India, Ministry of Agriculture. ———. 2006. Report of the National Commission on Farmers, New Delhi: Government of India, Ministry of Agriculture. ———. 2008a. Eleventh Five Year Plan (2007–2012): Agriculture, Rural Development, Industry, Services and Physical Infrastructure, New Delhi: Planning Commission, vol. 3. ———. 2008b. Economic Survey 2007–08, New Delhi: Ministry of Finance. Indian Council of Agricultural Research (ICAR). 1955. Report of the Joint Indo-American Team on Agricultural Research and Education, New Delhi: ICAR. ———. 1960. Report of the Second Joint Indo-American Team on Agricultural Education, Research and Extension, New Delhi: ICAR. ———. 1988. Report of the ICAR Review Committee, New Delhi: ICAR. ———. 1998. Decline in Crop Productivity in Haryana and Punjab: Myth or Reality? New Delhi: ICAR. International Assessment of Agricultural Knowledge, Science and Technology (IAASTD). 2009. Agriculture at the Crossroads, Synthesis Report of the International Assessment of Agricultural Knowledge, Science and Technology, Washington, D.C.: Island Press.

122 a Rajeswari S. Raina Jha, Dayanatha. 2002a. ‘Red-Taping Agricultural Research’, Economic and Political Weekly, 37(46), p. 4600. ———. 2002b. ‘Change is Difficult, but Change We Must: O&M in Agricultural Research’, Paper presented at the Workshop on National Agricultural Policy: Redesigning R&D to Achieve the Objectives, organized by the National Academy of Agricultural Sciences, 10–11 April, New Delhi: Indian National Science Academy. Krishnaji, N. 1993 [1972]. Pauperising Agriculture: Studies in Agrarian Change and Demographic Structure, New Delhi: Oxford University Press. Lele, U., and O. Goldsmith. 1989. ‘The Development of National Agricultural Research Capacity: India’s Experience with the Rockefeller Foundation and Its Significance for Africa’, Economic Development and Cultural Change, 37(2), pp. 305–43. Ministry of Agriculture. 1964. Report of the Agricultural Research Review Team, New Delhi: Government of India, Ministry of Food and Agriculture. Mruthyunjaya. 2002. ‘Crafting Research Institutions into New Age Institutions: The Case of ICAR’, Paper presented at the Workshop on National Agricultural Policy: Redesigning R&D to Achieve the Objectives, organized by the National Academy of Agricultural Sciences, 10–11 April, New Delhi: Indian National Science Academy. Naik, K. C., and A. Sankaram. 1972. History of Agricultural Universities in India, New Delhi: Oxford & IBH. National Academy of Agricultural Sciences (NAAS). 2002. ‘Agricultural Policy: Redesigning R&D to Achieve Its Objectives’, Policy Paper No. 18, New Delhi: National Academy of Agricultural Sciences. National Commission for Enterprises in the Unorganized Sector (NCEUS). 2006. Report on Conditions of Work and Promotion of Livelihoods in the Unorganized Sector (submitted to the Prime Minister), New Delhi: Government of India, Ministry of Micro, Small and Medium Enterprises, NCEUS. Patnaik, Utsa. 2007. The Republic of Hunger and Other Essays, New Delhi: Three Essays Collective. Polanyi, M. 1962. ‘The Republic of Science: Its Political and Economic Theory’, Minerva, 1(1), pp. 54–74. Raina, Rajeswari S. 1992. ‘The Organization of Agricultural Research in India: An Economic Analysis of Technology Generation, 1860–1990’, Unpublished PhD dissertation, Thiruvananthapuram: Kerala University and Centre for Development Studies. ———. 1999. ‘Professionalisation and Evaluation: The Case of Indian Agricultural Research’, Knowledge, Technology and Policy, 11(4), pp. 69–96. ———. 2003a. ‘Institutions and Organizations: Enabling Reforms in Indian Agricultural Research and Policy’, International Journal of Technology Management and Sustainable Development, 2(2), pp. 97–116. ———. 2003b. ‘Disciplines, Institutions and Organizations: Impact Assessments in Context’, Agricultural Systems, 78(2), pp. 185–212.

Agricultural Science and the State a 123 Raina, Rajeswari S., and Sunita Sangar. 2002. ‘Water Quality, Agricultural Policy and Science’, Knowledge, Technology and Policy, 14(4), pp. 109–25. Raman, K. V., M. M. Anwer and R. B. Gaddagimath (eds). 1988. Agricultural Research Systems and Management in the 21st Century, Proceedings of the International Seminar, 8–10 December, Rajendranagar, Hyderabad: National Academy of Agricultural Research Management. Royal Commission on Agriculture (RCA). 1928. Royal Commission on Agriculture in India Report, 1928, Bombay: Government Press (reprinted by Agricole Publishing Academy, 1983). Singh, S. 2007. ‘ICAR Sows Seeds of Change in Agri Varsities’, Livemint, New Delhi, 23 April. ICAR-sows-seeds-of-change-in-a.html. Accessed on 6 March 2011. Sinha, Suresh K. 2001. ‘Food Security of India: Time for Change’, in S. Kumar (ed.), India’s National Security—Annual Review, 2001, New Delhi: Vikas, pp. 190–224. Sivaraman, B. 1991. Bitter Sweet: Governance of India in Transition, New Delhi: Ashish Publishing House. Subramaniam, C. 1972. A New Strategy in Agriculture, New Delhi: Indian Council of Agricultural Research. Swaminathan, M. S. (ed.). 1993. Wheat Revolution: A Dialogue, Chennai: Macmillan. ———. 2005. ‘Science and Shaping Our Agricultural Future’, Public lecture at the K. R. Narayanan Oration, Canberra: Australian National University. Accessed on 15 July 2009. ———. 2006. ‘Looking Back at the Green Revolution’, Third Annual Governor’s Lecture, Norman E. Borlaug/World Food Prize International Symposium on The Green Revolution Redux: Can We Replicate the Single Greatest Period of Food Production in All Human History? 19–20 October, Iowa: Des Moines. United Nations Children’s Fund (UNICEF). 2008. State of the World’s Children 2008. Paris: UNICEF. University Education Commission (UEC). 1950. The Report of the University Education Commission (December 1948–August 1949), New Delhi: Government of India, Ministry of Education, 1962 reprint, vol. 1. Vaidyanathan, A. 2000. ‘Research for Agriculture: Some Current Issues’, Economic and Political Weekly, 35(33), pp. 2919–21. World Bank. 1990. Agricultural Research in India: Prologue, Performance and Prospects, Washington, D.C.: World Bank, Agricultural Operations Division, Asia Region. ———. 2008. Agriculture for Development, Washington, D.C.: World Bank. World Commission on the Social Dimension of Globalization (WCSDG). 2004. A Fair Globalization—Creating Opportunities for All, Geneva: International Labour Organization, WCSDG.

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PART II Entrepreneurship and Industry a Regional variations in the patterns and sources of accumulation and capitalist development and, not unrelated to this, the regional variations in growth across colonial India, are issues that have not received the attention they deserve. In the available historical literature, there has been a tendency to overemphasize certain trajectories of accumulation and certain sources of entrepreneurship and to overlook others; at one level, this has been the outcome of the pervasive influence of macro-centric perspectives. This is best reflected in the greater attention focused on more visible centres and regions (Bombay and Calcutta) at the expense of relatively inconspicuous yet economically vibrant regions (large parts of south India). Without underplaying the importance of merchant and trading capital as an important source of industrial entrepreneurship in large parts of colonial India, the essay ‘Revisiting Indian Capitalists in Colonial India: Some Critical Reflections’ by Raman Mahadevan underlines the significance of a certain broadening of the social sphere of accumulation in parts of southern India even as early as the 1930s and 1940s, reflected in the noticeable flow of agro-commercial and artisanal capital into modern industry (Chapter 6). This study makes a strong plea for the need to redraw the geographical contours of the accumulation process in a manner that is consistent with regional heterogeneity. Through this broad historical contextualization, the nature of entrepreneurship in post-colonial India assumes greater meaning and substance. Above all, it helps in narrowing the existing disconnects between the past and the present. Trading links between parts of south India and the West predated the arrival of formal colonialism. Pepper and cardamom, homestead perennial crops, provided the local peasantry the early exposure to the vicissitudes of external markets. The entry of coastal

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trading firms in the 19th century, marking the development of organized plantation agriculture in south-western India, resulted in drawing the peasantry even closer to the new production and marketing structure. Tharian George’s article, ‘From Merchants to Multi-national Enterprises: European Trading Firms in South India’s Plantation Sector’, is a useful contribution to the existing but sparse literature on the evolution of foreign capital in India. Through a longue durée approach, it brings out the differentiation within capital as reflected in the changing forms of capital consistent with the changing needs of the global market order. Limited liability joint-stock banking, the issuing of bank notes and deposit banking came into India with the British. Though a few Indian banks had entered the field in the later 19th century, presidency banks and exchange banks maintained the lead till 1916. The banks tended to exploit the big, up-country centres of trade and commerce and the four ports, leaving smaller towns and rural areas bereft of reliable banking institutions. This lacuna was sought to be filled at the time of independence with the nationalization of the Imperial Bank of India. The State Bank of India opened over 400 branches, mostly in the rural areas, during 1955–60. But the concentration in urban areas continued. The nationalization of 14 major banks and the directed expansion (called banking on fiat) saw banking spread to almost all parts of India. The story of Indian banking expansion has been dominated by initiatives taken by the government at various junctures to achieve equitable provision of banking services. But even here, the southern region shows a trend at variance with the overall trend. The roots of the ‘emerging south’ can perhaps be seen in the 1930s and 1940s, when 60 per cent of all new banks registered had their offices in present-day Kerala, Karnataka and Tamil Nadu. The 1960s saw the Reserve Bank of India follow a more active policy of compulsory amalgamations of sub-standard banks with well-managed institutions, whereby the number of banks came down from over 300 in 1960 to about 75 in 1969. Interestingly, 40 per cent of the banks at that point were from the south (Kerala, Karnataka and Tamil Nadu). The weeding out process of the 1960s underlined the strength of the southern banks. And this trend continues, with banking in the south showing a larger number of deposit and credit accounts per person, overall, even to this day.

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The essay ‘Fiat or Trust? A Story of Indian Banking (1857–2007) with a Regional Perspective’ by D. Narayana tells this story effectively. The story of manufacturing is of a piece with entrepreneurial development, coastal trade and banking. In his essay, ‘Six Decades of Industrial Development: Growth of the Manufacturing Sector in India from the 1940s’, C. P. Chandrasekhar provides a critical overview of the major trends in post-colonial India. India is a classic case of import-substituting industrialization, with the state playing a critical role in influencing the pace and pattern of industrialization. The principal aim of state policy was to ensure rapid industrial growth through the protection of domestic industry and massive public investment coupled with enhanced savings. The strategy produced high growth in manufacturing till the early 1960s. But the relative stagnation of agriculture became a drag on subsequent industrial growth. The potential of the system to grow was limited by the high income inequality in agriculture and asset concentration in industry, leaving the state to provide the stimulus. The big stimulus came in the 1980s with larger government spending, liberalization of imports and external commercial borrowing. The combination of these factors led to a financial crisis in the early 1990s and the subsequent ushering in of economic reforms. While the high growth continued into the 1990s, it was far more unstable, related to the unstable public expenditure and the boom in consumer credit. Export did not become an important source of overall growth, though it has played a part in specific industries. Only in the 2000s does export seem to have provided a stimulus to growth, which came to a halt with the global meltdown. Whether there can be a major industrial upswing without a major boost coming from the rural economy remains to be seen.

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Chapter 6 Revisiting Indian Capitalists in Colonial India: Some Critical Reflections Raman Mahadevan With the exception of a few studies of note, including a recent work that attempts to map India’s new capitalists,1 there has been a noticeable slackening, especially over the two decades since the late 1980s, of research interest in the evolution of India’s capitalists, with respect to both the colonial and the post-colonial phases. This may not be unrelated to the overall decline of intellectual investment in economic history in general and to the shift to postmodernist concerns in matters more cultural than material. Paradoxically, despite the considerable hype about the India growth story since the post-reform 1990s and about the exceptional role of Indian entrepreneurs as prime movers of this process, there has been no serious attempt by scholars from either side of the epistemological divide to undertake a study of this class. In sharp contrast to the present, during the early post-independence years and right up to the 1970s, there was considerable critical writing on the Indian capitalists. This was a period when the developmental state was still a viable option. Public investment was the preferred route. The state felt it expedient to position itself on the right side of the left and to make some noises periodically about the undesirability of economic concentration. In fact, the state itself lent support to the very production of knowledge on the structure of big capital in India, evident in the reports of the statutory Monopoly Inquiry Commission and Industrial Licensing Policy Inquiry Committee. The core findings of the Monopoly Inquiry Commission, namely, that 75 business houses all over India virtually controlled Indian industry, even became part of the popular discourse of those times. The upshot of all this was the spawning and generation of an enormous amount of very interesting literature that sought to throw light on the nature of the Indian bourgeoisie. There is now a fair body of literature on Indian

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capitalists pertaining largely to the colonial period, which sheds significant light on the process and social basis of accumulation and the nature of private investment in the manufacturing sector in many parts of colonial India.2 This literature remains to this day the staple diet for most students of economic history. The most recent Oxford history of Indian business and the new textbook on economic history are no exceptions in treading the beaten path (see Tripathi, 2004; Roy, 2000, ch. 5, subsection on ‘Entrepreneurship’). This chapter offers a critical reappraisal of the received knowledge and understanding of some aspects of entrepreneurial history. Emerging out of this discussion is an exploration of the possibility of reaping dividends from redrawing the socio-geographical contours of Indian entrepreneurship in the colonial period, with implications for the pattern of development in post-colonial India. The article underscores, further, the urgent need for a more nuanced interpretative framework for understanding the longterm historical process of the evolution of Indian capital, transcending the divide between colonial and post-colonial periods. Cast in an exploratory vein, it also underlines the need for re-examining the complex trajectories of the accumulation process. Above all, it underscores the importance of moving beyond the straitjacketed conceptual or paradigmatic boxes that have fettered our gaze until now. The chapter is organized into five sections. The first section provides a critical overview of the dominant paradigms vis-à-vis Indian entrepreneurship. It outlines the inadequacy of existing conceptual typologies employed in understanding the sources of Indian entrepreneurship in the colonial period, highlighting in particular the limitations stemming from their narrow geographical coverage and the excessive emphasis on large groups. The second section deals with the Chettys as a case study in order to address the larger question of the importance of the specificity of the regional dimension, as well as to bring out the variations in entrepreneurial response within merchant capitalist groups. The focus of the third section is essentially on underlining, through a case study of Coimbatore, the importance of agrarian capital as a source of industrial entrepreneurship. This trend has not only not been accorded the importance it deserves, but is one that was evident also in other regions even as early as the pre-independence period. The fourth section likewise deals with artisanal capital as

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a source of industrial entrepreneurship, a route that was to gain considerable significance in the post-independence period. The concluding section provides a brief overview of the trends in postindependence India, highlighting the continuities and discontinuities in the overall structure of capital as it evolves. By way of a caveat, it needs to be stated that much of the information and evidence for this study has been drawn from southern India, since it was here that more broad-based and diverse sources of entrepreneurship were most noticeable in the pre-independence period. These trends assumed greater significance not only in the south but also elsewhere in the post-independence and especially in the post-reform period.

Overview of Past Perspectives Looking back, it would seem that D. R. Gadgil’s exceptionally incisive work of the early 1950s on the evolution of business communities (see Gadgil, 1959) has had an unbelievably pervasive influence on subsequent writings on Indian capitalists. Notwithstanding the conceptual nuances, almost all studies have seemed to accept unquestioningly the notion that the sole and only sustainable route to accumulation in the colonial context was the merchant capitalist one.3 Given this precondition, it would follow that merchants from distinct business communities were best placed to invest their surplus in industry, as and when appropriate opportunities for investment emerged. This provided legitimacy to the business community paradigm, or what can euphemistically be defined as the ‘Marwari path’. This model underscores the crucial importance of the control of traditional merchant capitalist castes over Indian industry. This is not to deny the importance of the channel of capital accumulation, which allowed merchant castes to exercise control over product and credit markets and to move into industry at the appropriate juncture. The fact about the excessive control of merchant capitalists from distinct castes over the Indian manufacturing sector in pre- and post-independence India is well established and well taken. However, the crucial question in the context of our present concerns relates to inter-regional variations in the pattern of accumulation and the sources of entrepreneurship. Have these been overlooked and underplayed, and has this, therefore, in a sense, reinforced the disconnect between the past and the present? Was there a

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certain broadening of the social base of entrepreneurship, however nascent a trend this may have been, in the late colonial phase? These and many other such questions appear to be worthy of detailed investigation. Factory-based ‘modern’ industrialization or the manufacturing sector in India got under way from around the mid-19th century and was the outcome of the larger process of colonial commercialization. Starting from 1869, following the opening of the Suez Canal, the process of integration of the Indian economy with the prevailing global economic order, with London as its epicentre, assumed a new meaning and direction. Over time, a pan-Indian market began to take concrete shape, facilitated by the development of basic infrastructure. This was an ongoing process, with some regions becoming more integrated than others, influenced to a large measure by the nature of the colonial intervention and the specificities of the region with respect to its pre-colonial commercial structures, its resource endowments, etc. The spread of modern industry in India and the entrepreneurial response following it are quite exceptional in some respects, with few parallels in the rest of the Third World. This is because an indigenous capitalist class was able to carve out a space for its growth in spite of the presence of foreign capital (Mukherjee and Mukherjee, 1988). So much so that, by 1947, India could legitimately claim to be one of the most developed industrial and entrepreneurial bases among the ex-colonial countries of Asia and Africa (Lamb, 1976). The modern industrial sector underwent significant changes over time. Though textiles, comprising cotton and jute, remained by far the most important sub-sectors of the modern industrial sector in terms of capital investment and employment at the time of independence, yet a whole range of other industries in the consumer, intermediate and even capital goods sectors had begun to emerge, especially in the 1930s and 1940s (Ray, 1979). However, the process of modern industrialization was variegated, protracted and uneven, with some regions attracting greater private investment than others. Modern factory-based industry was confined initially to two or three nodal centres, principally Calcutta, Bombay and Ahmedabad. Though subsequently it spread gradually to other centres and regions, the lag between the former and latter regions could not be overcome entirely. This resulted in

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these regions often being characterized as essentially agrarian and industrially peripheral.4 The southern region, like other regions, could not escape being pushed into this slot. In the historiography of Indian industrialization and entrepreneurship, some regions have received disproportionately greater attention than others. This, we are inclined to argue, has had much to do with the earlier, popular, macro-centric histories, with the macro itself rather narrowly defined in terms of the most favoured regions in colonial India. The neglect is also linked crucially to an obsessive concern with size of enterprise. Larger enterprises imply greater visibility. Macro-histories have also been weighted in favour of the bigger centres. The fact that some of these bigger centres were increasingly experiencing deglomeration, especially from the 1940s, is an issue that has not been addressed seriously by economic historians. The narration of the story of Indian capitalists has thus been relatively straightforward and uncomplicated. All that it involved has been searching for the ubiquitous ‘Marwari’ or his counterpart all across the subcontinent. While the search has not been altogether futile, the results have not always been along expected lines. For instance, the Chettys of the Tamil region or the Shikarpuris of Sind (also described as Multanis), both communities that were major players in the ‘bazaar economy’ of colonial India, did not show any exceptional propensity or any alacrity to siphon part of their surplus into industry (Mahadevan, 1992a). Some Chettys did eventually move into industry but, in relation to the total investible surplus at their command, the movement of Chetty capital into industry cannot be described as significant. There was certainly nothing like a flood of Chetty capital flowing into the manufacturing sector in southern India, as perhaps it was anticipated would occur in the wake of the depression. All this may appear to some to be an oversimplification, if not a caricature, of a complex process that involved the spawning of an indigenous capitalist class. However, this is to miss the basic point of the need for re-examining the geographical contours and the nature of the accumulation process so as to encompass the regional dimension, including micro-regions. There is, in short, a need for redefining and re-examining the sites of accumulation over time in order to capture the diverse trajectories and sources of industrial entrepreneurship. This also underscores the need to shift the focus from the large to the medium and the small enterprise

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and, significantly, to move beyond the mega metropolis to small cities and towns and beyond to the rural hinterland, so as to accommodate and capture the dynamics of the heterogeneous nature of industrial capitalist enterprise. Our study reveals that entrepreneurial decisions and choices are complex, shaped as they are by varying influences at specific historical conjunctures. They clearly do not follow a set pattern, especially one that is unilinear and uniformly progressive. Investment in industry was only one possible outcome of the larger process of diversification. While the apparently conservative and cautious investment behaviour of spreading investment risks by maintaining a diversified investment portfolio and straddling the primary, tertiary and secondary sectors can be perceived at one level as essentially a hangover of the pre-industrial past, when appropriately contextualized, it can also be seen as an insurance mechanism against market imperfections and the uncertainties of industrial investment under colonial conditions.

The Southern Frame: Revisiting the Chettys The Chettys of the Nattukottai variety are probably the most significant and the most visible of the communities that straddled the commodity–credit grid in south India (Mahadevan, 1976; Rudner, 1995). However, the relatively circumscribed role of the Chettys over the greater part of the pre-independence period created an environment rather distinct from that obtaining in other regions of commercialized colonial India. Whether one could go as far as describing this condition as a ‘Vysia Vacuum’ (Damodaran, 2008) in south India, as a journalist-scholar has interestingly observed, is a moot question. We are inclined to view it more as a condition or an environment characterized by the absence of hegemony over channels of distributive trade and finance, which thus provided the requisite space for other players from non-ethnic and non-commercial castes to participate in the accumulation process. The influence of the raiyatwari land tenurial system, in conjunction with the commercialization process, would merit being probed as a possible explanation for the ethnically broadbased entrepreneurial base in this region. In short, one could perhaps argue that no strict entry barriers existed, unlike in areas where merchant capitalist control was dominant. Over time, this facilitated the entry of sections of the rich and middle peasantry,

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the upper echelons of the artisanal castes and other occupational castes from the socially marginal sections of south Indian society into the practice of channelling investment into trade, industry (both large- and small-scale) and the service sector. The broadening of the social space of entrepreneurship also lent a certain dynamism to the industrialization process. The role of sections of the Kamma Naidus, the Gounders, the Rajus, the Kaikollars or Senguntha Mudaliars, the Patnulkarans or Saurashtrians and the Nadars, among many others in Tamil Nadu; the Ezhavas, Thiyyas, Syrian Christians and Mancombu Brahmins in Kerala; the Kammas and Reddys in Andhra; and the Pais of Karnataka, is, with certain variations, representative of this trend. The Chetty presence in south India, while not entirely unimportant, was relatively marginal to their overall business enterprise. The Chetty story, though familiar and fairly well documented, may require nevertheless to be retold and reinterpreted. Much of the existing literature on the Chettys has dealt with the predepression period, the relatively more quiescent phase, being concerned more with their role as purveyors of credit and as agents of commercialization in the overseas regions of South and SouthEast Asia—the principal theatre of their capital accumulation. The South-East Asian connection was crucial in determining the pace, magnitude and nature of accumulation. It also had contradictory influences. Thus, while it considerably hastened the accumulation process and imparted visibility to the Chettys’ economic strength, it also had the effect at crucial historical junctures of slowing down their ability to exercise effective control over the south Indian product and credit markets. Until recently, there was an underlying assumption that the Chettys provided the thrust to the industrialization process in the larger region (Bagchi, 1972, 1991). This belief hinges crucially on two assumptions that have acquired legitimacy over time. First, following the major setback to their indigenous banking business in the wake of the depression, there was a considerable withdrawal of Chetty capital from parts of South and South-East Asia (Ito, 1966). Second, the post-1930s spurt in industrial investment, especially in the Tamil region, was seen as the outcome of the thrust provided by this capital in retreat from overseas. This inference would seem to be a case of misplaced optimism. In fact, there was no major pull-out of Chetty capital in the 1930s. The crisis ensuing from the depression underlined the perils of over-commitment

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to a particular line of activity and brought home to the Chettys the urgency of diversification, reorganization and restructuring of their investment portfolio. Diversification did not necessarily imply their willingness and inclination to invest in industry. In fact, our research seems to indicate that the bulk of the capital sought outlets in the tertiary sector rather than in manufacturing. The relatively muted response of the Chettys to industrial investment is better explained by the logic of higher returns and the risks associated with entering an unfamiliar area of investment involving technology and labour. Ironically, the entry of Chetty capital into industry in a relatively significant sense occurs during and after the Second World War, precisely when industrial profits were soaring (Mahadevan, 1992b, 2000). By this time the social contours of modern industry had already taken shape.

Agrarian Basis of Industrialization The overemphasis on the merchant capital paradigm has had the effect of underplaying or, at worst, overlooking agriculture as a potential site for accumulation, and agricultural surplus as a source of industrial investment.5 The Coimbatore case that we refer to in support of our argument, though unique in many ways, is suggestive of the trends that were visible elsewhere as well (Satyanarayana, 1992; Upadhya, 1988). The characteristic features of the agrarian economy of Coimbatore from the early years of the 20th century were its thottam (well-irrigated or garden cultivation), a diversified and flexible cropping pattern and a high degree of commercialization and market orientation (Baker, 1984; Mahadevan, 1992a). Coimbatore is synonymous with cotton. A crucial difference between the cotton markets here and elsewhere, and one that had implications for the industrialization process, was the greater involvement of producers and cultivators in the cotton trade. Price movements in Bombay and other markets were monitored closely by the peasant-traders even in the early 20th century, a sign of market savviness. By bypassing middlemen traders and dealing directly with cotton mills, sections of agrarian capital not only managed to appropriate higher producer prices, but were also able to gain vital exposure to the whole business of textile production (Baker, 1984; Mahadevan, 1992a). This would certainly have facilitated the entry of agro-commercial capital into this industry. The other distinctive feature of the ‘Coimbatorean’ economy, and

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one that perhaps explains to some extent its resilience and dynamism to this day, is the pervasive commercial ethic and the backward and forward integration between sectors as reflected in the two-way flow of capital. The prevailing view on the Coimbatore phenomenon, however, still rests largely on Chris Baker’s (1984) study of the Tamil Nadu countryside. In the absence of much work in this area, Baker’s study has been extremely influential not only in moulding opinion but in spawning a perspective on the nature of the industrialization process that we believe needs to be critiqued. Baker’s principal arguments are predicated on the notion that Coimbatore’s industrialization was inherently unstable and flawed since it was structured against a background of agrarian decline during the depression (ibid.). The crisis in agriculture is said to have induced agrarian capital to seek investments in industry. However, the push-factor theory is not an adequate model for Coimbatore because the flow of capital had begun much before the 1930s and continued for a long time after it. Rather than perceiving it as a distress-induced, one-way flow, it would be more fruitful to examine the growing productive investment in land as a sign of the nascent development of capitalism in agriculture. That there were clear signs of this trend by the 1930s is amply revealed by a very interesting study on the economies of large-scale farming in Coimbatore by Professor Ramakrishnan of the Coimbatore Agricultural College. Written in 1946, the following observations by him from the field are telling: It is the advent of cheap electricity from the hydro-electric power scheme . . . that has greatly accelerated the pace of enlargement and consolidation of holdings, the deepening and widening of wells, the introduction of improved implements and machinery and the lavish application of manures . . . . It is the interest taken by men who made money in the cotton trade or industry, in the development of agriculture as a side-line that accounts for far more expansion of garden cultivation than the exertions of local landholders of influence in buying and improving land. (Ramakrishnan, 1946)

Ramakrishnan’s concluding observations are even more perceptive: There is an interesting feature of the Coimbatore experiment. Intimate association with industry for some years has broadened the outlook

138 a Raman Mahadevan of these new big landlords, so far as investment in and improvement of land and cultivation are concerned, which years of preaching to landlords in the soil were not able to effect. Machinery, implements, fertilizers and new seeds are all bought and tried with avidity. (ibid.)

These perceptive observations help place in perspective some of the trends noticed in the contemporary economic history of the region, chiefly, the ability to adjust and adapt to the changing market conditions following globalization. The recent industrial history of Tiruppur is a good example of this kind, while also underlining the importance of the agriculture–industry nexus (Chari, 2004; Vijayabaskar, 2001). The innovative and intensely commercial ethic, a characteristic feature of this region, opens up a host of questions for further inquiry. Royal Classic Mills Ltd, a garment-manufacturing unit in Tiruppur promoted by R. Gopalakrishnan, a first-generation entrepreneur from the Gounder farming community, offers a good example of this commercially induced innovative trend. Gopalakrishnan not only moved from agriculture to promote Royal Classic Mills, a leading garmentexporting firm, but also went on to invest ‘about Rs 50 crore to set up cotton processing facilities and a wind farm, aimed at creating an integrated cotton-to-garment facility’ (Balaji, 2005). This programme is said to be ‘unique in that Royal Classic is aiming to exclusively buy RCH-2 Bt, the genetically-modified, bollwormresistant cotton developed by Rasi Seeds of Salem’ (ibid.). This is a classic instance not merely of backward and forward integration but also of the integration of fields and mills. The case of coastal Andhra and the response of middle and rich peasantry from the Kamma and Reddy communities, despite its distinctiveness, bears a close resemblance to the Coimbatore case (Satyanarayana, 1992; Upadhya, 1988). The record of private investment in Andhra in the post-independence era and especially during the post-reform phase cannot be de-linked from the larger historical context of the commercialization of agriculture in this region and of the emergence of agrarian surplus as a source of commercial and industrial investment. Particularly noteworthy is the emergence of major players from this region in the field of pharma, cement and infrastructure (Baru, 2000). The case of Kerala, despite the distinct external orientation of the economy, is not very different. The connection with the rural was not less intense here. The commercialization process as reflected in the

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spawning of the agro- and plantation-based industries provided space for the growth of sections of indigenous capital from among the Ezhavas, Thiyyas and the Syrian Christians, among others (Mahadevan, 1991; Rammohan, 1996). These cases are illustrative of a trend that underlines the weight and influence of the local in shaping the larger, complex picture.

The Artisanal Route Marx outlines two routes to industrialization in the context of the rise of capitalism, namely, the merchant capitalist route, and the other, more revolutionary route, where artisans, over time, through the logic of capital accumulation, move on to become industrialists. In the Indian context, with some rare exceptions, the latter route has been all but discounted (Bagchi, 1991). This fact has again had much to do with the limited geographical contours of analysis. It has been assumed that the artisanal industry, especially handlooms, experienced a complete decimation all across the subcontinent following the structuring of a colonial economy and the attendant adverse conditions. Without minimizing the importance of the de-industrialization debate, with which this issue is integrally linked, it may not be inappropriate to argue that there were considerable inter-regional variations that allowed traditional artisanal industries not merely to survive but to adjust, adapt, and grow and modernize (Roy, 1993). Here, again, the southern region seems to stand apart from the all-India pattern. It was characterized by a greater degree of intra-producer differentiation as well by the direct involvement of the producers in trade, bypassing merchant capital—the latter’s presence in the trade remained relatively weak (Roy, 1987). The history and structure of this industry both in the pre- and postcolonial periods in the southern region have been researched extensively. What emerges strikingly is its vitality and adaptability to market conditions and a high degree of commercial orientation. The fact that the modern mill sector in the south focused principally on spinning is extremely significant and highlights the symbiotic though unequal relationship between the mill and the handloom. The market-responsiveness of the handloom sector was also reflected in its sensitivity to the need for periodic technological upgradation. Thus, much before the power-loom boom in parts of the south in post-independence India, handloom producers were

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experimenting uninhibitedly with new technology for new product lines. The following extract from a government report for the Madras presidency, pertaining to the late 1930s, bears testimony to these developments: The handloom weavers in the province are taking to the manufacture of new styles of cloth to suit the changing demands of the market and small twisting machines with three or four spindles are now used for preparing twisted yarns of two colours for producing stripe effects. . . . Under the Pykara and Mettur hydro-electric projects, cheap electric power has been made available in many areas and already in Erode, Komarapalayam, Salem, Trichinopoly, power-looms, swivel looms, twisting machines, braiding machines, knitting machines and jiggers (for dyeing cloth in full width) are being operated with electric motors.6

All these were set up by what the report describes as ‘small capitalists’. Clearly, accumulation and differentiation were well under way. A fair number of instances also exist of some of these small capitalists from distinct castes associated with the handlooms, such as the Saurashtrians or Patnulkarans, the Kaikollars or Senguntha Mudaliars (Mines, 1984) and the Devanga Chettys, moving further up the social scale by investing in the mill sector. The Viapuri Textile Mills in Tiruchengode, the Ramalinga Choodambikai Mills in Tiruppur, the Dhanalakshmi Mills (also in Tiruppur) and the Sri Kothandarama Mills in Madurai are examples from the preindependence period of the forays by substantial handloom capitalists into the organized mill sector (Mahadevan, 1992a). This process accelerated considerably in the more liberalized postindependence period, as the recent history of the garment industry in Tiruppur and textile units elsewhere in Tamil Nadu would seem to indicate.

Postscript The 1940s remains a relatively under-researched decade in so far as the growth of capital in colonial India is concerned. Most studies have tended to focus mainly on the 1930s, and only peripherally on the crucial 1940s. This assumes importance given the spatial broadening and deepening of capital across India. There is also no longer any justification for historians to be rigid about the 1947

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cut-off and to shy away from focusing attention on the process of transition of capital from the colonial to the post-colonial era. Indian corporate capital at the time of independence was differentiated with respect to investment and size. The industrial space, especially the organized sector, was shared by relatively largesized Indian business houses from distinct business communities, as well as by region-centric Indian capital from very diverse social backgrounds, along with European managing agencies and multinational corporations. Indian capital from Bombay, Ahmedabad, Bengal and parts of north India was clearly more dominant by virtue of greater space for accumulation and because of the fact that the major industries happened to be located in these regions. But even at this point of time, there were clear indications of a certain broadening of the social sphere of accumulation. Southern India, particularly the regions of Tamil Nadu and Andhra, provide evidence on this score. Sections of agro-commercial capital had established more than a toehold in industry, in textiles or sugar as the case might be. This aspect has unfortunately not been accorded the importance it deserves in most standard macro-histories of industrialization. These developments had implications for the nature of entrepreneurship in the subsequent, post-independence period. Under the import-substituting industrialization programme of the postindependence era, with a system of licensing set up under the Industrial Development and Regulation (IDR) Act of 1951, it was the established, large corporate houses and business houses with a pre-independence lineage, mostly from certain business communities possessing enormous financial clout, that were better placed to take advantage of the opportunities for private investment. The licensing system was utilized by these established business groups to effectively pre-empt capacity in many industries and thus prevent the entry of new capital. However, as the market size was still small and the number of disappointed aspirants and claimants also relatively small, this did not create any major ripples. It has been observed that ‘even after almost two decades of industrial development most private investment was controlled either by Multinationals or by Marwari, Gujarati and Parsi enterprise’ (Baru, 2000). This is reflected best in the list of the top 75 industrial houses prepared by the Monopoly Inquiry Commission. The studies on capitalists during this period were thus concerned

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largely with issues relating to the concentration of economic power, or the question of the structure of big business or monopoly houses (see Chandra, 1981; Ghose, 1972; Hazari, 1966). In this sense, there appeared to be an epistemological continuation of the trend noticed with respect to historical studies, viz., of a restrictive gaze that was limited to the large and the major centres. There continued to be a reluctance to accommodate issues of regional differentiation and variations in patterns of capitalist development across regions and, linked to this, the question of new sources and spheres of accumulation. While there was a growing recognition of the importance of regional differentiation in the context of the varying patterns of agricultural growth and of its possible influence in shaping capitalist development (Raj, 1976; see also Bharadwaj, 1995), unfortunately this did not spawn any significant research on the emerging new regional capitalists. In addition to this, it is now acknowledged that government policies at the levels of both the states and the centre, and especially public investment, were a major catalyst for accumulation by new private entrepreneurs in many regions (Baru, 2000). The rise of a number of major players in the infrastructure sector in Andhra was closely related to this favourable conjuncture (ibid.; Damodaran, 2008). The growing processes of sub-contracting and ancillarization, which both private and public sector enterprises appear to have encouraged, also contributed in spawning the growth of small- and medium-scale industries in engineering and other sectors, many of which were promoted by a class of a first-generation entrepreneurs. There were clear signs, especially in the late 1970s and the 1980s, of a distinct change in the entrepreneurial landscape characterized by a broadening of its social base. This was also a period of social churning and the rise of backwardcaste movements with pronounced economic implications. With the expansion of the market and income, there was also an exponential growth in the number of claimants for licences for setting up industries. Their claims could not be brushed aside as easily as in the past. Under these circumstances, the pressure to dismantle the archaic regulatory system also gained momentum. The loosening of controls and the initiation of economic reforms and of new policies with respect to electronics and telecommunications were at a certain level a response to the needs of the changing

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industrial environment as well as to the aspirations of the new social forces representing industry. Education and government policy driven by science and technology were a major factor in this phase, providing a fillip to the new groups who were investing in the emerging industries, including electronics, communications, computer hardware and software, pharma and biotechnology. The entrepreneurs in many of the new technology-driven industries were first-generation entrepreneurs, most often ‘trained engineers of middle class origins . . . who have drawn on their cultural capital of higher education and social capital derived from professional experience’ (Upadhya, 2004, p. 5142). The 1991 reform and liberalization process contributed to formally dismantling all controls and enabling new groups to emerge in greater numbers across the industrial space. Coinciding with the rise of new groups has been the perceptible decline of the older merchant capitalist business groups. The decline is related at a basic level to their highly diversified investment portfolios, the absence of core competency and focus, and the inability to adjust and modernize. The decline of the Kanpur, Ahmedabad and Bombay textile industries is symptomatic of this trend. While the older Marwari and Baniya firms, with some exceptions, have all but declined, a number of new firms that have emerged can trace their origins to similar social backgrounds (Damodaran, 2008). But they operate in a very different environment, making very little use of traditional caste institutions for their advantage. As is more than evident, the preceding account is no more than a cursory and rather broad overview of what is essentially an extremely complex and richly textured landscape. It is more suggestive rather than descriptive and exhaustive in its orientation, and is intended largely to underscore the need for a fresh perspective for approaching what seem to be potentially rewarding fields of enquiry. a

Notes 1. See Damodaran (2008). For a short, interesting piece underlining the importance of the new trends vis-à-vis the rise of new capital, see Baru (2000). For a recent, sector-specific study, see Upadhya (2004).

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Another interesting study that succeeds in transcending in a crucial sense the colonial–post-colonial divide, and that throws new light on the interface between the state and Indian capitalists on vital issues of planning and development, is Chibber (2004). In view of constraints of space, the list that follows is necessarily not comprehensive. However, care has been taken to represent all the major strands of interpretation on this theme. See Desai (1968), Gadgil (1951), Guha (1970), Ito (1966), Lamb (1955, 1976), Levkovsky (1966) and Pavlov (1964). See also Bagchi (1972), Chandavarkar (1985, 1994), Mahadevan (1976, 1991, 1992a), Markovits (1985), Mukherjee (2002), Ray (1979, 1992), Rungta (1970), Timberg (1978), Tripathi (1984, 2004) and Upadhya (1988). This is best reflected in the sheer number of studies on business communities, some of which are cited in note 2. The fact that an entire seminar on the relevance of the business community typology was organized as late as 1984 testifies to the enormous influence of this paradigm; see Tripathi (1984). Even historians and social scientists of the left and Marxist persuasions couldn’t quite extricate themselves from the grip of this typology. In the absence of a critical mass of literature on the emergent modern economy of the colonial south, the study by Chris Baker (1984) was extremely influential in moulding opinion on the region’s evolution. Not only does the very title of the study, viz., An Indian Rural Economy 1880–1955: The Tamilnad Countryside, affirm Baker’s position that industrial development and urbanization were inconsequential and marginal in the Tamil region, but the study itself had the effect of further reinforcing the misrepresentation. Even an otherwise meticulous scholar like Claude Markovits sounds apologetic with regard to the treatment of south India: ‘Most of the data collected concern northern, western and eastern India. Therefore South India, although its business communities were far from negligible and showed specific traits have not been given all the treatment they would have deserved’ (Markovits, 1985, p. 5). The problem was perhaps not merely one of inaccessibility of data and paucity of a significant body of material, but also the more intractable and serious one of fitting a square peg into a round hole. The southern case was clearly at variance with the macro-Indian model (see Mahadevan 1999, 2004). Tyabji’s (1995) work may be seen as an attempt to correct this trend. The observations by an otherwise extremely perceptive senior scholar that ‘there is little evidence that entrepreneurship in agriculture provided a stepping stone to industry’ (Bagchi, 1972, p. 213), or that ‘no direct connection can be established between the survival and growth of a rich peasant class in a region and growth of large scale or even

Revisiting Indian Capitalists in Colonial India a 145 small-scale industry in that region’ (read south India; Bagchi, 1976), are good examples of the prevailing disinclination to move beyond established lines of thinking. At a certain level, it is also a reflection of the compartmentalization of academic disciplines and sub-disciplines and the difficulty this induces in seeing the interconnections between the two sectors. 6. See the Annual Report of the Department of Industries and Commerce for the year ending March 1939 (Madras: Government Press, 1939).

References Bagchi, A. K. 1972. Private Investment in India, Cambridge: Cambridge University Press. ———. 1976. ‘Reflections on Patterns of Regional Growth in India during the Period of British Rule’, Bengal Past and Present, 95(1), January–June, pp. 247–89. ———. 1991. ‘Reflections on the Nature of the Indian Bourgeoisie’, Social Scientist, 19(3/4), March–April, pp. 3–18. Baker, C. J. 1984. An Indian Rural Economy 1880–1955: The Tamilnad Countryside, New Delhi: Oxford University Press. Balaji, R. 2005. ‘Royal Classic Plans Bt Cotton Contract Farming’, Hindu Business Line, 12 February. Baru, Sanjaya. 2000. ‘Economic Policy and the Development of Capitalism in India: The Role of Regional Capitalists and Political Parties’, in Francine Frankel, Zoya Hasan, Rajeev Bhargava and Balveer Arora (eds), Transforming India: Social and Political Dynamics of Democracy, New Delhi: Oxford University Press, pp. 207–30. Bharadwaj, Krishna. 1995. ‘Regional Differentiation in India’, in T. V. Satyamurthy (ed.), Industry and Agriculture in India since Independence, New Delhi: Oxford University Press, pp. 189–218. Chandavarkar, Rajnarayan. 1985. ‘Industrialization in India before 1947: Conventional Approaches and Alternative Perspectives’, Modern Asian Studies, 19(3), pp. 623–68. ———. 1994. The Origins of Industrial Capitalism in India, New Delhi: Oxford University Press. Chandra, N. K. 1981. ‘Monopoly Capital, Private Corporate Sector and the Indian Economy: A Study in Relative Growth 1931–1976’, in A. K. Bagchi and N. Banerjee (eds), Change and Choice in Indian Industry, Kolkata: K. P. Bagchi, pp. 299–381. Chari, Sharad. 2004. Fraternal Capital, Delhi: Permanent Black. Chibber, Vivek. 2004. Locked in Place: State Building and Late Industrialization in India, New Delhi: Tulika.

146 a Raman Mahadevan Damodaran, Harish. 2008. India’s New Capitalists: Caste, Business and Industry in a Modern Nation, Ranikhet: Permanent Black. Desai, A. V. 1968. ‘Origins of Parsi Enterprise’, Indian Economic and Social History Review, 5(4), pp. 307–17. Gadgil, G. R. 1951. ‘Notes on the Rise of Business Communities in India’, New York: Institute of Pacific Relations. ———. 1959. ‘Origins of the Modern Indian Business Class: An Interim Report’, New York: International Secretariat, Institute of Pacific Relations. Ghose, Aurobindo. 1972. ‘Monopoly in Indian Industry: An Approach’, Economic and Political Weekly, 7(5/7), February Annual Issue, pp. 385–92. Guha, Amalendu. 1970. ‘Parsi Seths as Entrepreneurs—1750–1850’, Economic and Political Weekly, 5(35), 29 August, pp. M107–M1155. Hazari, R. K. 1966. The Structure of the Corporate Private Sector, Mumbai: Asia Publishing House. Ito, S. 1966. ‘A Note on the “Business Combine” in India with Special Reference to the Nattukottai Chettiars’, Developing Economies, 4(3), pp. 367–80. Lamb, Helen. 1955. ‘The Indian Business Communities and the Evolution of an Industrialist Class’, Pacific Affairs, 28(2), June, pp. 101–16. ———. 1976. ‘Business Organization and Leadership in India Today’, in Corliss Lamont (ed.), Studies on India and Vietnam, New York: Monthly Review Press, pp. 141–63. Levkovsky, A. I. 1966. Capitalism in India, Delhi: People’s Publishing House. Mahadevan, Raman. 1976. ‘The Origin and Growth of Entrepreneurship in the Nattukottai Chetty Community of Tamilnadu’, Unpublished MPhil dissertation, New Delhi: Jawaharlal Nehru University. ———. 1991. ‘Industrial Entrepreneurship in Princely Travancore: 1930–47’, in Sabyasachi Bhattacharya (ed.), The South Indian Economy: Agrarian Change, Industrial Structure and State Policy c. 1914–47, New Delhi: Oxford University Press, pp. 159–207. ———. 1992a. ‘Process of Manchesterisation in Colonial South India’, Paper presented at the 12th European Conference of Modern South Asian Studies, September 1992, Berlin. ———. 1992b. ‘The Pattern of Industrial Control in Colonial Madras: Some Critical Observations on the Relative Position of Indian and Foreign Capital, 1930–50’, in Arun Ghosh, K. K. Subramaniam, Mridul Eapen and Haseeb Drabu (eds), Indian Industrialization: Structure and Policy Issues, New Delhi: Oxford University Press, pp. 333–64. ———. 1999. ‘The Southern Region’, in Federation of Indian Chambers of Commerce and Industry (FICCI), Footprints of Enterprise: Indian Business through Ages, New Delhi: FICCI and Oxford University Press, pp.113–23. ———. 2000. ‘The South Side’, Business World, Special Millennium Issue on Democratization of Business, 3 January.

Revisiting Indian Capitalists in Colonial India a 147 Mahadevan, Raman. 2004. ‘Beyond the Rural–Urban Divide: Towards a Reassessment of the Archaeology of Industrialization in Colonial South India’, Paper presented at the workshop on Recent Trends in South Indian Studies, 9–11 December, Chennai: Madras Institute of Development Studies. Markovits, Claude. 1985. Indian Business and Nationalist Politics, Hyderabad: Orient Longman. Mines, Mattison. 1984. The Warrior Merchants, Cambridge: Cambridge University Press. Mukherjee, Aditya. 2002. Imperialism, Nationalism and the Making of the Indian Capitalist Class 1920–47, New Delhi: Sage. Mukherjee, Aditya, and Mridula Mukherjee. 1988. ‘Imperialism and the Growth of Indian Capitalism in the 20th Century’, Economic and Political Weekly, 23(11), pp. 531–46. Pavlov, V. I. 1964. The Indian Capitalist Class, Delhi: People’s Publishing House. Raj, K. N. 1976. ‘Growth and Stagnation in Indian Industrial Development’, Economic and Political Weekly, 9(5/6/7/9), pp. 223–36. Ramakrishnan. 1946. ‘Well Irrigation in Coimbatore’, Eastern Economist, 8 February. Rammohan, K. T. 1996. ‘Material Processes and Developmentalism’, Unpublished PhD dissertation, Thiruvananthapuram: Centre for Development Studies and University of Kerala. Ray, R. K. 1979. Industrialization in India: Growth and Conflict in the Private Corporate Sector 1914–1947, New Delhi: Oxford University Press. ——— (ed.). 1992. Entrepreneurship and Industry in India, 1800–1947, New Delhi: Oxford University Press. Roy, Tirthankar. 1987. ‘Relations of Production in Handloom Weaving in the Mid-Thirties’, Working Paper No. 223, Thiruvananthapuram: Centre for Development Studies. ———. 1993. Artisans and Industrialisation, New Delhi: Oxford University Press. ———. 2000. The Economic History of India 1857–1947, New Delhi: Oxford University Press. Rudner, D. W. 1995. Caste and Capitalism in Colonial India, Delhi: Munshiram Manoharlal. Rungta, R. S. 1970. Rise of Business Corporations in India 1851–1900, London: Cambridge University Press. Satyanarayana, A. 1992. ‘Industrialization in Colonial Andhra’, Occasional Paper No. LXVI, New Delhi: Nehru Memorial Museum and Library. Timberg, Thomas. 1978. The Marwaris, New Delhi: Vikas. Tripathi, Dwijendra (ed.). 1984. Business Communities of India: A Historical Perspective, Delhi: Manohar.

148 a Raman Mahadevan Tripathi, Dwijendra (ed.). 2004. The Oxford History of Indian Business, New Delhi: Oxford University Press. Tyabji, Nasir. 1995. Colonialism, Chemical Technology and Industry in South India, New Delhi: Oxford University Press. Upadhya, C. B. 1988. ‘Farmer Capitalists of Coastal Andhra Pradesh’, Economic and Political Weekly, 23(27/28), pp. 1376–82, 1433–42. ———. 2004. ‘A New Transnational Capitalist Class: Capital Flows, Business Networks and Entrepreneurs in the Indian Software Industry’, Economic and Political Weekly, 39(48), 27 November, pp. 5141–51. Vijayabaskar, M. 2001. ‘Industrial Formation under Conditions of Flexible Accumulation’, Unpublished PhD dissertation, New Delhi: Jawaharlal Nehru University, Centre for Development Studies.

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Chapter 7 From Merchants to Multi-national Enterprises: European Trading Firms in South India’s Plantation Sector Tharian George K. The overwhelming concern in the vast volume of scholarly literature on plantation agriculture has been with the assessment of either its development impact or the lack of it in the erstwhile colonies, as exemplified in the ‘development of underdevelopment’ paradigm. These theoretical positions are imbued primarily with captive definitions of the identity of plantation agriculture vis-à-vis other systems of agriculture.1 The resultant conceptual dichotomies and competing interpretations opened, as it were, a Pandora’s box of ambiguous generalizations on the characteristic features of plantation agriculture.2 The two major missing analytical links in these approaches have been the contextually specific contributory factors in the development of plantation agriculture across regions, and the consequences of changes in the post-colonial phase that eroded the sustenance of the foreign-owned, large-scale, exportoriented system of agriculture.3 The inherent difficulties in providing a consensual definition of plantation agriculture and drawing symmetrical conceptual contours are amply demonstrated by the differences in the patterns of agriculture evolved in the ‘colonies of settlement’ and the ‘colonies of tropical Asia’.4 Even among the colonies of tropical Asia, significant inter-regional as well as intra-regional differences have been observed in the pattern of export-oriented agriculture. The factors underlying these differences are: (a) the nature of metropolitan capital employed and the linkage effects; (b) agroclimatic conditions; (c) the extent of involvement or involution of the native peasantry; (d ) the nature and availability of labour; and (e) the rules and procedures pertaining to the appropriation and repatriation of the surplus generated.

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Despite the observed differences, export-oriented agriculture in the colonies inherited an internal dimension governing the institutional arrangements within the system and an external dimension linking the centre and the periphery. In course of time, the four major elements precipitating changes in the internal and external dimensions of plantations were: (a) the dynamics of the metropolitan capital involved; (b) the labour processes under the regimented, hierarchical systems in plantations; (c) changes in the structure and technology of production; and (d) changes in the mode of marketing and market orientation. Although the cumulative effect of these four factors led to a paradigm shift in plantation agriculture, the principal element governing these changes over various phases was the evolutionary dynamics of metropolitan capital. More precisely, the changes are reflective of the transformation in global capitalism marked by the internationalization of capital and the growth of highly integrated corporate capitalist enterprises (Brass and Bernstein, 1992). Although the predominance of European merchant capital in evolving large-scale, export-oriented plantations in the colonies is well recognized, its evolutionary dynamics and the outcomes from a regional perspective are issues that remain inadequately explored. Historically, the nature and role of metropolitan merchant capital varied significantly across regions, and agrarian systems evolved under different phases of colonialism (Bauer and Meier, 1994; Daniel, Bernstein and Brass, 1992; Findlay and Lundahl, 1994). For instance, the involvement of European merchant capital in the triangular trade among Europe, Africa and the Americas from the 16th to the 18th centuries led to a shift from coastal mercantilism and subsistence farming to capitalist agriculture with backward and forward linkages to industry.5 Conversely, the overarching process leading to the evolution of vertically integrated systems of plantation agriculture focused on perennial crops in tropical Asia had limited linkage effects from a long-term development perspective (Foster, 1999; Hayami, 1994; Jones and Wale, 1998). Moreover, the varied outcomes observed even among the tropical colonies due to region- and crop-specific factors cast doubt on unilateral approaches to exploring the links between the colonial past and contemporary issues (Antrobus, 1957; Clairmonte and Cavanagh, 1988; Daniel, Bernstein and Brass, 1992; George and Joseph, 2005; George and Sethuraj, 1996; Penot, 2004; Wickizer, 1951).

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It is against this backdrop that this chapter attempts to capture the metamorphosis of European trading firms involved in plantations in the specific regional context of south India, and the larger implications of this process in the contemporary context. The focus on south India stems from four important considerations: (a) compared to north-eastern India, the coastal regions of south India, especially the state of Kerala, had a long history of trade relations with European merchants in a variety of products, beginning with the era of organized European trade in spices, coconut products, coffee, tea and, finally, rubber; (b) even today, more than 67 per cent of the total area under the four major plantation crops in India, viz., tea, rubber, coffee and cardamom, is located in south India, compared to the mono-crop predominance of tea in north-eastern India (George and Joseph, 2005); (c) compared to the short-lived monopoly status of the East India Company in the development of tea plantations in north-eastern India, a number of European trading firms were active in south India’s plantation sector since the first half of the 19th century; and (d) in contrast to the active participation by native peasantry in cardamom, coffee and rubber plantations in south India, the development of tea plantations in Assam resulted in the involution of the local peasantry (Guha, 1988). An important analytical concern of this chapter is to reconstruct the rough edges and uneven configurations of the transmutation of trading capital over the long span. This undertaking is warranted by the conventional view on the limited growth potential of trading firms (Hymer, 1975). The chapter is organized into two parts: (a) a broad overview of the evolution and consolidation of European trading capital in south India’s plantation sector, extending from the mercantilist phase in the 17th century till the time of India’s independence in 1947;6 and (b) the contemporary scenario in the light of the legacy of trading capital in the region’s plantation sector.

Evolution and Consolidation The role of European capital in the development of the plantation sector in south India did not follow a linear path; rather, it evolved in fits and starts, governed primarily by prevailing British perceptions of and interests in overseas trade. Three broad phases of evolution are discernible. Phase I (1600–1833), representing the

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high point of mercantilism, was marked by a considerable degree of state intervention in external trade and the promotion of enterprises with monopoly trading privileges. Phase II (1833–69), corresponding with the ascendancy of new interest groups and the consequent abrogation of the East India Company’s monopoly trading privileges, witnessed the entry of new British partnership firms and joint-stock companies into trade and later into plantation agriculture in India and other tropical colonies in Asia. Phase III (1870–1947) was a period of consolidation and vertical integration by companies with larger capital bases and worldwide networks covering operations ranging from production to retail marketing. Despite the implicit limitations of this classification of phases, a comprehensive grasp of the European trading capital that built, adapted and consolidated plantation agriculture in south India and elsewhere necessitates a chronological sequencing of the developments.

The Mercantile Phase (1600–1833) The most important event dictating the terms of British foreign trade with India during the first phase was the granting of monopoly rights to the East India Company for overseas trade with Asia in 1600 (Barber, 1994; Nickalls, 1990; Rambousek et al., 1991).7 Therefore, for more than two centuries the scope and direction of the trade in spices and the development of plantation crops in south India were left primarily to the state-sponsored European monopoly trading companies.8 The mercantile orientation of these companies was reinforced by certain region-specific factors. The two major indigenous crops exported from the region during this phase were pepper and cardamom. While pepper cultivation was left to the local peasantry, or rather outsourced, efforts were made in the beginning of the 19th century for the large-scale cultivation of cardamom, otherwise considered a minor forest produce, as a secondary crop in coffee plantations. However, the focus of the European trading companies was on the pepper trade (Baak, 1995; Ravindran, 2002). Technically, a plantation-scale expansion of pepper and cardamom cultivation was hindered by: (a) the prevalence of state monopoly in the pepper and cardamom trade for more than a century from 1743 in the dominant princely state of Travancore; (b) negligible material transformation and value addition for these crops beyond

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the farm gate except sorting and grading; and (c) the unique agroclimatic requirements limiting the expansion of cardamom cultivation. Therefore, the chartered trading companies resorted to the procurement of these crops from the local peasantry, and trading margins were maximized in European markets. Although the British East India Company played a pivotal role in developing indigo plantations in Bengal between 1780 and 1802, it was unsuccessful in its attempts to develop coffee or tea plantations, with the major exception of the formation of the Assam Tea Company in 1839.9 There could be at least three reasons for the observed failure of the company to evolve and sustain large plantations in coffee, tea or rubber. The first of these is the transformation of the company from a monopolistic trading enterprise to a territorial empire following its assumption of the administrative and financial affairs of the provinces of Bengal, Bihar and Orissa in 1765 (Buchanan, 1966). Thereafter, it showed more interest in extracting surpluses directly from the producers in the form of tax and tribute (Wood, 2005). Second, the initial pattern of trade initiated by the company consisted essentially of voyages in which several merchants with diversified interests were associated (Buchanan, 1966). Third, the company faced competition from its own employees who traded on their own account and subsequently began developing plantation companies in north-eastern India as well as in south India (Antrobus, 1957; Chapman, 1985; Forrest, 1973).10 Therefore, the development of plantations in south India was left initially to European proprietary planters and subsequently to partnership firms. However, these changes were preceded by a host of developments culminating in the ascendancy of British industrial interests over mercantile interests.

The Evolutionary Phase (1833–69) This intermediate phase saw the beginning of rapid changes in the organization of industrial production and commerce in Britain. This phase was characterized by the ascendancy of industrial interests over purely trading interests. In this phase, Scottish capital took the lead in British overseas investments; Scottish universities such as Edinburgh and Glasgow took early initiatives in the teaching of botany and botanical collection; and Scots were the preferred managerial personnel for managing plantations in British colonies

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in tropical Asia (Brockway, 1979; Buchanan, 1966; Nickalls, 1990; Scott and Hughes, 1980).11 However, the entry of British partnership firms and subsequently of joint-stock companies in India’s overseas trade during this phase coincided with certain major developments, beginning with the abolition of the East India Company’s monopoly in the China tea trade in 1833. Table 7.1 summarizes the major developments during 1833–69 that had a strong bearing on the involvement of European trading firms in south India’s plantation sector. Table 7.1 Major Trade-Related Developments, 1833–69 Year




Abolition of East India Company’s monopoly in the China tea trade


Establishment of the Royal Botanic Garden of Kew as a state institution


Repeal of the English Navigation Act (1651)


Companies Act (1862)


Opening of Indo-European telegraph line via Russia


Opening up of Suez Canal

Entry of European partnership firms and transformation of the company’s role as part of the colonial administration. Accelerated plant transfers and scientific plant development leading to large-scale expansion of plantations in the tropical colonies, altering the patterns of world trade. Facilitated direct exchange of goods between India and the European continent—the restrictive detour via England became a thing of the past. Removal of restrictions on jointstock companies to register with limited liability. Emergence of a large number of joint-stock trading companies. Considerable boost to communication and commerce. Improvements in communication systems were accelerated by the first telephone cable laid between India and England in 1870. Reduced the duration of sea travel between India and Europe by half.

Source: Brockway (1979); Landes (1966); Rambousek et al. (1991).

From Merchants to Multinational Enterprises a 155

The developments during 1833–69 had three important effects: (a) the emergence of new British partnership firms and jointstock trading companies, not only to trade in the old staples of south India with allied interests in shipping and insurance, but also to develop coffee, tea and rubber plantations in the region; (b) cheaper modes of communication and transport; and (c) they paved the way for consolidation and vertical integration by British managing agencies in the next phase. The involvement of European partnership firms, popularly known as coastal trading firms, in south India’s plantation sector was confined initially to coffee. Though the genesis of commercial cultivation of coffee in this region is a disputed theme, coffee cultivation has been traced back to the last decade of the 17th century (Venkatesaiya, 1953). An important characteristic of coffee plantations from the initial phase onwards was the dominance of proprietary concerns, which continued even into the last quarter of the 19th century (Mayne, 1953). Along with the British proprietary planters, natives were also engaged actively in coffee planting in Mysore, as is evident from the composition of the United Planters’ Association of Southern India in 1894.12 In other parts of the region, coffee plantations were initiated by the European coastal firms trading in a variety of products of the region, including coffee. The first such initiative was by Parry & Co. in 1823 to develop coffee planting in Kalpeta district of Manantoddy (Ganapathy, 1978; Langley, 1953).13 Simultaneously, coffee plantations were developed by Arbuthnot & Co. and Binny & Co. in Mysore. The development of coffee plantations in Coorg, Nilgiris, Waynaad, Shevaroys and Travancore turned the west coast virtually into the natural outlet for coffee curing and finally for shipping to London. Apart from the role of trading and curing, these coastal firms combined the operations of banker, insurer, local transport and shipping agent, supplier of material inputs for the plantations and broker in charge of sale—all in return for the hypothecation of the crop. The multiplicity of roles combined by the coastal firms was important in creating the increased dependency of the proprietary planters. The fees and income accrued by the coastal firms were described as ‘commissions appertaining thereunto’ (Langley, 1953, p. 200). To a large extent, this was similar to the pattern observed in the case of the Costa Rican coffee sector during the 1840s (Findlay and Lundahl, 1994). Among the various operations, shipping was the

156 a Tharian George K.

most risky, sensitive and profitable.14 Coffee curing was perhaps the key element of change that transformed the operations of the coastal firms and led to their subsequent involvement in coffee plantations. Logically, entry into the coffee plantations was necessary to sustain surplus appropriation from trading and other services. Coffee curing and trading on the west coast were dominated by Peirce Leslie & Co., Aspinwall & Co., Volkart Brothers, Stanes & Co., Binny & Co. and Parry & Co. The main coffee-curing centres were established in Mangalore, Tellicherry, Calicut, Coimbatore, Quilon and Colachel. Three distinct features of these coastal firms during the early phase merit attention. First, the main function of these companies was financial with diversified trading interests.15 Second, the decisive role played by family and associations of friends in the organizational structure of these firms was reflective of the conditions prevailing in Britain. Finally, these firms exhibited enormous flexibility in capitalizing on new opportunities rather than implementing a preconceived plan for horizontal expansion or vertical integration. In essence, these traits of the coastal firms were reflective of the basic features of merchant’s capital observed by Marx: ‘Merchant’s capital is simply capital functioning in the sphere of circulation . . . . No species of capital changes its purpose, or function, with greater ease than merchant’s capital’ (Marx, 1984, pp. 279–82).

Consolidation and Vertical Integration (1870–1947) This phase marked the entry of British managing agencies with larger capital bases and global network relationships, leading to their control over production and trade. The process of consolidation was reinforced by technological advances in transport and communication and the resultant reduction in transaction costs. However, it was the emergence of tea as the major plantation crop in south India during the first quarter of the 20th century that gave a fillip to the growth of corporate structure in the plantation sector. Historically, this phase is considered the apogee of European colonialism, coinciding with the beginning of imperialism (Brass and Bernstein, 1992). The entry of the managing agencies, with their complex system of interlocking directorships, into the region’s plantation sector ensured risk-sharing as plantations were managed by partly owned companies whereas the wholly owned companies

From Merchants to Multinational Enterprises a 157

were involved at the stage of selling for which the agencies earned various types of commission. The interlocking connections included strong interdependence in the form of shareholding, credit relations, common financial dependence upon integrated industrial processes and common marketing strategies.16 It was the entry of two British trading firms, viz., the James Finlay Group in 1896 and Harrisons & Crosfield in 1907, in the guise of managing agents that triggered a wave of changes in the plantation sector of the region. In the year 1896, the 227 square miles of land in the possession of the North Travancore Land Planting and Agricultural Society were acquired by Consolidated Tea and Lands Company Ltd, an affiliate company promoted by the James Finlay Group.17 Similarly, the tea plantations of Parry & Co. were acquired by East India Tea and Produce Co. Ltd, an affiliate of Harrisons & Crosfield, in 1907 (Ganapathy, 1978; Nickalls, 1990). This was followed by the floating of new affiliate companies and more acquisitions by Harrisons & Crosfield. These developments had the effect of spurring the established coastal firms in the region to take up a direct interest in the planting side of the business (Langley, 1953).18 Other developments that had important implications for the subsequent changes in the region’s plantation sector included the widespread incidence of coffee leaf disease in the 1870s and the depression in coffee prices during 1879–88 on account of the emergence of cheaper Brazilian coffee on the world market (George and Tharakan, 1986). The depression continued into the first decade of the 20th century and led to changes in crop composition and the organizational pattern of the planters’ organizations in south India. By 1900, in both Kerala and Tamil Nadu, the area planted under tea exceeded that of coffee, whereas in Karnataka coffee remained the major plantation crop (George, 1982). An important consequence of the decline in coffee cultivation was the shift in the importance of regional planting bodies from the north (Mysore, Coorg and Waynaad) to the south (Nilgiris, Travancore and Anamallais). The composition of membership also changed from proprietary planters to public companies with their policy determined by boards in Britain (Langley, 1953). At the time of independence, the areas under tea, rubber and coffee in the region were around 67,000, 65,000 and 90,000 hectares, respectively. The control of area by non-Indian managing agencies and companies even during this period was substantial in the case of tea

158 a Tharian George K.

(more than 60 per cent) compared to rubber (27 per cent) and coffee (10 per cent) (George, 1982, p. 59; George and Thomas, 1997, p. 6; GoI, 1956, p. 13).

Three Multi-national Enterprises Among the European trading firms involved in south India’s plantation sector, three firms with varied strategies acquired the status of multi-national enterprises during the post-war period. These were Volkart Brothers, the James Finlay Group and Harrisons & Crosfield. While the first of these belonged to the genre of coastal firms, the latter two were British managing agents. Among the three, Volkart Brothers, a Switzerland-based partnership firm, was the first to start its trading operations in India with unlimited liability in 1851. Though the initial focus of trading was cotton, there was a gradual diversification into products exported from India, such as coffee, spices, oils and tea in exchange for soap, paper, matches, watches, textiles and machinery (Rambousek et al., 1991). Table 7.2 summarizes the evolution, growth and diversification of Volkart Brothers during the period from 1851 to 1947. Volkart Brothers, with its 18 affiliate companies based in 10 countries and a characteristic focus on trading in a wide range of products, was unique compared to its two British counterparts in the early phase. The distinctive features in the evolutionary dynamics of the company included: (a) a cautious approach towards pre-harvest payments to the proprietary planters, coupled with a staggered interest in the production side as indicated by its late entry into coffee plantations in 1936; (b) the company’s plantation interests were confined to only coffee compared to the involvement of other coastal firms in tea and rubber in the region;19 and (c) as early as the 1870s, the company embarked on a strategy of geographical and product diversification of its external trade, withdrawing from products for which domestic consumption demand had been growing (Rambousek et al., 1991). The emergence of Volkart Brothers as a multi-national enterprise involved diversifying into trading in primary products, engineering products, chemicals, innovative methods of coir yarn manufacturing in Ceylon, shipping, financial services, brokerage, and publications and audiovisuals, across Asia, USA, Latin America and Africa in the post-war period, which was unique. The organizational structure and business orientation of the company underwent significant changes with the

Region/country Winterthur (Switzerland) Bombay (India)

Colombo (Ceylon)

Cochin (India)

Karachi (India)

London/Liverpool (Britain) Tellicherry (India)

Tuticorin (India) Shanghai (China) Delhi (India)

Year 1851 1851




1869 1875

1877 1878 1885/86

(Table 7.2 Continued )

A1, B1, B2, B3, B4. Management of branches in other countries. Trading in general produce, engineering products. B1, B3, C5, D1. External and local trade in cotton; exports of cereals, pearls; imports of cars and trucks, electric motors, milling equipment, textiles machinery; airline agencies; factories for cotton ginning in various locations. B3, B5, C1, C2, C3. Export of graphite, coconut products, essential oils and cinnamon; imports of various products; factories for coffee processing, coir fibre processing and oil distilling. B3, C1, C6. Exports of cereals and manufacturing facilities for coir mats and matting, coir fibre and yarn; coconut plantations; pre-harvest loans to planters; agencies for airline and local transport. B1, B3, C4, C6. Exports of wool, oilseeds, rice, barley, wheat, saltpetre and indigo; airline agencies; agencies for European banks; factories for cotton ginning and pressing. A1, A2, B1, B2. Commodity brokers. B1, B3, C1. Export of pepper, coconut products, groundnuts, cashew nuts, fish oil and fish meal, sandalwood and rosewood; coffee-processing plants, coffee plantations; pre-harvest advance payments to growers. B3, C4. Exports of general produce and pearls; factories for cotton processing. C2, C5, C6, D1. Cotton trading; imports of clocks, grain, sugar. D1. Imports of textiles; liaising with central government.

Major activities/events

Table 7.2 Evolution of Volkart Brothers, 1851–1947

Evolution of Land Rights in India a 159

Madras (India) Lahore (India) Osaka (Japan) New York/New Orleans (USA) Bremen/Hamburg (Germany) Calcutta (India) Bombay (India) Singapore Sao Paulo/Santos (Brazil) Madras (India) Tellicherry (India) Sao Paulo (Brazil) Bombay (India)

1888 1890 1903 1920 1920 1922 1923 1924 1924 1930 1936 1942 1947

B1, B3, C4, C5, C6. Exports of indigo and furs, groundnuts, bee wax and silk waste; services in engineering. C5, C6, D1. Cotton purchasing; exports of furs, wool; imports of textiles. A1, B1. Imports of pharmaceutical products, machine tools. A1, A2, B2. Commodity brokers, machine tools, warehouse operations. A1. Trading in peanuts, rubber, sugar; purchasing finished products for India and Ceylon. B1, B3, C2, C6. Cotton trading; exports of bone-meal, silk waste, jute bags, manganese ore; factories for cotton ginning; airline agencies. Setting up an engineering department in Bombay. Trading in rubber, hides, copra and pepper. A1. Trading in tapioca, honey, pepper, menthol. Seed and groundnut business abandoned. Acquiring Karadibetta coffee plantation. Founding Volkart Irmaos Ltd. Purchasing a large site to accommodate an expanding engineering department.

Major activities/events

Source: Compiled from Rambousek et al. (1991). Note: A1: Trading in coffee, cotton; A2: Trading in cocoa; B1: Insurance agency; B2: Financial services; B3: Shipping agency; B4: Foreign exchange agency; B5: Banking; C1: Exports of coffee; C2: Exports of tea; C3: Exports of rubber; C4: Exports of cotton; C5: Exports of seeds; C6: Exports of hides; D1: Import of engineering products.



(Table 7.2 Continued )

160 a S. Neelakantan

From Merchants to Multinational Enterprises a 161

setting up of the Volkart Foundation in 1951. In 2001, the Volkart Foundation was restructured, and the company now focuses on media, publishing and real estate (Volkart Foundation, www. The evolution of Volkart Brothers as a multi-national enterprise and one of the three giants controlling the world coffee trade is a negation of the conventional view on the prospects of giant international trading firms.20 Such trading firms have been considered to be ‘like dinosaurs, large in bulk, but small in brain, feeding on the lush vegetation of the new worlds’ (Hymer, 1975, p. 40). Though the pre-eminence of the company in the world coffee trade was rooted in its long presence in two British colonies, viz., India and Sri Lanka, the mercantilist orientation of the company served as a springboard for capitalizing on the opportunities for product and geographical diversification. In this process, the company consolidated its trading interests with industrial and financial capital at no cost, utilizing the constitutional neutrality of Switzerland (Clairmonte and Cavanagh, 1988). Conversely, the mode of entry into and subsequent control of south India’s tea plantation sector by the James Finlay Group ushered in a new phase of involvement of European trading capital under the auspices of British managing agencies. It was the James Finlay Group that first opened its tea plantations in south India as a managing agent for its affiliate company in 1896. Subsequently, more affiliate companies were floated to manage tea plantations in India and elsewhere and the tea distribution business in Canada and the USA. Table 7.3 provides glimpses of the major events and activities of the James Finlay Group. The growth of the James Finlay Group as the largest vertically integrated tea company in India as well as one of the largest in the world exemplified two basic traits of Scottish capital, viz., dynamism and family control under the managing agency system.21 While the shift from cotton to tea trading was invigorated under the managing agency system, the Victorian antipathy to the jointstock company evidently allowed traditional family control to acquire many of the advantages of the joint-stock system without losing control (Chapman, 1985). This arrangement was fertile in resources and ensured a complete identity of ownership and control, which were legally separate companies. The four main tea companies established in the

162 a Tharian George K. Table 7.3 Evolution of the James Finlay Group Year


Major activities/events


Glasgow (Britain)

Trading, secretarial services to plantations and other companies.


Bombay (India)

Textile mill management.


Calcutta (India)

Jute mill management.


Karachi (India)

Cotton-ginning management.


Colombo (Ceylon)

Tea plantation management.


Travancore (India)

Tea plantation management.


Travancore (India)

Constructed the first hydro-electric power station.


Bombay (India)

Textile mill management.


Glasgow (Britain)

Conversion into a private limited company.


New York (USA)

Establishment of a subsidiary for tea distribution.


United Provinces (India)

Sugar refinery.



Promoting a subsidiary for tea distribution.


Glasgow (Britain)

Conversion into a public limited company.



Opening tea plantations.



Acquiring a tea factory.


Bihar (India)

Sugar refinery.


Vizagapatanam (India)

Manganese ore exports.


New York (USA)

Tea distribution business sold to local management.



Largest tea producer controlling estates in south and north India.

Source: Baig and Henderson (1978); Jones and Wale (1998).

1890s by the group were Scotland’s largest companies in 1904–05 (Scott and Hughes, 1980). The in-built advantages of the managing agency system were effectively utilized by the group, as indicated earlier.22 The transfer pricing mechanism with the subsidiaries was used effectively by the parent company, and provided protection from external shocks during the inter-war years. The controlling interests of the founder family in the company continued to be substantial even during the 1950s. The company also had control over 34 tea plantation companies in Ceylon, large-scale involvement in the East African tea industry,

From Merchants to Multinational Enterprises a 163

and controlling interests in 20 shipping agencies and seven insurance companies (Centre for Society and Religion, 1975). The net assets of the fully owned companies under the James Finlay Group were estimated to be US$22.1 million in 1938 and the company’s total worldwide employment was 150,000 in 1945 (Jones and Wale, 1998). The post-war period witnessed significant changes in the company’s strategies, especially with its growing interests in banking, insurance and oil exploration, to counterbalance the loss of traditionally strong tea interests in countries like India where the Indianization process had been under way since the late 1970s. Although it became a fully owned subsidiary of Hong Kong–based John Swire & Sons in October 2000, the company has retained its tea-growing interests in Kenya, Sri Lanka and Bangladesh along with worldwide trading in black tea, instant tea and decaffeinated tea (University of Glasgow, The transformation of Harrisons & Crosfield from a Liverpoolbased partnership firm trading in coffee and tea in 1844 to a multinational enterprise during the post-war period is unique given its wider range of interests in plantation crops, comprising tea, rubber, oil palm and cocoa, compared to the mono-crop focus of Volkart Brothers (coffee) and the James Finlay Group (tea). Its higher geographical diversification within the South-East Asian countries was instrumental in allowing it to capitalize on opportunities during the inter-war years. Table 7.4 summarizes the major milestones in the evolution of Harrisons & Crosfield as a multinational enterprise. Harrisons & Crosfield also entered south India’s plantation sector in 1907 as a managing agent. However, compared to the other two companies, Harrisons & Crosfield had been sequencing its plantation interests from tea to rubber, oil palm and finally to cocoa in South-East Asia. In this process, the planting side of the business acquired a higher priority than trading in due course, with a characteristic focus on rubber in Malaya, India and Indonesia. The company’s wider range of involvement in trade included its role as agents for insurance and shipping companies. From the very beginning, the company focused on acquisitions rather than greenfield investments. The research and development initiatives by the company in rubber were unique; it was observed that improved planting materials from the Prang Besar Estate ‘predated the Malaysian Rubber Research Institute’ (Nickalls, 1990, p. 93). The technological capabilities developed by the company

Region/country Liverpool (Britain) London (Britain) Colombo (Ceylon) Selangor (Malaya) Calcutta (India) New York (USA) Malaya Kuala Lumpur (Malaya) Malabar (India) Sumatra (Indonesia) London (Britain) Travancore & Malabar (India) Melbourne (Australia) Wellington (New Zealand) Quilon (India) Quilon (India)

Year 1844 1855 1895 1897 1900 1904 1905 1907 1907 1907 1908 1909–10 1910 1910 1911 1912

(Table 7.4 Continued )

Office for trade in tea to the US & Canada. Office for tea import and distribution. Floating of Golden Hope Rubber Estate. Office to manage plantation activities; formation of the ‘three sisters’ rubber companies. Floating of East Indian Tea and Produce Co. Ltd; acquiring Parry & Co.’s tea estate. Floating of the company’s first rubber estate. Incorporation as a limited liability company. Extensive acquisition of tea estates from Peirce Leslie & Co. and other coastal firms. Tea and rubber import. Tea and rubber import. Opening a branch and acquiring the tile works and saw mills of M/s Cameron & Co. Opening of the company’s engineering department.

Beginning of Harrisons & Crosfield as a partnership firm with a capital of £8,000 for trading in coffee and tea. Shift of headquarters to London. Company’s first tea plantation venture by acquiring Hopton Estate. Company’s first rubber planting in Pataling Estate; managing agents for Pataling.

Major activities/events

Table 7.4 Evolution of Harrisons & Crosfield

164 a S. Neelakantan

Shanghai (China) Kobe (Japan) Singapore North Borneo (Sabah, Malaya) Travancore (India) Malaya Malaya Sumatra (Indonesia) Canada Canada

1917 1917 1917 1920 1921 1923 1925 1926 1935 1947

Opening of office for tea export. Opening of office for textile export. Opening of office for rubber export and plantation management. Joint venture for logging and timber export. Liquidation of five companies to form Malayalam Plantations. Invention and patenting of Linatex—a low-temperature vulcanization invention. Acquisition of Prang Besar estate for R&D. Floating of first oil palm venture. Acquisition of a chemical distribution company. Floating a company to manufacture and distribute chemicals.

Major activities/events

Source: Ganapathy (1978); Jones and Wale (1998); Nickalls (1990).



(Table 7.4 Continued )

Evolution of Land Rights in India a 165

166 a Tharian George K.

in its rubber plantations were utilized effectively for evolving identical plantations across countries, and facilitated its entry into the chemicals field by imports of fertilizers and pesticides by the affiliate companies. In 1932, the company’s net assets were estimated to be nearly US$58 million, comparable to the assets of consumer goods firms such as Quaker Oats and Coca-Cola (Jones and Wale, 1998). In spite of its involvement in a number of plantation crops and allied areas, Harrisons & Crosfield’s emergence as a multinational enterprise was backed up by its stakes in rubber.23 In contrast to the James Finlay Group’s involvement in all the major tea-growing regions in India, Harrisons & Crosfield confined its operations to south India, focusing primarily on rubber. Its strategic diversifications into chemicals, engineering and services were effective in addressing the challenges of the inter-war years and after. The post-war period witnessed important changes in the organizational structure of the company, in the context of the Indianization process that began in the late 1970s. Simultaneously, the parent company consolidated its interests in speciality chemicals against the backdrop of its sale of larger plantation companies in Malaysia and Indonesia.24 The company changed its name to Elementis Plc in 1998, based on its larger acquisitions of chemical companies in Europe and the USA. Functionally, the vertically integrated system of plantation companies organized under the managing agencies excelled in the art of surplus appropriation. A tight network radiating from Mincing Lane in London to all the major tea producing and consuming countries ensured desired outcomes so as to counter the worst effects of the depression of the 1930s (Bagchi, 2002). An important feature of this era was the domination of all major industries in India by a small group of managing agencies in all regions of the country. In 1911, seven managing agencies controlled 55 per cent of jute companies, 61 per cent of tea companies and 46 per cent of coal companies (Bagchi, 1992). In a comparative sense, the returns of the British companies were higher from tea and rubber plantations compared to commercial banks and farm and ranching companies in South America (Rippy, 1953). The rate of dividends peaked for Indian tea companies during the inter-war years (83 per cent) and more than half of the companies distributed large bonuses in shares apart from the lush dividends (ibid.). Although there were strategic shifts in the policies pursued by

From Merchants to Multinational Enterprises a 167

the managing agencies in India after independence, the turning points were the abolition of the managing agency system in the country in 1970 and the implementation of the Foreign Exchange Regulation Act in 1973. The subsequent changes in strategies were revealed in the collaboration with Indian capital and the gradual exit of managing agencies from the plantation sector, as evident from the cases of the three multi-national enterprises.

The Legacy of Trading Capital Despite differences in the evolution, role and impact of trading capital across regions, its inherent traits have lent themselves to the pursuit of contextually specific objectives for surplus appropriation. In order to capture the legacy of trading capital, it is imperative to analyze its salient features, evolution and mutations from a global perspective. This project assumes importance in the context of the growing transnationalization of production and the integration of markets under the international trading system mandated by the World Trade Organization (WTO). In this process, though the crop-specific production processes and identity of the trading capital involved are geographically dispersed, market signals are electronically transmitted and internationally consolidated. Therefore, in the emerging, borderless world, there has been a remarkable integration in the role of trading capital, either through strategic international alliances or by subordination to international financial capital for surplus appropriation. In both cases, trading capital has exhibited two salient features, viz., predatory instincts and flexibility in reorganizing and transforming in tandem with the changing global economic scenario. The historical role of European trading firms, embodied in the dominant principle of profit on alienation (buying cheap and selling dear) during the spice era in south India, underwent important changes with the entry of the East India Company, the coastal firms and later the managing agencies into the plantation sector. Perhaps the most important events that exhibited the predatory instincts of trading capital were the developments in the world tea economy after the abolition of the East India Company’s monopoly privileges in the China tea trade in 1833. The formation of the Tea Committee in 1834, the establishment of the Assam Tea Company in 1839 and the first consignment of Assam tea for auction in London in the same year coincided with the loss of

168 a Tharian George K.

monopoly rights and the first opium war fought between China and Britain. While the inspiration behind the search for indigenous tea by the company in Assam was the annihilation of Chinese monopoly in tea production (Antrobus, 1957), the opium war brought forth the predatory trade tactics of imposing the officially banned opium instead of silver in exchange for Chinese tea. Subsequent developments led to the prominence of the estate system of tea cultivation in British colonies in contrast to smallholder tea cultivation in China, and to the gradual replacement of unfermented Chinese green tea by fermented black tea on the world market by the British companies (George, 1987; Nickalls, 1990). The induced changes in tastes and preferences in mass tea consumption habits are another landmark in the evolution of predatory tactics, and can be considered a precursor to culinary homogenization and the growing transnationalization of diets in recent times. Though the involvement of European trading capital in the region’s coffee cultivation was a rather short-lived affair, the strategies pursued by the firms signalled the organizational structure and policies to be evolved for the maximization of surplus appropriation from the plantation sector. The coastal firms were considered ‘west coast vultures’ for their exploitative tactics (Langley, 1953). None of these firms ventured into modern industries, confining themselves essentially to export-oriented, agro-based industrial complexes. However, the commercial institutions and practices developed by these firms were catalytic of the subsequent export-led growth of the plantation sector in the region. In essence, the coastal firms focused on surplus appropriation from trading and the services rendered to coffee plantations and old staples of the region, without any long-term investment in the production sector. Apart from its predatory instincts, trading capital possessed an inherent trait of adaptability that enabled it to reorganize and transform with changing circumstances. Once established in a sector or region, it acquired or utilized local knowledge and information, which reduced the costs of diversification into other activities. On closer examination, three broad phases of the involvement of European trading capital in south India’s plantation sector may be identified: (a) a buyer-driven commodity chain in the initial phase where market orientation, control over market information, product characteristics and mode of marketing acted as entry barriers while production functions were mainly outsourced

From Merchants to Multinational Enterprises a 169

by the trading firms; (b) a producer-driven commodity chain in the phase of consolidation where the trading giants integrated backwards into plantations and all allied areas of operations; and (c) the post-war phenomenon of the buyer-driven value chain where multi-commodity mega-conglomerates control both primary and retail markets with negligible interests in the production sector. Though the distinctions between commodity and product, and the associated idea of a shift from the commodity chain to the value chain (Bernstein and Campling, 2006b) over various phases are rather polemical, there are important implications from the point of view of the functional sphere of trading capital. The degrees and forms of vertical integration across commodity chains present a mixed picture and, consequently, allow for potential flexibility in cross-subsidization in any given commodity system. For instance, under the producer-driven, vertically integrated system of the commodity chain, cross-subsidization was effective through the transfer pricing mechanism. Conversely, cross-subsidization in the case of buyer-driven value chains under multi-commodity megaconglomerates is effected by virtue of their dominant position in the concerned transnational corporation in several commodity systems.25 In both cases, trading capital has exhibited remarkable flexibility in adapting to changing circumstances and has been successful in constantly reforming its strategies for surplus appropriation and accumulation. This is amply demonstrated by the reported producers’ share in the world value of cocoa and coffee, which stood at 4.1 per cent for cocoa and 21.7 per cent and 12.1 per cent for Arabica and Robusta coffee, respectively (Gilbert, 2007). The strategies to ensure uninterrupted supply of homogenized output through international contractual arrangements, organization of transport and control over primary and retail markets reinforced the buyer-driven value chains of the conglomerates. An important consequence of the transformation of trading capital from the control of producer-driven commodity chains to buyer-driven value chains since the 1970s has been perennial uncertainty in the farm-gate prices of tropical commodities, compared to the freedom from free-market instabilities in the case of retail prices controlled by multi-commodity mega-conglomerates (Corea, 1992; Forrest, 1973; George, 1986, 1987; George and Joseph, 2005; Manoharan, 1974). This coincided with the indigenization

170 a Tharian George K.

of plantation companies in India, Sri Lanka and Malaysia and the resultant loss of control over the production base by the erstwhile managing agencies. However, withdrawal from the production base was preceded by the repatriation of capital and its reinvestment in greener pastures elsewhere (Bagchi, 2002; George, 1982; Sivaswamy, 1956). At the policy level, the implications of these changes are amply demonstrated by the success of the interwar commodity agreements patronized by the colonial powers in stabilizing prices at remunerative levels, compared to the lukewarm response to the national and international initiatives in commodity price stabilization programmes during the post-war period (Corea, 1992; Daviron and Ponte, 2005; Forrest, 1985; George, 1987; Jones and Wale, 1998; Nickalls, 1990; Raffaelli, 1995). In fact, the share of farm-gate prices (producers’ share) has declined in the case of many tropical commodities (Clairmonte and Cavanagh, 1988; Khor, 2005; Puri, 2007; UNCTAD, 2007). A blatant illustration of the working of polarized price mechanisms may be observed in the case of the oldest cash crop exported from the region, viz., pepper—the reported share of the farm-gate price in the consumers’ price is only 8.4 per cent (Sreekumar, 2003). To a large extent, the oligopolistic control of the upper end of the value chains by the multi-commodity mega-conglomerates has been reinforced by three inter-related developments during the post-war period: (a) the dominance of smallholder systems in all tropical crop production with the major exception of tea; (b) the emergence of national and international standards for tropical crops; and (c) the growing importance of commodity futures replacing conventional systems of primary marketing. Structural changes in the production sector, characterized by the sustained growth of smallholder systems displacing vertically integrated systems in the post-war period, have effectively detached producers from control over the commodity chains. Though large in number, the smaller size of the producing units and their inability to engage in stockholding has limited their bargaining power. The woes of the smallholders have been compounded by the abolition of state-sponsored marketing boards across countries and crops as part of the liberalization programmes. This policy change has greatly enhanced the bargaining power of international trading firms (Bernstein and Campling, 2006a; UNCTAD, 2007). As a result, while the production processes of tropical crops are organized

From Merchants to Multinational Enterprises a 171

nationally, the critical stages of value addition are sourced and controlled internationally, reflecting the role of the market integration process (Daviron, 2002). In effect, the questionable role of market fundamentals in the price determination process has been increasingly exposed by the control over contract sales, storage facilities and stockholding exercised by international trading firms. The establishment of standards in tropical product markets and the creation of futures markets for the different products are perceived to be in tandem with the growth of the smallholder systems (Daviron, 2002). The standards for tropical products are considered to have bestowed equal market access, decapitalization of the cropping systems and reduction in the diversity of the commodities (ibid.; Daviron and Ponte, 2005). However, the perceived advantages from the size-neutrality of these standards with regard to market access need further exploration for two important reasons: (a) the products meant for mass global consumption require large-scale processing for uniform quality of various grades, which is normally beyond the scope of the smallholders and therefore leads to outsourcing of the processing operations by national and international trading firms; and (b) the consumer of the final product rarely has the privilege of bargaining on the standards prescribed for primary processing, and consumption at the upper end of the value chain is based on brand loyalties established by the multi-commodity mega-conglomerates. A corollary of the growth of futures markets for tropical commodities has been the transformation of single-line commodity trading firms into multi-commodity traders who have forged extensive links with transnational financial institutions since the 1960s. The 1980s witnessed the acquisition of these trading companies by large financial services companies. The trading interests of Goldman Sachs, Cargill Investors Services and Merrill Lynch are illustrative of the control of global commodity futures by the largest financial conglomerates (Clairmonte and Cavanagh, 1988). Although the perceived advantages of commodity futures compared to auctions include reduction in transaction costs, higher transparency of prices and price discovery, physical trade in the exchanges has become superfluous and the prices generated act as a reference point for negotiations. In effect, commodity futures are not only beyond the purview of the dominant smallholder sector engaged in tropical crop production, but also contain elements conducive to the free play of speculative forces. The gravity

172 a Tharian George K.

of the issue is underlined by the composition of crude oil trading at the New York Mercantile Exchange (Nymex), where the share of speculators was 71 per cent compared to only 29 per cent for the physical hedgers during the year 2008 (Bandyopadhyay, 2008). To a large extent, the price-determining capabilities of the most successful Third World producer cartel in the post-war period, namely, the Organization of Petroleum Exporting Countries (OPEC), appear to have been dwarfed by speculation since the mid-1990s. In this process, apart from the spatial integration of commodity markets, there has been a growing convergence in the movement of individual commodity prices over the decade of the 2000s. Despite the increased consolidation of commodity exchanges, the share of world commodity futures and options was only 8 per cent of the total volume of futures and options in 2004 (UNCTAD, 2006). The exponential growth of financial futures vis-à-vis commodity futures in both developed and developing countries explains the dilemmas in commodity futures and the strategic shifts in the control of the commodity markets. Functionally, the subordination of conventional forces of supply and demand to the complex network of global financial capital in the commodity markets has eroded the possibility of consensual explanations of the observed volatility and of compatible policy initiatives by the stakeholders. The metamorphosis of the trading capital involved in tropical crop production, and the control of world commodity markets by transnational financial companies in recent times, are essentially a change in form rather than a change in the objectives. The observed changes amplify the inherent tendencies of trading capital to deploy predatory tactics and to adapt and reorganize in tune with the changing global economic scenario. Although India’s plantation sector has been characterized by an increasingly inwardoriented market structure since independence, the convergence of markets in the era of globalization has been transmitting signals of market uncertainty, with implications for all the major plantation crops grown in the country. More than a relic of the colonial period, the equation between a large number of small producers and a few large buyers-cum-retailers has important implications for the survival strategies of the plantation sector in the region and elsewhere. In spite of the indigenization of the various processes involved in the plantation sector, the control of domestic and export markets by trading capital remains unchallenged. The resultant market

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uncertainties in farm-gate prices vis-à-vis the control of retail markets by powerful corporate groups have led to two important outcomes: first, the partial or even complete shelving of prescribed agro-management practices leading to decline in productivity as observed in the cases of tea and coffee (George and Joseph, 2005); and, second, the postponement of re-planting of the area under uneconomic age groups and the resultant increase in the share of this group in the total area.26 Interestingly, the bail-out mechanism that is gathering momentum in the plantation regions of south India during the 2000s has been the promotion of ecotourism, primarily by real estate dealers in both the organized and the unorganized sectors (George, 2006). However, the booming market is for land located in a unique ecosystem and not for the crops cultivated. This shift in focus is in tune with the conquest of markets by funds unleashed by global financial capital. Therefore, the moot question is whether the proponents of the new survival strategy are the ‘new avatars’ of re-christened trading capital in the era of globalization. a

Notes 1. The two major approaches to the analysis of plantation agriculture comprise those developed by the New World Group (the Plantation School) and the Circulationist Group. For a detailed discussion, see Murray (1992). 2. The rival approaches to plantation agriculture focused basically on a single set of elements, viz., the market, production relations and labour processes, to explain the inner dynamics of plantations and their relationship with the world capitalist economy. For instance, the conceptual framework evolved by the ‘Plantation School’ was flexible enough to accommodate both mercantilist-era slave plantations in the ‘New World’ and 20th century tropical plantations evolved in Asia. See Beckford (1985) and Best (1968). 3. In a contemporary sense, the term plantation agriculture is redundant for two important reasons: (a) across the major plantation crops and countries, the erstwhile, foreign-owned, large-scale estates have been replaced increasingly by native smallholder systems with the major exception of tea since 1950; and (b) in countries like India, there has been a remarkable shift from exports to the domestic market, with the notable exception of coffee (George and Joseph, 2005). Technically, large-scale plantations are justified only in the case of black tea manufacturing (Hayami, 1994; Wickizer, 1960).

174 a Tharian George K. 4. The colonies of settlement comprised the temperate zones of the New World settled by Europeans since the 16th century. Conversely, European attempts to develop perennial cash crop cultivation on a plantation scale in tropical Asia were effective only from the first half of the 19th century. The three notable differences are: (a) in the settlement colonies (the Americas, Canada and Australia), the movement of capital from Europe was followed by the movement of people for settling, whereas in tropical Asia the movement of capital was not followed by the movement of settlers; (b) in the Americas, imported slave labour was the major source of labour, compared to the indentured labour employed in tropical plantations in Asia; and (c) while short-term crops dominated the pattern of agriculture evolved in the colonies of settlement, perennial crops prevailed in the colonies of tropical Asia. In fact, John Hicks identifies three types of colonies: colonies of settlement, trading-post colonies and plantation colonies (Hicks, 1969). For a comparative analysis, see Daniel, Bernstein and Brass (1992); Findlay and Lundahl (1994). 5. The first leg of the triangular trade involved carrying cargoes of salt, textiles, firearms, hardware, beads and rum from Europe to Africa in ships. These products were bartered for slaves to be sold to plantationowners in the Americas. In the last leg of the triangle, sugar, silver, molasses, tobacco and cotton were purchased and shipped back for sale in Europe (Foster, 1999). 6. The abolition of the East India Company’s monopoly rights in the China tea trade had a profound impact on the subsequent growth of the trade relations of European trading firms (especially British firms) with the orient (Buchanan, 1966; Jones and Wale, 1998; Nickalls, 1990). The subsequent entry of European partnership firms in India’s plantation sector with varied scales and ranges of operations, culminating in the growth of a few multi-national enterprises at the time of the country’s independence, are the major concerns of this article. 7. The Dutch East Indies Company, founded in 1602, and French companies set up by Colbert, were the other permanent monopoly trading enterprises promoted by their respective governments. The main objective of giving monopolistic trading privileges to companies was to develop new markets, particularly in the trade beyond Europe (Barber, 1984). The Bubble Act of 1720 allowed the creation of jointstock companies with transferable shares and corporate status only with the consent of the state, which rarely approved the formation of such companies in the case of manufacturing and trading enterprises (Landes, 1966). 8. The landing of Vasco da Gama on the Malabar coast in 1498, and his arrival in Cochin in 1500, mark the beginning of organized Western contacts and trading in the region. However, European trade acquired

From Merchants to Multinational Enterprises a 175



11. 12.

a corporate character only with the formation of the British East India Company in 1600 and the Dutch East India Company in 1602. The Dutch hegemony in the Malabar trade lasted 150 years, beginning in 1663 with the capture of the Portuguese stronghold in Cochin. However, in 1795, Cochin was taken over by the British from the Dutch. By the last decade of the 18th century, all the important regions of south India growing plantation crops were under British control. The unsuccessful attempts of the company to establish large-scale coffee plantations in south Kerala during the first half of the 18th century, and in north Kerala during the last decade of the same century, were followed by efforts to develop coffee plantations in lower Bengal during the first half of the 19th century with discouraging results (Baak, 1995; Buchanan, 1966; Tharakan, 1998). For instance, the Jorehaut Tea Company was incorporated in 1859 by the former employees of the East India Company. The first coffee plantation acquired by Parry & Co. in south India in 1823 was developed by a former company official. Scottish leadership dominated railways, shipping, banking, coal, indigo, tea, cotton, jute and also the organization of foreign commerce. Composition of United Planters’ Association of South India (UPASI), 1894: Name of the planting region

Name of the representatives

North Mysore South Mysore North Mysore—native South Mysore—native North Coorg South Coorg Waynaad Nilgiris Shevaroys Kanan Devan South Travancore Nelliampathies

Digby T. Brett & L. D. Colledge Graham Anderson & J. G. Hamilton Srinivasa Row & Hajee M. Esoof Sait M. N. Subbaiya & V. A. Coelho G. K. Martin & W. H. Sprott A. Lambert & G. R. Evans George Romilly & R. K. Walker W. L. Edmiston & W. Rhodes James H. Gompertz & W. I. Lechier Baron von Rosenberg G. Clarke J. C. Abbot & R. Milne

Source: Mayne (1953).

13. In fact, the coffee plantation developed by the company was an acquisition from an East India Company official. The company also established coffee-curing works in Calicut in 1865 (Langley, 1953). 14. Even during the earlier phase, prior to the Industrial Revolution, ‘the English merchant class was able to grow rich, to accumulate capital, on middlemen’s profits and on the growing shipping industry which

176 a Tharian George K.



17. 18.


20. 21.



was needed to carry cheap sugar and tobacco, pepper and saltpetre on the ocean routes’ (Davis, 1954, p. 163). Peirce Leslie & Co., founded in 1862, focused on insurance and shipping prior to its entry into coffee curing. Aspinwall & Co., founded in 1863 as a proprietary concern, was initially involved in the timber business, ship building and trading in coconut products and pepper, before moving to the coffee business. Volkart Brothers was initially involved in cotton trading in Bombay before moving into the coffee business on the Malabar coast. The organizational structure of the managing agencies can be summarized as follows: a business group consisting of the core trading company surrounded by a cluster of non-wholly-owned firms engaged in repeated transactions with one another. In these transactions, contracts formed a very important component (Jones and Wale, 1998). This acquisition marks the birth of Kanan Devan Hills Produce Co. Starting 1908, Peirce Leslie & Co. floated or acquired 41 planting companies in Kerala and Tamil Nadu, associated as the Managing Agents (Langley, 1962). Aspinwall & Co. was the managing agent for more than 25 planting companies in Kerala and Tamil Nadu from the first decade of the 20th century (Aspinwall & Co., n.d.). Conversely, Volkart Brothers acquired its first coffee plantation in 1936 as compensation for losses incurred through pre-harvest advance payments. After the Second World War, the company acquired more coffee plantations in the region (Rambousek et al., 1991). This focus was unique because, while the company promoted one of the largest coffee-planting and processing companies in south India, viz., Consolidated Coffee Estates Ltd, it did not initiate coffee planting under the 14 coffee-trading companies promoted in different countries, including seven other coffee-producing countries. The other two coffee-trading companies are Cargill and J. Aron, a subsidiary of Goldman Sachs, a New York–based financial services company (Clairmonte and Cavanagh, 1988). The managing agency system can be defined as the vesting of the management of joint-stock companies in the hands of professional managers. The managing agency is usually responsible for initial promotion, financing, underwriting and organization of the joint-stock company (Kling, 1992). For instance, the company’s share in equity in the four promoted tea plantation companies in India was only 30 per cent in 1938 (Jones and Wale, 1998). The commission from insurance was one of the important sources of its income in the Calcutta branch in the 1900s (ibid.). In the early 1950s, the company was ranked as one of the top five agency houses in Malaya controlling 226,000 acres of rubber alone, the largest of any group (Jones and Wale, 1998).

From Merchants to Multinational Enterprises a 177 24. The large plantation groups owned by the company, namely, Golden Hope, Pataling and London Asiatic, were sold to Malaysian concerns in 1982. The Indonesian plantations were sold to four Indonesian businessmen in 1994. 25. The transformation and changes in the strategies pursued by the three giant European trading firms in south India’s plantation sector and the cases of Unilever and United Fruit Company during the post-war phase are illustrative cases. 26. The estimated share of area under the uneconomic age group in the case of tea was 33 per cent in north India, and 45 per cent in south India (Tea Board of India, 2007). For coffee, the share stood at 21 per cent (Coffee Board of India,, and for rubber at 41 per cent (Jacob and George, 2007).

References Antrobus, H. A. 1957. The History of Assam Tea Company (1839–1953), Edinburgh: T. and A. Constable. Aspinwall & Co. Ltd. n.d. Aspinwall: A Historical Review. Baak, P. E. 1995. Plantation Production and Political Power: Plantation Development in South West India in a Long-Term Historical Perspective, c. 1743–1963, Amsterdam: University of Amsterdam, CASA. Bagchi, A. K. 1992. ‘European and Indian Entrepreneurship in India (1900–30)’, in Rajat Kanta Ray (ed.), Entrepreneurship and Industry in India (1800–1947), New Delhi: Oxford University Press, pp. 157–86. ———. 2002. ‘The Other Side of Foreign Investment by Imperial Powers: Transfer of Surplus from Colonies’, Economic and Political Weekly, 37(23), pp. 2229–38. Baig, Amita, and William Henderson. 1978. A Century of Planting in the Kanan Devan Hills Concession (1878–1978), Calcutta: Tata-Finlay. Bandyopadhyay, K. R. 2008. ‘OPEC’s Price-Making Power’, Economic and Political Weekly, 53(46), pp. 18–21. Barber, William J. 1984. A History of Economic Thought, New York: Penguin. ———. 1994. ‘British Classical Economists and Underdevelopment in India’, in Gerald M. Meier (ed.), From Classical Economics to Development Economics, New York: St Martin’s Press, pp. 51–67. Bauer, Peter, and Gerald M. Meier. 1994. ‘Traders and Development’, in Gerald M. Meier (ed.), From Classical Economics to Development Economics, New York: St Martin’s Press, pp. 135–43. Beckford, George L. 1985. ‘Caribbean Peasantry in the Confines of the Plantation Mode of Production’, International Social Science Journal, 37(3), pp. 401–14. Bernstein, Henry, and Liam Campling. 2006a. ‘Commodity Studies and Commodity Fetishism I: Trading Down’, Journal of Agrarian Change, 6(2), pp. 239–64.

178 a Tharian George K. Bernstein, Henry, and Liam Campling. 2006b. ‘Commodity Studies and Commodity Fetishism II: “Profits with Principles”?’ Journal of Agrarian Change, 6(3), pp. 414–47. Best, Lloyd. 1968. ‘The Mechanisms of Plantation-Type Economies: Outlines of a Model of Pure Plantation Economy’, Social and Economic Studies, 17(3), pp. 283–326. Brass, Tom, and Henry Bernstein. 1992. ‘Introduction: Proletarianisation and Deproletarianisation on the Colonial Plantation’, in E. Valentine Daniel, Henry Bernstein and Tom Brass (eds), Plantations, Peasants and Proletarians in Colonial Asia, London: Frank Cass, pp. 1–40. Brockway, Lucile H. 1979. ‘Science and Colonial Expansion: The Role of British Royal Botanic Gardens’, American Ethnologist, 6(3), pp. 449–65. Buchanan, D. H. 1966. The Development of Capitalistic Enterprise in India, London: Frank Cass. Centre for Society and Religion. 1975. ‘The Liberation of Tea’, Logos (Colombo), 14(1), pp. 1–9. Chapman, S. D. 1985. ‘British-Based Investment Groups before 1914’, Economic History Review, n.s., 38(2), pp. 230–51. Clairmonte, Frederick, and John Cavanagh. 1988. Merchants of Drink: Transnational Control of Beverages, Penang: Third World Network. Coffee Board of India. Accessed on 20 June 2009. Corea, Gamani. 1992. Taming Commodity Markets: The Integrated Programme and the Common Fund in UNCTAD, New Delhi: Vistaar. Daniel, E. V., Henry Bernstein and Tom Brass (eds). 1992. Plantations, Peasants and Proletarians in Colonial Asia, London: Frank Cass. Daviron, Benoit. 2002. ‘Small Farm Production and the Standardisation of Tropical Products’, Journal of Agrarian Change, 2(2), pp. 162–84. Daviron, Benoit, and Stefano Ponte. 2005. The Coffee Paradox: Global Markets, Commodity Trade and Elusive Promise of Development, New York: Zed Books. Davis, Ralph. 1954. ‘English Foreign Trade, 1660–1700’, Economic History Review, n.s., 7(2), pp. 150–66. Findlay, Ronald, and Mats Lundahl. 1994. ‘Natural Resources, Vent-forSurplus, and the Staples Theory’, in Gerald M. Meier (ed.), From Classical Economics to Development Economics, New York: St Martin’s Press, pp. 68–93. Forrest, Denys. 1973. Tea for the British: A Social and Economic History of a Famous Trade, London: Chatto and Windus. ———. 1985. The World Tea Trade: A Survey of the Production, Distribution and Consumption of Tea, Cambridge: Woodhead-Faulkner. Foster, J. B. 1999. The Vulnerable Planet: A Short Economic History of the Environment, New York: Monthly Review Press.

From Merchants to Multinational Enterprises a 179 Ganapathy, K. M. 1978. Malayalam Plantations: An Era of Planting in South India, Chennai: Malayalam Plantations Ltd. George, K. Tharian. 1982. ‘The Economics of Tea Plantations in South India’, Unpublished PhD dissertation, Cochin: University of Cochin. ———. 1986. ‘From Collusion to Merger’, Indian Manager, 16(1), pp. 25–30. ———. 1987. ‘International Commodity Agreements: The Case of Natural Rubber’, Social Scientist, 15(4/5), pp. 77–86. ———. 2006. ‘Tourism as a Survival Strategy for Kerala’s Plantation Sector: A Tantalising Agenda in the Era of Globalisation’, International Seminar on Kerala History, 16–17 March, Thiruvananthapuram: Kerala Council for Historical Research. George, K. Tharian, and Joby Joseph. 2005. ‘Value Addition or Value Acquisition: Travails of the Plantation Sector in the Era of Globalisation’, Economic and Political Weekly, 40(26), pp. 2681–87. George, K. Tharian, and M. R. Sethuraj. 1996. ‘Dynamics of World Natural Rubber Economy: Its Relevance to India’, Economic and Political Weekly, 31(22), pp. 1355–58. George, K. Tharian, and P. K. M. Tharakan. 1986. ‘Penetration of Capital into a Traditional Economy: The Case of Tea Plantations in Kerala, 1880–1950’, Studies in History, 2(2), pp. 199–229. George, K. Tharian, and K. Kurian Thomas. 1997. ‘Five Decades of Rubber Board and the Indian Rubber Industry: An Assessment in Retrospect’, Mimeo, Kottayam: Rubber Research Institute of India. Gilbert, Christopher L. 2007. ‘Value Chain Analysis and Market Power in Commodity Processing with Application to the Cocoa and Coffee Sectors’, in Governance, Coordination and Distribution along Commodity Value Chains, FAO Commodities and Trade Proceedings, 4–5 April, Rome: Food and Agriculture Organization, vol. 2, pp. 267–97. Guha, Amalendu. 1988. Planter-Raj to Swaraj: Freedom and Electoral Politics in Assam (1826–1947), Delhi: People’s Publishing House. Hayami, Yujiro. 1994. ‘Peasant and Plantation in Asia’, in Gerald M. Meier (ed.), From Classical Economics to Development Economics, New York: St Martin’s Press, pp. 121–34. Hicks, John. 1969. A Theory of Economic History, New York: Clarendon Press. Hymer, Stephen. 1975. ‘The Multinational Corporation and the Law of Uneven Development’, in Hugo Radice (ed.), International Firms and Modern Imperialism, New York: Penguin, pp. 37–62. Jacob, Jom, and Tharian George K. 2007. ‘Ageing Age-Composition of Mature Area and Declining Yield Profile of Natural Rubber in India?’ Mimeo, Kottayam: Rubber Research Institute of India.

180 a Tharian George K. Jones, Geoffrey, and Judith Wale. 1998. ‘Merchants as Business Groups: British Trading Companies in Asia before 1945’, Business History Review, 72(3), pp. 367–408. Khor, Martin. 2005. The Commodity Crisis and Global Trade in Agriculture, Penang: Third World Network. Kling, Blair B. 1992. ‘The Origin of the Managing Agency System in India’, in R. K. Ray (ed.), Entrepreneurship and Industry in India (1800–1947), New Delhi: Oxford University Press, pp. 83–98. Landes, David S. 1966. ‘The Structure of Enterprise in the Nineteenth Century’, in David S. Landes (ed.), The Rise of Capitalism, New York: Macmillan. Langley, W. K. M. 1953. ‘The Coast Firms’, in S. G. Speer (ed.), UPASI (1893–1953), Coonoor: United Planters’ Association of Southern India, pp. 193–209. ———. 1962. Century in Malabar: The History of Peirce Leslie & Co. Ltd (1862–1962), Madras: Madras Advertising Co. Manoharan, S. 1974. Indian Tea: A Strategy for Development, New Delhi: S. Chand. Marx, Karl. 1984. Capital: A Critique of Political Economy, Moscow: Progress Publishers, vol. 3. Mayne, Wilson W. 1953. ‘The Story of UPASI’, in S. G. Speer (ed.), UPASI (1893–1953), Coonoor: United Planters’ Association of Southern India, pp. 1–135. Murray, Martin J. 1992. ‘“White Gold” or “White Blood”? The Rubber Plantations of Colonial Indo-China, 1910–40’, in E. Valentine Daniel, Henry Bernstein and Tom Brass (eds), Plantations, Peasants and Proletarians in Colonial Asia, London: Frank Cass, pp. 41–67. Nickalls, Guy. 1990. Great Enterprise: A History of Harrisons & Crosfield, London: Harrisons & Crosfield. Penot, E. 2004. ‘From Shifting Agriculture to Sustainable Rubber Complex Agroforestry Systems (Jungle Rubber) in Indonesia: A History of Innovations Process’, in D. Babin (ed.), Beyond Tropical Deforestation, Paris: UNESCO/CIRAD, pp. 221–50. Puri, Lakshmi. 2007. ‘Commodities and Development’, Paper presented for the Commission on Trade in Goods and Services and Commodities, 11th Session, 21 March, Geneva: UNCTAD. Raffaelli, Marcelo. 1995. Rise and Demise of Commodity Agreements: An Investigation into the Breakdown of International Commodity Agreements, Cambridge: Woodhead Publishing. Rambousek, Walter H., Armin Vogt, Hans R. Volkart and Insel Verlag. 1991. Volkart: The History of a World Trading Company, Winterthur: Volkart Brothers. Ravindran, P. N. 2002. ‘Introduction’, in P. N. Ravindran and K. J. Madhusoodanan (eds), Cardamom: The Genus Elettaria, London: Taylor and Francis, pp. 1–10.

From Merchants to Multinational Enterprises a 181 Rippy, Fred J. 1953. ‘Background for Point Four: Samples of British Profitable Investments in the Underdeveloped Countries’, Journal of Business of the University of Chicago, 26(2), pp. 110–24. Scott, John, and Michael Hughes. 1980. The Anatomy of Scottish Capital: Scottish Companies and Scottish Capital (1900–1979), London: Croom Helm. Sivaswamy, K. G. 1956. ‘The Minute of Dissent’, Report of the Plantation Inquiry Commission (Part I—Tea), New Delhi: Government of India. Sreekumar, B. 2003. ‘Value Chain and Value Addition: A Synoptic View of Pepper Exports from India’, International Seminar on Agro-Industrial Global Commodity Chains: Implications for Business Strategies and Policies in Kerala, 18–19 September, Cochin: Cochin University of Science and Technology. Tea Board of India. 2007. htm. Accessed on 20 June 2009. Tharakan, Michael P. K. 1998. ‘Coffee, Tea or Pepper? Factors Affecting Choice of Crops by Agro-Entrepreneurs in Nineteenth Century South West India’, Working Paper No. 291, Thiruvananthapuram: Centre for Development Studies. UNCTAD. 2006. Overview of the World’s Commodity Exchanges, UNCTAD/ DITC/COM/2005/08, Geneva: UNCTAD Secretariat. ———. 2007. Conference on Global Initiatives on Commodities: Re-launching the Commodities Agenda, TD (XII)/BP/1, 7–11 May, Brasilia. University of Glasgow. ugd/051-100/ugd091.html. Accessed on 20 June 2009. Venkatesaiya. 1953. ‘Coffee in Mysore’, in S. G. Speer (ed.), UPASI (1893– 1953), Coonoor: United Planters’ Association of Southern India, pp. 184–92. Volkart Foundation. http://www.Volkart.Ch/English/PortraitHolding.htm. Accessed on 20 June 2009. Wickizer, V. D. 1951. Coffee, Tea and Cocoa: An Economic and Political Analysis, Stanford: Stanford University Press. ———. 1960. ‘The Smallholder in Tropical Export Crop Production’, Food Research Institute Studies, 1(1), pp. 49–99. Wood, Ellen Meiksins. 2005. The Empire of Capital, New York and London: Verso.

182 a S. Neelakantan

Chapter 8 Fiat or Trust? A Story of Indian Banking (1857–2007) with a Regional Perspective D. Narayana The global financial meltdown of recent years has seen the Indian banking system standing tall. There has not been a single case of bank failure in either the public or the private sector in India. Diverse explanations may be offered of the strength of the Indian banking system, but a study of its history spanning over two centuries would open up explanations that may not be very evident otherwise. This chapter seeks to carry out such an exercise. In developing countries, financial intermediaries serve a useful purpose in mobilizing savings and making available financial resources for productive investment. Prudent banking practices instil confidence in savers and slowly help raise the savings rate. While indigenous bankers did exist in India before the arrival of the British, the latter introduced a public debt system and banking institutions that began spreading with the integration of India with the international market in the later half of the 19th century. The presidency banks, with minority government participation, led the initial spread. The close links with the government and the handling of government finances brought a certain legitimacy to these banks. Certain periods in the growth of these banks were marked by compulsive expansion of the banking network to unbanked areas, for instance, during 1921–26 and 1955–60. While private banks have followed the path shown by the Imperial Bank of India and the State Bank of India, banking expansion was confined largely to cities and towns. Massive expansion of the banking network into rural areas and unbanked regions followed the nationalization of the major private sector banks in 1969. The reforms since 1991 have seen a reversal of the trends observed during 1969–91, with variations across the regions of the country. Certain regions and certain sectors show a dynamism not seen elsewhere. This study of the

A Story of Indian Banking (1857–2007) a 183

history of Indian banking has been carried out with the objective of discerning the multiple sources of its strength. The chapter is organized into eight sections. In the first section, the early beginnings of banking are discussed in terms of its initial spread and institutional types. The second section describes the first major government-led expansion of banking, when the three presidency banks were amalgamated into the Imperial Bank of India in 1921. The mission of opening 100 branches in five years was unparalleled anywhere in the world. Another major governmentled expansion of banking followed the nationalization of the Imperial Bank of India and the constitution of the State Bank of India (in 1955) and its associate banks (discussed in the third section). Despite massive expansion by the State Bank group, by 1969 only around 25 per cent of commercial bank branches were in rural areas, and the rural reach of bank credit was low. The nationalization of major private banks and directed expansion saw the manyfold expansion of banking in India over 1969–91, reaching rural areas and agriculture (see the fourth section of this chapter). The fifth section analyzes the noticeable narrowing down of banking activity in India—narrowing geographical coverage, decreasing exposure to agriculture and confinement to more profitable regions—post the financial sector reforms. The sixth section picks up the threads of the southern phenomenon as these emerge out of the discussion in the preceding sections, followed by some concluding remarks.

Early Beginnings The British introduced limited liability joint-stock banking, the issuing of bank notes and deposit banking into India. Banking in the colonial period had four constituents: exchange banks, the presidency banks, the Indian joint-stock banks and cooperative credit societies.1 Exchange banks began to enter India in 1853, and financed mostly foreign trade in India. The presidency banks held the government cash balances, advanced short-term credit to private business and accepted deposits from the public. Among the presidency banks, the Bank of Bengal was founded in 1806, the Bank of Bombay in 1840 and the Bank of Madras in 1843. Attempts were made to start modern banks in India in the late 18th century—the first bank established in India was the Bank of Hindusthan in 1770—but few banking institutions took root before

184 a D. Narayana

the end of the 19th century. Indian banks had a history of booms followed by crashes. The first boom occurred in Calcutta in the early 19th century. The crash in the 1830s and 1840s finished these banks off. A second boom occurred in Bombay in the 1860s, and most banks crashed after a brief while. A third boom in Calcutta in 1906 was followed by a crash in 1913–14. Legal difficulties and the lack of government support thwarted the development of commercial banking in India till the mid-19th century. The legal difficulties were removed with the enactment of a law in 1860 that gave the advantage of the principle of limited liability to banking. Soon, new banks were being registered in India (Tripathi, 2004). In 1870, there were two Indian joint-stock banks with capital and reserves of Rs 5 lakhs or more. By 1900, the number had increased to nine, and their share in total deposits showed a substantial gain (Table 8.1). However, till 1916, the presidency banks and exchange banks maintained their accustomed lead in general growth. But the wave of swadeshi sentiment beginning in 1906 altered the trend irrevocably, bringing Indian joint-stock banks into prominence. Table 8.1 Growth of Banking Deposits in India, 1870–1936

Year 1870 1880 1890 1900 1916 1926 1936

Total private deposits ( ` lakhs) 705 1,251 2,499 3,085 10,845 20,850 25,718

Share of presidency banks (%)

Share of exchange banks (%)

90.64 67.87 59.06 39.80 41.21 35.44 30.63

7.38 27.10 30.13 34.04 35.07 34.31 29.17

Share of Indian joint-stock banks (%) 1.98 5.03 10.81 26.16 23.72 30.25 40.19

Source: Muranjan (1940). Note: In 1921, the three presidency banks were amalgamated into the Imperial Bank of India.

In the initial 150 years (1770–1920) of banking in India, the tendency was to exploit more intensively the five big up-country centres of trade and commerce (Lahore, Delhi, Amritsar, Lucknow and Cawnpore) and the four great ports (Bombay, Calcutta, Madras and Rangoon). Even as late as 1916, about 32 per cent of the total number of head offices and branches were concentrated in these

A Story of Indian Banking (1857–2007) a 185

few places (Muranjan, 1940), and the total number of banking centres in the country was 140 (out of 2,300 towns with populations over 5,000); the average number of branches per banking centre was 2.47.

Government-Led Expansion of Banking in India One of the first government-led expansions of banking took place with the amalgamation of the three presidency banks into the Imperial Bank of India in 1921, sanctified by a constitution imparted to it by the legislature. ‘The terms and conditions of the amalgamation perhaps had no “parallel anywhere in the world”’ (State Bank of India, 2003, p. 92).2 While the agreement imposed certain obligations and restrictions in the matter of the bank’s business, it conferred a distinct status to the bank, which greatly aided its healthy growth: The obligation of opening 100 new branches within the first five years, again ‘unparalleled in banking history’, was perhaps ‘the best way open to the Government at the time to ensure the spread of banking facilities throughout India and Burma at the quickest possible rate’. . . . Its 162 branches (besides a few sub-agencies and pay offices) at the end of 1925 covered the whole of the British empire of India, Ceylon and Burma . . . accounting for a little over 25 percent of the total bank branches in India. (ibid.)

The Imperial Bank of India opened 102 branches between 1921 and 1926, of which 36 were set up in places where no other banks existed previously; of the remaining 66 branches, 61 were opened at places where government treasuries were located. Within five years, the Imperial Bank of India had succeeded in increasing its branch network more than two-fold (from 70 in 1921 to 162 in 1925), and it continued to more than double its branch network every 10 years till 1936 (Table 8.2). The general tendency of the expansion of banking in the country was characterized by the Imperial Bank of India pioneering a branch in a new place and others hastening in its wake. A comparison of the place distribution of the branches of the Imperial Bank of India with that of the Big Five of the Indian joint-stock banks in 1936 confirms this surmise. In the year 1936, the Imperial Bank of India was spread over 156 places. The Allahabad Bank

~59 (17.46)


140 2.47

Banking centres Number of branches per centre

339 2.15


161 (22.15)


514 2.82


366 (25.24)


1,991 5,532

437 (7.90) 79 3,025


1,781 4,694 1,047 (21.91) 1,534 3.06

367 (7.89) 62 2,484


1,672 3.07



2,602 (28.90) 128 4,615+ 1,479 181 9,005 2,287 (25.40) 3,573 2.52


60,236 35,166 (58.38) 37,532 1.64

24,784+ 17,566



71,177 30,769 (43.23) 34,688 2.05

13,859 (19.47)


Source: RBI, Statistical Tables Relating to the Banks in India (various issues). Notes: Figures in brackets represent percentage shares in total number of branches. The State Bank of India includes its associate banks. The split shown in the row ‘Other scheduled banks—branches’ from 1969 is between nationalized banks and the rest. EB: Exchange Banks; IBI: Imperial Bank of India; PB: Presidency Banks; SBI: State Bank of India.


Non-scheduled banks—branches Total branches Rural branches

EB branches Other scheduled banks—branches


Bank group

Table 8.2 Expansion of Branch Offices of Banks in India, 1916–2006

186 a S. Neelakantan

A Story of Indian Banking (1857–2007) a 187

existed in the same year in 36 places but, of these, the Imperial Bank of India was unrepresented in only three. The Central Bank of India had branches in 52 different places, but it was free from the competition of the Imperial Bank of India in only 12 places. The Punjab National Bank was active in 46 places but its operations were free from the shadow of the Imperial Bank of India in only 15 of these. The Bank of India, rigidly confined as it was to about seven big cities of India, naturally encountered competition from almost all its big rivals. Of the 23 places in which the Indian Bank of Madras operated, the Imperial Bank of India was absent in only four (Muranjan, 1940). The concentration of branch offices in ports and large towns is also reflected in the trend in the number of offices per banking centre, which saw a continuous increase from 2.15 in 1926, to 2.82 in 1938, to 3.06 in 1949. It remained at around that figure till 1955 (Table 8.2). The period between 1938 and 1947 saw a phenomenal expansion of banking in India. The number of scheduled banks and branch offices increased from 32 and 677, respectively, in 1938 to 83 and 3,025, respectively, in 1947. The number of non-scheduled banks and their branch offices increased from 243 and 673, respectively, in 1939 to 403 and 1,991, respectively, in 1947. By 1949, there were 655 non-scheduled banks in all, having 2,219 offices. This period saw hardly any expansion of the branch network of the Imperial Bank of India. The Rural Banking Enquiry Committee (RBEC) summarizes succinctly the growth during this period as follows: ‘As against 339 towns out of 2300 served by banks in 1928, as reported by the Central Banking Enquiry Committee, 1506 towns out of a total of 2448 are now being served by banks’ (RBEC, 1953, p. 23). While this is described as an impressive record, the RBEC goes on to characterize the growth as: careless, and even unscrupulous, expansion of branch by banks having inadequate financial resources and following unsound methods of working, with the result that even during the period from 1941 to 1946, when circumstances were generally favourable to the development of banking, as many as 254 joint stock banks went into liquidation. The position in this respect was aggravated later when after partition the favourable economic factors ceased to operate, and another 114 banks closed their doors during the years 1947, 1948 and 1949. (ibid.)

188 a D. Narayana

With a few exceptions, the banks that went into liquidation during the years 1941–49 were all small, non-scheduled banks. This assumes importance given that the scheduled banks are generally concentrated in the cities and larger towns, while smaller towns are served largely by non-scheduled banks, cooperative banks, etc. (RBEC, p. 25). Thus, reliable banking was still confined to the major towns in India at independence.

Nationalization of the Imperial Bank of India At the time of independence, the Imperial Bank of India had a market share of a little over 30 per cent of deposits and 23 per cent of advances of all scheduled banks in India. A sprawling network of 437 offices (including sub-offices), out of the total of 3,462 offices of all scheduled banks, ensured its presence in practically every important trading centre of the subcontinent. The gradual spread of the banking habit in the first half of the 20th century, with the Imperial Bank of India choosing to open branches at practically all the major trading marts of the country, and the recognition of the bank as a repository of the people’s trust, are indisputable facts. Trade and commerce benefited as the Imperial Bank financed the movement of produce and goods from the producing to the consuming centres as well as to the ports. The small trader was brought within the banking fold as the branch agent increasingly met his financial needs, however meagre. The gold loan scheme offered by the Imperial Bank helped the ‘small man’ to a moderate extent. Modern industries—both large and small—were the principal beneficiaries as the bank became connected intimately with practically every industrial activity. Till 1935, the Imperial Bank granted credits to large managing agency houses as well. The branches of the Imperial Bank also refinanced local bankers (State Bank of India, 2003). At the time of the partition of the Indian subcontinent, the Imperial Bank of India was undoubtedly the most powerful commercial bank of the country. The move to nationalize the bank was first announced in 1948 and led eventually to the appointment of the Rural Banking Enquiry Committee by the Government of India in November 1949. The committee commented on the somewhat lopsided extension of banking in India, from the data compiled by it on the regional distribution of towns served and not served by commercial banks (Table 8.3). The RBEC expected

NA 632

NA 213

4 3 34 8 16 1 12 129 6 NA

5,000– 20,000 1 35 103 69 199 18 27 160 20 NA

50,000 50,000

Number of towns not served by commercial banks, with a population of


5 39 137 78 218 20 40 295 37

Total number of towns not served

2 38

21 404

14 193

23 128

50,000 20,000 50,000 7 12 2 1 28 12 11 7 73 24 15 26 15 7 1 113 56 27 6 2 1 3 32 17 5 14 61 32 23 1 28 17 10 2 4 2 6

Number of towns served by commercial banks, with a population of

Table 8.3 Regional Distribution of Towns Served and Not Served by Commercial Banks

304 743

Population not known 26 25 69 8 135 2 28 38 65 43

364 1,506

47 77 188 56 332 11 85 168 121 57

Total number of towns served

Evolution of Land Rights in India a 189

190 a D. Narayana

the Imperial Bank to extend banking to hitherto unbanked areas. It recommended the establishment of a State Bank of India with the objective of extending the concept of state partnership to commercial banking. The related government release envisioned that the bank would have a country-wide network of branches provided by the amalgamation of different ‘state-associated’ banks, including the Imperial Bank. The bill to constitute a State Bank of India was moved in the Lok Sabha on 22 April 1955 by A. C. Guha, Minister of Revenue and Defence Expenditure. The minister spoke at length on the sad plight of the Indian peasantry and the rural industries etc. But with the proposed opening of 400 new branches by the State Bank of India in rural areas, he hoped that the new offices and more that would follow would cater not only for the agricultural credit requirements but also serve the interest of rural industries. (State Bank of India, 2003, p. 626)

The State Bank of India was born on 1 July 1955: The significance of the contribution of the State Bank to the branch expansion in the country is evidenced by the fact that out of the 429 branches opened during the period July 1, 1955–December 1960, 352 branches were opened in rural and semi-urban areas, i.e., places with population of 30,000 or less. (RBI, 1960, p. 31)

The year 1959 also saw the enactment of the State Bank of India (Subsidiary Banks) Act, 1959, providing for the constitution of eight major state-associated banks as subsidiaries of the State Bank of India. At the end of 1960, of the 4,141 offices of scheduled banks, the number of offices accounted for by the State Bank of India and its subsidiaries was 1,281. The State Bank of India group continued to expand, adding around 150 branch offices a year till 1969. The other scheduled banks added about 300 branches a year. But the number of banking centres increased by less than 2,000 during this period, indicating that the other scheduled banks were focusing on banked centres rather than unbanked centres. The situation with regard to branch banking as of 1969 is presented in Table 8.4. In many Indian states, the top three banks accounted for over 60 per cent of all branch offices, and the top bank accounted for over 30 per cent of branch offices. The top bank in almost all the states was the State Bank of India or one of

618 89 309 833 191 638 361 1,161 850 111 412 393 1,091 816 487 279

Number of branches of SCBs SBI-182 SBI-40 SBI-140 BOB-180 PNB-40 SBT-140 SBI-122 SBI-204 SyB-191 SBI-58 PNB-118 SBBJ-213 SBI-165 SBI-287 UnBI-130 PNB-50

Andhra Bank-131 UnBI-20 CBI-45 DB-122 SBI-35 SIB-54 SBIndore-54 BOM-148 SBM-115 UnCB-11 SBP-64 BR-58 IB-159 PNB-127 SBI-107 CBI-30

Bank with the second highest number of branches (name and number) SBH-105 UnCB-8 PNB-27 SBI-119 CBI-32 CaB-54 CBI-30UnCB-30 CBI-92 CaB-107 UnBI-9 CBI-46 PNB-37 IOB-112 CBI-104 UnCB-49 SBI-29

Bank with the third highest number of branches (name and number) 29 45 44 20 21 22 33 17 22 52 23 54 15 35 27 27

Share of the top bank in the total number of branches in the state (%)

Source: RBI, Statistical Tables Relating to the Banks in India, 1969. Note: BOB: Bank of Baroda; BR: Bank of Rajasthan; CaB: Canara Bank; CBI: Central Bank of India; DB: Dena Bank; IB: Indian Bank; IOB: Indian Overseas Bank; PNB: Punjab National Bank; SBBJ: State Bank of Bikaner and Jaipur; SBH: State Bank of Hyderabad; SBI: State Bank of India; SBIndore: State Bank of Indore; SBM: State Bank of Mysore; SBP: State Bank of Patiala; SBT: State Bank of Travancore; SCB: Scheduled Commercial Bank; SIB: South Indian Bank; SyB: Syndicate Bank; UnBI: United Bank of India; UnCB: United Commercial Bank.

Andhra Pradesh Assam Bihar Gujarat Haryana Kerala Madhya Pradesh Maharashtra Mysore Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal Delhi


Bank with the highest number of branches (name and number)

Table 8.4 Distribution of Commercial Bank Branches by Bank Group and State, 1969

Evolution of Land Rights in India a 191

192 a D. Narayana

its associate banks. The exceptions to this pattern were Gujarat, Maharashtra, Punjab, Haryana, Delhi, Kerala, Mysore and Tamil Nadu, where the concentration was much lower. But even here, the State Bank of India and its associates were the largest banks. In Gujarat, the State Bank of India was the third largest bank, and in Haryana, it was the second largest; in Kerala, the State Bank of Travancore was the largest, and in Maharashtra, the State Bank of India was the largest. The importance of the State Bank of India and its associate banks only increased after nationalization and, by 1969, the group as a whole accounted for close to 30 per cent of all commercial bank branches in the country. Despite such rapid expansion of the State Bank of India and its associate banks, the rural penetration of commercial banks continued to be low—only about 25 per cent of the branch offices were located in rural areas (Table 8.2). Rural deposits and credit were 6.4 per cent and 3.3 per cent of total deposits and credit, respectively. Further, the regional concentration of branch offices was fairly high. In 1969, over 50 per cent of the branch offices of commercial banks, 47 per cent of the deposits and 56 per cent of the bank credit were accounted for by the states of Gujarat, Maharashtra, Mysore, Kerala and Tamil Nadu, accounting for around 33 per cent of the Indian population.

Expansion of Banking following Nationalization of Major Private Sector Banks The nationalization of 14 major commercial banks in 1969 changed the structure of banking in India in almost every sense of the term. ‘Mass banking’ became the byword. The next two decades witnessed rapid expansion of the branch network. The State Bank group added an average of 470 branches a year, the nationalized banks added 1,200 branches a year and the other scheduled commercial banks (which included regional rural banks as well) added another 900 offices a year. With clear guidelines on opening branch offices, expansion into unbanked centres took place at a pace never seen before or after. While, in 1969, around 3,500 centres in the country had 2.52 offices per centre, by 1991, 37,500 centres had banking facilities and the number of branch offices per centre had dropped to 1.64 (Table 8.2). Rural deposits, which accounted for about 6 per cent of the total in 1969, increased to over 15 per cent

A Story of Indian Banking (1857–2007) a 193

of the total by 1991. More importantly, the rural share of credit moved up from 3 per cent in 1969 to 14 per cent in 1991. While the branch expansion led by the State Bank of India group from 1955 halted the decline in the shares of the north-eastern, eastern and central regions in the total number of branches, the northern and western regions made small gains in their shares. It was the large expansions of the banks into unbanked areas during 1969–91 that brought about decisive gains in the shares of the north-eastern, eastern and central regions, the three regions together improving their share in the total number of branch offices by almost 20 percentage points (Table 8.5). In 1969, there existed one branch office of a bank per 60,000 population in India. The density ranged from around 35,000 in Gujarat, Kerala, Mysore, Punjab and Tamil Nadu to around 110,000 in Madhya Pradesh and Uttar Pradesh, and to over 170,000 in Assam, Bihar, Orissa and Tripura. Following the rapid expansion of branch networking during 1969–91, the population per office fell to 14,000 and, more importantly, the density ranged from 7,000 (Himachal Pradesh) to 17,900 (Bihar), indicating a much better distribution of branch offices across the states of the union. While the southern and western regions of the country accounted for about 60 per cent of total branch offices in the country in 1969, the branch expansion during the two decades after the nationalization of the major private banks brought this figure down to around 40 per cent. Despite the fall in the share of branches, the two regions showed hardly any decline in their share of deposits and credit. The share of the two regions in total deposits dropped from 50 per cent in 1969 to 47 per cent in 1991, and the share in credit fell from over 60 per cent to 55 per cent. Interestingly, the two regions showed contrasting trends. The southern region showed an increase in its share of deposits from 17.5 per cent in 1969 to 21.1 per cent in 1991, and in its share of credit from 23.6 per cent to 26.7 per cent during the period. In the western region, the share of deposits dropped from 32.7 per cent in 1969 to 26.2 per cent in 1991, and the share of credit from 36.6 per cent to 27.9 per cent (Table 8.6).

Financial Sector Reforms and After While the policy thrust of the 1969–91 period was on expanding the branch network into unbanked centres, the financial sector

493 73 610 824 606 1,850 149 4,605

Northern region North-eastern region Eastern region Central region Western region Southern region Centrally administered areas All-India

10.7 1.6 13.2 17.9 13.2 40.2 3.2 100.0

Share (%)

13.8 1.1 9.9 13.3 15.9 43.6 100.0


Share (%)

695 58 500 668 803 2,194

No. of offices



1,394 100 909 1,177 2,090 3,207

No. of offices


15.7 1.1 10.2 13.3 23.5 36.2

Share (%)



9,174 1,844 11,172 12,789 9,215 16,042

No. of offices


15.23 3.06 18.55 21.23 15.30 26.63

Share (%)


Source: RBI, Statistical Tables Relating to the Banks in India (various years). Note: The percentage does not add up to 100 in 1960 as there was difficulty in assigning some states to regions.

No. of offices



Table 8.5 Distribution of Branch Offices of Commercial Banks by Region, 1948–2006


11,864 1,953 12,350 14,170 11,102 19,738

No. of offices


16.67 2.74 17.35 19.91 15.60 27.73

Share (%)


194 a S. Neelakantan

A Story of Indian Banking (1857–2007) a 195 Table 8.6 Share (%) of Southern and Western India in Total Loans and Advances of Scheduled Commercial Banks, 1949–2006 State Andhra Pradesh Mysore Kerala Madras Pondicherry Goa Gujarat Maharashtra Sub-total

1949 2.03 2.63 10.74

30.77 46.17





3.97 3.73 3.04 9.22 0.13 0

4.39 4.99 2.83 11.25 0.13 0 6.25 30.47 60.31

6.87 6.24 3.43 10.23 0.13 0.37 5.28 22.57 55.12

6.38 6.85 3.19 9.30 0.09 0.26 3.77 33.25 63.09

36.91 57.00

Source: RBI, Annual Report on the Trend and Progress of Banking in India (various issues). Note: Mysore stands for Karnataka in later years; Travancore–Cochin in 1949 is taken as Kerala; Madras in later years stands for Tamil Nadu; Maharashtra in 1949 and 1959 includes Gujarat as well.

reforms that were part of the macro-economic adjustment policies put a stop to branch expansion into unbanked areas after that period. Not only were branch offices not being opened in new centres, but existing offices were being closed. Over the period 1991–2006, about 7 per cent of banking centres—that is, 2,844 centres out of 37,000—saw branch offices of banks being closed. This is unprecedented in the history of banking expansion in India. However, the number of branch offices itself increased by over 10,000 during the period. Over 50 per cent of the banking centres that lost branch offices are located in the north-eastern, eastern and central regions of the country, and over 60 per cent of new branch offices are being opened in the northern and southern regions of the country. This redrawing of the distribution of banking centres and branch offices has led to an intensification in terms of branch offices per centre in some regions. In the northern, western and southern regions of the country, the number of branch offices per centre has increased rapidly and has crossed the levels existing at the time of bank nationalization (Table 8.7). The redistribution of banking centres and branch offices has had a profound impact on the distribution of loans and advances in the country. The share of the southern and western regions of the country in total bank credit has reached close to two thirds. The highest share of these regions before nationalization of the

756 99 544 822 1,005 1,795 5,021

1970 5,283 1,396 8,076 9,018 4,716 9,043 37,532


4,974 1,256 7,729 8,014 4,290 8,425 34,688


No. of banking centres

1,764 150 1,208 1,566 2,526 3,931 11,148


9,174 1,844 11,172 12,789 9,215 16,042 60,236


11,864 1,953 12,350 14,170 11,102 19,738 71,177


No. of branch offices

Source: RBI, Statistical Tables Relating to the Banks in India (various years).

Northern region North-eastern region Eastern region Central region Western region Southern region All-India


Table 8.7 Distribution of Banking Centres and Offices by Region, 1970–2006

2.33 1.52 2.22 1.91 2.51 2.19 2.22


1.74 1.32 1.38 1.42 1.95 1.77 1.60


2.39 1.55 1.60 1.77 2.59 2.34 2.05


No. of offices per centre

196 a S. Neelakantan

A Story of Indian Banking (1857–2007) a 197

major private sector banks was 60 per cent in 1969 (Table 8.6). The reforms have given a big push to the southern and western regions of the country. The easing of the pressure on priority sector lending by banks, and the redefining of the priority sector following the reforms of 1991, had their impact on agricultural lending in the country. The number of agricultural loan accounts had increased almost 40-fold during 1969–91, and in some regions the increase was close to 300-fold (Table 8.8). The reforms changed all that: the number of loan accounts showed hardly any increase during 1991–2005. In fact, three of the regions recorded sharp reductions in the number of loan accounts. The only region that showed any sizeable increase in the number of accounts—23 per cent—was the southern region.

The Resilience of Southern Banking The history of banking expansion in terms of branch networking in India has been led by the government ever since the amalgamation of the three presidency banks into the Imperial Bank of India in 1921, under terms and conditions unparalleled anywhere in the world. After independence, the nationalization of the Imperial Bank of India and the constitution of the State Bank of India in 1955 and its eight associate banks in 1959 saw another wave of government-led expansion. The third major wave followed the nationalization of major private banks in 1969. The central role played by the government in expanding the banking network and reaching banking services to the villages and unbanked centres has led people to repose their faith in Indian banks in good and bad times. The massive expansion of banking at the behest of the government saw the lowering of the variation in the density of the bank branch network between rural and urban areas and among the different regions of the country. However, the consistent thrust on reaching the branch network to all regions of the country has not resulted in eliminating the differences in the shares of deposits or credit among them. In particular, during the phase of rapid expansion of banking between 1969 and 1991, the share of the southern region in deposits and credit did not fall. Similarly, during the reforms since 1991, while the number of agricultural

15 0.330 13 31 81 419 568

1969 2,205 377 3,449 3,509 2,562 8,707 20,809


2,408 254 2,339 3,825 2,087 10,729 21,642


Number of accounts (’000) 2.76 0.06 2.28 5.52 14.47 74.91 100


Source: RBI, Statistical Tables Relating to the Banks in India (various years).

Northern region North-eastern region Eastern region Central region Western region Southern region All-India


10.60 1.81 16.56 16.86 12.31 41.84 100


2005 11.13 1.18 10.81 17.67 9.64 49.57 100

Percentage share

Table 8.8 Growth of Agricultural Loan Accounts of Commercial Banks, 1969–2005

142.95 1,142.42 270.51 113.60 31.65 20.76 37.18


1.09 0.67 0.68 1.09 0.81 1.23 1.04


Increase between years

198 a S. Neelakantan

A Story of Indian Banking (1857–2007) a 199

loan accounts declined everywhere, the southern region alone showed an increase. What explains the resilience of the southern region? An explanation is offered here in terms of the growth of banking institutions in south India in the period preceding independence. The explanation is developed using the data presented in Tables 8.9 and 8.10, which have been collated as follows. The banks listed in the Statistical Tables Relating to the Banks in India (RBI, issues of 1941 to 1969) have been entered into an excel sheet with the year of registration and place of registration. The banks are listed under four classes, namely, A1 (scheduled banks) and A2 (non-scheduled banks), both with paid-up capital and reserves of ` 5 lakhs and above, and B and C with paid-up capital and reserves of ` 1–5 lakhs and ` 50,000–1 lakh, respectively. Banks listed under a lower class at one point of time could appear in another class at a later date. A careful scrutiny of all the banks for cases of repetition has been carried out. Also, banks registered outside present-day India have been removed. Tabulations have been carried out by year of registration and place of registration separately for each class, or for all classes as needed. Table 8.9 Distribution of Banks by Year and Region of Registration in India, until 1969 Year of registration Region Kerala, Karnataka, Tamil Nadu Mumbai Maharashtra West Bengal Punjab Delhi Rest of India Total

Before 1900



1950 and Date beyond uncertain








0 0 3 0 1 11 32

3 3 8 8 1 17 87

8 19 50 11 11 87 474

0 0 1 0 0 4 11

1 0 18 3 1 17 76

12 22 80 22 14 136 680

Source: RBI, Statistical Tables Relating to the Banks in India (various years).

As discussed earlier in this chapter, the period between 1920 and 1949 witnessed a phenomenal increase in the number of banks registered in the country. Of the total number of banks surviving

145 0 8 24 8 0 62 247

Kerala, Karnataka, Tamil Nadu Mumbai Maharashtra West Bengal Punjab Delhi Rest of India Total

196 1 10 43 13 1 40 304


170 0 7 5 2 0 25 209


15 7 1 16 3 0 20 62


46 11 12 31 13 6 28 147

53 7 8 12 5 11 21 118

1947 1961

30 4 5 6 4 8 18 75


160 7 9 40 11 0 82 309


242 12 22 74 26 7 68 451


223 7 15 17 7 11 46 327


30 4 5 6 4 8 18 75


No. of banks of classes A1 and A2 No. of banks of Classes A1, A2, B and C

Source: RBI, Statistical Tables Relating to the Banks in India (various years).



No. of banks of classes B and C

Table 8.10 Evolution of the Banking Structure in India, 1941–69

200 a S. Neelakantan

A Story of Indian Banking (1857–2007) a 201

as of 1940 together with those registered (including failed ones) between 1940 and 1969, numbering about 680 in all, as many as 474 were registered during 1920–49 (Table 8.9). As has been the case since the inception of modern banking in India, almost 60 per cent of all banks were registered in the part of the southern region consisting of present-day Kerala, Karnataka and Tamil Nadu. The place of registration was not confined to a few towns in this region, but was spread over its length and breadth. As indicated earlier, the period of phenomenal growth of banking institutions—the 1930s and 1940s—was also a period marked by the demise of a large number of them. While the liquidation of over 250 banks during 1941–46 was attributed to the difficult economic situation prevailing then, the closing down of 114 banks during 1947, 1948 and 1949 led the central banking authorities to act expeditiously. The Banking Companies Act of 1949 clearly distinguished banks from other financial institutions, and stringent conditions were laid down for the registration of new banks, leading to the drying up of new registrations altogether (Table 8.9). Simultaneously, the Reserve Bank of India pursued a policy of persuasion and guidance in the 1950s to strengthen the banking system. While some non-banking companies fulfilled the conditions set down by the Banking Companies Act of 1949, and some went in for voluntary mergers or amalgamations, the expected results could not be achieved. The total number of banks of all sizes declined by about 110 between 1947 and 1961 (Table 8.10), but many weak banks continued to carry on business. Other active policies had to be pursued to strengthen the banking sector. Such an opportunity presented itself to the Reserve Bank of India subsequent to the failure of two scheduled banks, namely, Lakshmi Bank and Palai Central Bank, in 1960. The Reserve Bank assumed powers to formulate and carry out schemes for the reconstruction and compulsory amalgamation of sub-standard banks with well-managed institutions, powers that were subsequently strengthened with the passing of an ordinance in 1961. The method adopted by the Reserve Bank was one of granting a moratorium rather than liquidating the weak bank. In the event of liquidation, payment to the depositors and shareholders is based on realization, whereas moratorium aims at reconstruction and merger with a

202 a D. Narayana

well-managed institution without adversely affecting depositors. By 1969, the number of banks had been reduced to 75 without any failure. The pre-eminent role of south India in the growth of banking has already been mentioned. But south India had a higher share of smaller banks in the total. For instance, in 1941, while at the all-India level over 20 per cent of the banks fell in classes A1 and A2 (capital and reserves above ` 5 lakhs), their share in the south was less than 10 per cent. Despite their small size, the fact that southern banks were well managed becomes evident as we trace the evolution of the distribution of banks through the next 30 years. In 1941, only 15 of the 62 class A1 and A2 banks were in the south (24 per cent). This figure increased to 31 per cent by 1947, to 45 per cent by 1961, and remained at 40 per cent in 1969 (Table 8.10). The compulsive action by the Reserve Bank in merging weaker banks with well-managed ones brought the smaller, well-managed southern banks to the fore. The large number of banks and banking offices of all types in the south early on had an enduring impact on the later banking development in the region. The small banks escaped the net of nationalization and government-led branch expansion, which manifested itself in the lower growth of bank offices in the south during some periods. It cushioned the large variations in the growth of credit in the south. The environment created by the financial sector reforms was also taken full advantage of by these banks, as is evident from the concentration of branch offices of old and new private banks in south India in early 2000. In the year 2002, of the 4,400 branches of the old private banks, around 3,100 were located in these three states, and over 50 per cent of the 1,000-odd branches of the new private banks were also located here. The long exposure to organized banking in the southern region needs to be taken into account along with the higher rate of banking observed in this region. The prevalence of higher rates of deposit and credit accounts may be observed in both the rural and the urban areas of this region. The exposure to credit activities of banks is one of the highest in the southern region, almost double the national rate, and especially high in the rural areas as well (Table 8.11). Southern India looks different in the banking map of India. Why has it become differentiated from the rest of India? A detailed

A Story of Indian Banking (1857–2007) a 203 Table 8.11 Deposit and Credit Accounts per 1,000 Population across the Regions of the Country, 2005 Deposit (C+S) accounts per 1,000 population Region Northern region North-eastern region Eastern region Central region Western region Southern region All-India

Credit accounts per 1,000 population





338 186 185 242 263 393 270

652 281 413 375 526 486 483

55 35 45 45 46 136 64

71 41 47 49 121 185 104

Source: Computed from RBI (2005) and census data, 2001 (see RGI, 2004). Note: C+S: current and savings.

discussion of the reasons is beyond the scope of this chapter, but a few lines of explanation may be indicated here. Unlike the rest of India, the region comprising present-day Tamil Nadu, Kerala and part of Karnataka was characterized by the raiyatwari system of landownership, wherein the crop to be cultivated could be decided by the cultivator and the disposal of the produce rested in his hands. The coastal trading firms dealt directly with the proprietors of the land, and they also had a banking department accepting deposits from the public. The failure of Arbuthnot and Co. in 1906 shattered the credibility of these agency houses, opening the way for the banks to fill a gap. The absence of a traditional trading caste in the south aided this process by providing an opportunity for the other castes to move in. The cultivation of numerous export crops in this region and their integration into international trade may also have played a role.

Conclusions Minority government participation and government-led expansion imparted strength to the Indian banking system initially. This scenario turned into government ownership and control, with the nationalization of the Imperial Bank of India and the constitution of the State Bank of India and its associate banks in the 1950s, and the nationalization of private sector banks later. While the reforms of 1991 gave functional autonomy and powers to raise

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capital from the market to public sector banks, government control stayed in place. The stringent conditions for registering new banks imposed since the Banking Companies Act of 1949 have been eased with the new guidelines issued in 1993, but this has not meant going back to the free entry of pre-independence days. The policy of guided amalgamations and compulsive mergers of the weak banks with well-managed banks that has been followed since independence has entailed the elimination of weak banks. The more stringent policy of moratorium and reconstruction introduced in 1960 and continuing till today—as is evident from the cases of United Western Bank and Ganesh Bank in 2006—prevents any bank failure. Thus, the policies of government ownership of the major banking segment, the government’s watchdog function and the compulsory reconstruction of weak banks followed by the central banking authority are the sources of strength of the Indian banking system. Along with building public trust in banking institutions, the central banking authorities have an important role to play in nurturing banking. This latter role was played effectively during the 1950s and 1960s by weeding out unscrupulous and sub-standard banks. The nurturing of small banks gave a distinct characteristic to banking in south India, which in later years resulted in a higher participation of people in deposit and credit banking. Such nurturing could be done on the large base of numerous small banks that came into existence in the period from 1920 to 1950. Rapid expansion of government banks and the disbursing of subsidized loans do not develop banking habits, as is evident from the experience of almost 30 years since bank nationalization in other parts of India. These institutions are seen more as an extension of government offices distributing doles. Banking sector reforms do not offer a solution to this problem, as the tendency of banks in a liberalized environment is to work with a shorter horizon within banked areas. a

Notes 1. The list of constituents is not complete without a mention of the bazaar, the indigenous trading and financial network. Indian merchants had a long experience of handling money, being part of the old inter-Asian

A Story of Indian Banking (1857–2007) a 205 trading and banking system of the Indian Ocean, which was fractured by the expansion of European powers in the 19th century. The credit transfer mechanisms and the trading techniques of Indian merchants were sufficiently sophisticated, and their trading and financial network was known as the bazaar, operating on paper credit. The world of mobile credit operating through negotiable instruments had emerged in Asia before the coming of the Europeans. The higher tier that European corporations occupied relegated the bazaar to a subordinate stratum of the colonial business world (Ray, 1995). 2. Observations of E. J. Bunbury, chairman of the 11th annual general meeting of the shareholders of the Imperial Bank of India held at Bombay on 17 August 1931.

References Muranjan, S. K. 1940. Modern Banking in India, Bombay: New Book Co. Ray, R. K. 1995. ‘Asian Capital in the Age of European Domination: The Rise of the Bazar, 1800–1914’, Modern Asian Studies, 29(3), pp. 449–554. Registrar General of India (RGI). 2004. Census of India 2001: Population Profiles: India, States and Union Territories, New Delhi: Office of the Registrar General. Reserve Bank of India (RBI). 1960. Trend and Progress of Banking in India during the Year 1960, Mumbai: RBI. ———. 2005. Basic Statistical Returns of Commercial Banks in India 2005, Mumbai: Department of Economic Analysis and Policy, vol. 34. ———. Various years. Statistical Tables Relating to the Banks in India, Mumbai: RBI. Rural Banking Enquiry Committee (RBEC). 1953. Report of the Rural Banking Enquiry Committee, New Delhi: Government of India, Department of Economic Affairs. State Bank of India. 2003. The Evolution of the State Bank of India, vol. 3: The Era of the Imperial Bank of India, 1921–1955, New Delhi: Sage. Tripathi, D. 2004. The Oxford History of Indian Business, New Delhi: Oxford University Press.

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Chapter 9 Six Decades of Industrial Development: Growth of the Manufacturing Sector in India from the 1940s C. P. Chandrasekhar Post-independence India was a classic case of state-led economic

development. Not only was the state highly interventionist, but over time the economy included a sizeable public sector, especially in the areas of infrastructure and basic industries. The ‘mixed’ economy that thus came into being within the political framework of a parliamentary democracy made the Indian experiment novel and unique. The Indian industrialization strategy was seen as a model for developing countries with a reasonable home market. State intervention attempted to influence the pace and pattern of industrialization by: (a) insulating the domestic market from excessive import competition; (b) regulating the inflow of foreign capital and mediating the interaction of domestic and foreign capital; (c) investing in infrastructure, basic and heavy industries and closing the gaps that might not be filled by private players because of lumpy investments, long gestation lags and uncertain profits; (d) using controls on capacity creation and production and the tax-cum-subsidy regime to influence the allocation of investment; and (e) putting in place a regulatory regime that attempted to reduce industrial concentration and ensure a more regionally dispersed industrial sector. Given this background, India’s transition in 1991 to a liberal and open industrial policy regime was an event of great historical significance. The question as to why and how the transition occurred and the effect it had on the pace and pattern of industrial growth, employment generation and distribution are still being debated. This chapter traces the evolution of India’s industrialization since independence, to partly explain the transition and to assess the impact of alternative policy regimes on the pace and pattern of industrialization.

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Industrialization during the 60 years since independence may be periodized in two alternative ways: in terms of episodes of growth and deceleration; and in terms of the policy regime in place. The former approach warrants dividing the whole period into three phases: (a) the immediate post-independence years (1950–64), when Indian industry grew at creditable rates compared both with earlier phases of industrialization and with the pace of industrialization in many similarly placed developing countries; (b) the period from the mid-1960s to the late 1970s, referred to as one of ‘secular stagnation’; and (c) the years since the 1980s when growth has not only risen on average and remained high for a relatively long period of time, but has shown signs of further acceleration after 2002 (Table 9.1). Table 9.1 Annual Trend Rates of Growth of Output (%)

1950–51 to 1964–65a 1965–66 to 1979–80b 1965–66 to 1974–75b 1975–76 to 1984–85c 1985–86 to 1994–95d 1995–96 to 2004–05e 2000–01 to 2006–07e



Mining and quarrying


7.2 4.7 4.3 4.9 6.2 5.5 7.3

7.1 3.8 2.7 4.3 6.2 5.8 7.9

5.9 6.9 9.4 6.6 4.2 2.7 4.0

13.6 6.2 3.8 7.3 8.3 5.0 4.8

Source: Computed from figures on the Index of Industrial Production (IIP) reported in Reserve Bank of India, Handbook of Statistics on Indian Economy, various issues, and Reserve Bank of India, Report on Currency and Finance, various issues. Notes: (a) Based on series with base 1950–51 = 100; (b) Based on series with base 1960 = 100, converted to base 1970–71 = 100; (c) Based on series with base 1970 = 100; (d) Based on series with base 1980–81 = 100; (e) Based on series with base 1993–94 = 100.

When seen in terms of policy, we can speak of three phases, two of which coincide with the growth-based periodization, and one that does not. The first was the period of dirigisme (early 1950s to the middle of the 1960s), with a highly interventionist state leading development. In the second phase—the middle of the 1960s to the end of the 1980s—interventionism remained in place but, because of evidence that intervention had not been implemented as planned and had therefore not realized its multiple objectives, it

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was losing its legitimacy. This triggered a contradictory phase in policy where the strengthening of some measures of intervention was accompanied by a creeping process of limited liberalization. Finally, the third phase began in 1991–92 when, in the wake of the balance of payments crisis of 1991, the government opted for an accelerated process of liberalization.

The Early Years The Indian economy at independence was predominantly agrarian, with mining, manufacturing and small enterprises contributing around 17 per cent of national income and less than 10 per cent of employment (Krishnamurthy, 1965; Reserve Bank of India, 1956). The share of the organized factory sector in industry stood at less than 40 per cent and, going by weights accorded in the Index of Industrial Production (IIP), nearly two thirds of organized sector production consisted of traditional activities like textiles, food processing and processing of agricultural and mineral raw materials. Roughly 55 per cent of the total supply of capital goods and 27 per cent of industrial raw materials in 1950–51 were imported (Ahmad, 1968). The principal aim of state policy was a rapid acceleration of industrial growth with a view to breaking the barriers to increases in productivity characteristic of predominantly agrarian economies. Four initiatives were considered crucial to realizing this objective. First, a widening and intensification of protection offered to manufacturing through an across-the-board increase in tariffs and the institution of quantitative restrictions on imports. Second, a massive step-up in public investment, which would not only close such infrastructural gaps as could hamper industrial development, but also result, directly through purchases of commodities and indirectly through the creation of additional incomes, in a rapid growth of the protected home market. Third, a step-up in the rate of savings, which would be accompanied by measures to channelize these funds to the state sector (taxation) as well as to the private sector through the mediation of the state (financial institutions). And, finally, the introduction of a wide range of controls on capacity creation, production and prices, which would ensure that these funds would be utilized in accordance with the investment mix specified by the strategy of industrialization adopted by the government.

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Thus, the framework under which post-independence industrialization occurred has been described as follows: in a regime with heavy all round protection and import control the government was to spearhead investment in crucial high-risk sectors (involving lumpy investments and long gestation lags), while making finance available to the private sector to take advantage of opportunities opened up as a consequence of its own investment and its protectionist policy. (Patnaik, 1979, p. 6)

This strategy produced an unprecedented spurt in industrialization during the 1950s and early 1960s, with import substitution providing a major part of the stimulus for growth. According to Ahmad (1968), import substitution accounted for 23 per cent of the total output growth of all industries during the period from 1950–51 to 1965–66. Bhagwati and Desai (1970) find that over the period 1951–63, while three of four indicators showed import substitution to be negative for ‘all industries’, they were positive for some sub-sectors, with the degree of import substitution being the highest in the investment goods sector. In fact, till 1957, the extent of import substitution was the highest in the consumer goods sector, followed by the intermediate and investment goods sector in that order. But with the launch of the Second Five Year Plan and the emphasis on heavy industry, matters changed completely. Two problems were generated by the state-engineered expansion of industry of this kind. First, it resulted in a high degree of disproportionality between industrial and agricultural growth. Second, though it did result in a substantial degree of substitution of imports at the final goods stage, it set off demands for imports of capital and intermediate goods that drew on India’s scarce foreign exchange reserves (Chandra, 1973; Desai, 1971). The extent of the dissociation between industry and agriculture becomes evident from the relative rates of growth of output of just around 3.34 per cent for agriculture and over 7 per cent for industry. In a predominantly agrarian economy, agricultural stagnation cannot but act as a drag on industrial growth owing to three major linkages. First, agriculture constitutes a major source of demand for the products of industry. Second, most of India’s traditional industries like cotton and jute textiles, sugar, vegetable oils and tobacco are essentially agro-based, and are dependent on the availability of agricultural inputs. Finally, agriculture remains the dominant

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supplier of what constitutes the ‘wage basket’ in a poor country like India. Indifferent agricultural performance can therefore constrain the pace of industrialization both directly and by setting off an inflationary spiral that could squeeze profit margins as well as force the government to opt for deflationary policies aimed at holding the price line. While all these factors rendered the slow pace of agricultural growth a drag on the expansion of industry (Chakravarty, 1974; Mitra, 1977; Raj, 1976; Vaidyanathan, 1977), the last of them led to ‘stop–go’ policies with regard to public investment providing the mechanism for periods of boom and recession (Bagchi, 1970; Patnaik, 1972). If these factors did not constrain the expansion of industry over the 1950–65 period, it was partly because of the nature of industrialization engineered by public investment (which was heavily biased in favour of nonagro-based industry), and partly because of the large imports of food under PL 480 that helped augment supplies and hold the price level (Nayyar, 1978).1 Large food aid—averaging 5–8 per cent of availability—did result in subdued price trends in the agricultural sector, which shifted the terms of trade against it and in favour of industry (Tyagi, 1987). This provided the basis for non-inflationary growth of industry led by large-scale public investment. Over the period 1950–51 to 1964–65, while real investment in the private sector grew at a compound rate of just 3.9 per cent per annum, that in the public sector grew at a remarkable 13 per cent per annum. The other effect of state-engineered industrialization was the growing reliance on imports, which led to a worsening of India’s balance of payments position. High levels of protection and the Mahalanobis strategy notwithstanding, India’s dependence on imports of basic and intermediate-stage goods increased substantially over the second plan period. Two factors contributed to this trend. First, responding to market signals, the private sector resorted increasingly to the production of import-intensive consumption goods (Raj, 1967). And second, starting with the 1957 foreign exchange crisis, the government provided licences for capacity creation in this sector so long as entrepreneurs could find a foreign partner who would finance the foreign exchange component of the investment involved. This was because it was motivated by the need to stall a sharp decline in investment as a result of foreign exchange stringency.

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Thus, by the time the drought years of the mid-1960s severely constrained India’s manoeuvrability, a difficult balance of payments situation and rising agricultural prices presaged an end to the years of high industrial growth. It was precisely at this point that the now well-documented reverse tilt in the terms of trade between agriculture and industry occurred, which led up to the period when the deceleration of industry inevitably began.

Structural Change Underlying the overall trends in industrial growth in India were certain crucial structural features influencing the pattern of industrialization over the first decade and a half after independence. By 1947, Indian industry was characterized by a high degree of concentration. The most significant aspect of this concentration was the role of the ‘business group’ as the representative unit of Indian capital (Ghose, 1972, 1974; Hazari, 1966). The group consisted of a large number of legally independent companies operating in a number of related as well as unrelated areas, controlled by a single, central decision-making authority and thereby functioning as a coordinated organization. This meant that besides a high degree of product concentration, monopoly in India consisted of the predominance of a few representative units of capital in most areas of industry. In 1964, the Monopolies Inquiry Commission reported that of a total of 1,298 products studied by it, 87.7 per cent were in the hands of oligopolists, with 437 being produced by only one firm each and 229 by two firms each (Government of India, 1965). In fact, except for food products, cotton textiles and jute textiles, almost the whole of Indian industry was characterized by monopoly, duopoly and oligopoly. But that was not all. Given the extremely diversified and technologically integrated structure of the business group, a few business houses tended to monopolize most areas through firms under their control. In a system where capacity is licensed with the aim of achieving plan targets, these business houses were able to corner a disproportionate share of licences issued by the government in all areas of industrial activity (Government of India, 1967, 1969). Cornering licences did not necessarily lead to the creation of capacity, given that the business houses followed a two-pronged strategy. In the more dynamic areas where profit margins are high,

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the business houses adopted an ‘offensive’ strategy of obtaining licences, establishing capacity and bidding for a dominant share of the market. In areas where profits are lower either because of slack market conditions or price controls, they pre-empted capacity by obtaining licences, preventing entry by others, but not translating these licences into installed capacity. This ‘defensive’ strategy permitted retaining monopoly power without actually investing in productive capacity. The pre-emptive behaviour of the business group had a number of implications. First, the government’s efforts at diverting investment to priority sectors through the use of the licensing mechanism were never realized (Ghose and Vyas, 1969; Shetty, 1978). Independent of the licences issued, investments made and capacities installed tended to correspond to market signals. Private investment flowed in the direction of the lucrative market for manufactured luxury consumer goods. Sunset industries like coarse textiles, facing a slowly growing market, became the sources of surplus for investments in other dynamic areas, but were themselves deprived of much-needed investments for modernization. The immediate impact of this situation was that productive capacity fell short of targets and even actual demand in many cases. The government responded by stricter scrutiny of applications and ‘over-licensing’ in order to circumvent applications that had ‘pre-emption’ as their motive. But given the rather wide range of firms through which the business group could apply for licences in any one area, this only led to a spiral where the share of preemptive applications and the extent of over-licensing increased over time, defeating the purpose for which licensing was adopted (Chandrasekhar, 1987). The Indian experience of this period has some significant implications for the political economy of industrialization. In alternative situations, like that of South Korea, the relative weakness of private industry had helped the state mould the quantum, direction and nature of industrial investment, while providing substantial concessions to the private sector. In the Indian case, however, while concessions have not been negligible, efforts at influencing investment behaviour have in most cases been unsuccessful. In understanding this difference it may be useful to recall that while most of South Korea’s industrial leaders were post-war creations, India had an assertive industrial class well before independence

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in 1947, and leading Indian industrialists had sat together and formulated the Bombay Plan—a plan of action for the postindependence state.

The Public Sector The behaviour of the private corporate sector, and consequent developments with regard to the commodity composition of industrial output, also crystallized the role to be played by the public sector. Though industrial policy resolutions and statements about the ‘commanding heights’ role of the public sector suggested that the latter was to play a leading role in industrial development, in practice it merely adjusted to an inevitable residual role in an industrialization process where market signals and private decision making determined the direction of growth. The government’s own realization of the supportive role to be played by the public sector was reflected in the third plan, which stated that such investment was required since: a number of basic industries which require large investments and extensive collaboration with foreign firms or governments and which could be undertaken only on the assurance of future prospects, with no immediate gain in sight, would not normally be started if reliance was to be placed entirely on private enterprise. (Government of India, 1961)

The state therefore chose to play a dominant role in the infrastructural sector, owning in time more than 60 per cent of all productive capital, eight of the top 10 units, and employing two thirds of the workers in the organized sector (Bardhan, 1984). Over 90 per cent of the cumulated investment in public sector projects (Chaudhuri, 1978) was accounted for by steel, engineering, chemicals, petroleum, mining and minerals by the mid-1960s, endowing it with a high capital–output ratio. Not surprisingly, while the public sector’s share in total physical assets increased quite sharply over the years, its share in production increased from around 2.5 per cent in 1950–51 to only around 26 per cent by 1965–66. One concomitant of this tendency was an extremely low margin over costs, which could easily turn into a loss if costs rose due to over-manning or inefficiency, or administered prices were not increased fast enough to accommodate changes in the costs of inputs.

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Besides carrying the burden associated with serving as the supplier of infrastructural inputs, the supportive role of the state is seen in its attitude vis-à-vis the investments of financial institutions. By virtue of holding more than 25 per cent of the paidup capital of private joint-stock companies through the financial institutions, the state was in a position to wield considerable influence over the private sector. But, unlike the case in South Korea, for example, the control over financial resources has never been utilized to influence investment decisions in the private corporate sector.

Deceleration in Growth Two factors were responsible for bringing the high growth of the first decade and a half after independence to an unacceptable low. To start with, the stimulus arising from protection had exhausted itself. This was not surprising, since import substitution results in a once-for-all increase in indigenous output. Once domestic markets have been captured by indigenous producers from foreign ones, any further growth depends on the growth of the market as a whole. By 1965–66 the share of imports in domestic availability exceeded 20 per cent in only four out of 20 industrial groups: petroleum products, basic metals, non-electrical machinery and electrical machinery (Ahluwalia, 1985). A large part of this significant but residual reliance on imports may be explained by the fact that import substitution occurs most often only at the final stages of production, while dependence on imports for certain initial, second- and subsequent-stage goods, where the size of the domestic market may completely rule out indigenous production, continues. Thus, if the rapid pace of expansion of industry had to be sustained, the overall market for manufactures had to grow. This obviously did not occur, leading to the deceleration in industrial growth during the decade after the poor harvests of the mid-1960s. The second factor explaining the deceleration was the slowdown in the growth of public expenditure in general and public capital formation in particular, which had provided the principal stimulus for growth prior to the mid-1960s. Capital formation in the public sector, which registered a rapid increase till the mid-1960s, decelerated sharply subsequently and grew at a compound rate of just 3.2 per cent per annum till the late 1970s. Given the role that public investment had played in an India-type mixed economy, the

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impact of the deceleration of such investment was two-fold: first, it resulted in a slower growth of the home market and therefore a slower growth in the demand for products of the private sector; second, it resulted in a slowdown in capacity creation in certain crucial sectors like power, transport and irrigation. The slowdown in investment in irrigation obviously limited the pace of growth of production in general and foodgrains production in particular. And the cut-back in investment in infrastructural areas resulted in infrastructural bottlenecks whenever the economy, after a good harvest, found itself on an upswing. The inflationary potential built into the economy by these two sets of bottlenecks meant that any boom was soon accompanied by an inflationary spiral that cut it short by forcing a reduction in public investment and expenditure aimed at holding the price level. As a result, in the period after the mid-1960s, industrial growth came to depend on the expansion of the middle- and upper-income markets for consumer durables, rather than on public investment, which at least till the late 1970s lost its role as the locomotive of industry. The consequent shift in the commodity composition of industrial output perpetuated industry’s relative degree of independence vis-à-vis the pace of agricultural growth.2 The kind of consumer demand that came to serve as the engine of growth consisted not of ‘agro-based’ products, in the sense that they are dependent on agriculture for their inputs, but items that are ‘chemical-based’ such as synthetic textiles, plastic goods and pharmaceuticals, or ‘metal-based’, such as motorcycles and cars, electrical appliances and radios and television sets. The rate of growth of agriculture need not constrain the rate of growth of the output of these products, provided the demand for them is rising rapidly enough and the necessary intermediate goods (chemicals, metals, etc.) are available in adequate quantity. However, the growth of demand for luxury consumer goods and consumer durables in particular was inadequate to offset the slower growth in demand for industrial products as a whole, as a result of the deceleration in public investment. In the net, we saw the decline in rates of growth noted earlier. Thus, by the mid-1970s, it appeared that the industrial sector had run up against a demand constraint that could not be met unless there was a rapid expansion in exports or a breakthrough in the agricultural sector that raised incomes to levels that could set off an industrial boom.

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Overall, a number of features of India’s post-independence growth strategy structurally limited the potential of the system. In particular, four mutually reinforcing and inter-related contradictions need to be noted. To start with, despite talk of land reform, of providing ‘land to the tiller’ and curbing the concentration of economic power, little was done to attack and redress asset and income inequality. And while the worst forms of monopolistic practices were curbed, asset concentration in the industrial sector was never really challenged. Second, the state under the old economic policy regime had simultaneously to fulfil two different roles that were incompatible in the long run. On the one hand, it had to maintain growing expenditures, in particular investment expenditure, in order to keep the domestic market expanding. At the same time the state was the medium through which largescale transfers were made to the capitalist and proto-capitalist groups; in other words, the state was an instrument for the ‘primary accumulation of capital’. Through the non-payment of taxes, through a variety of subsidies and transfers and through lucrative state contracts, private fortunes were built up at the expense of the state exchequer. The contradiction between these two different roles of the state manifested itself in a deepening fiscal crisis. The third contradiction lay in the inability of the state to impose a minimum measure of ‘discipline’ and ‘respect for law’ among the capitalists, without which no capitalist system anywhere is tenable. In particular, given the strength and assertiveness of the domestic industrial capitalists, the government was not in a position to discipline them to the extent required to launch a strategy to use cheap labour resources as the base for a thrust into the international market for manufactured mass consumption goods. The final contradiction had its roots in the cultural ambience of an ex-colonial society like India. The market for industrial goods was from its very inception a socially narrowly based one. Capitalism in its metropolitan centres, however, is characterized by continuous product innovation resulting in alterations of lifestyles. In an ex-colonial economy like India, the comparatively narrow social segment to whose hands additional purchasing power accrues in large measure is not satisfied with having more and more of the same goods that are produced domestically. Its demand is for the new goods being produced and consumed in the metropolitan

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centres, and which, given the constraints upon the innovative capacity of the domestic economy, are incapable of being produced locally purely on the basis of indigenous resources and indigenous technology. Once these contradictions are taken into account, the structural features of industrialization during the immediate postindependence period and the deceleration in industrial growth after the mid-1960s are explained. An industrial impasse seemed inevitable given the institutional context and the growth dynamic of India’s mixed-economy-based strategy of development.

The 1980s Turnaround Seen in this light, what was surprising was not the industrial impasse of the mid-1960s but the turnaround in industrial growth in the 1980s, when the factors that had earlier constrained the expansion of the mass market were still operating. This implied that the stimulus to growth, as before, had to come from the state (Chakravarty 1987; Patnaik, 1995). There were three new features characterizing the 1980s that allowed the economy to escape from the growth impasse of the earlier period. First, there was a big increase in the fiscal stimulus to the economy provided by government spending. The gross fiscal deficit of the central and state governments together averaged 9.5 per cent of gross domestic product (GDP) at current market prices in the second half of the 1980s, and touched 10.1 per cent in 1990–91. This was not due to any increase in the share of public investment, but largely the result of a decline in the share of public savings, reflected in the burgeoning revenue deficit (which rose from an average of 2.8 per cent of GDP between 1985–86 and 1989–90 to 4.5 per cent in 1990–91). The second new feature was the liberalization of imports of capital goods and components required for a number of commodities catering to luxury consumption, especially of electronics and automobiles. This was based on the argument—stated explicitly by some government officials—that since even the small segment of the population that demanded such goods amounted in absolute terms to a fairly large number, the economy could grow on the basis of such an industrialization strategy whose benefits would eventually ‘trickle down’ to the poorer sections of the population as well.

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The third new feature was a systematic resort to commercial borrowing from abroad, including from non-resident Indians (NRIs). As the trade and current account deficits went up in the latter half of the 1980s, and access to soft loans dwindled, there was increasing recourse to external commercial borrowings. This in turn contributed, with a lag, to large current account deficits because of the need for debt servicing, and eventually necessitated further borrowing. The debt in dollar terms nearly quadrupled during the 1980s, from around $20 billion in 1980 to nearly $82 billion in 1990; debt to banks and private individuals increased more than 10 times from just under $2 billion to more than $22 billion. By 1990, India’s debt-service payments absorbed foreign exchange amounting to nearly one third of the value of exports.3 It is the combination of these three features that explains the state’s ability to pull the economy out of the impasse it faced during the late 1960s and 1970s. Of course, it may be asked why earlier successive governments—which were after all just as desperate to revive growth—could not adopt a similar strategy. To answer this we need to look at developments outside the country, which influenced India’s medium-term growth prospects significantly. The rise to dominance of finance capital in the international economy was the most important of such developments. Until the early 1970s, the private international financial system played only a limited role in recycling financial surpluses to the developing countries. Capital flows to developing countries, barring a few unusual exceptions like South Korea, were through official bilateral and multilateral channels. The period immediately after the first oil shock saw a dramatic change in this scenario. Since oil surpluses were held mostly as deposits with the international banking system based in and controlled by the developed world, the private financial system there became a powerful agent for recycling surpluses. The expenditure fuelled by such credit in both the developed and developing worlds generated further surpluses with the oil producers, who then deposited these surpluses with transnational banks, which, in turn, could offer further doses of credit. By 1981, OPEC countries are estimated to have accumulated surpluses to the tune of $475 billion, $400 billion of which was parked in the developed industrial nations (Lissakers, 1991).

Six Decades of Industrial Development a 219

Another factor contributing to the increase in international liquidity during the 1970s and 1980s was the increase in international liabilities of the United States, as reflected by the explosion of the Eurocurrency market in the 1970s. This was sustained by the confidence in the dollar stemming from the immediate postwar hegemony of the US, which made it as good as gold. Such international confidence in its currency allowed the US to ignore national budget constraints on its international spending, resulting in the emergence of strong banking and financial interests with an international agenda. The influence of these interests was reflected in policies that affected domestic manufacturing interests adversely, as suggested by the widening and persistent US trade deficit after the mid-1970s. The massive increase in international liquidity found banks and non-bank financial institutions searching desperately for the means to keep their capital moving. Capital in the form of debt and equity investments began to flow into the developing countries, especially those that were quick to liberalize rules relating to crossborder capital flows and regulations governing the conversion of domestic into foreign currency. This power to the finance elbow was all the more significant because a slowdown in productivity growth in metropolitan industry had already been bringing the post-war industrial boom to a close—a process hastened by the contractionary response to the oil shocks. As a proportion of gross national income, the debt stocks of developing countries rose from 11 per cent in 1970 to 21.4 per cent in 1980 and 35.1 per cent in 1990.4 From the point of view of governments in certain developing countries, this growth in international finance appeared positive. Some of them needed the liquidity to finance their post-shock deficits. But for others that were not willing to undertake the structural reforms that would involve attacking the very landed and industrial interests they represented, the new situation appeared to offer a lifeline. They could now experiment with the alternative of opening up their economies, integrating with world capitalism, and hope to derive at least some of the benefits of whatever growth occurred in the world system. This was certainly true of India in this period. Thus, this congruence of interests—of the developing countries to borrow and the banks to lend—resulted in the fact that the current account deficit was for almost a decade and a half no constraint

220 a C. P. Chandrasekhar

on growth at least in some underdeveloped countries. Seen in this light, the revival of growth in India during the 1980s is far easier to explain. Exploiting the access to foreign exchange that was afforded by the rise to dominance of finance internationally, the government chose to pump-prime the system. The fiscal stimulus was financed through rising deficits, including a rising deficit on the revenue account of the government’s budget. The demand stimulus resulting from such expenditure was serviced by domestic industry with the help of imported capital goods, intermediates and raw materials, imports of which were liberalized. The increase in foreign borrowing from the International Monetary Fund, the international commercial banking system and nonresident Indians saw India’s foreign debt to GDP ratio double during the 1980s, leading to the balance of payments crisis of 1990–91 and thereafter to the adoption of the stabilization and adjustment strategy.

Post-reform Growth The government argued that the 1990s crisis derived from three sources: the excessive presence of government, both as a regulator and a participant in economic activity, that stifled private initiative; excessive government spending and a fiscal deficit that was too high; and inadequate liberalizing reform that supposedly prevented India’s exports from rising fast enough. Having framed the problem in this manner, the neoliberal reform programme could focus on a chosen set of areas. Curtailment of the fiscal deficit was made the fundamental task of fiscal policy. Trade liberalization was accelerated, which involved doing away with quantitative restrictions on imports and reducing customs tariffs, with attendant revenue implications. Controls on the free operation of large industrial capital, domestic and foreign, were dismantled. A host of direct and indirect tax concessions were provided to industry, reducing the tax base of the government further. Concessions were also provided to foreign investors in the hope that they would use India as a base for world-market production. One implication of this strategy was an attempt at fiscal deficit reduction at the centre. Between 1989–90 and 1999–2000, the centre’s net tax revenue to GDP had declined from 7.9 to 6.6 per cent, or by 1.3 percentage points. As a result, even the limited ‘success’

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with reduction in the fiscal deficit that the government achieved implied significant fiscal compression. Such fiscal compression implies that, unless exports provide an alternative stimulus to industrial growth, the basic tendency in the system would be one that involves a slowdown. It hardly bears stating that India’s export performance during the 1990s was by no means exceptional. Occasional spurts in the dollar value of exports in general, and manufactured exports in particular, do not constitute the basis for sustained growth. And post-reform export growth trends indicate that such spurts have indeed been the exception. Freer conditions and better terms for entry of foreign investors have not delivered the export thrust that was expected. Add to this the fact that import liberalization does displace earlier sources of domestic production with imports or import-intensive products, and value addition in domestic industry is eroded further. To summarize, the basic tendency in the system post-reform has been for industrial growth to decelerate. This raises the question as to what explains the persistence of a reasonably high rate of industrial growth during the 1990s. An explanation of this can focus usefully on a seldom-noted feature of manufacturing growth during the 1990s, namely, an increase in volatility. As Figure 9.1 shows, in the case of manufacturing production, while in the 1980s, most years were characterized by rates of growth near or above the average rate, in the 1990s, rates at or above the average were far less frequent. Three factors seem to explain the instability. Public expenditure was far more unstable in the 1990s because of variations in the government’s degree of adherence to its irrational fiscal deficit targets. An added factor was the sudden burgeoning of public expenditure towards the end of the 1990s owing to the implementation of the Fifth Pay Commission’s recommendations and the influence of the political business cycle. It needs to be noted that it was not the agricultural cycle or the balance of payments crisis that influenced the government’s inter-temporal expenditure patterns. The instability in government expenditure that contributed in part to the instability in industrial growth was the result of autonomous actions of the government rather than the result of externally imposed constraints. The second factor was the release of the pent-up demand for domestically assembled, import-intensive manufactured goods in

222 a C. P. Chandrasekhar Figure 9.1 Growth Rates in Manufacturing

Source: Computed from figures on Index of Industrial Production obtained from Reserve Bank of India, Handbook of Industrial Statistics, various issues.

the initial post-liberalization years, the consumption of which was limited by import regulation earlier. In as much as such pentup demand is soon satiated, the spur to growth provided by this specific factor evaporated, resulting in a slowing of the growth rate pending an expansion of the market for such manufactures among a larger section of the population. Finally, the instability in manufacturing growth has been the result of the way that market has been expanded, especially in urban India, during the years of neoliberal reform: through a boom in housing and consumer credit. One consequence of financial liberalization and the excess liquidity in the system created by the inflow of foreign capital has been the growing importance of credit provided to individuals for housing investment and purchase of consumer durables and automobiles.

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One implication of the expansion of the market for manufactures through these means is that the extent of such an expansion depends crucially on the ‘confidence’ of both lenders and borrowers. Lenders need to be confident of the future ability of their clients to meet interest and repayment commitments. Borrowers (excluding those consciously involved in fraud) need to be confident of their ability to meet, in the future, the commitments they make in the present. This crucial role of the ‘state of confidence’ in triggering this form of demand is captured in the oft-used phrase: ‘the feel-good factor’. Since there is a strong speculative element involved in lenders providing credit and borrowers increasing their indebtedness, the state of confidence of both parties matters. When such confidence is ‘good’, we can experience growth or even a mini-boom. When such confidence is low in the case of either borrowers or lenders, we experience recessionary conditions. To the extent that financial liberalization provides the basis for an expansion of the world of debt—mediated either through bank accounts or plastic cards—a degree of volatility in demand for manufactures is inevitable. The role of these factors is corroborated partly by the pattern of manufacturing growth during the 1990s. As Table 9.2 shows, a major source of manufacturing growth has been the contribution made by the consumer goods sector. Even though its low weight makes its contribution to aggregate manufacturing growth less significant, the growth performance of the consumer durables sector has been the best. Table 9.2 IIP-Based Rates of Growth of Manufacturing Production (Use-Based Classification) 1994–95 to 2004–05 Growth rate (%) Basic goods Capital goods Intermediate goods Consumer goods Durables Non-durables General

4.49 6.92 6.39 6.45 9.16 5.65 5.83

Contribution (%) 1.59 0.67 1.69 1.83 0.47 1.31 5.83

Source: Computed from figures on the Index of Industrial Production obtained from the Central Statistical Organization, as available at, accessed January 2009.

224 a C. P. Chandrasekhar

An important implication of debt-financed manufacturing demand is that it is inevitably concentrated in a narrow range of commodities—varying from construction materials to automobiles and consumer durables—that are the targets of personal finance. Their importance in terms of contribution to growth is corroborated, however tangentially because of the nature of aggregation, by the data provided in Table 9.3. To the extent that these commodities are of a kind that are capital- and import-intensive in nature, the domestic employment and linkage effects of this expansion would be limited. Not only would employment growth be limited, as has been the case, but sustaining the growth process would require generating more of the same kind of demand. Table 9.3 IIP-Based Growth in 17 Major Industry Groups, 1994–95 to 2003–04 Growth rate Contribution (%) (%) Food products Beverages, tobacco and related products Cotton textiles Wool, silk and man-made fibre textiles Jute and other vegetable fibre textiles (except cotton) Textile products (including wearing apparel) Wood and wood products; furniture & fixtures Paper and paper products and printing, publishing and allied industries Leather and leather & fur products Basic chemicals and chemical products (except products of petroleum & coal) Rubber, plastic, petroleum and coal products Non-metallic mineral products Basic metal and alloy industries Metal products and parts (except machinery and equipment) Machinery and equipment other than transport equipment Transport equipment and parts Other manufacturing industries Manufacturing (total) Source: Same as Table 9.2.

3.60 12.70 1.47 8.33 0.59

0.41 0.38 0.10 0.24 0.00

5.50 –4.53 6.17

0.18 –0.15 0.21

6.76 7.83

0.10 1.38

6.56 9.00 4.36 5.27

0.47 0.50 0.41 0.19



8.95 3.86 6.14

0.45 0.12 6.14

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The Return of Growth Acceleration The period since 2003–04 has seen a return of the tendency for industrial growth to accelerate as the Indian economy has moved on to a higher growth trajectory, with growth of GDP averaging over 8.5 per cent per annum over the subsequent four years. Taking a long view, we find that industrial growth as captured by the IIP, which averaged 9 per cent in the second half of the 1980s, slumped immediately after the balance of payments crisis of 1991. However, a recovery followed, with manufacturing growth rising to a peak of 14.1 per cent over the three-year period from 1993–94 to 1995–96. But the boom proved short-lived, and industry entered a relatively long period of much slower growth, with fears of an industrial recession being expressed by 2001–02. Since then the industrial sector has recovered once again, with rates of growth touching the high levels of the mid-1990s by 2004–05. Even though the peak of 1995–96 has not been equalled, growth was creditable and sustained for three years thereafter. There are significant differences between the mini-boom of the mid-1990s and that which occurred 10 years later, with elements of both continuity and change. The element of continuity stems from the extremely important role that credit-financed consumption and investment played in keeping industrial demand at high levels. Credit has been an important stimulus to industrial demand in three areas, namely, housing and real estate, automobiles and consumer durables. The point to note is that compared to the mid-1990s the growth of credit has been explosive, facilitated in part by the liquidity injected into the system by the large inflows of foreign financial capital in the form of equity and debt. In the wake of this increase in liquidity, expansion in credit provision has been accompanied by an increase in the exposure of the banking sector to the retail loan segment. The share of personal loans in total bank credit has almost doubled in recent years, rising from 12.2 per cent in 2001 to 23.3 per cent in 2005. Much of this has been concentrated in housing finance, with housing loans accounting for 53 per cent of retail loans in 2005 (Table 9.4 and Figure 9.2). But purchasers of automobiles and consumer durables have also received a fair share of credit. The element of change in the factors contributing to industrial growth during the current boom as opposed to that in the mid-1990s

226 a C. P. Chandrasekhar Table 9.4 Growth and Share of Personal Loans in Total Bank Credit (%) Growth of total bank credit

Growth of personal loans

Share of personal loans in total bank credit

1992–93 1993–94

18.8 8.3

20.9 12.1

8.3 8.6














































31.4 28.6

38.0 22.7

23.3 22.3

End of March


Source: Reserve Bank of India, Basic Statistical Returns of Scheduled Commercial Banks in India, various issues.

Figure 9.2 Trends in Housing Loans

Source: Reserve Bank of India, Basic Statistical Returns of Scheduled Commercial Banks in India, Mumbai: RBI, various issues.

Six Decades of Industrial Development a 227

is the stimulus provided by exports. In the early and mid-1990s, high growth was accompanied by high imports, with exports growing, if at all, in areas where India had been traditionally strong. In recent years, the share of India’s traditional manufactured exports such as textiles, gems and jewellery and leather in the total exports of manufactures has declined, while that of chemicals and engineering goods has gone up significantly. This would have stimulated growth. While exports are by no means the principal drivers of manufacturing production, they play a part in sectors like automobile parts and chemicals and pharmaceuticals, where Indian firms are increasingly successful in global markets. All this suggests that Indian industry has been experiencing a transition. While during the first four decades of development, industrial growth was almost solely dependent on the stimulus offered by government expenditure and the support provided by public investment in infrastructure, there are signs that other sources of demand such as private consumption demand and exports have been playing an important role in recent times. However, there is already evidence to suggest that the post2003 boom may, like the mid-1990s one, be short-lived. The only encouraging feature is that the more recent downturn was driven by the global crisis. The two main channels through which the global crisis was transmitted to India were a decline in exports and a net outflow of foreign investment. Figures for the dollar value of exports during the month of March 2009 pointed to a 33.3 per cent decline in export values relative to the corresponding month of the previous year. This was the fifth consecutive month in which the month-on-month growth rate was negative. India’s exports over the financial year 2008–09 stood at $168.7 billion, just 3.4 per cent higher than in 2007–08. This compares with 23–31 per cent annual growth rates over the previous four years. Given the structure of India’s exports, it is to be expected that this deceleration in export growth would have affected output growth in a range of traditional and modern manufacturing sectors that have contributed to the export revival of recent years. The other area where the effect of the crisis is visible is capital inflows. With foreign investors having to reduce their credit dependence and meet commitments at home, they have been booking profits or selling assets in emerging markets to mobilize the requisite funds. This has affected India as well. As compared with a net

228 a C. P. Chandrasekhar

inflow of portfolio investment of $29.4 billion in 2007–08, India experienced a net portfolio investment outflow of $13.9 billion in 2008–09. Though direct investment inflows remained high at $33.6 billion, they were lower than the $34.4 billion recorded in 2007–08, resulting in a total net foreign investment inflow of just $19.6 billion in 2008–09 as compared with $63.8 billion in 2008–09. These developments affected industrial growth adversely. The month-on-month annualized rate of growth of industry, as reflected by the IIP, points to a sharp deceleration and subsequent contraction of output in the organized industrial sector. As Figure 9.3 shows, month-on-month rates, which indicated a slackening of industrial growth during the first two quarters of 2008–09, point to a significant worsening of industrial performance leading to negative growth rates during the subsequent two quarters. While the export decline just noted could partly explain this adverse turn, the substantial dependence of Indian manufacturing on the domestic as opposed to the export market implies that the fundamental problem facing the economy is a slackening of domestic demand. This, in turn, is seen as being substantially the result of a contraction of credit-financed consumption. If so, the country once again faces an industrial growth impasse. a

Notes 1. This is not to neglect the role that import substitution of capital-intensive consumption goods for the upper-income groups played in sustaining the growth of an industry that was relatively independent of agriculture, and the impact that the subsequent exhaustion of these possibilities could have had on the rate of growth (Nayyar, 1978). 2. The shift does not show through in the relative weight of the durable consumer goods sector in the use-based indices of production with 1960 and 1970 as base, because of the inclusion under consumer durables of items that did not properly belong there in the 1960 classification (see Bagchi, 1987). 3. While this increase in external debt was not quite as rapid and extensive as had occurred in the previous decade in some Latin American economies, it was nevertheless very significant in terms of India’s balance of payments. 4. Figures are from World Bank, World Development Indicators Online, Accessed July 2009.

Source: Computed from Index of Industrial Production figures released by the Central Statistical Organization, Government of India.

Figure 9.3 Month-on-Month Rates of Industrial Growth, 2008–09

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230 a C. P. Chandrasekhar

References Ahluwalia, I. J. 1985. Industrial Growth in India: Stagnation since the Mid-Sixties, New Delhi: Oxford University Press. Ahmad, Jaleel. 1968. ‘Import Substitution and Structural Change in Indian Manufacturing Industry: 1950–66’, Journal of Development Studies, 4(3), pp. 352–79. Bagchi, A. K. 1970. ‘Long Term Constraints to India’s Industrial Growth, 1951–68’, in E. A. G. Robinson and M. Kidron (eds), Economic Development of South Asia, London: Macmillan, pp. 170–98. ———. 1987. Public Intervention and Industrial Restructuring in China, India and Republic of Korea, New Delhi: ILO-ARTEP. Bardhan, Pranab. 1984. The Political Economy of Development in India, New Delhi: Oxford University Press. Bhagwati, J., and P. Desai. 1970. India: Planning for Industrialization, New Delhi: Oxford University Press. Chakravarty, Sukhamoy. 1974. ‘Some Reflections on the Growth Process in the Indian Economy’, Hyderabad: Administrative Staff College of India (reprinted in Sukhamoy Chakravarty, 1993, Selected Economic Writings, Oxford: Oxford University Press). ———. 1987. Development Planning: The India Experiences, Oxford: Clarendon Press. Chandra, Nirmal. 1973. ‘Western Imperialism and India Today’, Economic and Political Weekly, 8(7), pp. 221–44, 403–8. Chandrasekhar, C. P. 1987. ‘Investment Behaviour, Economies of Scale and Efficiency under an Import-Substituting Regime’, Economic and Political Weekly, 22(19/21), pp. AN61–AN72. Chaudhuri, Pramit. 1978. The Indian Economy: Poverty and Development, New Delhi: Vikas. Desai, V. V. 1971. ‘Pursuit of Industrial Self-Sufficiency: A Critique of the First Three Plans’, Economic and Political Weekly, 6(18), pp. 913–16. Ghose, Aurobindo. 1972. ‘Monopoly in Indian Industry: An Approach’, Economic and Political Weekly, 7(5/7), pp. 385–92. ———. 1974. ‘Investment Behaviour of Monopoly Houses’, Economic and Political Weekly, 9(43/44), pp. 1813–24, 1868–76. Ghose, Aurobindo, and Arvind Vyas. 1969. ‘Industrial Structure and Industrial Policy’, in Kerala State Planning Board, Alternative Policies to the Fourth Five Year Plan, Thiruvananthapuram: Kerala State Planning Board. Government of India. 1961. Third Five Year Plan, New Delhi: Government of India, Planning Commission. 15/8P/89/8P890H01.htm. Accessed on 29 July 2009. ———. 1965. Monopolies Inquiry Commission Report, New Delhi: Government of India, vols 1 and 2.

Six Decades of Industrial Development a 231 Government of India. 1967. Industrial Planning and Licensing Policy: Final Report, New Delhi: Government of India, Planning Commission. ———. 1969. Industrial Licensing Policy Inquiry Committee Report (Dutt Committee), New Delhi: Government of India. Hazari, R. K. 1966. The Structure of the Private Corporate Sector: A Study of Concentration, Ownership and Control, Mumbai: Asia Publishing House. Krishnamurthy, J. 1965. ‘Secular Changes in Occupational Structure’, Indian Economic and Social History Review, 2(1), pp. 42–51. Lissakers, Karin. 1991. Bankers, Borrowers and the Establishment, New York: Basic Books. Mitra, Ashok. 1977. Terms of Trade and Class Relations, London: Frank Cass. Nayyar, Deepak. 1978. ‘Industrial Development in India: Some Reflections on Growth and Stagnation’, Economic and Political Weekly, 13(31/33), pp. 1265–78. Patnaik, Prabhat. 1972. ‘Disproportionality Crisis and Cyclical Growth’, Economic and Political Weekly, 22(13), pp. A30–A36. ———. 1979. ‘Industrial Development in India’, Social Scientist, 7(11), pp. 3–91. ———. 1995. Whatever Happened to Imperialism and Other Essays, New Delhi: Tulika. Raj, K. N. 1967. India, Pakistan and China: Economic Growth and Outlook, Lal Bahadur Shastri Memorial Lecture 1966, Bombay: Allied Publishers. ———. 1976. ‘Growth and Stagnation in Indian Industrial Development’, Economic and Political Weekly, 11(5/7), pp. 223–36. Reserve Bank of India (RBI). 1956. Report on Currency and Finance, Bombay: RBI. Shetty, S. L. 1978. ‘Structural Retrogression in the Indian Economy since the Mid-Sixties’, Economic and Political Weekly, 13(6/7), pp. 185–244. Tyagi, D. S. 1987. ‘Domestic Terms of Trade and Their Effect on Supply and Demand of Agricultural Sector’, Economic and Political Weekly, 22(13), pp. A30–A36. Vaidyanathan, A. 1977. ‘Constraints on Growth and Policy Options’, Economic and Political Weekly, 12(38), pp. 1643–50.

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PART III Demographic Trends a This part contains a set of three essays on fertility, mortality and migration, in that order, and covers a long stretch beginning with the early 19th century. The demographic trends brought forth in these essays further confirm the regional pattern of development already described in this volume, pertaining to per capita income growth, poverty reduction and banking. The chapters help clarify the inter-relationship between demographic change and economic change. They also bring out the striking aspect of movement of population at advanced stages of fertility and mortality transition and rapid economic growth. India is unique in that its natural fertility level was one of the lowest ever recorded despite universal marriage. Its population seems to have fluctuated at around 100 million for many centuries. In the post-independence period, a national birth control programme was launched to safeguard the gains of development efforts. But the demographic goals were achieved 30 years behind schedule. However, by 2005, the whole of south India, Punjab and Himachal Pradesh (accounting for a quarter of the country’s population) achieved a below-replacement level of fertility, another 13 states (accounting for about 37 per cent of the population) were in rapid transition to replacement fertility, and the remaining eight states had total fertility rates above 3. ‘Fertility in India since Independence: An Overview’ by K. Srinivasan not only sets out the trends and patterns of fertility transition across the states of India, but also offers explanations in terms of the proximate determinants of fertility, namely, marriage, contraceptive use, post-partum infecundity and abortion. These proximate determinants are influenced in turn by income, poverty, urbanization, female literacy and delivery of health care services. Among these variables, poverty influences contraceptive

234 a Shaping S. Neelakantan India

use and age at marriage, and female literacy influences fertility indirectly through these two proximate determinants. Computation of Coale’s index of overall fertility, index of marital fertility and index of marriage for the districts of the country shows that most of the districts falling in the lowest decile of the first two indices lie south-west of a line joining north Goa with Chennai. The highest values of the index of marital fertility are reported by the districts of Uttar Pradesh, Bihar, Jharkhand, Madhya Pradesh and Rajasthan. Mortality changes in India since 1872 (the date by which some systematic data become available) may be categorized into four phases. The level of mortality was high and hardly any growth in the population occurred during 1872–1921. The slow decline in mortality rates during 1921–47 may be attributed to climate changes and improvement of natural immunity. The phase of high reduction in adult mortality (1947–70) is marked by the reduction in communicable diseases such as malaria, smallpox and cholera. The rapid decline in mortality during 1970–2001 came with high reduction in infant and child mortality associated with improvements in access to health care services, nutrition and female literacy. The rapid strides have a distinct regional flavour, with south India leading the decline in mortality. The contribution by K. Navaneetham and C. S. Krishnakumar, titled ‘Mortality Trends and Patterns in India: Historical and Contemporary Perspectives’, delineates the phases of transition and their correlates. Their analysis covers life-course ages, sex differentials and regional patterns, with an adequate discussion of the social determinants. Historically, international migration from India was linked integrally to colonization. The abolition of slavery was a precondition for the export of indentured labour from India; the first major exports were to Mauritius. During 1830–1916—the years of formal existence of indentured labour—more than a million Indians were transported to meet the demands of British expansionism. Migrant labour took various forms, such as indentured labour and kangani, depending upon the circumstances. In the post-independence period, two different streams left the country: the skilled migrated to the United States of America, Canada, the United Kingdom and Australia; the unskilled migrated to the Middle East. The numbers in the first stream increased during the 1960s and 1970s. A

Evolution ofDemographic Land Rights in Trends India a 235

significant increase took place in the 1990s following the information technology revolution. Overall, about 1.25 million left the country during 1950–2000. Large migration to the Middle East followed the oil price spike in 1973. About three million Indians are currently in the Middle East; about 55 per cent of this figure is contributed by three states, namely, Kerala, Tamil Nadu and Andhra Pradesh. Overall, close to 60 per cent of international migrants are from south India, Maharashtra, Gujarat and Punjab. ‘A Long Haul: Revisiting International Migration from India during the 19th and 20th Centuries’ by S. Irudaya Rajan and Prabhat Kumar documents the story of international migration of Indians over this long stretch. The chapter focuses on forms of migration, the source centres and the destinations of migrants at varying time points. The big picture that emerges is revealing. It shows quite clearly that the economically vibrant states of the south accounted for an overwhelming share of overseas migrants. Does this not further reinforce the general proposition of ‘two Indias’?

Evolution of Land Rights in India a 237

Chapter 10 Fertility in India since Independence: An Overview ∗ K. Srinivasan Pre-independence Levels of Fertility A unique feature of the Indian population, compared to all other

populations, European, Chinese and African included, is that its natural fertility levels (around six births per woman)1 were among the lowest ever recorded, almost 40 per cent lower than the natural fertility of the European populations studied by Louis Henry (1961). Marriage was nearly universal and it was customary to marry off girls before they attained puberty. In spite of these facts that should have contributed to higher natural fertility, it was kept only moderately high and fluctuating owing to the practices of prohibition of widow marriage in a number of communities; prolonged periods of breast-feeding of infants that suppressed the restart of ovulation in mothers after the birth of a child; abstinence from sexual intercourse on a number of days in a month based on the phases of the moon and in post-partum periods for religious reasons; and terminal abstinence at a relatively early age in the reproductive period (in the early 30s for many women) because of a daughter coming of age, or a daughter or daughter-in-law becoming pregnant. High prevalence of febrile diseases like malaria and tuberculosis also contributed to high secondary sterility. As a consequence, population growth was very small over the centuries and the population of the subcontinent seems to have fluctuated at around 100 million for many centuries. A detailed discussion of these factors and their impact on aggregate fertility levels can be had in Nag (1982) and Srinivasan (1988).

∗ The author wishes to thank Mr Arin Kar and Mr Arbind Acharya, Research Officers at IIPS, for assistance in the compilation and analysis of data.

238 a K. Srinivasan

The estimates of total fertility rate (TFR) and crude birth rate (CBR) provided by Mari Bhat for different decades from 1871 to 1971 based on the census data show that the TFR values were around 6 in most decades before independence, with the crude birth rate between 45 and 47 births per 1,000 population per year until 1961 (Bhat, 1989; Bhat, Preston and Dyson, 1984). Because of the influenza pandemic that killed almost 20 million people during 1918–19, the TFR and CBR values for the decade 1911–21 were somewhat lower than in the previous and the following decades. There were also substantial inter-state differentials in the natural fertility levels because of differences in socio-cultural practices with regard to the proximate variables mentioned earlier, and the prevalence of febrile diseases such as malaria and tuberculosis.

Post-independence Initiatives to Reduce Fertility After political independence in 1947, a series of five-year development plans were launched, commencing in 1951, aimed at modernizing agriculture, expanding educational opportunities for children and industrialization of the economy. With modernization, many social and cultural practices, such as abstinence for religious reasons and prolonged breast-feeding of children, that indirectly dampened fertility levels were relaxed, slowly but steadily, at different paces in different states, contributing to a substantial increase in natural fertility. A number of studies demonstrate the fertility-increasing effects of modernization in most states (Bhat, 1989; Easterlin and Crimmins, 1985; Srinivasan, 1988). On the other hand, as society becomes modernized, an increasing number and proportion of couples desire smaller families and start using contraception. Thus, in the early stages of modernization, two opposing forces, one contributing to an increase in natural fertility and the other to increased use of modern methods of contraception that tend to reduce the observed fertility, begin operating simultaneously. However, the observed fertility declines may be less than what might be estimated from the extent of contraceptive use.

Evolution of the Family-Planning Programme Immediately after independence, it was felt by planners, intellectuals, women’s groups and social workers alike, excepting a few

Fertility in India since Independence: An Overview a 239

hard-core Gandhians, that a national programme of birth control was necessary to prevent the impact of developmental efforts being overrun by high population growth, to prevent back-street abortions by mothers to avoid unwanted births contributing to high maternal morbidity and mortality, and to improve the health of women by enabling them to have babies by their choice and by chance. An official programme of birth control (as it was called at that time, a term that is quite unacceptable in present times) was launched in 1952 as part of the First Five Year Plan, promoting and offering contraceptive supplies and services to married couples. In the first two five-year plans (1951–61), a clinic-based approach was adopted and only a few urban centres were covered by family-planning clinics supplying condoms, spermicidal jellies and diaphragms to married women who visited the clinics seeking contraceptive advice and services. The programme was run on a low key during the first two five-year plans. The seminal work by Coale and Hoover (1958), using Indian macro-economic data and information on savings and investment rates and population projections, proved that reduction in aggregate fertility rates would be conducive to higher rates of savings, investment and economic growth. Their work strongly supported national programmes of family planning to reduce aggregate fertility levels as an integral part of economic development. The need was felt to launch the programme in both the rural and the urban areas of the country, and the ‘extension approach’ was launched in 1961. In this approach, all eligible couples were to be visited at home, family-planning messages carried to them, and they were to be motivated to adopt the small family norm and use family-planning methods. The programme was made part and parcel of the public health programme, especially maternal and child health services in the country. For the first time, a demographic target in terms of reduction in the crude birth rate of the population was fixed in 1962. Over successive five-year plans, the programme expanded in coverage, intensity and quality of services. Vasectomy was the method promoted and widely accepted until 1976, when this programme suffered a serious setback following the excesses of the period of national emergency during 1975–77. After the emergency was lifted in 1977, when the family-planning programme recovered

240 a K. Srinivasan

after a few years, it was female sterilization that became the most accepted method of family planning. Vasectomy lost its appeal for ever. Generally, over the years, the family-planning programme intensified its emphasis on promoting sterilization among married couples by offering incentives. Though a variety of contraceptive services were offered to couples, the emphasis was on sterilization and vasectomy until 1976 and tubectomy thereafter. The demographic goals set by policy-makers at the national level from time to time are given in Table 10.1. Table 10.1 Desired Demographic Goals: India, 1962–2007 Year of statement 1962 1966 1968 1969 (start of Fourth Five Year Plan) 1974 (start of Fifth Five Year Plan) April 1976 April 1977 January 1978 (Central Council of Health) January 1981 (Sixth Five Year Plan, 1980–85)

Seventh Five Year Plan (1985–90)

Eighth Five Year Plan (1992–97)

Specified goal

Target year for achieving goal

CBR 25 CBR 25 CBR 23 CBR 32 CBR 25 CBR 30 CBR 25 CBR 30 CBR 25 CBR 30 CBR 25 CBR 30

1972 As promptly as possible 1978–79 1974–75 1979–81 1979 1984 1978–79 1983–84 1978–79 1983–84 1982–83

NRR 1; CBR 21; CDR 9; LEB 64 years; CEP 60% NRR 1 CBR 29.1; CDR 10.4; IMR 90; CEP 42% Universal immunization; 75% antenatal care CBR 26


By 2006–11 By 1990

By 1991 By 1990 By 1997 (Table 10.1 Continued )

Fertility in India since Independence: An Overview a 241 (Table 10.1 Continued ) Year of statement

LEB male LEB female IMR CDR CBR GFR Ninth Five Year Plan (1997–2002) Tenth Five Year Plan (2002–07)

Target year for achieving goal

Specified goal 1991–92 57.7 58.7 78.0 10.0 28.9 130.3

1996–97 60.1 61.1 68.0 8.7 25.7 113.0

CBR 23–24

By 2002

CBR 21

By 2007

2006–07 66.1 67.1 48.0 7.4 21.7 91.4

Source: Srinivasan (2006). Note: NRR: Net reproduction rate; CDR: Crude death rate; LEB: Life expectancy at birth: CEP: Effective couple protection rate; IMR: Infant mortality rate; GFR: General fertility rate.

Though a demographic goal was fixed for the first time in terms of a desired crude birth rate of 25 to be achieved by 1972, it is significant that this goal was actually realized only in 2002, about 30 years later. Though the planners knew that the goal of 25 for CBR was not achievable by 1972, they persisted with this unrealistic target from plan to plan, simply shifting the target date forward by five or 10 years. This preoccupation with fertility goals led to the fixing of contraceptive acceptor targets that were considered necessary in order to achieve a predetermined reduction in the birth rate. The contraceptive acceptor targets were not achieved in many plan periods; this was also the case with the birth rate targets. The rigid bureaucratic approach to the programme led to much manipulation of the figures on contraceptive use from the field level upwards, leading ultimately to excesses, including compulsory sterilizations in some states, during the emergency in 1976–77.

Trends in Contraceptive Use Though falling short of targets, the steady increase in contraceptive use among eligible couples in the country, stimulated and supported by the national programme of family planning over the decades, has been largely responsible for the declines in fertility, beginning in the urban areas and in the southern states and

242 a K. Srinivasan

spreading throughout the country. The rate of effective couple protection (CEP)2 for all-India rose from 14.9 per cent in 1975 to 43.3 per cent in 1990 and then to 46.6 per cent by 2005 (see Table A1 in the appendix to this chapter). While the increase in the 15-year period, 1975–90, was 28.4 percentage points, the increase in the next 15-year period was only 3.3 percentage points. Thus, the pace of increase in contraceptive use has slowed down considerably during the past 15 years. This is due partly to the launch of the Reproductive and Child Health Programme in 1995, when family-planning targets were abolished and family planning itself was played down as a government programme in tune with international developments. The slowdown could possibly also be due to changes in the quality of reporting of data on contraceptive acceptance following the abolition of the target system. The national pattern of rapid increase in the proportion of couples effectively protected during 1970–90 and stagnation thereafter is observed across almost all the states: the rightward shift of states in the upper panel and leftward shift in the lower panel of Table 10.2 indicates as much. Among the states, only Andhra Pradesh, Karnataka and Rajasthan have arrested such a trend in the second period. It is interesting to note that during the period 1990 to 2005, fertility levels in both Kerala and Tamil Nadu continued to decline, though there has actually been a decline in the use of contraception as reported by official sources. This implies that in these two states, contraceptive use among couples has been taken over steadily by the private sector, with couples buying or using contraceptive services from private agencies and nongovernmental organizations, bringing out the severe limitations of the official data on CEP.

Fertility Levels and Trends Current Levels of Fertility Table 10.3 provides the TFR levels estimated for the period 2003–05 by the recently conducted National Family Health Survey (NFHS-3), the rates estimated by the official Sample Registration System (SRS) for the year 2005, and the year by which the recently set goal of achieving a TFR of 2.1 (replacement level of fertility to be realized by the year 2010 according to the National Population Policy, 2000) will be actually achieved. (For details about NFHS-3,

Less than 10%


Less than 30% Assam, Manipur, Bihar, Jammu and Kashmir, Meghalaya, Nagaland, Tripura, Arunachal Pradesh

Arunachal Pradesh, Nagaland, Meghalaya

Source: Table A1 (appendix).

50% and above



Less than 30%

CEP in 1990

15% and above



Less than 5%

CEP in 1975 20–29%

Bihar, Jammu and Kashmir Assam


Madhya Pradesh Haryana, Kerala, Maharashtra, Tamil Nadu

Rajasthan, Mizoram


CEP in 2005

Uttar Pradesh, West Bengal, Goa Orissa


Sikkim, Tripura


CEP in 1990 30% and above

Gujarat, Punjab, Haryana

Andhra Pradesh, Karnataka

50% and above

Himachal Pradesh, Karnataka, Madhya Pradesh, West Bengal, Goa Andhra Pradesh, Gujarat, Haryana, Kerala, Maharashtra, Orissa, Punjab, Tamil Nadu, Delhi

Uttar Pradesh, Rajasthan


Table 10.2 Distribution of Indian States by CEP in 1975, 1990 and 2005

Evolution of Land Rights in India a 243

244 a K. Srinivasan Table 10.3 Current Fertility Levels according to NFHS and SRS Current TFR


Year by which TFR 2.1 will be achieved

NFHS-3 (2003–05)


India Andhra Pradesh Assam Bihar Chhattisgarh Delhi Gujarat Haryana Himachal Pradesh Jammu and Kashmir Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh Uttarakhand West Bengal North-eastern states

2021 2002 2019 2021 2022 Achieved 2001 2012 2012 Achieved 2001 NA 2018 2005 Achieved 1998 2025 2009 2010 2006 2021 Achieved 2000 2027 2022 2003 2005

2.7 1.8 2.4 4 2.6 2.1 2.4 2.7 1.9 2.4 3.3 2.1 1.9 3.1 2.1 2.4 2.0 3.2 1.8 3.8 2.6 2.3 NA

2.9 2 2.9 4.3 3.4 2.1 2.8 2.8 2.2 2.4 3.5 2.2 1.7 3.6 2.2 2.6 2.1 3.7 1.7 4.2 NA 2.1 NA

Source: IIPS and Macro International (2007); Planning Commission, Vision 2020; Registrar General of India (2006).

see IIPS and Macro International [2007]; for the Sample Registration System see Registrar General of India [2006].) From the table it can be seen that the TFR estimated for the period 2003–05 by NFHS-3 was 2.7, while that estimated by SRS for 2005 was 2.9. It appears that SRS estimates of the recent fertility levels in many states are higher than the NFHS estimates. The major finding of NFHS-3 is that by 2005, eight states accounting for one fourth of the country’s population (Andhra Pradesh, Goa, Himachal Pradesh, Karnataka, Kerala, Punjab, Sikkim and Tamil Nadu) had already achieved below-replacement levels of fertility (TFR of less than 2.1); another 13 states (Assam, Chhattisgarh,

Fertility in India since Independence: An Overview a 245

Delhi, Gujarat, Haryana, Jammu and Kashmir, Maharashtra, Manipur, Mizoram, Orissa, Tripura, Uttarakhand and West Bengal) accounting for 37 per cent of the population of the country were in rapid transition to replacement fertility with TFR levels ranging from 2.1 to 3.0; and the remaining eight states covering 38 per cent of the nation’s population (Arunachal Pradesh, Bihar, Jharkhand, Madhya Pradesh, Meghalaya, Nagaland, Rajasthan and Uttar Pradesh) had TFRs above 3. Among the third group of states, fertility levels were quite high (over 3.8) in two states, Bihar (4.0) and Uttar Pradesh (3.8), together comprising one fourth of the country’s population. These two states seem to need special attention from the point of view of preventing unwanted births (unwanted by the couples themselves), which is about 30 per cent of the births occurring in them. The country as a whole is expected to reach the replacement level of fertility only by 2021, instead of by 2010 as planned in the year 2000 by the National Population Policy.

Fertility Trends Tables 10.4 and 10.5 present the data on the trends in total fertility rates for the Indian states. The data have been compiled from the Sample Registration System implemented in the country since 1966, and the estimates are considered fairly reliable after 1970. Data are provided for only the 16 large states of the country as in 1970, since the trends are compared at this level of aggregation. Also, since the estimates are based on the data compiled from a sample of households representative of the rural and urban areas of each state, three-year moving averages have been furnished for the periods 1970–72, 1980–82, 1990–92, 2000–02 and 2003–05, in order to have statistically stable estimates of the vital rates. The estimates for the period prior to 1970 are taken from Bhat (1989). The state of Uttar Pradesh includes the subsequently carved-out state of Uttarakhand and, similarly, Bihar includes Jharkhand and Madhya Pradesh includes Chhattisgarh. These states comprise about 97 per cent of the population of the country. The trends in total fertility rate (TFR) from 1941–51 to 2003–05, provided in Table 10.4, present an interesting picture. Between 1941–51 and 1951–61, there is an increase in TFR values from 5.6 to 6.03. This may be attributed partly to the Bengal famine that caused widespread havoc and famine-related deaths in Bengal

5.57 4.8 7.4 5.7 6.0 6.4 NA NA 5.4 4.9 5.6 5.7 5.1 5.6 6.0 4.5 5.8 5.5

India Andhra Pradesh Assam Bihar Gujarat Haryana Himachal Pradesh Jammu and Kashmir Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal

6.03 5.6 7.8 6.2 6.4 7.3 NA NA 6.4 5.5 6.6 5.9 5.5 7.0 6.4 4.8 6.6 6.9

1951–61 5.92 5.46 – 6.28 6.12 6.91 NA NA 5.73 4.74 6.45 5.49 6.01 5.64 6.51 4.65 6.38 6.40


5.2 4.7 5.5 5.2 5.7 6.4 4.7 NA 4.2 4 5.7 4.5 4.8 5.3 5.8 3.9 6.7 NA


4.5 3.9 4.1 5.6 4.4 5 NA NA 3.6 2.9 5.2 3.7 4.2 4 5.5 3.4 5.8 4.1


3.7 3 3.4 4.6 3.2 3.9 NA NA 3.1 1.8 4.7 3 3.3 3.1 4.5 2.2 5.2 3.2


3.1 2.3 3 4.4 2.9 3.1 2.2 NA 2.4 1.8 3.9 2.4 2.7 2.4 4 2 4.5 2.4


2.9 2.1 2.9 4.3 2.8 2.9 2.1 NA 2.3 1.7 3.7 2.2 2.6 2.2 3.7 1.8 4.3 2.2


Source: Bhat (1989) for 1941–51, 1951–61 and 1961–71 and, for the later periods, various issues of the Sample Registration System.


India/Major states

Table 10.4 Trends in Total Fertility Rate (TFR), India and Major States

246 a S. Neelakantan

3.1 3.6 4.7 3.4 4.2 NA NA 3.3 1.8 3.9 3.4 3.4 3.3 4.8 2.4 5.5 3.6



Source: Sample Registration System, various issues.

4.7 5.6 NA 6 6.8 4.8 NA 4.5 4.1 6 4.7 4.9 5.6 5.9 4.2 6.9 NA

Andhra Pradesh Assam Bihar Gujarat Haryana Himachal Pradesh Jammu and Kashmir Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal

1970–72 5.5

India/Major states India

Total fertility rate: rural

2.3 3.1 4.4 3.1 3.1 2.2 NA 2.5 1.8 4.1 2.4 2.7 2.3 4.0 1.9 4.6 2.5


2003–05 4.2 4.1 NA 4.6 4.4 3.1 NA 3.4 3.6 4.5 3.9 4.3 4.4 4.8 3.1 4.9 NA


1970–72 2.5 2.1 3.4 2.9 2.9 NA NA 2.5 1.8 3.3 2.5 2.4 2.4 3.5 2 3.8 2



Total fertility rate: urban

Table 10.5 Trends in Total Fertility Rate (TFR), India and Major States (Rural and Urban)

1.7 1.6 3.2 2.2 2.4 1.5 NA 1.8 1.7 2.5 2.0 1.9 2.0 2.7 1.6 3.4 1.5



Evolution of Land Rights in India a 247

248 a K. Srinivasan

and partly to the after-effects of the partition of India. In these two large upheavals, millions lost their lives and millions were moved forcibly from one place to another, causing disruptions in family life and dampening fertility levels. Historical evidence from Europe suggests that major social upheavals such as those caused by wars, epidemics and natural calamities have a sharp, dampening effect on fertility but, when life returns to normal conditions, fertility levels also bounce back to normal levels. The TFR for the country as a whole for 1966 (1951–61) was estimated at 6.03 children per woman, ranging from a high of 7.8 in Assam to a low of 4.8 in Tamil Nadu; the TFR declined to 4.5 by 1981 (1980–82), ranging from 5.6 in Bihar to a low 2.9 in Kerala, and declined further to 2.9 by 2004 (2003–05), ranging from 4.3 in Bihar to 1.7 in Kerala. Thus, during the 38 years from 1966 to 2004, the TFR at the national level declined by 52 per cent, with the southern states recording a faster pace of decline in fertility than the northern states. This has contributed to a widening of inter-state demographic differentials, not only in terms of population growth rates but also in terms of population age distributions and economic dependency ratios. It is also significant that there has been a slowdown in the pace of decline in fertility since 1990 (see Table 10.4 and Figure 10.1). The TFR for the rural areas of the country (Table 10.5) declined from a level of 5.5 in 1971 (ranging from 6.9 in Uttar Pradesh to a low of 4.1 in Kerala), to 4.0 in 1991 (ranging from 5.5 in Uttar Pradesh to a low of 1.8 in Kerala), and had declined further to 3.2 by 2004 (ranging from 4.6 in Uttar Pradesh to a low of 1.8 in Kerala). The urban fertility (TFR was estimated at 4.2 in 1971) had declined dramatically to replacement levels of 2.1 by 2004, ranging from a high of 3.4 in Uttar Pradesh to a low of 1.7 in Kerala. Thus, the urban fertility of Uttar Pradesh was 50 per cent more than that of Kerala even in 1971, and is at present double that of Kerala. The urban TFR in India in 1971 was a quarter lower than the rural TFR. The difference has widened over the years; in 2004, it was around one third lower. The widening gap is attributable to Andhra Pradesh, Assam, Bihar, Gujarat, Madhya Pradesh, Orissa and Rajasthan. In the rest of the states, the rural–urban gap either remained stagnant (Karnataka, Maharashtra, Uttar Pradesh and West Bengal), or came down (Haryana, Himachal Pradesh, Kerala, Punjab and Tamil Nadu).

Fertility in India since Independence: An Overview a 249 Figure 10.1 Total Fertility Rates in India and Four States, 1941–51 to 2003–05 TFR India and four states 8 7 5.8 5.7 5.57




4.9 4.5

6.6 6.2 6.03 5.5



4.74 4.65


6.28 5.92

5.8 5.6






3.4 3

4.5 4.4



4 3.9



2.9 2.2


2 1.8


1.8 1.7




–0 03 20



2 20



2 19



–7 70 19



1 –7 61 19

51 19








Year India

Tamil Nadu



Uttar Pradesh

Proximate Determinants of Fertility in the Indian States It is well known from studies of demographic transition in the West that modernization and socio-economic development serve as strong triggers for married couples to voluntarily choose the small family by adopting artificial methods of birth control. The fall from natural fertility levels to replacement fertility took more than 100 years in the Western world, but, in developing countries such as India and China where national programmes of family planning were initiated and modern methods of family planning were made easily available, couples took to family planning rather readily and fertility levels have declined rapidly. What was achieved over a century in the Western world was achieved in less than a generation, 25 years, in many developing countries and in many states of India.

250 a K. Srinivasan

Though many modernizing factors contribute in tandem to the adoption of the small family norm, the practice of contraceptive methods and declines in fertility, they cannot influence fertility directly. Rather, they influence fertility through a number of intermediate variables. Four of these are considered as the most important in determining fertility levels, and are termed the ‘proximate determinants of fertility’ (Bongaarts, 1978; Davis, 1951). These proximate determinants are marriage, contraceptive use, postpartum infecundity or amenorrhea and abortion. Any developmental variable, such as education, industrialization, increase in income, urbanization or improvements in the status of women, affects fertility by influencing one or more of these four proximate determinants. Among these, the most powerful proximate factor is the use of contraception. In order to study the extent of association of the proximate determinants with fertility in India at the state level, data pertaining to these proximate fertility determinants, selected socio-economic variables and fertility (TFR) available from the latest round of the National Family Health Survey, NFHS-3, conducted during 2005–06, is furnished in Table A2 in the appendix. Some interesting observations emerge from Table A2. Among women aged 20–24, 45 per cent were married before the age of 18 years, the minimum legal age at marriage. This proportion ranged from a high of 61 per cent in Rajasthan and 60 per cent in Bihar to a low of 14 per cent in Jammu and Kashmir and 15 per cent in Kerala. Similarly, among men aged 25–29 years, 29 per cent were married before the legal minimum age of 21 years, ranging from a high of 57 per cent in Rajasthan and 51 per cent in Uttar Pradesh to a low 3 per cent in Kerala and 7 per cent in Goa. Thus, millions of marriages take place even now before the legal minimum age at marriage is attained, among both men and women, and most of these marriages are concentrated in the northern states. Generally, low age at marriage, indicated by a high proportion of women married before the age of 18 years, is associated with higher fertility. But there are exceptions. Andhra Pradesh reports the lowest fertility among all the states in the country with TFR at 1.79, but 55 per cent of women (aged 20–24 years) were married before the age of 18, and 35 per cent of men aged 25–28 years were married before the age of 21 years, the average age at marriage being 16 years. This is a rather unique case not only in India but also in any human population studied so far. This situation is

Fertility in India since Independence: An Overview a 251

possible because most of the women in the state get married at a young age, have one or two children, and then get sterilized. The percentage of married women in the age group 15 to 49 years who are sterilized is 63 per cent, the highest among the 29 states in the country. The median age at the birth of the first child in the state is 16 years, and 18 per cent of the women in the age group 15–19 years are currently pregnant. This is a unique demographic situation, unparalleled in human history. The unmet need for contraception, either for spacing or for limitation, is 13 per cent for the country as a whole, ranging from a high of 35 per cent in Meghalaya to a low of 5 per cent in Andhra Pradesh. These data suggest the urgent need for strengthening family-planning services in the north-eastern states. The percentage of women in the post-partum amenorrhoeic state at the time of the survey was 6 per cent in the country as a whole, ranging from 11 per cent in Bihar to a low 2 per cent in Kerala. This indicates that the periods of breast-feeding are almost similar across the states. Correlations of TFR with all the fertility-related variables are significant. For example, the correlation of TFR is highly significant (p < .01) with mean age at marriage, teenage pregnancy, effective female literacy, women with two children wanting no more children, use of any modern contraceptive method, female sterilization and unmet need for contraception. Age at marriage, motivation for having a small family and the use of contraception, particularly female sterilization, are the three variables very highly correlated with fertility. Though this is almost stating the obvious on the basis of empirical data, it is to be reiterated that family-planning programmes have been the driving force behind the bulk of the fertility reductions in the country. In order to investigate further how economic and social development variables indirectly influence fertility levels through marriage and contraceptive use, we used a multi-variate analysis using a path model. Fertility (TFR) at the state level is considered as the dependent variable influenced by the following economic and infrastructure variables: per capita net domestic product at current price (PCI); percentage of people below the poverty line (POV); percentage of urbanization (URB); road length per one lakh population (RDL); effective female literacy rate (FLR); and health worker per one lakh population (HWP). The proximate determinants taken are infant mortality rate (IMR); effective

252 a K. Srinivasan

couple protection rate (CEP); and percentage of females married at age 15–19 years (MWN). The path diagram shows how each of these variables influences fertility, directly or indirectly, through a proximate determinant (Figure 10.2). It is assumed that all the six socio-economic variables influence the three proximate determinants of fertility, IMR proxying for the period of postpartum amenorrhea and couple protection rate; and proportion married in the age group 15–19 years being used as a proxy for age at marriage. The TFR is assumed to be affected directly by these three proximate determinants and also by female literacy and density of health personnel. The values of the path coefficients computed using the data presented in Table A3 (appendix) show that among the two income variables, per capita GDP and percentage of poor, it is the latter that has significantly influenced, in the desired direction, contraceptive use and age at marriage (Table 10.6). Among the three Figure 10.2 Path Diagram PCI






0.249 –0.474∗ 0.432∗∗ 0.401 0.401

0.087 0.087


–0.255 –0.226 0.032

PCI 0.291 0.134 0.030 0.068 0.031 0.099




–0.051 –0.706∗∗∗ 0.063 –0.221 0.166 0.187 –0.330* –0.450∗ –0.007 –0.186 0.245 0.102 0.184 0.060 0.102 –0.002 0.305






0.722 0.393 0.552 –0.643∗∗∗ 0.086 0.640


Source: Table A3. Notes: PCI: Net per capita net domestic product at current price; POV: Percentage of people below poverty line; URB: Percentage of urbanization; RDL: Road length per one lakh population; EFL: Effective female literacy rate; HWP: Health worker per one lakh population; IMR: Infant mortality rate; CEP: Effective couple protection rate; MWN: Percentage of females married at age 15–19 years; TFR: Total fertility rate per average women. ∗ Significant at 10% level; ∗∗ Significant at 1% level; ∗∗∗ Significant at 0.1% level.

IMR Effective couple protection rate Percentage of females married (15–19) Direct effect on TFR Indirect effect on TFR Total effect on TFR

Dependent variables


Table 10.6 Path Coefficients and R2 Values

Evolution of Land Rights in India a 253

254 a K. Srinivasan

proximate variables, only contraceptive use significantly affects fertility directly, and female literacy influences TFR only indirectly through increase in contraceptive use and rise in age at marriage.

District-Level Analysis of Fertility Levels and Patterns A detailed analysis of district-level fertility is now possible as a large body of information on demographic, health, economic, education, infrastructure and programme related variables is available from recent censuses and district-level surveys. Particularly useful are the biennial series of the district-level household surveys carried out by the Ministry of Health and Family Welfare with the Indian Institute of Population Studies as the nodal agency from 1998–99. In this section, we study the spatial variations in fertility levels in terms of Coale’s indices and the effect of contraceptive use on fertility at the district level, controlling for some factors such as urbanization, the female literacy rate and the percentage of population in major religious groups. The causal relationships are examined at two levels, namely, district and state.

Factors Associated with Fertility: A Multi-variate Analysis We use the estimates of TFR available at the district level for the period 1995–2001, estimated by the reverse survival method using the population of children aged 0 to 6 in the 2001 census (Guilmoto and Rajan, 2002) as the dependent variable. As predictors, we use the district-level data on contraceptive use available from the districtlevel survey of 1998–99, and the proportion of urbanization (URB), female literacy rate (7+) (FLR) and percentage of Muslim population (PMP) available from the 2001 census. Though the fertility data available at the district level refer to an earlier period than the predictors, we ventured to use them assuming that the variability of fertility at the district level in 2001–02 would remain the same as during 1995–2001, though the levels might have changed. We carried out a simple multi-variate regression analysis and a multilevel analysis to study the effects of different levels of aggregation on fertility using the district-level data available for 593 districts.

Fertility in India since Independence: An Overview a 255

The correlation matrix (not shown here) of these five variables across the 593 districts reveals that all the four factors—CEP, URB, FLR and PMP—are significantly correlated with TFR, with the percentage of Muslims positively correlated and the other three variables negatively correlated, all of them being statistically significant. Since the analysis is based on 593 observations, the findings can be considered more robust and reliable than those based on the state level discussed in the previous section. In the multi-variate analysis, we found that the regression equation of TFR with the above predictors is as follows (t-values within brackets): TFR = 0.005∗ – 0.026∗ CEP – 0.0001∗ URB– 0.027∗ FLR+0.005∗ PMP (–13.281) (–0.174) (–10.282) (2.080) 2 Adj. R = 0.515 The regression coefficients of contraceptive use, female literacy and percentage urban are all statistically significant and negative.

Fertility Indices at the District Level We use the estimates of CBR at the district level available from an indirect estimation using the reverse survival method (Guilmoto and Rajan, 2002), and compute the three well-known Coale’s indices of fertility, I(f), I(g) and I(m), namely, the index of overall fertility, index of marital fertility and index of marriage, which are standardized indices based on indirect standardization using the age pattern of Hutterite fertility rates.3 Using these rates as standards, indirect standardization techniques are used to compute Coale’s indices, I(f), I(g) and I(m). The index of overall fertility, I(f), is computed as the proportion of observed births to estimated births, if all women in the reproductive ages of a district are assumed as married and had the maximum fertility rates observed in Hutterite women. The fertility of married women in the given population, I(g), is the ratio of the observed number of births in the districts to the estimated number based on the actual number of married women in the district in each reproductive group having the Hutterite fertility rates. The index of marriage, I(m), is defined as the extent to which there is universality of marriage and the marital union occurs at a young age, and is measured as the

256 a K. Srinivasan

ratio of births to married women to total women assuming all the women in each age group are married. It is indicative of the effect of age at marriage and universality of marriage in the society, as it impacts fertility. It is well known that I(f) = I(g) ∗ I(m) We computed these three index values for all the districts of the country for which data were available (593), using the data on age distributions and estimated crude birth rates from the 2001 census. The districts were then ranked according to their levels from highest to lowest, and we identified the top and bottom deciles in these values to give a comparative picture of the districts with the highest and lowest fertility in terms of these three indices. There are 59 districts in the lowest and highest deciles in each of the three indices. The average of the bottom group of districts in I(f) values was 0.1572, while the average of the 59 districts in the top decile was 0.4374, almost three times the value in the lowest decile. Similarly, in terms of I(g) values, the lowest group of districts had an average of 0.2196, while the highest group had an average of 0.5386 (two and a half times); in terms of I(m) values, the lowest group of districts had an average of 0.5941, while the highest group had an average of 0.8881 (one and a half times the value in the lowest deciles). Interestingly, most of the districts falling in the lowest decile of the index of overall fertility are also the districts falling in the lowest decile of the index of marital fertility, and lie south-west of a line connecting Chennai with north Goa (Table 10.7). As regards the districts falling within the highest decile of the index of overall fertility, about 50 per cent are not the districts with the highest index values of marital fertility. There are 19 districts from the north-eastern states with the highest marital fertility which do not find a place in the highest decile of overall fertility, as they report the lowest index values of marriage. In fact, the lowest values of the index of marriage are reported mostly from the north-east, including Sikkim and Assam, and from Jammu and Kashmir. The highest values of the index of marital fertility are reported from the districts of Uttar Pradesh, Bihar, Jharkhand, Madhya Pradesh and Rajasthan, many of which also report high index values of marriage.

Fertility in India since Independence: An Overview a 257 Table 10.7 States and Districts Falling in the Lowest and Highest Deciles of Index Values Index of overall fertility I(g)

Index of marital fertility I( f )


Tamil Nadu (21), Pondicherry (3), Kerala (13), Karnataka (7), Goa (2), Andhra Pradesh (4), Central Delhi, New Delhi, Kolkata, Mumbai, Rajkot, Navsari, Imphal, Mokokchung, Leh

Tamil Nadu (20), Pondicherry (2), Kerala (11), Karnataka (9), Goa (1), Andhra Pradesh (9), Kolkata, Hugli, Mumbai, Rajkot, Navsari, Leh, Hamirpur

North-east, Sikkim and Assam (34), Jammu and Kashmir (8), Orissa (3), Tamil Nadu (2), Karnataka (2), Goa (2), Central Delhi, Himachal Pradesh (1), Andaman and Nicobar, Diu, Mumbai, Kolkata, Sindhudurg


Uttar Pradesh (20), Bihar (14), Jharkhand (3), Madhya Pradesh (9), Rajasthan (9), Meghalaya (4)

Uttar Pradesh (17), Bihar (4), Jharkhand (3), Madhya Pradesh (5), Rajasthan (9), North-east (19)

Uttar Pradesh (12), Bihar (19), Jharkhand (5), Madhya Pradesh (13), Rajasthan (10)


Index of marriage I(m)

Note: Numbers within brackets are the number of districts of the state falling in the respective category.

It is seen that in terms of overall fertility, marital fertility and the index of marriage, large population segments of the country, mostly in the inland areas of the Indo-Gangetic belt, have very high values, more than double the index values of the southern states. It is also significant that, despite universality of marriage and relatively low age at marriage, the observed fertility levels are low in India in most of the states. India offers a unique example wherein populations can enjoy the benefits of low fertility without sacrificing the institution of marriage. The altar of marriage need not be sacrificed at the altar of low fertility, either as a cause or as an effect.

258 a K. Srinivasan

Conclusions After independence in 1947, a national programme of family planning was launched in 1952 with the specific aim of reducing population growth rates, by reducing the fertility levels, as a part of the process of modernization and economic development through a series of five-year plans. The family-planning programme underwent many changes from plan to plan, but the broad objective of motivating married couples to accept the small family norm and practise modern methods of contraception, with an emphasis on sterilization, persisted over the decades. Mostly due to the impact of the programme, contraceptive prevalence increased substantially in both rural and urban areas of the country, and fertility levels declined from 6 children per woman during 1961–71 to 3.7 during 1990–92, and further to 2.9 during 2003–05. The crude birth rate declined from 41.2 in 1966 to 29.6 during 1990–92 and to 24.2 during 2003–05. In 2005, the TFR was estimated at 2.9 and, among the 29 states of the country, nine states achieved below-replacement level of fertility (TFR < 2.1). Ten other states had TFR between 2.1 and 3.5, and only the five states of Bihar, Jharkhand, Madhya Pradesh, Rajasthan and Uttar Pradesh had TFR above 3.5. Fertility decline seems to have commenced first in the urban areas, spreading to the coastal districts and then spreading inwards, though in the states of Tamil Nadu and Kerala all the districts were reporting low fertility by 1992. The pace of decline in the fertility levels after 1997 has slowed down, probably because of the reduced emphasis on family planning. There are considerable inter-state differentials in fertility, with Kerala and Tamil Nadu leading the decline and the five states of the Hindi heartland lagging behind Kerala by about 20 years. If the present trend of fertility decline continues in the future, the country as a whole will achieve replacement level of fertility only by 2021, instead of by 2010 as planned in the National Population Policy of 2000. The developmental programmes for reducing poverty and increasing female literacy have been found to have a substantial positive impact on contraceptive use and rising age at marriage and, consequently, on fertility. Similarly, reduction in fertility in the poorer sections of the population has contributed to increased

Fertility in India since Independence: An Overview a 259

schooling for their female children and to their rise from below the poverty line. Inter-state and inter-district analyses of fertility levels and trends offer interesting insights into the dynamics of fertility in different parts of the country a

Notes 1. Natural fertility is defined as fertility that prevails in the absence of any deliberate control on the part of couples to space or limit the number of children in their reproductive lives. 2. Effective couple protection rate (CEP), that is, the percentage of eligible couples effectively protected, is a term used by the official programme and is roughly equivalent to the contraceptive prevalence rate (CPR). 3. The purpose of computing and using the maximal natural fertility is partly to study the impact of marriage patterns on fertility at the district level. Among all populations that did not use any deliberate control on fertility and for which accurate recorded data on vital events are available, the Hutterites living in Canada are considered the best and their fertility is taken as the highest level of natural fertility achievable by human beings in large populations. The Hutterites are a Christian religious sect of French descent living in Canada since the mid-19th century. Marriage was universal among them and their religious faith did not permit them to practice any methods of family planning, either for spacing of children or for limitation of family size. In addition, and more importantly, they had accurate data on births, marriages and deaths taking place in their population for over 100 years. Their age pattern of marital fertility is considered to be the highest natural fertility level ever observed in a human population. Their age-specific marital fertility rates are given below: Age group 15–19 ASMFR












45–49 TMFR (per woman) 61


References Bhat, P. N. M. 1989. ‘Mortality and Fertility in India, 1881–1961: A Reassessment’, in T. Dyson (ed.), India’s Historical Demography: Studies in Famine, Disease and Society, London: Curzon Press, pp. 73–118.

260 a K. Srinivasan Bhat, P. N. M., S. H. Preston and T. Dyson. 1984. Vital Rates in India: 1961–81, Washington, D.C.: National Academic Press. Bongaarts, J. 1978. ‘A Framework for Analyzing the Proximate Determinants of Fertility’, Population and Development Review, 4(1), pp. 105–32. Coale, A. J., and E. Hoover. 1958. Population Growth and Economic Development in Low Income Countries, Princeton, NJ: Princeton University Press. Davis, K. 1951. The Population of India and Pakistan, New York: Princeton University, Office of Population Research. Easterlin, R. A., and E. M. Crimmins. 1985. The Fertility Revolution: A Supply–Demand Analysis, Chicago: University of Chicago Press. Guilmoto, Christopher Z., and S. Irudaya Rajan. 2002. ‘District Level Estimates of Fertility from India’s 2001 Census’, Economic and Political Weekly, 37(7), pp. 665–72. Henry, Louis. 1961. ‘Some Data on Natural Fertility’, Eugenics Quarterly, 8(2), pp. 81–91. International Institute for Population Sciences (IIPS) and Macro International. 2007. National Family Health Survey (NFHS 3), 2005–06, Mumbai: IIPS, vol. 1. Nag, Moni. 1982. Modernization and Its Impacts on Fertility: The Indian Scene, New York: Centre for Policy Studies, Population Council. Registrar General of India. 2006. ‘Sample Registration System’, SRS Bulletin, New Delhi: Office of the Registrar General. Srinivasan, K. 1988. ‘Modernization, Contraception, and Fertility Change in India’, International Family Planning Perspectives, 14(3), pp. 94–102. ———. 2006. ‘Population Policies and Family Planning Programs in India: A Review and Recommendations’, Fifth Dr C. Chandrasekaran Memorial Lecture Series, 3 February, Mumbai: International Institute for Population Sciences. Accessed on 23 September 2007.

Fertility in India since Independence: An Overview a 261

Appendix Table A1 Trends in Effective Couple Protection Rate Year/India & States Andhra Pradesh Assam Bihar Gujarat Haryana Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal Himachal Pradesh Jammu and Kashmir Manipur Meghalaya Nagaland Sikkim Tripura Arunachal Pradesh Delhi Mizoram Goa India








18.6 10 6.8 21.5 28.4 13 21.6 13.7 25.9 17.7 24.6 7.7 21.5 8.3 11.8 9.5 9.1 4.9 2.8 0.8 8.3 6.7 0.6 39.6 3.5 12.7 14.9

26.7 19.3 12.3 32.8 30.3 22.9 29.4 21.1 35.2 24.8 25 13.3 28.6 11.6 22 23.8 10.3 9.4 6.4 1 10 9.6 1.7 36.1 10.5 16.3 22.3

32.3 24.7 16.8 44.3 46.2 32.5 40 29.4 51.6 31 50.4 19.5 36.2 16.7 29 34.4 14.5 18.4 5.7 2.3 13 10.7 4.3 37.8 20.6 23.3 32.1

45.2 25.2 26.3 56.6 58.2 45.4 52.5 40.3 56.4 40.8 74.2 29.5 56.2 33.8 34 50 22.4 26.7 5.3 4.8 18 17.9 9.9 42.1 37.7 30.9 43.3

49.4 22.6 22.4 61 56 52.7 50.7 48 54.1 40.6 79.1 30.2 54.8 37.1 35.7 57.9 19.2 23 4.3 9 21.7 23.8 12.9 40.6 47.3 34.8 45.8

52.8 15.2 21.2 52.8 49.4 56.3 39.6 45.9 49.3 37.6 65.5 36.1 50.4 38 32.2 46.9 14.4 17.8 4.7 8.2 21.5 23.4 14 27 34.3 23.9 46.2

62.4 12.1 16.6 50.2 43.3 56.7 37.6 47.2 48.8 32 56.5 45 49 36 31.3 50.5 15.9 14.5 8.1 9.2 26.6 22.2 15.5 24.9 42.8 31.8 46.6

Source: Family Welfare Year Books. Note: For all data on trends in the new states formed after 2000, viz., Jharkhand, Chhattisgarh and Uttaranchal, the figures refer to the combined states of Bihar, Madhya Pradesh and Uttar Pradesh, respectively. ∗ Currently protected rate; for other years, couples effectively protected.

X1 44.5 54.7 38 60.3 33.5 12.3 39.8 14 41.2 15.4 38.8 53 19.4 36.3 57.1 21.5 53 53.3 40.6

India/States India Andhra Pradesh Assam Bihar Gujarat Himachal Pradesh Haryana Jammu and Kashmir Karnataka Kerala Maharashtra Madhya Pradesh Punjab Orissa Rajasthan Tamil Nadu Uttar Pradesh West Bengal Arunachal Pradesh

29.3 34.8 15.7 43 31.4 15.5 33.7 15.3 14.9 2.9 15.4 54 27.2 22.2 56.7 8.4 51.4 26.9 30.6

X2 2.68 1.79 2.42 4 2.42 1.94 2.69 2.38 2.08 1.93 2.11 3.12 1.99 2.37 3.21 1.8 3.82 2.27 3.03

X3 16 18.1 16.4 25 12.7 3.1 12.1 4.2 17 5.8 13.8 13.6 5.5 14.4 16 7.7 14.3 25.3 15.4


17 16 18 16 18 20 17 19 17 20 17 16 19 18 16 19 17 17 17


83.2 91.5 82.9 60.2 85.7 96.3 87.8 77.6 88.4 88 88 81.9 91.2 82.3 72.8 94.6 64.2 89.4 72.2


48.5 67 27 28.8 56.5 71 58.2 44.9 62.5 57.9 64.9 52.8 56 44.6 44.4 60 29.3 49.9 37.3


37.3 62.9 13 23.8 42.9 49 38.2 26.3 57.4 48.7 51.1 44.3 30.8 33.1 34.2 55 17.3 32.2 22.5


13.2 5 10.8 23.1 8.2 7.3 8.3 15 10.2 9 9.6 11.8 7.4 15 14.7 8.9 21.9 8.8 19.3


6.3 3.8 6.8 10.7 5.6 3.5 4.6 4.3 4.6 2.3 5.0 8.6 3.6 6.5 7.6 3.1 8.5 5.3 8.6


(Table A2 Continued )

1 3 0.2 0.6 0.6 6.3 0.7 2.6 0.2 1 2.1 1.3 1.2 1 0.8 0.4 0.2 0.7 0.1


Table A2 Selected Indicators on Marriage, Family Planning and Fertility at State Level, 2005–06

262 a S. Neelakantan

44.8 19.4 7.2 47.1 27.1 11.6 20.8 18.2 24 11.4 21.3

X2 2.62 2.13 1.79 3.31 3.8 2.83 2.86 3.74 2.02 2.22 2.55

X3 14.6 5 3.6 27.5 8.3 7.3 10.1 7.5 12 18.5 6.2

X4 17 19 22.15 16 19 20 19.47 18.83 18.34 18 18

X5 75.3 91.6 82.5 64.3 36 64.5 43 57.8 95.8 92.3 86.3

X6 49.1 56.4 37.2 31.1 18.5 23.5 59.6 22.5 48.7 44.9 55.5

X7 40.7 23 25.8 23.4 9.5 8.1 42.9 9.9 21.2 17.6 32.1

X8 3.5 0.8 0.1 0.4 0.1 0.5 0 0 4.5 0.5 1.8


10.5 8 13.2 23.7 35.1 12.6 17.4 26.3 16.9 10.5 11.3


7.9 3.8 2.8 9.9 10.0 5.7 4.9 8.7 4.4 4.1 6.8


X1: Women aged 20–24 years married by age of 18 years (%); X2: Men aged 25–29 years married by age 21 years (%); X3: Total fertility rate; X4: Women aged 15–19 years who were already mothers/pregnant (%); X5: Median age at first child for women (25–29 years, %); X6: Married women with two living children wanting no more children (%); X7: Women using any modern method (%); X8: Female sterilization (%); X9: Male sterilization (%); X10: Total unmet need (%); X11: Currently amenorrhoeic (%).

51.8 21.2 11.7 61.2 24.5 12.7 20.6 21.1 30.1 41 22.6

Chhattisgarh Delhi Goa Jharkhand Meghalaya Manipur Mizoram Nagaland Sikkim Tripura Uttaranchal Note:



(Table A2 Continued )

Evolution of Land Rights in India a 263

Andhra Pradesh Arunachal Pradesh Assam Bihar Jharkhand Delhi Goa Gujarat Haryana Himachal Pradesh Jammu and Kashmir Karnataka Kerala Madhya Pradesh Chhattisgarh Maharashtra Manipur Meghalaya Mizoram

India/States 16,708 14,683 10,718 5,333 8,749 42,378 48,582 18,560 23,286 19,784 12,781 17,806 19,951 10,704 9,922 21,871 10,658 14,654 18,491

PCI 15.77 33.47 36.09 42.60 NA 8.23 4.40 14.07 8.74 7.63 3.48 20.04 12.72 37.43 NA 25.02 28.54 33.87 19.47

POV 27.30 20.75 12.90 10.46 22.24 93.01 49.76 37.36 28.92 9.80 24.81 33.99 25.96 26.46 20.09 42.43 26.58 19.58 49.63

URB 257.40 1,672.60 335.70 91.60 42.60 186.20 717.70 271.60 133.40 487.30 231.00 288.70 473.80 266.70 169.80 276.10 527.70 412.50 571.10


50.43 43.53 54.61 33.12 38.87 74.71 75.73 57.80 55.73 67.42 43.00 56.87 87.72 50.29 51.85 67.03 60.53 59.61 86.75


41.97 85.62 34.42 17.91 – 42.76 76.36 44.42 37.13 92.68 17.66 51.04 51.67 59.66 . 45.39 57.58 73.2 213.15


Table A3 Data on Selected Indicators at State Level, 2001

53.00 61.00 66.00 62.00 69.00 40.00 15.00 50.00 42.00 36.00 45.00 43.00 15.00 70.00 71.00 38.00 30.00 45.00 34.00


67.00 37.30 27.00 28.80 31.10 56.40 37.20 56.50 58.20 71.00 44.90 62.50 57.90 52.80 49.10 64.90 23.50 18.50 59.60


1.79 3.03 2.42 4.00 3.31 2.13 1.79 2.42 2.69 1.94 2.38 2.08 1.93 3.12 2.62 2.11 2.83 3.80 2.86


(Table A3 Continued )

30.40 23.30 26.60 45.00 44.80 8.60 6.10 19.60 22.40 6.10 6.50 26.10 10.80 27.90 24.80 21.70 9.20 12.30 11.30


264 a S. Neelakantan

32.67 47.15 6.16 15.28 36.55 21.12 34.44 31.15 NA 27.02

POV 17.23 14.99 33.92 23.39 11.07 44.04 17.06 20.78 25.67 28.03

URB 1,056.30 644.00 252.60 234.50 373.30 266.10 509.40 149.50 395.20 114.80

RDL 61.64 50.51 63.36 43.85 60.40 64.43 64.91 42.22 59.63 59.61

EFL 31.2 37.44 56.68 49.03 116.64 64.17 49.29 34.39 – 37.9

HWP 38.00 65.00 42.00 65.00 34.00 31.00 52.00 73.00 42.00 48.00

IMR 22.50 44.60 56.00 44.40 48.70 60.00 44.90 29.30 55.50 49.90

CEP 9.50 22.70 11.60 30.90 16.50 12.80 25.90 25.40 11.00 38.50


3.74 2.37 1.99 3.21 2.02 1.80 2.22 3.82 2.55 2.27


PCI: Net per capita net domestic product at current price; POV: Percentage of people below poverty line; URB: Percentage of urbanization; RDL: Road length per one lakh population; FLR: Effective female literacy rate; HWP: Health worker per one lakh population; IMR: Infant mortality rate; CEP: Effective couple protection rate; MWN: Percentage of married females aged 15–19 years; TFR: Total fertility rate per average women.

17,629 9,281 24,283 12,570 16,658 20,361 15,253 9,178 12,687 16,146

Nagaland Orissa Punjab Rajasthan Sikkim Tamil Nadu Tripura Uttar Pradesh Uttaranchal West Bengal Note:



(Table A3 Continued )

Evolution of Land Rights in India a 265

266 a S. Neelakantan

Chapter 11 Mortality Trends and Patterns in India: Historical and Contemporary Perspectives∗ K. Navaneetham and C. S. Krishnakumar The story of mortality transition in India is truly a remarkable one.

Mortality, which was high during the 19th century, started declining from the beginning of the 20th century, doubling the life expectancy at birth in the course of the 20th century. It had reached 61.3 years for males and 63.0 years for females by 1997–2001. In the post-independence period, substantial reduction in mortality at younger ages has been the dominant contributory factor in the improvement in life expectancy at birth. Many factors have acted as catalysts in the reduction of mortality at younger ages. Among these, maternal and child health interventions have played a significant role in lowering both infant and child mortality (Claeson et al., 2000). Moreover, improvement in education, better health services and developments in medical technology have reduced the incidence and prevalence of many infectious and parasitic diseases such as smallpox, which has helped reduce child mortality. Few studies have examined the trends and patterns of mortality across time and across regions in India (Bhat and Navaneetham, 1991; Jain, Visaria and Visaria, 1985; Navaneetham, 1993a, 1993b; Preston and Bhat, 1984; Roy and Lahiri, 1987; Visaria, 2004). A recent study by Chaurasia (2006) makes an attempt to study mortality trends in urban areas, covering the period 1971–2002. Chaurasia concludes that the rate of decline in urban male mortality has been slower than that of urban female mortality in India. In their study of patterns of mortality at adult ages, Krishnaji and James (2002) conclude that gender differentials and rural–urban differentials have narrowed down over the period from the 1970s. However,

∗ We are grateful to Raman Mahadevan and D. Narayana for their very constructive comments, which helped greatly to improve this paper.

Mortality Trends and Patterns in India a 267

their analysis is confined to adult mortality, and that too only up to 1997. Further, a concern has been raised with regard to the slower decline or stagnation in infant and child mortality in the late 1990s, departing from the long-term trend observed in India since 1981 (Claeson et al., 2000). Unlike many other less developed countries, India has rich sources of historical information of high quality on mortality (Dyson and Crook, 1984). However, studies that use such information to explain the mortality transition during the 20th century are scanty. Based on this premise, the present study explores old evidence to comprehend the present mortality transition in India. In particular, it investigates the trends and differential patterns of mortality across different stages of the life course since the 1970s, that is, from infancy to childhood, through adult mortality, to mortality at old ages. This would reveal the process of mortality change over the life course, and will be useful for policy intervention for sustainable improvement in the health of the population. More specifically, this chapter addresses the following issues: (a) a review of the longterm trends and patterns of mortality, especially from the 1880s to the 1970s, to contextualize the historical roots of contemporary mortality experience; (b) analysis of the trends in mortality over the life course—child (0–4 years), childhood (5–14 years), adult (15–59 years) and old age (60–69 years)—in India and in its major states since the 1970s; and (c) assessing the significance of gender and geographical differences in mortality across the different stages of the life course in India since the 1970s. The data for the analyses of trends during the pre-independence period are drawn mainly from published secondary sources. However, the analyses of the post-1970 period are based on the life tables constructed by the Registrar General of India (RGI) for the periods 1970–75, 1976–80, 1989–93, 1993–97 and 1997–2001. These life tables have been constructed using age-specific death rates published by the RGI based on the Sample Registration System (SRS). The SRS has been the primary system in India for collecting fertility and mortality data continuously since the late 1960s. The design of the survey has improved over the years. Detailed discussion of the sample frame, representativeness and reliability of the survey may be had elsewhere (see Bhat and Navaneetham, 1991).

268 a K. Navaneetham and C.S. Krishnakumar

Mortality Trends in India during the Colonial Period The demographic history of colonial India may be categorized broadly into two phases: the period from the year of the first official census in 1871 to 1921; and the phase from 1921 to 1951. While the first phase was marked by either negative or a minimal growth of population coupled with considerable decadal fluctuations, the second phase was characterized by slow but steady growth. The annual growth rate of population for the period 1921–31 was just under 1 per cent; by 1951 this increased to about 2 per cent (Guha, 1991). The changes in population growth are attributable to the relatively rapid reduction in mortality rather than to fertility and migration. The high fertility level in many parts of the country was perhaps the consequence of high infant and child mortality. It is argued by some that migration had a significant role in spreading many diseases (Klein, 1989). However, others contend that this was not a significant source of population change for the subcontinent as a whole (Guha, 1991). Studies examining mortality changes over the centuries in relation to economic and social dynamics are very few, and are based mostly on small case studies (Dyson, 1991; Guha, 1991; Klein, 1989, 1990).

Hunger, Disease and Death: The Phase of High Mortality, 1872–1921 Mortality across British India was strikingly high in the period between 1872 and 1921. The average life expectancy at birth during 1881–1920 was around 25 years—25.3 years for males and 25.6 years for females during 1901–11—signifying very heavy mortality during the late 19th and early 20th centuries. Infant mortality rates exceeded 200 in the country, with high fluctuations (see Figure 11.1). At higher ages, mortality fluctuation was nominal, despite its high level. Infant mortality contributed the greatest part of the total mortality rate. However, Bhat (1989) argues that India’s high mortality regime during the late 19th and early 20th centuries was characterized by extraordinarily heavy adult mortality. Levels of mortality tended to vary significantly across regions. Clark (1987) examines the mortality differentials across the presidencies of British India. She finds that Madras presidency (which included present-day Andhra Pradesh and Tamil Nadu) had better










Source: Guha (1991).

Death rates (per 1000)


Below age 1











Age 5 to 9

Age 1 to 4

1900 1898





1916 1912

1910 1906

1908 1904

1896 1894









Trends in child mortality rates in India: 1892–1919


Trends in infant mortality rates in India: 1892–1919


Death rates (per 1000)

Figure 11.1 Trends in Mortality Rates in India, 1892–1919

Evolution of Land Rights in India a 269

270 a K. Navaneetham and C.S. Krishnakumar

survival probabilities than the United Provinces (Uttar Pradesh) and Bombay presidency (Maharashtra and Gujarat). Adult mortality differed significantly between north and south India. Incidence of malaria was greater in the United Provinces, and could result in a high level of mortality. Insufficient rain and harvest failure and the ensuing agrarian crises in Bombay resulted in high mortality. Regular food shortages following famine conditions were a major factor in the pronounced increase in mortality in Bombay. Relative to other provinces, Madras faced fewer epidemics and natural threats during 1871–1921. However, fairly significant mortality persisted in many parts of the province at various points of time (Guilmoto, 1992). As regards gender differentials in mortality, a significant difference is observed between males and females and across regions. In Madras province, male life expectancy was higher than that of females in this period, but in other regions female life expectancy was higher. In the United Provinces, there was a narrowing of the male–female mortality gap during the decade of the flu epidemic. In the case of Bombay, only in the period 1891–1901 was there a noticeable trend of a relatively high female life expectancy. In the United Provinces, male child survival was much lower than that of females. The high death rates during 1872–1921 were primarily owing to burgeoning disease mortality, supplemental to famine deaths. The famines of 1896–1900, plague, and the great influenza epidemic of 1918–19 were among some of the major crisis points in South Asian demographic history as reflected in the heavy death tolls (Table 11.1). Around 19 million people died due to famines (Davis, 1951). The influenza epidemic of 1918–19 killed over 17 million, accounting for around 5 per cent of the population (Mills, 1986). More than 12 million lives were lost due to the plague epidemic in the period 1894–1934. It is claimed that during this period, roughly 95 per cent of world deaths in the plague pandemic were in India (see Klein, 1989). Between 1872 and 1921, plague and influenza pandemics accounted for the lives of about 28 million, amounting to 4.5 per cent of the total mortality (ibid.). Smallpox was endemic in India and accounted for nearly a third of all deaths in the 18th and 19th centuries. Even though vaccination was introduced in 1802, its impact was visible only after the 1880s (Gupte, Ramachandran and Mutatkar, 2001).

Mortality Trends and Patterns in India a 271 Table 11.1 Influenza Mortality Rates, Incidence Rates and Case Mortality Rates: Province and Jail Population, India, 1918

Province Central Provinces Bombay Presidency United Provinces Punjab North-West Frontier Assam Lower Burma Madras Presidency

Province influenza mortality per 1,000

Jail influenza mortality per 1,000

Jail influenza incidence rate per 1,000

Jail influenza case mortality per 1,000

67.6 54.3 47.2 46.0 44.4 26.1 16.2 15.8

34.8 36.0 20.9 38.9 28.6 5.9 6.4 10.9

457.5 348.0 296.7 334.7 311.1 351.1 278.6 318.7

76.1 103.4 70.4 116.2 91.8 16.7 22.9 34.3

Source: Proceedings of the Department of Education: Sanitary, Part A, 1918; and Annual Report of the Sanitary Commissioner with the Government of India, 1918. From Mills (1986).

Disease-induced mortality was high and showed an increasing trend over the period 1872–1921 (Table 11.2). Disease mortality had increased by about 30 million fatalities per decennium during the period 1901–11 as compared to 1872–81. The increase in deaths during the decade 1911–21 was about 50 million compared to the period 1872–81. The combination of poverty, low standard of living, malnutrition and insanitation—and these were not unrelated Table 11.2 Increase in Disease Mortality, 1872–1921 Year 1872–81 1881–91 1891–1901 1901–11 1911–21 1872/81–1981/91 1872/81–1891/1901 1872/81–1901/11 1872/81–1911/21

Population increase (%)

Mortality increase (%)

Disease mortality increase (%)

1 10 1 6 1 10 11 19 20

3–6 10–14 0–8 12–18 3–6 10–14 20–23 28–33

11–13 3–8 5–15 12–18 11–13 15–20 29–32 53–56

Source: Report of the Sanitary Commissioner of India, 1871–1918, passim; Report of the Public Health Commissioner, 1919–21, passim; Statistical Abstract for British India, 1871–1922, CI, 1881–1921, passim. From Klein (1989).

272 a K. Navaneetham and C.S. Krishnakumar

to each other—contributed to heightening mortality levels. The changes in disease ecology maximized exposure to new disease microbes among the vulnerable population (Klein, 1989). Death rates among the poor were 10 times higher than among the rich, as poor populations were badly nourished and highly vulnerable to diseases through insanitation and crowding. Famine deaths declined substantially only after 1901, but the disturbing attack of pandemic diseases continued. Some efforts were made to reduce famine-related deaths by improving cultivation and through better distribution of available foods. However, these efforts did not yield the desired results, as food supplies increased by only 15 per cent per person in 1891– 1901, stabilized in the following decade, and then fell by 5 per cent in 1901–21 (Table 11.3). Crop output expanded through improvements in irrigation and double cropping. However, some parts of British India were not free from agrarian distress. This was the outcome of accumulated unpaid debts contracted mainly during the war, and of economic inflation. It was observed that improvements in crop output in the period 1891–1921 were not uniform across the regions (Table 11.4). Thus, the United Provinces, Madras and Punjab showed better development compared to other regions of India. Negative increase in all-crop per capita output was observed in Bombay, the Central Provinces and Bengal. The quality of life of the large mass of working people in both rural and urban India was abysmally poor. The record of the colonial state with respect to social welfare measures left much Table 11.3 Area under Crops, Foodgrains, Irrigation, British India, 1891–1921 (5-Year Moving Averages, in Millions of Acres) Year/Area under crops

All crops



1891–1896 1896–1901 1901–1905 1905–1911 1911–1916 1916–1921

193.32 189.76 205.64 217.78 221.78 218.78

178.83 174.62 183.36 197.22 199.26 196.10

26.24 30.36 33.20 40.32 45.44 47.82

Source: Parliamentary Papers, 1894, LIX, pp. 342–43; 1902, CXII, pp. 118–19, 174, 202; 1904, CII, pp. 124–25; 1914, XCVII, pp. 129, 146; 1924, XXVIII, pp. 297–300. From Klein (1989).

Mortality Trends and Patterns in India a 273 Table 11.4 Increases in All-Crop Output (Per Capita, %), 1891–1921 Province United Provinces Madras Punjab Bombay, Sind Central Provinces Bengal British India




8 7 42 28 –2 2 10

3 3 1 1 1 –15 –5

23 19 1 –17 32 8 2

Source: Klein (1989).

to be desired. Its interventions in the sphere of public health were severely inadequate in terms of outlay and outreach, and had little effect in improving the well-being of the people in the long run.

Towards Relative Stability: 1920–1947 After the 1920s, there was a rapid decline in death rates and, concomitantly, a steady growth of population. The significant post1920 decline in mortality has attracted some debate and discussion among demographers and economic historians. While some scholars ascribe the turnaround to improved climatic conditions, others are of the view that the pronounced decline in mortality was related to the development of natural biological immunity to some of the deadly diseases among the ordinary people. Efforts were made to foster agricultural production through better irrigation and agricultural innovations. Improvements in the distribution of agricultural commodities and the starting of new health care institutions reduced famine in many parts of the country. All these efforts may have reduced adult mortality significantly. The decline in infant and child mortality was higher than that in mortality for ages 5–9 during 1920–44 (Figure 11.2). Diseases like cholera, smallpox, plague, diarrhoea and respiratory diseases continued to account for the high death toll during 1922–41 (Table 11.5). As per the official statistics, respiratory diseases killed thousands of people in the country. However, disease mortality had declined substantially compared to the period 1872–1921. Until the mid-1940s, plague had been a major public health problem; thereafter, it was brought under control as part of the malaria eradication programmes (Gupte, Ramachandran and Mutatkar, 2001).









Source: Guha (1991).


1938 1936 1934

1932 1930


Death rates (per 1000)

Below age 1







1936 1934

1932 1930


Death rates (per 1000)

Age 1 to 4 Age 5 to 9



1942 1940




1938 1926 1924


Trends in child mortality rates in India: 1920–1944


Trends in infant mortality rates in India: 1920–1944


Figure 11.2 Trends in Mortality Rates, 1920–44

274 a S. Neelakantan

Mortality Trends and Patterns in India a 275 Table 11.5 Official Mortality Rates for Individual Diseases in India, 1922–41 (per 1,000) Disease/Mortality rate Cholera Smallpox Plague Diarrhoea Respiratory diseases






Average (1921–41)

0.3 0.2 0.3 0.7 1.2

1.3 0.5 0.2 0.9 1.5

0.2 0.2 0.2 0.8 1.5

0.4 0.2 0.1 1 1.8

0.8 0.2 0.1 0.9 1.6

0.7 0.3 0.4 0.9 1.6

Source: Report of the Public Health Commissioner, 1922–41, passim; in Klein (1990).

Though data on agricultural yields for the colonial period are not wholly reliable (Heston, 1983), a broad consensus among economic historians is that there was no upsurge in per capita food supply (Table 11.6). Not only did food supply remain stagnant during this period but, what was worse, the Indian population is said to have experienced significant nutritional deficiencies. Technological innovations in agriculture were insufficient to produce the food required for the country due to increase in population growth. Studies indicate that rural and urban dwellers had nutritional deficiencies. Food-processing technology was not adequately developed and, hence, food nutrients were lost in processing. Those who suffered particularly from a relatively high degree of malnutrition were urban dwellers. Children were also found to be among the most vulnerable groups with respect to malnutrition. In India, the average daily caloric intake per person in 1921 and 1941 were 1,950 and 1,750 kilocalories, respectively, while the recommended minimum was 2,400 calories (see Klein, 1990). The absence of potable drinking water, unsatisfactory sanitation and poor personal hygiene, together with inadequate nutritional food, rendered the rural population particularly susceptible to contagious diseases like cholera, typhoid fever, dysentery and diarrhoea. Table 11.6 Per Capita Availability of Foodgrains Annually (in Tons) Author





Blyn (British India) Sivasubramonian (India) Heston (India)

0.22 0.20

0.20 0.18

0.16 0.15

0.16 0.14





Source: Klein (1990).

276 a K. Navaneetham and C.S. Krishnakumar

In brief, mortality was high in India during the colonial period 1872–1947. Average life expectancy at birth during the period 1872–1921 was around 25 years. The high mortality regime was also characterized by extraordinarily heavy adult mortality. The high level of mortality during this period was due mainly to famine, plague, smallpox and influenza. After 1921, a marginal decline in adult mortality was observed, but mortality seems to have stagnated at high levels up to 1950. In the period 1920–47, efforts were made to reduce famine deaths and diseases of hunger. However, the impact of these efforts was not highly visible throughout the country.

Mortality Trends since Independence The Phase of Declining Mortality, 1947–70: Reduction in Communicable Diseases Mortality declined rapidly after independence. India’s crude death rate declined from around 32 deaths per 1,000 population during the mid-1940s to about 21 by the mid-1960s. Life expectancy at birth increased by around 14 years between 1951–61 and 1971–81. Though overall mortality was disadvantageous to females, Bhat (1987) observes that the decline in mortality among female adults was relatively rapid during this period (Table 11.7). At the time of independence, the incidence of deaths related to communicable diseases was very high in the country. Understanding this fact, the government started many health interventions to control or eradicate diseases. In 1953, at the time of launching the National Malaria Control Programme, the incidence of malaria was 750 lakhs (75 million) and annual deaths were at around 8 lakhs Table 11.7 Estimates of Mortality Parameters in India, 1951–81

Period 1951–61 1961–71 1971–81

Expectation of life at birth

Percentage dying before age 5

Crude death rate

Crude birth rate





28.2 20.8 15.2

47.1 43.0 37.2

35.5 43.2 49.8

35.7 43.5 49.3

29.7 23.7 19.0

27.9 23.7 20.7

Source: Bhat (1987).

Mortality Trends and Patterns in India a 277

(Gupte, Ramachandran and Mutatkar, 2001). In 1961, the incidence of malaria came down to half a lakh cases in the country. In the late 1950s, there were over 15,000 deaths due to smallpox (ibid.). However, by the end of the 1970s, smallpox had been eradicated almost completely in many parts of the country. During this period, cholera was controlled by government health intervention through improved supply of safe water and sanitation. Deaths due to cholera declined from over 20 lakhs (2 million) in the 1940s to under 150,000 during 1959–68. Deaths from tuberculosis (TB) were also controlled to some extent, though not completely, with the introduction of the national TB control programme in 1962 (Visaria, 2004). These along with other health interventions had a significant impact on the enrichment of health among the common people and, by the end of the 1970s, many communicable diseases had been controlled effectively. This is well reflected in the reduction of mortality in the following years. However, the mortality declines among the various stages of the life course were not uniform. Mortality declined among adults relatively faster than among other age groups, and mortality reduction in the childhood ages was slower (Bhat, 1987). Among the states, Karnataka recorded the fastest reduction of mortality during this period. The slowest reduction of mortality was observed in Orissa (ibid.).

The Phase of Rapid Reduction in Mortality, 1971–2001 Mortality in India declined rapidly after the 1970s, and the life expectancy at birth of both males and females increased in all the states in both rural and urban areas (see tables in the appendix to this chapter). Improvement in life expectancy was more favourable to females than males. The increases in life expectancy of males and females were 11.2 and 14.5 years, respectively, in rural areas and 7.2 and 9.8 years, respectively, in urban areas during 1971– 2001. However, these improvements were below the standard set by the United Nations (1982) for a given mortality level. The life expectancy at birth of both males and females differs significantly between rural and urban areas. As of 1997–2001, females residing in urban areas lived on an average about seven years longer than their rural counterparts. Similarly, urban males lived five years longer than rural males. Though the rural–urban differential in life expectancy at birth has narrowed down over

278 a K. Navaneetham and C.S. Krishnakumar

the years, significant differences between rural and urban areas continue to persist in the country. The life expectancy at birth, which was unfavourable to females in the rural areas in the 1970s, turned favourable by the 1990s (Figure 11.3). The relative advantage of females in urban areas has improved since the 1970s. Irrespective of region, the pace of improvement in life expectancy was faster during the period 1980–90. It has been noted that the gain in life expectancy at birth was faster in all the states during the 1980s and slowed down during the 1990s. Slow progress in life expectancy at birth was expected in the case of Kerala, as the state had already reached a relatively higher level. That was not the case in many other Indian states, like Uttar Pradesh and Bihar. What is surprising is that life expectancy at birth did not improve at the expected rates in several of the states where it was low. Improvement in life expectancy was slow in many states, especially in the northern parts of India. Compared to other states, backwardness in life expectancy in the rural areas of Assam, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh and Bihar during 1970–2001 is noteworthy (Table 11.8). As expected, longevity in these states has not improved, irrespective of gender. These states have not caught up with the southern states due to slow progress in improvement of life expectancy at birth. Similarly, the urban areas of Andhra Pradesh, Assam, Gujarat, Madhya Pradesh, Orissa and Uttar Pradesh show less improvement in life Figure 11.3 Trends in Life Expectancy at Birth by Place of Residence and Gender, India 75.0

Life expectancy at birth

70.0 65.0 60.0 55.0 50.0 45.0








25.0 1970–75


1989–93 Period



Mortality Trends and Patterns in India a 279 Table 11.8 Transition in Life Expectancy at Birth in Indian States, 1970–75 and 1997–2001 Life expectancy at birth, 1970–75 53.8

Himachal Pradesh Haryana, Kerala, Punjab

Rural female 51.8

Haryana, Karnataka, Maharashtra

Kerala, Punjab

Urban male < 58.8

58.8–61.7 >61.7



Urban female < 59.2





280 a K. Navaneetham and C.S. Krishnakumar

expectancy at birth during the reference period. Kerala has been at the forefront in the achievement of life expectancy at all times, except in the case of the urban male. The life expectancy of urban males in Kerala, which was lower than that in Haryana, Himachal Pradesh and Karnataka in 1970–75, improved and reached higher levels in 1997–2001 (Figure 11.4). Figure 11.4 Box Plots Showing Variation in Life Expectancy at Birth, States of India


The box plots confirm that average life expectancy at birth has improved in India in both rural and urban areas as well as for males and females, and the pace of improvement has slowed down during the 1990s. Kerala is an outlier state and its life expectancy at birth is far ahead of all other states in India with respect to rural males, rural females and urban females. However, in the case of urban males, Kerala’s life expectancy at birth is not very different from other states in India. Again, the overall health of the population in India seems to be converging across states, as evident from the reduced spread of box plots over the years.

Mortality Trends and Patterns in India a 281

Demographers have forecast a worldwide convergence of countries towards low mortality and fertility with a resultant higher life expectancy at birth. The logic of convergence is that there will be a rapid improvement in life expectancy at birth in high-mortality countries and a slower progress in countries that have had low mortality. Reduced child mortality was expected to bring down the higher mortality in the former countries, whereas the rise in chronic diseases would make it difficult in the latter. However, this expectation of worldwide convergence in population health status is not guaranteed, as there is increased heterogeneity between countries (McMichael et al., 2004).

Mortality across Various Stages of Life Mortality trends in India and its states are examined from a lifecourse perspective in this section. The trends in the probability of dying during the ages 0–4 in India by place of residence and sex are shown in Figure 11.5. In the early 1970s, the chance of dying before attaining the fifth birthday was around 24 per cent for rural females; this came down to 11 per cent during the late 1990s. Similarly, for rural males, it declined from 17 per cent in the early 1970s to 10 per cent in the late 1990s. In urban areas, in the early 1970s, the chance of dying from birth to age 5 was 11 per cent for males and 12 per cent for females; it declined to 6 per cent for males and 7 per cent for females in the late 1990s. India is far behind many South-East Asian countries, including China, in this Figure 11.5 Trends in the Probability of Dying in India, Age Group 0–4

Probability of dying

Urban Female 0.30

Rural Female


Rural Male Urban Male

0.20 0.15 0.10 0.05 0.00 1970–75





282 a K. Navaneetham and C.S. Krishnakumar

respect. In the year 2000, the chance of dying from birth to age 5 was 3 per cent for males and 4 per cent for females in China, and 2 per cent for both males and females in Sri Lanka. Irrespective of gender, decline in mortality was faster during the 1980s and slowed down during the 1990s in both rural and urban areas. The rural–urban differential has narrowed down mainly due to faster reduction in child mortality in rural areas, but differences continue to persist. Child mortality declined in all the states in India during 1970–2001; however, the decline was remarkable in southern states such as Kerala and Tamil Nadu (results not shown here). It is also noted that child mortality among urban males increased during the 1990s in the states of Bihar, Haryana, Himachal Pradesh, Kerala and Punjab. It is worth mentioning here that in India, about 70 per cent of under-5 mortality occurs before reaching the age of 1 (IIPS, 2000). A recent study shows that infant mortality inequality has intensified in India in recent years (Narayana, 2008). India’s reduction in the IMR is significantly lower than that of Bangladesh or Sri Lanka. Low reduction in infant mortality in most of the poorer states of India is linked to low female literacy, low women’s empowerment and lack of health care services, while the low reduction in developed states is largely because of mortality inequality, with higher female mortality among infants (ibid.). In fact, child deaths occurring in India now represent the highest number within a single country worldwide (UNICEF, 2004). The high level of child mortality (87 per 1,000 population) is caused mainly by diarrhoea, pneumonia and undernutrition. It has also been noticed that the causes of deaths among neonates are asphyxia, pre-term delivery, sepsis and tetanus. Jones, Schultink and Babille (2006) argue that 57 per cent of annual child deaths can be prevented through the achievement of a high coverage of basic public health and nutritional interventions. Exclusive breast-feeding is a highly effective way to reduce child mortality. Even though breastfeeding is practised widely, early and exclusive breast-feeding is not common in India. Around 25 per cent of children born in India in the late 1990s were of low birth weight. Low birth weights increase the chances of neonatal mortality. Childhood and maternal malnutrition is an important determinant of low birth weight in India (Dharmalingam, Navaneetham and Krishnakumar, 2010). Similarly, poor nutrition and anaemia among women at the reproductive

Mortality Trends and Patterns in India a 283

ages have adverse consequences for child mortality. In India, one in three women in the maternal age suffers from chronic energy deficiency, and more than 50 per cent from anaemia. A higher level of maternal malnutrition would have adverse implications extending beyond maternal mortality to intrauterine growth retardation, child malnutrition and emergence of chronic diseases, among others (Jose and Navaneetham, 2008; Osmani and Sen, 2003). As regards mortality trends among children (5–14 years), among rural males, the chance of dying declined from 3.5 per cent in the early 1970s to 1.5 per cent in the late 1990s. The chance of dying among rural females was higher than males, but declined from 4 per cent in the early 1970s to 1.9 per cent by the end of the 1990s. Among urban dwellers there was a marginal difference between males and females in the probability of dying during the 1970s: 1.9 per cent for males and 2.1 for females. However, by the end of the 1990s, the risk of dying was almost equal for both males and females (around 0.9 per cent each). As observed in the case of child mortality, the speed of decline in the mortality rate among persons aged 5 to 14 was faster during the 1980s and slowed down during the 1990s in both rural and urban areas irrespective of gender. However, the rural–urban differential narrowed down during the 1990s (Figure 11.6). With regard to the states in India, mortality in the age group 5–14 declined in all the states in the rural areas during 1970–2001. In Figure 11.6 Trends in the Probability of Dying in India, Age Group 5–14 Rural Male Urban Male


Rural Female

Probability of dying


Urban Female

0.04 0.03 0.03 0.02 0.02 0.01 0.01 0.00 1970–75





284 a K. Navaneetham and C.S. Krishnakumar

several of the states, mortality increased during the 1990s in urban areas. The urban male mortality rate increased in some states, such as Bihar, Kerala, Maharashtra and Tamil Nadu, and, similarly, the urban female mortality rate increased in the states of Assam, Bihar, Haryana, Himachal Pradesh, Kerala and Orissa during the 1990s. In the case of adults, the chance of dying between the ages 15 and 60 was 35 per cent for rural males and 33 per cent for rural females in the early 1970s; this declined to 27 per cent and 21 per cent, respectively, for males and females in the late 1990s (Figure 11.7). Similarly, in urban areas, it declined from 29 per cent to 22 per cent for males and from 24 per cent to 16 per cent for females in the respective periods. Contrary to the trends in the childhood ages, rural males faced a greater risk of dying in adulthood throughout the period; the risk was virtually constant during the 1990s. This was true in most of the states. Again, mortality decline was slower or stagnant during the 1990s in all the categories. Mortality among rural women declined faster during the 1980s and continued to decline at a lesser speed during the 1990s. The intervention of the maternal and child health programmes may be a prime factor in this decline as well as in the reduction in maternal mortality rates during the 1980s (Bhat, Navaneetham and Rajan, 1995). In the old ages (60–69), the probability of dying was greater for males than females in both rural and urban areas of India. In the Figure 11.7 Trends in the Probability of Dying in India, Age Group 15–59 Rural Male Urban Male Rural Female


Urban Female

Probability of dying

0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00






Mortality Trends and Patterns in India a 285

early 1970s, about 40 per cent of men and 36 per cent of women died during the ages 60–69 years. In the late 1990s, these figures were 31 per cent and 24 per cent for men and women, respectively. The decline was faster during the 1980s for all categories, except urban females for whom mortality declined steadily during the 1990s (Figure 11.8). In most states, rural areas showed a faster reduction in mortality among women during 1970–2001, and the decline was greater during the 1990s. With regard to gender differentials, the overall picture that emerges is that the mortality scenario was unfavourable to females during the infant and childhood periods. Moving towards the higher age groups, the pattern of sex differentials in mortality has reversed. Adult and old age mortality were favourable to females as compared to males over the years irrespective of place of residence and region.

Convergence of Mortality in India To understand the convergence of mortality across various life-course ages, box plots are used. Figures 11.9 through 11.12 show the box plots for the mortality rate across various life-course ages. The distribution of the probability of dying from birth to age 5 in the box plot in Figure 11.9 shows that child mortality for both males and females has been converging over the years in both rural and urban areas. Further, the variation was greater among rural Figure 11.8 Trends in the Probability of Dying in India, Age Group 60–69 0.45

Probability of dying

0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05

Rural Male Urban Male Rural Female Urban Female

0.00 1970–75





286 a K. Navaneetham and C.S. Krishnakumar Figure 11.9 Variability in Probability of Dying across States, Age Group 0–4

females in India and smaller among urban males during 1997– 2001. Also, the rural–urban gap has narrowed down over the years in India, but continued to persist during the 1990s. The gender differential seems to be lower than the rural–urban gap in India. Female children residing in rural areas are seen to have greater disadvantages than male children. With regard to the probability of dying between ages 5 and 15, there does not seem to be any convergence over the years (Figure 11.10). The variation was larger among females than males, and it had increased for rural females during 1997–2001 compared to earlier periods. The rural–urban gap narrowed down over the years, but continued to persist in the 1990s; it was greater than gender differentials. In adult ages, an interesting pattern can be noticed while looking at the box plot in Figure 11.11. Rural males continue to have disadvantages, though the spread has reduced over the years. Rural females, who had an edge over urban males in the 1970s in mortality, continued to improve during the 1990s. However, rural female

Mortality Trends and Patterns in India a 287 Figure 11.10 Variability in Probability of Dying across States, Age Group 5–14

Figure 11.11 Variability in Probability of Dying across States, Age Group 15–59

288 a K. Navaneetham and C.S. Krishnakumar

adult mortality continued to vary enormously among the states of India. The variation in mortality seems to be narrowing down in urban areas for both males and females. The box plots show that the gender differential in adult mortality seems to be greater than the rural–urban gap in India. In the old ages (60–69), the probability of dying across the Indian states has been narrowing (see box plot in Figure 11.12). Further, it is evident that the rural–urban gap and gender differences have also narrowed down over the years.

Conclusion This chapter has analyzed mortality changes in India since 1872. Based on the pace of mortality changes, we have classified the colonial period into two phases: first, the period of high mortality (1872–1921), and second, the period of slow decline in mortality (1921–47). The high level of mortality during the first phase was owing to severe and repeated famines and epidemics of plague, smallpox and influenza. During the second phase, overall mortality Figure 11.12 Variability in Probability of Dying across States, Age Group 60–69

Mortality Trends and Patterns in India a 289

declined slowly, even though infant and child mortality continued to be high (Table 11.9). Table 11.9 Broad Phases of Mortality Transition in India over the Period 1872–2001




Approximate period

Mortality level /changes






Slow decline (adult mortality started declining, high levels of infant and child mortality continued)



Declining (high reduction in adult mortality)



Rapid decline (high reduction of infant and child mortality, particularly in the south Indian states)

Significant correlates or causes Famine, plague, smallpox, influenza, malnutrition, agrarian distress Respiratory diseases, cholera, smallpox, plague, diarrhoea, improvements in climatic conditions and natural biological immunity Reduction of communicable diseases (control of malaria, smallpox and cholera) Establishment of maternal and child health programme, technological development, improvement in nutrition, improvement in female education

In the post-independence period, mortality reduction during 1947–70 was due mainly to public health interventions targeting communicable diseases. Until the 1950s, nearly 40 per cent of the babies born died before attaining their fifth birthday; this decreased to 26 per cent during 1951–61. Excess child mortality was observed among female children at the end of the 19th century, after which it declined gradually and then re-emerged in the 1970s. Despite a rapid decline in mortality among infants and children under 15 years of age till the early 1990s (slowing down thereafter), mortality levels were still high. Adult mortality has declined significantly among women since the 1970s, although the decline was slower during the 1990s. Adult male mortality has not declined significantly in most states, both in the rural and in the urban areas. Rural adult males face a greater risk of dying between ages 15 and 59. In the old ages, men are at greater risk of mortality in both rural and urban areas, and the mortality decline was slower during the 1990s.

290 a K. Navaneetham and C.S. Krishnakumar

The overall health of the population in the states of India seems to be converging; however, the patterns seem to be different across the age groups. Child mortality seems to be converging across the states in India, whereas there is no apparent mortality convergence at the childhood ages (5–14). Also, adult mortality among rural females continues to be heterogeneous across the states in India, whereas the variation has been narrowing among urban females and males. This study envisages many policy recommendations for further mortality reduction in India. The pace of mortality transition has not been uniform between place of residence and across various stages of the life course. Since child mortality is converging, uniform health care intervention may be designed to reduce infant and child mortality throughout the country. Similarly, common national-level strategies can be formulated to reduce mortality at older ages (above 60). However, wide variation in mortality is observed in the case of adults, particularly in the rural areas. Also, the gender differential in mortality is more prominent than the rural– urban differential in this age group. This necessitates identifying risk factors specific to region or gender for furthering reduction in mortality in this age group. Over the past two centuries, mortality was related mostly to either famine or communicable diseases, and strategies designed to address those have brought mortality down. However, morbidity from communicable diseases, including TB, remains quite high. The emergence of new diseases including HIV/AIDS and the re-emergence of malaria pose a greater challenge for India. Non-communicable diseases are also on the rise due to changes in lifestyle. Therefore, India is experiencing a double burden of disease (Visaria, 2004). This will have greater implications particularly for the health and economic conditions of the poor. Addressing these issues will be a challenge for India.

References Bhat, P. N. M. 1987. ‘Mortality in India: Levels, Trends and Patterns’, Unpublished PhD Dissertation, Philadelphia: University of Pennsylvania. ———. 1989. ‘Mortality and Fertility in India, 1881–1961: A Reassessment’, in Tim Dyson (ed.), India’s Historical Demography: Studies in Famine, Disease and Society, London: Curzon Press, pp. 73–118.

Mortality Trends and Patterns in India a 291 Bhat, P. N. M., and K. Navaneetham. 1991. ‘Recent Trends in Age Specific Mortality in India’, Journal of Institute of Economic Research, 26(1/2), pp. 49–69. Bhat, P. N. M., K. Navaneetham and S. I. Rajan. 1995. ‘Maternal Mortality in India: Estimates from Regression Model’, Studies in Family Planning, 26(4), pp. 217–32. Chaurasia, Alok Ranjan. 2006. ‘Mortality Transition in Urban India 1971– 2002’, Discussion Paper Series No. 113/2006, Delhi: Institute of Economic Growth. Claeson, Mariam, Eduard R. Bos, Tazim Mawji and Indra Pathmanathan. 2000. ‘Reducing Child Mortality in India in the New Millennium’, Bulletin of the World Health Organization, 78(10), pp. 1192–99. Clark, A. W. 1987. ‘Social Demography of Excess Female Mortality in India: New Directions’, Economic and Political Weekly, 22(17), pp. WS12–WS21. Davis, Kingsley. 1951. Population of India and Pakistan, Princeton, NJ: Princeton University Press. Dharmalingam, A., K. Navaneetham and C. S. Krishnakumar. 2010. ‘Nutritional Status of Mothers and Low Birth Weight in India’, Maternal and Child Health Journal, 14(2), pp. 290–98. Dyson, Tim. 1991. ‘On the Demography of South Asian Famines: Part I’, Population Studies, 45(1), pp. 5–25. Dyson, Tim, and Nigel Crook. 1984. ‘Issues in Indian Demography’, in Tim Dyson and Nigel Crook (eds), India’s Demography: Essays on the Contemporary Population, Atlantic Highlands, NJ: Humanities Press, pp. 1–12. Guha, Sumit. 1991. ‘Mortality Decline in Early Twentieth Century India: A Preliminary Enquiry’, Indian Economic and Social History Review, 28(4), pp. 371–91. Guilmoto, C. Z. 1992. ‘Towards a New Demographic Equilibrium: The Inception of Demographic Transition in South India’, Indian Economic and Social History Review, 29(3), pp. 247–89. Gupte, M. D., Vidya Ramachandran and R. K. Mutatkar. 2001. ‘Epidemiological Profile of India: Historical and Contemporary Perspectives’, Journal of Bioscience, 16(4), pp. 437–64. Heston, Alan. 1983. ‘National Income’, in Dharma Kumar and Meghnad Desai (eds), Cambridge Economic History of India, II: c. 1757–c. 1970, Cambridge: Cambridge University Press, pp. 376–462. International Institute of Population Studies (IIPS). 2000. National Family Health Survey-2, India, 1998–99, Mumbai: IIPS. Jain, A. K., L. Visaria and P. Visaria. 1985. ‘Mortality Trends in India during the 1970s: A Critical Review’, in Proceedings of the International Population Conference, Liege: International Union for the Scientific Study of Population, vol. 2, pp. 353–65. Jones, Gareth, Werner Schultink and Marzio Babille. 2006. ‘Child Survival in India’, Indian Journal of Pediatrics, 73, June, pp. 479–89.

292 a K. Navaneetham and C.S. Krishnakumar Jose, Sunny, and K. Navaneetham. 2008. ‘A Factsheet on Women’s Malnutrition in India’, Economic and Political Weekly, 43(33), pp. 61–67. Klein, Ira. 1989. ‘Population Growth and Mortality Part I: The Climacteric of Death’, Indian Economic and Social History Review, 26(4), pp. 387–403. ———. 1990. ‘Population Growth and Mortality in British India Part II: The Demographic Revolution’, Indian Economic and Social History Review, 27(1), pp. 33–63. Krishnaji, N., and K. S. James. 2002. ‘Gender Differentials in Adult Mortality in India—with Notes on Rural–Urban Contrasts’, Economic and Political Weekly, 37(46), pp. 4633–37. McMichael, Anthony J., Martin McKee, Vladimir Shkolnikov and Tapani Valkonen. 2004. ‘Mortality Trends and Setbacks: Global Convergence or Divergence?’ Lancet, 363, 3 April, pp. 1155–59. Mills, I. D. 1986. ‘The 1918–19 Influenza Pandemic—The Indian Experience’, Indian Economic and Social History Review, 23(1), pp. 1–40. Narayana, D. 2008. ‘Intensifying Infant Mortality Inequality in India and a Reversal by Policy Intervention’, Journal of Human Development, 9(2), pp. 265–81. Navaneetham, K. 1993a. ‘Mortality Decline in India: An Analysis of Regional and Temporal Variations’, Demography India, 22(1), pp. 53–63. ———. 1993b. ‘The Influence of Cohort Effects on Mortality Trends in India: Role of Economic Factors’, Population Research and Policy Review, 12(2), pp. 159–76. Osmani, Siddiq, and Amartya Sen. 2003. ‘The Hidden Penalties of Gender Inequality: Foetal Origins of Ill-Health’, Economics and Human Biology, 1(1), pp. 105–21. Preston, S. H., and P. N. M. Bhat. 1984. ‘New Evidence of Fertility and Mortality Trends in India’, Population and Development Review, 10(3), pp. 481–504. Registrar General of India. SRS based Abrided Life Tables, for the periods 1970–75, 1976–80, 1989–93, 1993–97 and 1997–2001, New Delhi: Registrar General of India, Controller of Publications. Roy, T. K., and S. Lahiri. 1987. ‘Recent Levels and Trends in Mortality in India and Its Major States: An Analysis Based on SRS Data’, in K. Srinivasan and S. Mukherji (eds), Dynamics of Population and Family Welfare, Mumbai: Himalaya Publishing House, pp. 279–347. United Nations. 1982. Model Life Tables for Developing Countries, New York: United Nations, Department of International Economic and Social Affairs. United Nations Children’s Fund (UNICEF). 2004. State of the World’s Children 2005, New York: UNICEF. Visaria, Leela. 2004. ‘Mortality Trends and Health Transition’, in Tim Dyson, Robert Cassen and Leela Visaria (eds), Twenty First Century India: Population, Economy, Human Development and the Environment, New York: Oxford University Press, pp. 32–56.




1.00 1.07 1.06 1.01 0.97 1.04 0.97 1.02 1.05 1.04 1.02 1.14

47.4 54.7 50.5 52.4 62.9 44.8 52.8 44.6 55.7 45.6 45.9 39.2

47.4 58.4 53.6 52.9 60.7 46.6 51.1 45.6 58.5 47.5 46.6 44.6

0.99 1.02

Ratio (m/f)

47.6 44.4


47 45.5


Source: Registrar General of India.

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

1970–75 58.8 53.9 58.9 58.4 62 63.5 58.6 68.7 52.7 61.1 55.3 64.8 55.6 60.1 55.9 59.2 57.9

Male 60.4 54.6 56.3 59.6 62.4 63.7 61.7 73.9 51.8 63.1 54.6 66.9 55.8 61.1 53.9 61.1 58.1


1989–93 0.97 0.99 1.05 0.98 0.99 1.00 0.95 0.93 1.02 0.97 1.01 0.97 1.00 0.98 1.04 0.97 1.00

Ratio (m/f)

Table A1 Life Expectancy at Birth in Rural India


60.9 56.8 60.6 61.1 64.3 65.3 61 70.9 55.5 62.9 57.6 66.8 59.3 62.5 58.7 61.5 60.1

Male 63.2 57.1 58.6 62.7 64.2 65.8 64.5 75.6 55.1 65.1 57.5 68.4 59.5 64.4 57.3 63.2 61.6


1997–2001 0.96 0.99 1.03 0.97 1.00 0.99 0.95 0.94 1.01 0.97 1.00 0.98 1.00 0.97 1.02 0.97 0.98

Ratio (m/f)

Evolution of Land Rights in India a 293

59.1 56.2 55.2 62.2 60.6 66.1 66.3 57.1 58.8 56.3 61.2 59.3 60.7 50.4 59.2

54.7 62.8 63.4 62.7 61.0 56.3 58.8 54.6 61.1 59.8 58.6 52.6 58.8


1970–75 55.3 55.3

Source: Registrar General of India.

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



0.99 1.01 1.05 0.95 0.92 0.99 1.00 0.97 1.00 1.01 0.97 1.04

0.94 0.98

Ratio (m/f) 62.7 63 64.1 60.2 65.1 64.3 64.8 68.8 60.2 66.1 61.4 66.4 63.4 64.6 59.8 66.6 63.5


65.6 64.1 66.9 64.0 69.2 67.7 67.1 74.8 62.4 70.3 65.7 71.1 63.3 68.4 61.4 68.3 66.3


1989–93 0.96 0.98 0.96 0.94 0.94 0.95 0.97 0.92 0.96 0.94 0.93 0.93 1.00 0.94 0.97 0.98 0.96

Ratio (m/f)

Table A2 Life Expectancy at Birth in Urban India

64.9 65.9 65.8 64.2 66.6 66.4 67.5 70.2 63.0 68.5 63.2 68.7 65.6 66.6 62.2 67.9 66.0


68.2 67.0 67.3 67.3 70.0 69.7 69.6 76.2 64.8 71.9 66.7 71.9 66.2 70.8 63.5 70.1 69.0


1997–2001 0.95 0.98 0.98 0.95 0.95 0.95 0.97 0.92 0.97 0.95 0.95 0.96 0.99 0.94 0.98 0.97 0.96

Ratio (m/f)

294 a S. Neelakantan

Evolution of Land Rights in India a 295

Chapter 12 A Long Haul: Revisiting International Migration from India during the 19th and 20th Centuries S. Irudaya Rajan and Prabhat Kumar ‘Migration

is a product not of discrete and unconnected factors in the sending and the receiving countries, but of historical connections between the countries. It is not fortuitous; it is systemic’ (Bonacich and Cheng, 1984, cited in Skeldon, 1997, p. 21). This perceptive observation underscores the importance of historical contextualization of the process of migration. Migration of populations from one area to another in search of better opportunities has been a characteristic feature of human history. Spatial unevenness in development, whereby some regions develop faster than others, also induces people to move to those regions to avail of opportunities of livelihood. However, it is essential, even historically, to make a distinction between internal migration and overseas migration (though, as we shall indicate later, the two are not entirely unrelated). International migration from India has a history going back to the very beginnings of civilization. However, the earlier migration appeared to be more trade-induced, being limited largely to merchants and sailors. Large-scale, organized, international migration as a distinct process and as we understand it today has a history that goes back roughly two centuries and is linked integrally to the larger process of colonization. The overriding imperial interests reflected in the demand for cheap labour in other parts of the empire were in essence at the root of the phenomenon of migration, a trend that has continued till date despite the changes in the constellation of productive forces within the global capitalist order. Thus, the abolition of slavery in 1833 was an important landmark in creating the necessary preconditions for the onset of a new era of migration from India, as exemplified in the export of

296 a S. Irudaya Rajan and Prabhat Kumar

indentured labour to the various plantations of the overseas British colonies. Indian indentured labour served to replace the liberated slaves as well as to meet the growing demand for cheap labour in these capitalist farms. Despite the changes over the last two centuries in the direction, magnitude and pattern of migration, it would not be far-fetched to state that in some respects the presentday migration is a continuation of the earlier trend. This chapter examines in historical perspective the dynamics and the long-term trends of this significant socio-economic process. The chapter focuses on two broad phases of international migration, namely, the pre-independence era and the post-independence period. Pre-independence migration is classified further into indentured labour migration (1834–1910), emigration under the kangani system (1910–35) and ‘free migration’. The chapter is organized into seven sections. The second, third and fourth sections take up the three forms of migration, namely, indentured labour, kangani and ‘free’, respectively. The fifth section is a brief discussion of migration by Indians to industrialized countries in the postindependence era. The sixth section deals in some detail with the large-scale migration of Indians to the Middle East following the Gulf boom of the mid-1970s, followed by the concluding section.

Indentured Labour from India Though Africa was by far the most significant source of the slave trade, with an annual average of about 38,000 persons being sold into slavery in the Americas and the Atlantic basin between 1821 and 1867, there is also evidence of some Indians being part of the slave trade, though to distinctly different colonial destinations. Thus, the sale of southern Indian slaves by the Dutch to French planters in Mauritius and Reunion in the latter part of the 18th century was in a sense a precursor of indenture. It is estimated that in 1800 there were about 6,000 Indian slaves in Mauritian estates, while thousands were enslaved in Reunion. Later Mauritius, having partly solved its labour shortage through the importation of Indians in the early 19th century, set a precedent that led to the formalization of the indenture system. Thereafter, indentured labour was crucial in facilitating the expansion of local colonial economies, by cutting labour costs and facilitating capital accumulation, until the early 20th century.

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As a half-way stage between slavery and free labour, indenture was different from peonage and serfdom. It was peculiarly adapted, like slavery, to the recruitment of labour through migration. It enabled imperial business enterprises to transfer cheap labour to newly developing areas, and yet restrained that labour from immediately taking hold of holdings of its own in places where unexploited land was abundantly available. Despite its temporary character—contracts under the indenture system were usually for a maximum of seven years—it did appear somewhat attractive to those who found it demeaning to become slaves. The social gulf between employers and labourers notwithstanding, it held the possibility of eventual freedom for the latter. During the 80 years of its formal existence from 1830 to 1916, the system of indenture was responsible for the transportation of more than a million Indians to provide cheap labour required for the global development of British capitalism (Tinker, 1974). Indentured labour migration to Mauritius, Natal and Fiji was part of a global process of labour migration from India, which began after the abolition of slavery. During this period, the demand for a cheap, unskilled and pliant labour force in colonies engaged primarily in sugar production was heightened, and this deficit was filled significantly by indentured labour from India in numerous colonial settlements A critical assessment of the conditions prevailing in India during British rule reaffirms the crucial connection between British expansionism and the international commoditization of Indian labour (Thiara, 1995). The significant outflow of Indian labour under the indenture system was not unrelated to the larger process of colonial commercialization that got under way in the course of the 18th and 19th centuries. The process of economic transformation following the integration of the Indian economy with and its subordination to the world commodity market through trade and investment, and the long-term impact of these processes, are well acknowledged and documented and do not merit further elaboration. However, it might not be out of place to underline the importance of locating migration within the context of this socioeconomic churning unleashed by colonial commercialization. The changes in the agrarian structure across the country following the introduction of the new tenurial system paved the way for monetization and commercialization of agriculture, and in the

298 a S. Irudaya Rajan and Prabhat Kumar

long run encouraged sub-infeudation and the proliferation of a class of agricultural labour. The decline of traditional industry in many parts of India without any significant compensating growth of modern industry resulted in the swelling of the numbers of destitute artisans into the already overcrowded agricultural sector. The successive failure of monsoons and the resultant outbreak of famines in the last quarter of the 19th century leading to very high mortality were all manifestations of the crisis of the times. Such conditions encouraged and spawned what may be described as distress-induced migration. To the poor and the destitute, migration was essentially an escape route for survival. Until 1870, Calcutta remained the main ‘coolie catchment’ centre and port of embarkation. Thereafter, the recruiters cast their net towards the United Provinces and Bihar. Increased demand for labour also resulted in the resumption of migration from Madras and Bombay in the 1840s (Tinker, 1974). Often, colonies expressed a preference for recruits from particular geographical areas of India, as illustrated by the Caribbean case, where a prejudice existed against workers from south India (ibid.).

Indentured Labour in Mauritius During the period 1834–1910, around half a million indentured Indian migrants entered Mauritius (Table 12.1). While construction work in the colonies of the Pacific and the Indian Ocean did spawn a demand for labour, yet it was primarily plantation agriculture that absorbed much of the indentured labour. In Mauritius, sugar production began in the 1790s. Rapid expansion occurred after the British conquest, as British merchant capitalists facilitated further links (Hazareesingh, 1975). With an economy highly reliant on sugar mono-culture for export where plantation agricultural production was crucial, Mauritius was the first country to receive indentured Indians in 1834. By 1838, around 25,000 Indians had arrived in Mauritius, halving the cost of slaves (Tinker, 1974). Given that the sugar industry was the main generator of public finances, its continued prosperity was vital, and the colonial state maintained conditions for profitable sugar production, primarily by guaranteeing a cheap and docile labour supply. After a brief depression immediately following abolition, sugar production expanded rapidly, rising from an annual average of 36,000 short tons during apprenticeship to 136,000 tons in the

Revisiting International Migration a 299 Table 12.1 Total Import of Indentured Labourer Immigrants, Showing Origins in Regions of the South, Classified by Destination, 1831–1920 (in Thousands) Destination British Caribbean Mauritius Reunion French Caribbean French Pacific Dutch Guiana Cuba Peru Natal Transvaal East Africa Queensland Fiji Hawaii Total % of Total




39.3 0 34.2 18.4 0 0 0 0 0 0 0 0 0 0 91.9 4.86

17.8 0.8 1.3 2.1 1 2.8 125.8 121.8 0 63.7 0 0.5 0 34.3 371.9 19.65

429.4 451.8 75.6 79.1 0 34.5 0 0 152.2 0 39.4 0 56 0 1,318 69.64

Javanese 0 0 0 0 0 19.3 0 0 0 0 0 0 0 0 19.3 1.02

Pacific Islanders 0 0 0 0 0 0 0 0 0 0 0 62.5 26.5 2.4 91.4 4.83

Source: Northrup (1955) cited in Bhattacharya (2004).

early 1860s (North-Coombes, 1990). Technical advances, the centralization of sugar milling, expansion of the cane-growing area achieved by Indian labourers and a restructuring of the labour force were factors responsible for this expansion. Plantations became the dominant form of enterprise in Mauritius. In 1913, 94 per cent of cultivated acreage was committed to sugarcane, up to 98 per cent of which was exported (ibid.). After 1880, the flow of indentured labour migration was deflected away from Mauritius, which by 1871 had an Indian population of 216,258—compared with 99,784 Creoles—constituting approximately 70 per cent of the population, a proportion that has remained constant thereafter (Tinker, 1974). After 1880, the scale of migration became smaller and was directed mainly towards Natal and the Caribbean.

Indian Indentured Labour in British West Indies In 1838, British Guiana was the first Caribbean territory to receive indentured Indians; several other Caribbean colonies began importing Indian labour in the following years. Between 1838 and 1917, around half a million Indians were brought to the Caribbean

300 a S. Irudaya Rajan and Prabhat Kumar

(Table 12.1). Indian labour stimulated a major upswing in the British West Indies sugar trade. The period 1865–84 was one of un-precedented prosperity for West Indian sugar, facilitated not only by cheap labour but also by overseas consumption, low duties and high prices, and the introduction of new technologies (Beachey, 1957). Yet the 1880s saw a rapid demise of West Indian cane sugar, due mainly to the boom in European beet sugar production. The price of West Indian cane sugar nose-dived as a consequence. This resulted in the failure of many plantations and the amalgamation of estates and their concentration in the hands of a few individuals or firms. Given the drastic constriction of the sugar industry, there was little question of labour shortage. In addition to local African part-time labourers and the estate Indian labour force, steamship services within the Caribbean carried large numbers of immigrants among colonies. Still, Caribbean planters continued to press the colonial authorities for more and more indentured Indian immigrants. Their primary motivation was to suppress agricultural wages; as long as an indentured labour force was available, free labour could make no demands on the plantocracy. While indentured labourers continued to arrive from India, migrants who had finished their contracts tended to remain in the Caribbean.

Indian Indentured Labour in Natal and Fiji In Natal, sugar production, which began in 1852 with the assistance of experienced planters and Indian workers from Mauritius, was smaller in scale than in Mauritius and the sugar industry, marked by lack of capital and technological backwardness, was limited in its significance (Brain, 1985). While Natal planters enjoyed political influence, they received little help from the colonial state planters. Less reliant on plantation production and mono-culture, Natal was marked by greater diversity in agricultural production, the mining and urban sectors also being crucial to the economy. Containing a greater magnitude of natural and human resources, Natal had more potential for economic growth and structural diversification than Mauritius. This advantage later facilitated greater diversification and a higher rate of Indian urbanization of Natal. Between 1860 and 1911, around 150,000 Indian indentured labourers are said to have arrived in Natal. Following the induction of indentured labour, production in Natal also doubled during the period from 1860 to 1864 and again from 1890 to 1894 (North-Coombes, 1990).

Revisiting International Migration a 301

In Fiji, the annexation of the island by Britain in 1874 together with the changing policies of the imperial government and general economic difficulties led to the promotion of plantation culture. Sir Arthur Hamilton Gordon, Fiji’s first governor, invited the Australian Colonial Sugar Refining Company (CSR), which predominated until the 1970s, to extend its activities to Fiji; all that was left was to secure a supply of cheap labour (Lal, 1990). After numerous experiments with labour from the Pacific Islands, Gordon turned to the reservoir of labour in India. Fiji reportedly accounted for an inflow of around 61,000 Indians between 1879 and 1916 (Gillion, 1962). While migration to Fiji was comparatively small in scale, the Indian population equalled that of indigenous Fijians. The above account testifies clearly to the crucial role of Indian indentured labour in consolidating the larger imperial interests of British capitalism in times of both boom and recession. By working at very low wages in labour-intensive plantation production, Indian labour assisted in keeping the cost of production low and thus helped the British sugar barons realize large profits. Throughout this period, shipments to various colonies under the indenture system were often suspended temporarily, following evidence of abuses involving labourers’ recruitment in India, their transport and their treatment on overseas estates (Protector of Emigrants 1875–1918, cited in Tinker [1974]). Accounts of Indian migration to the Danish colony of St Croix, for example, were so harsh that the Government of India cancelled its permission to obtain labourers after a single shipment. The system of indentured migration was brought to a halt mainly through pressures in India brought to bear by middle-class and nascent nationalist Indians (Emmer, 1986; Tinker, 1974). In addition to this, it was observed that the intense ‘intra-capitalist competition’ for cheap sources of labour ensured that ‘the monopoly of plantation capital in cheap indentured labour did not remain unexamined and unquestioned’ (Bhattacharya, 2004). It was the combination of all these factors that resulted eventually in the abrogation of the indenture system. In 1917, after numerous investigations, all new indentures were suspended for the duration of World War I. In 1920 the system was abolished completely, and the event was hailed as a redletter day throughout India, where it was regarded as a development paralleling the abolition of slavery nearly a century earlier. Table 12.1 confirms the contribution of Indian indentured labour

302 a S. Irudaya Rajan and Prabhat Kumar

to the overall system. Close to 70 per cent of labourers under this system are found to be Indians. This was also the reason why it was such an important day for Indian labour when the system was finally abolished. The indenture system gave way eventually to a system of recruitment through contracts, which was described variously as the kangani or the maistry system, especially in parts of south India. Even during the time when the indenture system was in vogue, planters in certain regions, particularly in Malaya, recruited labour under the contract or kangani system. The two systems of labour recruitment were said to have coexisted in Malaya from around the late 1860s until the second decade of the 20th century, when the indenture system was formally abolished (Satyanarayana, 2001).

The Contract or Kangani System of Labour Recruitment The so-called kangani system involved a short-term (usually 30-day) contract, generally verbal rather than written. It received its name from the peculiarly important role of the kangani, or headman, who was both recruiter and field foreman. Sent by an employer or association of estate-owners to bring back his friends, neighbours and relatives from his home district, the kangani undertook to provide food, clothing and transit for the recruits in connection with the overseas trip. Started in Ceylon, where it had entirely replaced indenture by 1910, the system was patriarchal, since the kangani was usually the senior member of a family or group to which were added other families drawn from the same vicinity. The labour force thus formed was subdivided into smaller groups, each under its own sub-kangani (sillara kangani), each holding its earnings in common and each assuming joint liability for advances made to it by the head kangani. It was often through the head kangani that all advances were made, and in all financial transactions except the payment of wages he was frequently the sole intermediary between the coolie and the employer. The coolie might, indeed, owe more to him than he owed the estate, so that in a sense the kangani actually assisted the estate in financing its labourers. To begin with, emigration to Malaya was based on the indenture system, but kangani-assisted migration was also prevalent during the same period. Similarly, migration to Burma was free and

Revisiting International Migration a 303

unassisted since its inception, but in course of time the contract/ maistry system of labour recruitment became dominant. The contract labour system contained many elements of unfreedom. It can be argued that no arbitrary distinction between freedom and unfreedom is possible in the study of labour migration. Both these aspects were present in labour relations throughout the 19th and 20th centuries. For instance, due to the introduction of the kangani system, the abolition of the government-regulated indenture system in 1910 in Malaya did not necessarily usher in a free plantation labour force. Likewise, the unaided, free and voluntary migration to Burma did not grant real freedom to labourers, because under the maistry system there were innumerable possibilities for labour enslavement. Nevertheless, the maistry and kangani systems of labour recruitment represented a unique caste/cultural arrangement. Interestingly, these labour intermediaries had an overwhelming presence in the landscape of capital–labour relations and acted as the chief mediators between the employers and the employees. They were an integral part of the caste/clan system of local society of south India. They were also, indeed, the crucial links in incorporating the rural economy of south India into the plantation and urban economies of South-East Asia in the 19th and 20th centuries. They undoubtedly acted as important agents of regular, continuous and unbroken streams of labour migration. Poor economic conditions and an unfavourable agricultural environment compelled the emigration of labourers from the lower castes/classes. It was a sort of ‘shovelling out of paupers’. Especially for the lower Sudra and depressed castes, emigration also meant fleeing from caste oppression. Migration to South-East Asia did provide them better opportunities and potential social mobility that were denied to them in their native places. As casual labourers/ coolies in Burma and Malaya, they were able to earn relatively higher wages. In many respects, lower-caste labour communities were better able to respond positively to opportunities abroad. Many of them also emigrated because friends and relatives who had previously been to South-East Asia had told them of the higher wages obtainable there and assured them that employment could be found easily (Satyanarayana, 2001). Emigration of labourers to South-East Asian countries in the 19th and 20th centuries followed a definite regional and linguistic pattern. Burma attracted Telugu labourers, mostly from the districts

304 a S. Irudaya Rajan and Prabhat Kumar

of Ganjan, Vizapatam, Godavari and Kistna, who accounted for about 25 per cent of the 0.522 million Indian population enumerated in Burma in 1931 (Satyanarayana, 2001). Malaya was the destination for Tamil labourers; close to 90 per cent of the 0.583 million in 1931 hailed from Trichinopoly, Tanjore, Salem, South and North Arcot districts. Telugus were the second largest ethnic group among the Indian immigrants in Malaya in 1921. Migration to and from Burma was seasonal. Migration to Burma increased from an average of 35,000 a year in the late 1880s to over 100,000 in the early 1900s, and further to over 150,000 by the mid-1920s. The number of persons returning from Burma showed a corresponding increase from about 35,000 in the late 1890s to around 110,000 in the early 1910s. The numbers were slightly lower for Malaya: around 20,000 a year in the late 1880s to around 50,000 in the early 1900s and 1920s. But emigration to Malaya, unlike to Burma, was marked by wide fluctuations: 110,000 migrated in the early 1910s, less than 50,000 in 1914 and over 150,000 in 1926 and 1927. The communities emigrating to South-East Asian countries were non-Brahmin castes, such as Kapu, Nayudu, Kamma, Reddy, Padayachi and Vellala. Emigration seems to have instilled a sense of independence, equality and dignity among the lower castes, and returned emigrants were better off than before. One effect of this method of securing Indian labour was to encourage the transplantation of Indian culture to new regions. In Ceylon and Malaya, the south Indian coolie acquired a paternalistic security that he did not have in India. It enabled him to live within his own community, among neighbours and relatives from his homeland, without greatly disturbing his native customs. This was particularly true of Ceylon, where the proportion of women among the migrants was high, where each plantation usually had a Hindu temple, where the Indian diet was maintained, the same costumes worn and the native language spoken. The migrants had little relation with the natives, whether Singhalese or Malayan, and scarcely ever inter-married with them. Their exodus therefore led to the formation of little Indias in the new lands. Unlike the Chinese, they migrated to survive rather than to climb socially. The Chinese emigrant left his country in order to enrich himself, to rise to the position of businessman or landowner, but the Tamil emigrant under the kangani system left his country in order to survive.

Revisiting International Migration a 305

‘Free Migration’ The formal abolition of the kangani system was brought about by the Sastri report of 1936. The kangani system gave way to free migration. This system may be regarded as a major breakthrough in the emigration stream from India, as migration under it was an individualistic and not a group-based decision. All along during the continuous stream of migration, there had been a parallel stream of individual migration as well. This comprised an army of petty contractors, merchants, bankers, shopkeepers and pedlars. They knew how to cater to the special needs and exploit the peculiar weaknesses of Indian labourers. They were free emigrants in every sense of the word. Generally of higher caste than those who had gone as contract labourers, they came on their own resources, usually with a small capital and a wide experience in the kind of trade they sought to practise. They were Chettiars from Madras, Marwaris from Rajputana, Baniyas from the United Provinces and Pathans from the north-west. They started their business once they found that a given place had a sufficient number of Indian indentured labourers to sustain their occupation. Thus, they had been migrating from the middle of the 19th century. They included Muslims in large numbers, larger than was usual among Indian emigrants; and they were more accustomed to travel and more resourceful, ambitious and aggressive. They lent money at usurious rates to small Indian agriculturists, took mortgages on their lands, sold them trinkets, imported Indian sweets and jewellery, acted as intermediaries, organized commercial transportation and, in general, played the role of petit bourgeoisie in the Indian community. The success of these middlemen was phenomenal. Many of them became rich and, after the habit of orientals everywhere, attempted to invest their savings in land. They also pushed on into new territories, thus giving a wider spread to the already widely dispersed Indian migration. One group of persons from India that deserves special attention is the Sikhs. Their migration during the pre-independence period was different from that of other communities in India because, unlike indentured Indian labourers, they were free migrants. The British regarded them as a martial race and they were recruited in large numbers into the armed forces. They were rewarded for their loyalty at the time of what is contentiously called ‘India’s first war of independence’, when they helped suppress the revolt

306 a S. Irudaya Rajan and Prabhat Kumar

by fighting bravely against Hindus and Muslims. At the time of World War I, as many as 150,000 Sikhs were enlisted in the British army. The availability of fertile lands due to the huge canal projects undertaken in the state of Punjab provided Punjabis with the wherewithal (money earned from agriculture) to travel outside the country. They had seen other parts of the world while serving the British army abroad, and hence some of them who preferred the life abroad settled down in various parts of the world. For a community that forms a mere 2 per cent of the Indian population, their presence is quite remarkable among the Indian diaspora. Overall, migration from India acquired momentum following the abolition of slavery in 1833 through an act of British parliament. Thereafter, a more or less steady growth in migration occurred over time. Though the volume of migrants remained high in relative terms, the proportion of the population migrating was low, especially when compared with those of other countries of the world. Of the 30 million migrants who left the country before independence, an estimated 24 million returned to the country (see Table 12.2). Various causes have been attributed to this trend of significant return migration. These range from unfamiliar cultural environment to hostility from the natives, among other factors (Thiara, 1995; Vertovec, 1995). The foundation of the migration streams from India had already been laid by the time India attained independence. Certainly the changed political equations within and outside the country had a role to play in the future of migration from India, and so did the change in the world economy. Two clearly different kinds of labour migration from India have been taking place since independence: (a) persons with technical skills and professional expertise migrating to countries such as the USA, Canada, the UK and Australia as permanent migrants (since the early 1950s); and (b) unskilled and semi-skilled workers migrating to the oil-exporting countries of the Middle East on temporary contracts, especially following the oil price increases of 1973–74 and 1979. These are taken up in the next two sections.

Migration to Industrialized Countries: Magnitude and Composition Labour flows to the industrialized countries have continued for a long time, but information on them is negligible. Whatever analyses

Revisiting International Migration a 307 Table 12.2 Estimated Total Migration to and from India, 1834–1937 (in Thousands) Year 1834–35 1836–40 1841–45 1846–50 1851–55 1856–60 1861–65 1866–70 1871–75 1876–80 1881–85 1886–90 1891–95 1896–1900 1901–05 1906–10 1911–15 1916–20 1921–25 1926–30 1931–35 1936–37 Total

Emigrants 62 188 240 247 357 618 793 976 1,235 1,505 1,545 1,461 2,326 1,962 1,428 1,864 2,483 2,087 2,762 3,298 1,940 815 30,192

Returned migrants 52 142 167 189 249 431 594 778 958 1,233 1,208 1,204 1,536 1,268 957 1,482 1,868 1,867 2,216 2,857 2,093 755 24,104

Net migrants 10 46 73 58 108 187 199 198 277 272 337 257 790 694 471 382 615 220 546 441 –153 60 6,088

Source: Davis (1951).

have been carried out to date on the composition of these flows are based on immigration statistics of the destination countries. The USA received the largest number of Indian emigrants (Khadria, 1999; Nayyar, 1994). The general trend indicates that Indian immigration, which was a negligible proportion of the total immigrants in the USA and Canada, increased rapidly during the 1960s and the 1970s (Table 12.3). In 2001, Indians constituted about 4.0 per cent and 5.7 per cent of the total immigrants in the United States and Canada, respectively, and these rates seem to have stabilized by the end of the 20th century. In comparison, the proportion of Indian immigrants to the UK declined sharply from around 20 per cent during the 1960s to about 10 per cent during the 1980s. Migration flows to industrialized countries during the 1990s, considered the most critical phase of contemporary globalization,

308 a S. Irudaya Rajan and Prabhat Kumar Table 12.3 Migration from India to USA, Canada and UK, Selected Years, 1951–2003 Years 1951 1955 1961 1965 1971 1975 1981 1985 1991 1995 2000 Total (1951–2003)

United States of America 109 194 421 582 14,310 15,773 21,522 26,026 45,064 34,748 42,046 1,411,000

Canada 120 224 568 2,241 5,313 10,106 8,263 4,038 12,850 16,254 NA 322,215

United Kingdom NA NA 17,100 16,700 19,100 23,100 6,590 5,500 5,680 4,860 8,045 467,634

Source: Nayyar (1994) and, accessed on 5 March 2009.

are of great importance for both theoretical and policy reasons. However, hardly any detailed analysis exists of the changing nature of this flow. We collate the latest information pertaining to Indian immigration flows to the industrialized world with a view to examining the trends in the 1990s. The information in relation to three major destinations, the USA, the UK and Canada, is presented in Tables 12.3 and 12.4. It is evident that the annual inflow of Indian immigrants into the USA and Canada increased in the 1990s. The average annual inflow of Indian immigrants to the USA increased from 26,184 persons during the 1980s (3.5 per cent of total immigrants) to 38,330 during the 1990s (4.5 per cent of total immigrants). In the case of Canada, the average annual inflow of Indian immigrants increased from 7,930 during the 1980s (6 per cent of total immigrants) to 13,770 during the 1990s (7 per cent of total immigrants). Another striking feature of migration flows from India to the industrialized nations during the 1990s was the growing importance of newer destination countries. This period witnessed a significant flow of Indian professionals, especially IT professionals, to countries such as Australia, Germany, Japan and Malaysia. For instance, nearly 40,000 Indians migrated to Australia, accounting for 4.1 per cent of total immigrants. Migration from India to industrialized counties, though modest in scale, grew steadily between

Revisiting International Migration a 309 Table 12.4 India’s Share in Total Immigration to USA, Canada and UK Immigration to USA From India From all countries India’s share (%) Canada From India From all countries India’s share (%) United Kingdom From India From all countries India’s share (%)




1981–90 2001 (Total)

2,120 31,214 172,080 261,841 1,284,000 2,515,000 3,322,000 4,493,000 7,338,000 31,811,000 (0.1) (0.9) (3.8) (3.6) (4.0) 2,802 25,722 72,903 79,304 1,574,841 1,409,677 1,440,338 1,336,767 (0.2) (1.8) (5.1) (5.9) NA NA NA

125,600 635,000 (19.8)

83,040 732,900 (11.3)

51,480 516,870 (10.0)

322,215 5,647,125 (5.7) 467,634 4,896,581 (9.6)

Source: Nayyar (1994) and

1950 and 2000. Nearly 1.25 million Indians have migrated to the principal destinations. The flow was especially impressive during the 1990s, a period that, incidentally, witnessed a tightening of immigration policies in many industrialized countries. The average inflows of Indian immigrants to these principal destinations in fact increased from around 10,300 persons per annum in the 1950s to around 60,000 persons per annum during the 1990s.

Occupational Distribution and Skill Composition A look at the figures relating to the occupational distribution of Indians immigrating to industrialized countries shows that in the first half of the 1970s, persons with professional expertise, technical qualifications and managerial talents constituted a large proportion of the emigrant workforce from India to the USA, but their share declined over time. In Canada also, between 1971 and 1990, the share of professional, technical, entrepreneurial, managerial and administrative occupational groups declined (Table 12.5 and 12.6). However, the share of white-collar workers (clerical, sales and service) remained almost unchanged, and the share of workers engaged in farming, horticulture and animal husbandry rose significantly. During the 1950s and the 1960s, a significant proportion of persons who migrated to the UK and, to some extent, to Canada, were unskilled or semi-skilled workers. During the 1970s and the 1980s, however, much of the emigration

Source: Same as Table 12.3.

Professional and technical Executive, administrative and managerial Clerical and administrative support Sales Service Farming, forestry Skilled workers Total with occupation No occupation or occupation not reported Total immigration

Occupation group

1971–75 31,623 (43.4) 1,503 (2.1) 1,620 (2.2) 375 (0.5) 800 (1.1) 214 (0.3) 1,637 (2.2) 37,772 (51.8) 35,140 (48.2) 72,912 (100.0)

20,586 (26.9) 3,574 (4.7) 2,491 (3.3) 704 (0.9) 788 (1.0) 1,311 (1.7) 2,512 (3.3) 31,966 (41.8) 44,595 (58.2) 76,561 (100.0)


15,461 (15.7) 5,059 (5.2) 2,326 (2.6) 1,317 (1.3) 2,115 (2.2) 2,675 (2.7) 2,823 (2.9) 31,776 (32.4) 66,403 (67.6) 98,179 (100.0)


Number of persons (percentages)

Table 12.5 Immigration from India to USA by Major Occupation Group, 1971–90

(13.5) (5.8) (2.8) (1.4) (4.5) (3.3) (2.5) (33.8) (66.2) (100.0)

1986–90 19,160 8,292 3,982 1,989 6,453 4,646 3,583 482 94,035 142,140

310 a S. Neelakantan

Source: Same as Table 12.3.

Professional and technical Executive, managers and administrators Clerical and sales Service Farming, forestry and animal husbandry Skilled workers Occupation not classified Total workers Total non-workers Total immigration

Occupation group (11.1) (1.3) (5.5) (1.3) (4.8) (14.0) (4.2) (42.3) (57.8) (100.0)

1971–75 4,721 567 2,337 549 2,063 5,956 1,814 18,007 24,625 42,632

1,070 (3.5) 210 (0.7) 800 (2.6) 179 (0.6) 454 (1.5) 955 (3.2) 3,694 (12.2) 7,362 (24.3) 22,909 (75.7) 30,271 (100.0)

1976–79 914 (2.8) 221 (0.7) 484 (1.5) 236 (0.7) 1,225 (3.7) 790 (2.4) 6,139 (18.8) 10,009 (30.6) 22,648 (69.4) 32,657 (100.0)


Number of persons (percentages)

Table 12.6 Immigration from India to Canada by Major Occupation Group, 1971–90

1986–90 974 (2.1) 687 (1.5) 774 (1.7) 432 (0.9) 2,208 (4.7) 1,899 (4.1) 9,430 (20.2) 16,404 (35.2) 30,243 (64.8) 46,647 (100.0)

Evolution of Land Rights in India a 311

312 a S. Irudaya Rajan and Prabhat Kumar

was made up of persons with professional expertise, technical qualifications or managerial talents and of white-collar workers who were also educated. Such a skill composition continued to dominate the migration flows during the 1990s as well (Nayyar, 1994).

Migration to the Middle East: Magnitude and Composition The oil price increases of 1973–74 and 1979 led to enormous growth in the demand for foreign labour in the oil-exporting countries of the Gulf. In response, labourers from India began to migrate in large numbers and the flow still continues. The scale of labour movements into the Gulf was linked intimately to the escalation in oil revenues, the unprecedented rate of investment in the domestic industry and infrastructure of the oil-producing states of the Gulf region, and the shortage of domestic labour in them. Overall, the number of migrant workers in these countries increased from 800,000 in 1972 to 1.71 million in 1975, and further to an estimated 2.82 million by 1980 (Birks and Sinclair, 1980; Demery, 1986). Foreign workers’ share in total employment in the six member countries of the Gulf Cooperation Council (GCC, comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates [UAE]) rose from 50.5 per cent in 1975 to 70 per cent by 1980—49 per cent in Oman, 59 per cent in Bahrain, 78 per cent in Kuwait and 89 per cent in Qatar and the UAE. The Ministry of Labour, Government of India, has been the primary source of information on year-wise out-migration. Section 22 of the Emigration Act (1983) provides that no citizen of India shall emigrate unless he/she obtains emigration clearance from the Protector of Emigrants. However, the act exempts some categories of persons. Therefore, this data set is partial, as it includes only the number of those who require and actually obtain emigration clearance while migrating abroad to seek employment. Over and above this problem, the outflow of this proportion of the labour force to the Middle East has been on the increase from the mid1980s for two reasons: (a) change in demand composition in the Middle East labour market in favour of skilled labour; and (b) bringing in of more and more sections of persons under the category not requiring clearance. The partial nature of these data is compounded further by illegal migration, which does not get reflected in statistics. The main modus operandi has been the manipulation of tourist and business visas. Persons with passports

Revisiting International Migration a 313

endorsed under the category emigrant check required (ECR) have to obtain ‘suspension’ from the requirement to obtain emigration clearance if they intend to travel abroad for non-employment purposes. While provisions have been made to safeguard against the misuse of ‘suspension’, it is common knowledge that considerable numbers of persons who go to the Middle East after obtaining ‘suspension’ do not return and manage to secure jobs there through networking with their relatives or acquaintances. The data on such migrants are not available. Therefore, in general, we may state that although the data set suggests the broad trend, it under-represents the size of out-migration. Trends in the annual outflow of migrant labour from India to the Middle East for the period 1976 to 2001, based on the available statistics (although underestimated), are outlined in Table 12.7. The data show that out-migration increased at a phenomenal rate through the late 1970s, peaking in 1981. From 1979 to 1982, nearly 234,064 persons migrated per annum from India to the Middle East for employment purposes. The period during 1983–90, however, witnessed a significant reduction in the number of Indian workers migrating to the Middle East, with the average number of persons migrating per annum declining to 155,401. This decline may be attributed mainly to the reduction in demand for migrant workers in the Middle East, emanating primarily from the oil glut of the early 1980s. Viewing this trend, apprehensions were expressed in many quarters as to whether Indian labour migration to the Middle East would be sustained in a significant manner over the next couple of decades. These apprehensions were aggravated further by the events relating to the Gulf crisis of 1990, which forced nearly 160,000 Indians to return home from the war zones in distressed conditions (Sasikumar, 1995). Contrary to apprehensions of declining out-migration, evidence indicates that labour migration from India to the Middle East has picked up substantial momentum since the initial hiatus in the early 1990s. During 1992–2001, nearly 360,000 persons per annum migrated from India to the Gulf countries. This is significantly higher than the quantum of labour outflows from India during the ‘Gulf boom’ of the late 1970s and early 1980s. The data on emigration clearances by country of destination for the period from 1990 to 2001, presented in Table 12.8, show that Saudi Arabia and the UAE have been the principal destinations for Indian migrants during the last two decades. In fact they account for about 55 per cent of total Indian emigration to the Middle East.

26 20 65 10 60 30 100 152 38 501

(5.19) (3.99) (12.97) (2) (11.98) (5.99) (19.96) (30.34) (7.58) (100)

1979 30 50 115 40 100 40 270 250 21 916

Source: Ministry of External Affairs, Government of India.

Bahrain Iraq Kuwait Libya Oman Qatar Saudi Arabia UAE Others Total


(3.28) (5.46) (12.55) (4.37) (10.92) (4.37) (29.48) (27.29) (2.29) (100)


77 (7.03) 35 (3.19) 100 (9.12) 25 (2.28) 184 (16.79) 50 (4.56) 380 (34.67) 225 (20.53) 20 (1.82) 1,096 (100)


100 (6.4) – 88 (5.85) 12 (0.8) 220 (14.62) 75 (4.98) 600 (39.87) 400 (26.58) 10 (0.66) 1,505 (100)


Table 12.7 Estimates of the Indian Migrant Population in the Middle East (in Thousands)

130 (4.23) – 280 (9.12) – 340 (11.07) 120 (3.91) 1,200 (39.09) 1,000 (32.57) – 3,070 (100)


314 a S. Neelakantan

Revisiting International Migration a 315 Table 12.8 Number of Emigration Clearances Granted by Countries of Destination, 1990–2001 Country Bahrain Kuwait Oman Saudi Arabia UAE Singapore Others Total




6,782 1,077 4,267 79,473 11,962

15,622 26,981 29,056 269,639 77,066

16,647 14,580 30,113 214,068 112,644

10,004 143,565

19,974 438,338

26,162 414,214

1999 14,905 19,149 16,101 27,160 79,269 19,468 23,500 199,552

2001 16,382 39,751 30,985 78,048 53,673 27,886 18,110 264,835

Source: Ministry of Labour, Government of India.

Within India, migration to the Middle East originates from a number of states. A detailed review of the migration literature in India, however, reveals that Kerala has always had a dominant position in terms of the export of manpower to the Middle East. International labour migration has been so integral to Kerala’s economy and society that it is viewed as ‘the single most dynamic factor in the otherwise dreary employment scenario of the socially well-developed state during the last quarter of the twentieth century’ (Zachariah, Kannan and Rajan, 2002). It may also be appropriate to mention here that many of the available studies on international labour migration from India focus largely on Kerala. Hence, the empirical support for many of our arguments is based on evidence from Kerala. A macro perspective on the relative importance of the different states in relation to labour migration to the Middle East can also be obtained from the emigration statistics, which, as mentioned earlier, relate to unskilled workers who require emigration clearances (keeping in mind the likely underestimation). The data for emigration clearances is presented in Table 12.9. Three states, Kerala, Tamil Nadu and Andhra Pradesh, together contribute about 55 per cent of those who have obtained emigration clearance. In terms of the share of these prominent states, there has been a steady decline in Kerala’s contribution and an increase in the share of Tamil Nadu and Andhra Pradesh. This could also mean that larger numbers of persons who migrate from Kerala are now engaged in skilled/professional activities in the Middle East, whereas there is a larger outflow of unskilled labourers, who require emigration

64 109 73 19 22 29 25 135 475

(13.37) (22.94) (15.28) (4.05) (4.68) (6.04) (5.33) (28.31) (100)


Source: Ministry of Overseas Indians, 2009. Note: ∗Figures up to 31 March 2009.

Kerala Tamil Nadu Andhra Pradesh Karnataka Gujarat Maharashtra Punjab Rest of India Total

State 125 117 48 75 50 29 24 80 549

(22.79) (21.33) (8.84) (13.73) (9.10) (5.34) (4.39) (14.49) (100)

2005 120 156 98 24 13 15 39 211 677

(17.74) (22.99) (14.43) (3.60) (1.96) (2.27) (5.81) (31.20) (100)

2006 150 151 105 27 20 21 54 281 809

(18.59) (18.64) (12.98) (3.34) (2.48) (2.66) (6.66) (34.66) (100)

2007 181 129 98 22 16 25 54 324 849

(21.29) (15.18) (11.49) (2.64) (1.85) (2.92) (6.42) (38.20) (100)


Table 12.9 Workers Granted Emigration Clearance, by Major States of India, 2004–09

35 23 19 5 3 5 7 72 171

(20.58) (13.33) (11.12) (3.22) (1.69) (3.20) (4.38) (42.48) (100)


316 a S. Neelakantan

Revisiting International Migration a 317

clearance, from the other states (Zachariah, Mathew and Rajan, 2002; Zachariah, Nair and Rajan, 2002; Zachariah, Prakash and Rajan, 2002).

Conclusions Imperial needs required substantial migration of labour from India to the plantation colonies in the West Indies, Ceylon, South-East Asia, Mauritius, Fiji and South Africa. The bulk of these migrants comprised indentured labourers. Kingsley Davis estimates that about 30 million Indians emigrated between 1834 and 1947 (Davis, 1951). This scale of movement was as large as the European migration to the Americas in the 19th century, but about 24 million of these migrants returned to India. However, migration of significant numbers did continue between India and Ceylon, Africa and South-East Asia, mostly in the form of unskilled labour. The migration in colonial times can be regarded as primarily a coping strategy on the part of the poor migrants in an economy where agriculture was failing. In the post-independence period, the ‘Gulf boom’ and the information technology (IT) revolution have played important roles in migration from India. While in the early 1950s and the 1960s, it was just the professionally qualified persons who migrated from India, the Gulf boom opened up the Middle East for unskilled and semi-skilled migrants from India, especially from south India. The IT revolution has ensured that Indians are in demand as ‘knowledge workers’ throughout the world. Migration has brought rich dividends to India in the form of remittances. However, the lack of a good database on migrants from India inhibits a systematic analysis of the issues.

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Revisiting International Migration a 319 Tinker, H. 1974. A New System of Slavery: The Export of Indian Labour Overseas 1830–1920, London: Oxford University Press. Vertovec, S. 1995. ‘Indian Indentured Migration to the Caribbean’, in R. Cohen (ed.), The Cambridge Survey of World Migration, Cambridge: Cambridge University Press, pp. 57–62. Zachariah, K. C., K. P. Kannan and S. Irudaya Rajan (eds). 2002. Kerala’s Gulf Connection: CDS Studies on International Labour Migration from Kerala State in India, Thiruvananthapuram: Centre for Development Studies. Zachariah, K. C., E. T. Mathew and S. Irudaya Rajan. 2002. ‘Consequences of Migration: Socioeconomic and Demographic Dimensions’, in K. C. Zachariah, K. P. Kannan and S. Irudaya Rajan (eds), Kerala’s Gulf Connection: CDS Studies on International Labour Migration from Kerala State in India, Thiruvananthapuram: Centre for Development Studies. Zachariah, K. C., P. R. Gopinathan Nair and S. Irudaya Rajan. 2002. ‘Returning Home: Problems and Potentialities’, in K. C. Zachariah, K. P. Kannan and S. Irudaya Rajan (eds), Kerala’s Gulf Connection: CDS Studies on International Labour Migration from Kerala State in India, Thiruvananthapuram: Centre for Development Studies. Zachariah, K. C., B. A. Prakash and S. Irudaya Rajan. 2002. ‘Working in Gulf: Employment, Wages and Working Conditions’, in K. C. Zachariah, K. P. Kannan and S. Irudaya Rajan (eds), Kerala’s Gulf Connection: CDS Studies on International Labour Migration from Kerala State in India, Thiruvananthapuram: Centre for Development Studies.

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PART IV A Critical Theoretical Perspective a By critically evaluating the status and trajectory of the discipline of modern Indian economic history, ‘Pathways to India’s Economic Past’ by K. T. Rammohan is a particularly useful contribution to historiography, both in terms of providing a much-needed introspective thrust and, importantly, in helping to locate the essays in this volume within the broader context of the emerging methodological trends of the discipline. Departing from the growing perception that economic history is in a state of crisis, this article is inclined to argue that it is currently in a moment of experimentation and resurgence. The crisis, if any, was limited to practitioners of cliometric history, which held sway mainly in the United States of America and Europe. Elsewhere, there are clear signs of robustness in economic history, as reflected in the repositioning of objects of inquiry, the reassessment of conceptual frameworks and engagement with new analytical grids. The chapter affirms the robustness of economic history by taking the case of the economic historiography of post-1850 India. India is an apt choice for the experimental moment because of its sheer size and the presence of diverse sub-regional micro-economies generating multiple trajectories of development. Its relatively long modern history, extending over two centuries, and the largely unbroken record of debates on economic change, also facilitate this process. Covering almost four decades of the evolution of the discipline, the chapter subjects the dominant theoretical paradigms of the 1960s and 1970s, namely, the nationalist economic, Marxist politicaleconomic and the neoclassical economic paradigms, to critical scrutiny with respect to their central propositions, political-ideological lineages and analytical categories and methods. It then moves on

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to focus on the intermediate phase of the 1980s and 1990s, a phase marked by advances in historiography and the resultant unease with positivist historiography. The concluding section focuses on the recent, emerging trends in economic history as reflected in the shift away from grand macronarratives to sub-regional and micro-histories. This is evident from the increasing use of the methods of ethnography and oral history and an engagement with literary sources. At a certain level, this is an outcome of the growing realization of the limitations of mere quantitative analysis given the nature and quality of the data. While there is now a deeper understanding of the many gaps in the history of colonial India, there is also a growing awareness of the need to explore the post-independence economic histories of continuities and discontinuities in structures, processes, relationships and actors. That this volume of essays has made a small beginning in filling some of these gaps becomes evident when the essays are viewed in the context of this concluding chapter.

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Chapter 13 Pathways to India’s Economic Past∗ K. T. Rammohan This chapter traces the trajectory of thinking on the economic history of modern India. India is a compelling choice for such an exercise for several reasons. First, the space and the people: given the geographical spread and the size of the population, the economic history of India represents the history of an overwhelming segment of the world economy. Second, the global interconnections: the economic history of India is not an insular area of study turned in upon itself. India’s economic past is linked inextricably with the economic history of the Arab world and Europe. Third, the internal heterogeneity: India encompasses immensely diverse sub-regional economies and micro-economies that yield multiple trajectories of development. Fourth, the long and continuing tradition of scholarly debate: the subcontinent has a history of debates on economic change that spans over a century and a half, with identifiable phases and distinctive frameworks of analysis. Fifth, the present transdisciplinarity: recent historical writings on the economy are located in the interstices of various social sciences, including political economy, human geography and social anthropology. Finally, the tradition of unhesitating auto-critique: after decades of fiery polemics, the economic history of India has now come to recognize the limits to understanding the economic past, yielding thereby many lessons for any inquiry into the past. The present inquiry into the history of the economic history of India is organized into five sections. The first section outlines the paradigms1 that ruled in the 1960s and 1970s when systematic academic inquiries into the economic history of modern India began to appear.2 The second section explores the feasibility of the cliometric path to India’s economic past. The third section captures the scholarly conversations from the 1980s to the 1990s, when ∗ I am deeply indebted to Raman Mahadevan for critical comments on an earlier draft of this paper.

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the contentions of the ruling paradigms were subjected to critical review, attempts made to chart the so-called mid-way of analysis, and new social histories of the economy were produced with inputs from social anthropology and political science.3 The fourth section probes the link between economic history and subaltern studies, the most remarkable project in the historiography of South Asia. The concluding section identifies the signposts of a future economic history of India.

Paradigms of the Past The impact of British colonialism on Indian society was a theme that evaded consensus. Besides ardent loyalists and hostile opponents, there were many who viewed it as a mixed blessing, with differences on the nature of this ‘good–bad mix’. Some among the British themselves were severely critical of the colonial project. Marx and many liberal thinkers in England were ambivalent on the question. Within India, the measures painstakingly initiated by British administrators created certain social and economic groups like landlords, mostly upper castes, as pillars of support for the colonial economy and administration. Also, there were a few other sections of Indians, professionals and high officials, who were by and large appreciative and supportive of colonial governance. Yet it was also the case that the early nationalist thought was articulated by the new urban elite born of these groups.4 The new elite were based predominantly in and around the presidency cities of Bombay, Calcutta and Madras, besides other towns like Pune and Allahabad, and to a lesser extent in the princely capitals.5 Preeminent in the pre-British social and economic order, this class, by acquiring English education, had managed to retain or regain local supremacy. From 1857, with the establishment of universities in the three presidency capitals, the class began expanding. A large number of Indians were thus equipped to explore the condition of India’s economy. They were groomed to participate in civil society debates occurring in both India and Britain on the economic impact of colonial rule. Some of the pioneering nationalist writings were in local languages, especially in Marathi. As early as 1843, Ramakrishna Vishwanath published a book on the Indian economy in Marathi. This was followed by Lokhitwadi Gopal’s Lakshmidyan published

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in 1849 (Hatekar, 2003). By the first decade of the 20th century, economic journals in local languages—in Malayalam, for instance, Lakshmivijayam and Janmi—had begun to appear. These identified with regional and national economic interests, and/or with the interests of specific classes. From the 1870s, a steady stream of writings in English also began to flow in, the most famous of which are Dadabhai Naoroji’s collection of speeches and writings through three decades entitled Poverty and Un-British Rule in India published in 1901, and Romesh Chunder Dutt’s two-volume The Economic History of India published during 1902–04. Mahadev Govind Ranade’s Essays on Indian Economics published in 1898, G. Subramania Iyer’s Some Economic Aspects of British Rule in India brought out in 1903 and G. V. Joshi’s essays on India’s economic situation written mostly around this time were also greatly influential in shaping nationalist economic thought.6 The nationalist writings considered India an advanced civilization but a backward economy. Drawing on contemporary theories of political economy and collating supportive statistics, these writings sought to affirm that British colonialism had impoverished the Indian economy. Besides spatial comparison with England, temporal comparisons were made with India’s own economic past, that is, the economic conditions of the pre-British period. Interest in political economy led these writers to focus on issues of production and distribution of wealth. The idea of drain of economic surplus from India to Britain—causing India’s economy to retard and Britain’s to grow—formed the central thrust of the early nationalist perspective.7 Dutt’s Economic History of India presents the nationalist stance and the contending position taken by British colonialists: What are the causes of this intense poverty and these repeated famines in India? Superficial explanations have been offered one after another, and have been rejected on close examination. It was said that population increased rapidly in India, and that such increase must necessarily lead to famines; it is found on enquiry that the population has never increased in India at the rate of England, and that during the last ten years it has altogether ceased to increase. It was said that Indian cultivators were careless and improvident, and that those who did not know how to save when there was plenty, must perish when there was want; but it is known to men who have lived all their lives among these

326 a K. T. Rammohan cultivators, that there is not a more abstemious, a more thrifty, a more frugal race of peasantry on earth. It was said that the Indian moneylender was the bane of India and by his fraud and extortion kept the tillers of the soil in a chronic state of indebtedness; but the inquiries of the latest Famine Commission have revealed that the cultivators of India are forced under the thraldom of money-lenders by the rigidity of the government revenue demand. It was said that in a country where the people depended almost entirely on their crops, they must starve when the crops failed in years of drought; but the crops in India, as a whole, have never failed, there has never been a single year when the food supply of the country was insufficient for the people and there must be something wrong, when failure in a single province brings on a famine, and the people are unable to buy their supplies from neighbouring provinces rich in harvests. (R. C. Dutt, 1990, pp. v–vi)

The imperialist perspective, on the other hand, either denied any substantive effect or emphasized the positive effects of British rule. It was a mix of two views: of imperial benefaction and imperial innocence. It viewed British rule as conducive to India’s economic growth; if backwardness still persisted, it was due to factors internal to India. These were seen to include, besides population size and physical geographic conditions, the shyness of capital, the nature of family organization, the community ethos and social values. A third view, the Marxist view that coincided with the spread of communist ideology, emerged relatively late, in the 1920s. The pioneering Marxist text on colonial Indian economy is Rajani Palme Dutt’s India Today (1986 [1940]). Despite being a full-time activist of the British communist party, Dutt’s work was constrained by the dictates of political correctness. As Bhattacharya (2007, p. 10) notes in relation to Dutt’s discussion of the labouring classes in India: ‘[he] was content to posit a category of the Indian proletariat on classical Marxist lines, without exploring their specifics. The theory and practice of the Communist International allowed for little else.’ In the academies, beginning from the 1960s, the contending perspectives of the earlier period were forged into paradigms. Available economic historiography (most recently, Roy [2004b]) concerns itself mostly with how ideology shaped the different paradigms. It is therefore worth exploring the influence of other critical components of economic historiography, especially economic theory. The three paradigms that rose to prominence were the nationalist

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economic, the Marxist political-economic and the Cambridge paradigms.8 Each of these had distinct theoretical economic lineages and orientations. The nationalist paradigm was inspired broadly by political economy—not always or strictly Marxist political economy. Even more, its roots lay in nationalist economics as propounded by Friedrich List and the German historical school. The Marxist economic historians drew on successive radical theories of economic conditions in colonies, beginning from Marx. The Cambridge paradigm, which contrasted sharply with both these, drew upon two analytical streams: from economics, neoclassical economic theory, and from history, the Cambridge school. Importantly, however, in terms of the philosophical–methodological premises of historiography, with a few differences in emphasis, all three genres shared the domain of positivist historiography. The nationalist paradigm was somewhat shy of economic theorizing. In fact, it was left to the Marxist economic historians to draw upon the nationalists’ observations and provide them a certain theoretical rigour. The central argument of the Marxists was that British colonialism had turned India into a site of underdeveloped capitalism, marked by external dependency and sustained economic backwardness. Colonial economic interests destroyed the local economy of independent handicraft workers and self-sufficient peasants. They directed domestic economic activity into export-oriented agriculture and factory industry, both having low potential for employment. The few dynamic features of colonially induced capitalism—like the development of railways—were functional to the needs of the British economy. In taking this stance, the Marxist economic historians of India departed boldly from Marx’s assumption of the normalcy of the destructive effects of capitalism in India, and his optimistic faith in the virtuous effects of capitalism in the long run. How did neoclassical economic theory fashion Cambridge economic historiography? Neoclassical economics centralizes issues of supply and demand in understanding an economy. Its interest lies not in issues of the origin of surplus and its distribution among different social groups and the associated relations of power, as is the wont of political economy. Rather, its concerns are confined mostly to the question of the technical fulfilment of inputs that sets the market right and yields economic growth.9

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The Cambridge economic historiography chose to situate economic change in British India in the interstices of resources, market and risk behaviour. Conspicuously missing from its economic analysis were the political relations of power. It affirmed that India’s slow economic growth was due to internal factors—a combined outcome of low savings and capital formation, inadequate development of the market, the poor quality of labour, demographic pressure, static technology and scant market intelligence. As the preconditions for economic development were missing, economic backwardness was the inevitable outcome. More recent writings of the Cambridge school not only absolve Britain of the responsibility of causing economic backwardness but also propose that the colonial Indian economy was actually on a growth-path (Roy, 2004a). Besides sharing the methodological domain of positivist historiography, scholars of all three genres focused on a common set of relationships: first, the relationship between colonial state policy and the economic growth of India; and second, the relationship between the Indian capitalist class and the local feudal lords, the colonial state and colonial capital. A recent contribution to economic historiography seeks to lump together the non-Cambridge paradigms, designating them as the left–nationalist paradigm (Roy, 2004b). True, the nationalists and the Marxists agreed broadly on the negative consequences of British rule on India’s macro-economy, but there are substantive differences between them which caution against the use of the taxonomy ‘left–nationalist’. The two genres have different conceptual lineages. Nationalist historiography, as noted earlier, drew on a mix of early pro-India writings on the economy, theories of national economic growth as professed by the German historical school and, partly, on Marx’s random views on capitalist development in colonies. Occasionally, it even borrowed dependency terminology. It was eclectic without being correspondingly creative. The Marxist economic historiography was, in sharp contrast, rooted strongly in Marxist political economy. Also, it was proactive towards contemporary approaches in political economy and, over time, expanded its concerns to include the dependency approaches of African and Latin American economists and sociologists. Besides these, the Soviet stance on the nature of capital and the state in

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India and Mao Tse-tung’s observations on Chinese capital were influential in shaping the Marxist economic historiography of India. While the nationalist writings focused primarily on the extranational distribution of surplus between India and Britain, the Marxists were concerned as much about internal distribution of surplus among different economic classes within India. Unlike the nationalists, they did not assume that what is good for the national capital is good for the national economy and people. The two historiographies differed on the precise impact of colonialism on the development of capitalism in India. There were differences on aspects such as the manner of development of the productive forces, the status of feudalism, the pace of growth and spread of the capitalist class, the nature of its identification with the Indian economy and nation and the implications of this class for the post-colonial development experience. By the early 1980s, it was evident that a composite Marxist economic historiography was not an option. Views within the Marxist school contrasted immensely, and fierce debates broke out on nearly every aspect of India’s economic past, including the postcolonial present. The mode of production and the character of the Indian bourgeoisie in terms of its relation with the colonial state and capital and with feudalism came in for intense debate (S. K. Ghosh, 1985). In sum, critical differences prevailed between the nationalist and Marxist schools (and the latter’s various sub-sets) over the characterization of economic actors, activities and relationships. The nationalist school viewed Indian capitalists as a ‘mature, politically conscious, all-India class’, ‘a class for itself’, emerging ‘in the process of struggle against other classes … particularly against the metropolitan bourgeoisie and colonial state’, acting as ‘national watchdogs on the economic front’ and ‘providing an immediate and sharp critique of British economic policy’ (Mukherjee, 2002). The economic interests of this class were seen as conforming to the interests of the Indian nation and fundamentally in conflict with British imperial interests. The Marxist economic historians were of the view that colonial economic policy as shaped by imperial preferences and the dominant structure of finance—with imperial banks at the helm—had seriously hindered the growth of Indian capitalists. The Marxists believed that capitalists in colonial India were underdeveloped

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and fragmented, differentiated regionally in terms of size and growth, lacking an all-India character and locked in a dependent relationship with British capital and the colonial state (Bagchi, 1975). Between the Marxists, there was debate over the precise degree of dependence (S. K. Ghosh, 1985). Marxist historians, and even non-Marxist historians of the liberal persuasion, were sceptical of the nationalist role assumed to have been played by Indian capital in the political sphere. They argued that the participation of capitalists in India’s political life ‘remained limited’. It was noted that speeches by prominent businessmen, an important source based on which the nationalist paradigm was sought to be substantiated, ‘often reflect more the “public” image which businessmen wanted to project than their actual preoccupations’ (Markovits, 1985). The colonial records—one of the sources of nationalist historiography—were criticized for being inspired by a ‘conspiracy’ theory of Indian nationalism subscribed to by British administrators (Markovits, 1985). They tended ‘to overestimate the importance of business support to the Congress and of business influence over the Congress’ (ibid.). On ground, the fear of the rising popular movements prompted Indian capital to ally with the colonial state and rendered it incapable of being consistently anti-imperialist (ibid.). Studies on the regional and sub-regional bourgeoisie reaffirmed the Marxist view of the Indian capitalist as lacking an all-India character, and its fragmentary nature as a class (Bagchi, 1975; Markovits, 1985). Fractions of southern Indian capital imagined regimes of accumulation that excluded the rest of India but included parts of South-East Asia (Mahadevan, 1978a, 1978b, 1992).

Cliometric History Cliometric history, especially vibrant in the United States of America during the 1960s and 1970s, also wielded some influence among a section of India’s economic historians, especially from the Cambridge school. Truth in economic history was associated with its measurability, leading many a young economic historian to believe that methodology was a matter of techniques. Mapping India’s economic past drawing primarily upon a quantitative database and deploying statistical techniques was fated to be a failed project ab initio. The India database was insufficient

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and weak, often irregular, erroneous and unsuited to comparison. Statistical analysis with official data was only fruitful in a limited way; worse, it was often misleading. It is not that economic historians were unaware of the limitations of the database they worked with. Ideological compulsions scripted the pace and manner of its reading. ‘One econometric skill well-developed in all South Asianists is the ability to expose the fragility of data they wish to disbelieve’ (Tomlinson, 1998, p. 2). It became a habit with economic historians to express disbelief in the database when it failed to support their favoured assumptions. On the contrary, data were hastily deployed even when only superficially in agreement with the perspective adopted. The third way was to ‘refine’ data to concur with pet assumptions. The number game is not a monopoly of any school, as evinced by the writings of all genres of the economic historiography of India. The weirdness of the ideology-driven number game that began during the early 1960s, and continues in some quarters to this day, may be captured through a close reading of the curtain-raiser essay of the 2004 debate (Roy, 2004b)—the last major debate in the economic history of India. Writing from the perspective of the Cambridge school, the study seeks primarily to disprove the statistical proposition of poor growth of average income in colonial India. In the case of agriculture, the study notes that, between 1865 and 1914, income grew by a little over 1 per cent for India and 1.5 per cent to 2.5 per cent for ‘the most rapidly developing economies of the time’ (ibid., p. 3239). From this it is argued hastily that the difference was not significant, with no mention made of the levels of development at which the cited growth rates occurred. Of industry, the study notes that de-industrialization is not an apt characterization of a period when ‘millions of artisans not only continued in business, but also saw rise in output per worker’ (Roy, 2004b, p. 3240). This statement contains many silences. First, how many millions? The activities they were engaged in also need to be indicated. The suggested interconnections of economic activity, employment and income should be mapped as also their implications for well-being. If output did rise as suggested, some idea of its scale and the means by which this occurred and its effects on the workforce needs to be provided. There are other interesting aspects to this number game. The study notes that ‘many continued in business’, but does not state

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whether any and how many were thrown out of employment. No justification is given for statistically privileging output per worker rather than employment, or for the measurement of industrial development. Also, how meaningful is it to talk of industries as a whole and across the country? How valid is it to consider new industrialization in certain regions as compensating for deindustrialization in other regions that affected the livelihood and activities of entirely different sets of people? In situations where data contradict the ideologically preferred inferences, as noted earlier, often criticism is directed against the database itself. The cited study considers the figures of agricultural income for late 19th century India as authentic and comparable with world statistics. Yet, when the same statistical series suggest a slowdown in growth rates of grain production in the post-1914 period, the author suspects the veracity of ‘the statistical system’ (Roy, 2004b, p. 3239). Whether or not the inferences follow from the figures in hand is rarely self-critically evaluated. The study infers that the economies of India and Britain were mutually complementary. Even if one does not challenge the legitimacy of deploying statistical tools to capture the complex qualitative aspect of the relationship between two unequal economies, the specific use of statistics needs to be examined. Roy’s study seeks to prove the mutual complementarity of the relationship by observing the movement of gross domestic product (GDP) in Britain and India. It notes that the GDP growth rates of the two countries moved in tandem: relatively high in the late 19th century and slowing down subsequently. What inference regarding the causality of economic growth is warranted from GDP growth rates? Statistically speaking, it cannot even be said whether the economic growth in the two countries is related (Rammohan, 2005). Besides the limitations of available statistics, no statistics are available for many segments, processes and actors of the Indian economy. These include processes and activities linked indirectly to the all-India market, or linked too remotely or hardly linked; caste- and community-based production and trading systems; non-monetized segments and activities; neighbourhood labour, mandatory gifts, exchanges and services; the nether-domains of corruption, piracy and theft; the micro-domains of accumulation as

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inheritance and dowry; local notions of labour, wealth and welfare and associated economic practices. Despite the insufficiencies of the quantitative database that restrain the use of statistical techniques, the number game continued unabated for three decades. Confession came only in the late 1990s: ‘We cannot write an economic history of modern India by simply letting the data speak for itself’ (Tomlinson, 1998, p. 2). A Cambridge scholar, for long engaged in disproving the de-industrialization hypothesis, finally announced that ‘deindustrialisation is difficult to test’ (Roy, 2000, p. 124).

Questioning the Paradigms The somewhat clinical presentation here of the nationalist, the Marxist and the Cambridge viewpoints on the economic history of India tends to mask the ferocity of the polemical war between them. Starting from the early 1960s, when the economic history of India/South Asia emerged as a field in universities within and outside India, it was fraught by polemics. By the mid-1980s, the debate had assumed the dimensions of a bitter war. While the Marxists ridiculed the idea of ‘studying a colonial economy without perceiving colonialism’ (Habib, 1984, p. 355), a historian of the rival, Cambridge school dubbed her Marxist critic a ‘Manichean’ (Kumar, 1985, p. 383). Such was the rage and language of the times.10 Looking back, the India debate seems to have generated more heat than light. Certainly, at one level, it was a landmark in the history of the discipline in India, but entailed no epistemic break with positivist historiography. However, it facilitated a great deal of scholarly attention, as reflected in a growing community of economic historians and a vastly expanding literature. Importantly, again, it had an organic link with the larger civil society debates in India on the post-independence state and its economic and foreign policies. Further, for many students of history the debate revealed the irreducibly ideological nature of historiography, which also helped them subsequently to question the project of scientific history, Marxist or otherwise. Yet, considering that the practice of thinking and writing the economy had changed substantially over time worldwide (especially since the Annales), the India debate was miserably out of tune with the times in its concerns and methodology. What is more, the debate led to a path-dependence

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in discussion, in some cases lasting even up to the present century. Hypotheses of the 1960s were sought to be ‘proved’ again and again, sometimes with more sophisticated analysis and the use of new models.11 Despite path-dependence in some quarters, the 1980s and 1990s marked a remarkable phase of questioning, if not rewriting, the economic history of modern India. Beginning from the early 1980s, important methodological objections were raised against the ruling paradigms. The initial criticism came from within empiricist quarters. Robb (1981) compared the statistical database and techniques deployed by celebrated studies of rival genres to show how these sought to excel each other by mindless abuse of statistics. It was pointed out that the ruling paradigms had sustained themselves more by ideology than empiricism. The interpretations were influenced by preconceptions rather than concrete evidence. Their ‘precise’ calculations were shown to rest on a weak database and sets of unproven assumptions. Doubts were raised about the use of counterfactuals, the arbitrary choice of parameters and the validity of generalizations for the whole economy based on subregional data. Also, the fact that these inquiries failed to engage with ecological settings and technological processes came in for criticism (Robb, 1981). Further criticism of the ruling paradigms related to their overemphasis on the so-called preconditions for economic development. While the nationalist paradigm posited that the enabling factors of industrial development were distorted by colonialism, the detracting paradigm held that these never existed. Both overlooked the fact that variables like technological capability, identified as preconditions, were more often consequences rather than causes of economic growth. While the criticisms raised against the ruling paradigms were substantive, the alternative approaches hinted at were often weak and self-contradicting. The ‘alternativists’ included, prominently, advocates of ‘mid-way’, ‘arrested development’ and ‘colonial neglect’ hypotheses. Rather than offering any distinctively new way of viewing Indian economic processes, these approaches were, at best, uninspiring admixtures of earlier perspectives and, at worst, pale shadows of any one of these, with often commonplace observations.

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The suggested ‘mid-way’ was conceived to lie ‘between the nationalist and imperialist position’ (Robb, 1981, p. 523). Its purveyors, even while recognizing that colonialism was an important factor behind India’s economic backwardness, pointed out that it would be wrong to assume that every aspect of backwardness could be ascribed to it. The need to look for variables, endogenous and exogenous, economic and cultural, was emphasized (ibid.). The ‘arrested development’ hypothesis (Rothermund, 1988) was centred on the notion of colonial lapse. As pointed out, ‘it would be wrong to assume that … growth was arrested intentionally by British rule. British rule could often be blamed only for not implementing measures which could have removed obstacles to economic growth’ (ibid., p. 9). The ‘arrested development’ hypothesis ties up with the imperial innocence argument of yesteryear and the colonial neglect hypothesis advanced subsequently. For Tomlinson, a major proponent of the colonial neglect hypothesis, the causes of economic stagnation, which were already present before the British arrived, continued during their rule and afterwards too. The colonial state, guided by its own narrow administrative interests, did not seek to rectify these causes. For the most part, the colonial state was semi-detached from the life of its citizens and did not see itself as capable of influencing their economic progress very much (Tomlinson, 1998). If none of the so-called alternative approaches failed to make a dent, it was because the economic history of India was in need of inquiries in the liminal rather than the in-between spaces of ruling historiographies. Chandavarkar (1985) was among the first scholars to recognize this. He initiated the search for culturally sensitive ways of viewing India’s economy under colonial rule. The alternativists had hinted that the preoccupation with the European experience ‘itself created the problem of why India did not develop’ (Robb, 1981, p. 522). Chandavarkar identified such preoccupation as the major hurdle to a sensitive understanding of India’s colonial economy. The model of industrialization and social change underlying the ruling paradigms, he pointed out, were derived from the historical experience of Europe and especially of Britain. ‘Considering that British industrialization was a particular and somewhat unique historical development this was a selflimiting exercise’ (Chandavarkar, 1985, p. 624). Considering the divergences in cultural traditions and political values, ‘no simple

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evolutionary schemata of social change and economic development can be readily applied to Indian evidence’ (Chandavarkar, 1985, p. 624). This coincided with the search for ‘an endogenously inspired Third World perspective’ (Simmons, 1985, pp. 596–97) that would unseat the European model from historiographical consciousness. Importantly, Chandavarkar called for revising the approach to India’s economic history but not at the cost of discounting the fundamental experience of colonialism: Since at least the nineteenth century, writers … have invited us to choose between colonial rule and the Indian social structure as the main cause of economic backwardness…. The growth and spread of commercialisation in land, labour and produce, capital and credit, scarcely the creation of colonial rule alone, was a slow … process, but did not develop in a single, unilinear direction …. [Yet] it was also the case that India was ruled in the interests of Britain’s imperial global system. This fact alone served to shape the Indian ways which were not conducive to economic growth. (Chandavarkar, 1985, passim)

What is the present status of the once-dominant paradigms? Despite being discredited for the abuse of statistics to absolve colonialism of its sins, Cambridge economic historiography continues to enjoy visible presence in research and publishing. Also, it remains an enduring presence in the undergraduate classroom. This is evident from the fact that the two textbooks widely in use today—Kumar (1983) and Roy (2000)—both within and outside India belong to this genre. While up until the end of the 1990s, Cambridge economic historiography was somewhat subtle and defensive about its ideology, in the present era of globalization it takes an overt ideological stance. While admitting its failure to substantially influence the course of economic history thinking of the 1960s and 1970s, Cambridge economic historiography seeks self-validity in the present by referring to globalization as vindicating the pro-market ideas it had advanced earlier. This is exemplified by a recent inquiry that declares its objective as studying colonial India without perceiving colonialism (Roy, 2004b). Moreover, Cambridge historiography has recommended the deployment of recent ideas of neoclassical economics (Roy, 2004b). Yet its idea of economic growth, underlying assumptions, variables of focus and inferences have remained unchanged through the

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past half century. This is not surprising either, considering that economic historiography, of whichever genre, is anchored in specific economic theoretical and ideological premises. The nationalists and the Marxists, while more socially sensitive and expansive in their analyses, were inhibited by epistemological constraints similar to those of the Cambridge school. The notion of scientific history and the belief in objective historical truth about the economy arrived at through precise statistics continue to haunt the once-dominant paradigms.

Subaltern Studies How did subaltern studies, a major project of South Asian history and society initiated in the early 1980s, influence the writing of economic history? It has been suggested that subaltern studies ‘rekindled interest in labour’, but ‘economics had no clearly defined role in it. Economic questions troubled it, and were shut out of it’ (Roy, 2005, p. 17). The relationship between economic history and subaltern studies is much more nuanced than suggested by Roy. Rather than evading the economic question, subaltern studies expanded the horizon of the economy by including the aspects of dominance and resistance of economic actors. It revealed the agricultural worker as a thinking subject, not merely a census category. The ground for the subaltern studies project was laid by exploring the land question in colonial India (Chatterjee, 1984; Guha, 1963). The early subaltern writers explored the consciousness of an economic subject, the peasant. By the end of the 1980s, the terms of inquiry had expanded from the field and the hill-tract to include the factory in the city, yielding a new explanatory mode for understanding industrial working-class history. The project rejected the practice of indiscriminately ‘conferring on working classes in all historical situations a (potentially) uniform, homogenized, extrahistorical subjectivity’ and emphasized instead the need to factor in specific cultural pasts in writing the history of class-consciousness (Chakrabarty, 1996, p. 223). Unlike the nationalist and the Marxist schools that dismissed new Cambridge writings as a rehash of imperialist propositions, the ‘subalternists’, inspired by a tradition of critical Marxism, invited a debate. Perhaps this also sprang from the need of the subalternists to closely examine a project that staked claim to a genre

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of historiography outside the domains of the nationalist and the colonial, as did they themselves. While the subaltern critique was not conceived specifically as an intervention in economic history, yet it tended to question the fundamental assumptions of the Cambridge economic historians. The subalternists delineated two major tenets of Cambridge historiography for their critique: first, that colonialism did not imply any fundamental break in Indian history; and second, that it was not a coercive regime of power and worked with local consent. The continuity from the pre-colonial to the early colonial period was assumed in Cambridge historiography to have been ensured by earlier social and economic forces and processes responding proactively to, and developing in tandem with, the forces and processes of the European-dominated world economy. Rather than passive bystanders or victims, Indians were viewed as participants in building colonialism. Cambridge historiography considered the political sphere as expressing relations similar to those of the economy and society. The political sphere was seen as constituted vertically around factional collaborations within the patron–client nexus, rather than horizontally around oppositional struggles involving groups formed of shared identities such as class, caste and gender. The subalternists pointed out that in taking this approach of vertical cooperation, the Cambridge school conflated the biography of the colonial state and its Indian elite collaborators as the history of colonial India (Amin, 2002; Chatterjee, 1999a; Guha, 1982; Hardiman, 1996; Pandian, 1995). Commenting specifically on writings on economic change in colonial India, the subalternists criticized ‘the somewhat antique convention of writing Indian economic history as the life-history of economic policies’ (Guha, 2009, p. 119). They stressed the need to write agrarian history in a manner that relocated the actors ‘from the glossaries of fiscal terms into the real world of rural class society’ (ibid., p. 122). Also, the subalternists were among the first to emphasize the environmental and cultural dimensions of economic history (ibid.; Chakrabarty, 1996; Hardiman, 2000). The subalternists not only intervened in the protracted debate among the nationalists and (varied shades of) Marxists on the characterization of Indian capitalists, but also liberated the discussion from its lock-in situation. Even while partly joining hands with radical Marxist historiography, the subalternists pointed out

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that the issue of the characterization of Indian capitalists was an ‘obsolete problem’. It was eminently significant in the pre–World War II situation of identifying allies and enemies in a revolutionary struggle of national liberation. However, the question today is ‘to identify the specific character of this bourgeoisie which remains dependent on foreign capital yet enjoys power in its particular nation-state’ (Chatterjee, 1999b, p. 10). The debate, it was pointed out, required to be raised to a much higher level of theoretical precision. Subaltern studies re-examined critically such stereotypes as ‘the Indian moneylender’ portrayed by the ruling paradigms as pure economic entities. According to the imperialist view, the rural moneylender was an economic category specific to the geoclimatic conditions of India, an outcome of the vagaries of season and unpredictable harvest that pushed peasants into chronic indebtedness. For the nationalists and the Marxists, the rural moneylender was an economic product of colonial governance, whose excessive revenue demand and neglect of irrigation impoverished the peasants. The subaltern project, at variance from both these paradigms, was concerned with the culture of exploitation, that is, the ideological–hegemonic aspects of usury. In focusing on these aspects, it sought to write caste into economic history (Hardiman, 2000). Despite this, the textual approach to caste characteristic of most of the subaltern writings (Rammohan, 2009) has inhibited further advance in this direction.

The Emergent Economic History This review has shown that the economic history of India has come a long way since the 1960s and 1970s. Prominent historiographies have shed the earlier self-complacency emerging from the assumption of having arrived at the single and ultimate truth about economic change in the region. The attempts to find the non-existent mid-way between left- and right-wing historiographies have been abandoned. The notion of scientific history that restrained not only the traditional nationalist-economic, the Marxist politicaleconomic and the neoclassical economic historiographies but also the supposed alternative of mid-way approaches is now under severe challenge. The field of economic history of India, in the present moment of transdisciplinarity, is reaching out to other human sciences (Rammohan, 2005).

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True, papers and monographs broadly following the earlier frameworks continue to appear. Even these, however, show definitive signs of change. Nationalist-economic historiography, for instance, while still pursuing the theme of the empire and the nation, searches for new definitions of surplus and economic drain (Mukherjee, 2010). Its bête noire, the neoclassical economic school, enriches its conceptual apparatus by incorporating aspects of new economic theory like institutional economics (Roy, 2004a, 2004b, 2005). Marxist political-economic historiography deploys new analytical frameworks like global commodity chains and flexible accumulation (Rammohan and Sundaresan, 2003; Vijayabaskar, 2001). New themes like the social landscapes of technology are being pursued (Rammohan, 2008a, 2008b). Commodity histories, including that of labour power, are being explored in new ways (Rammohan, 2006, 2009). There are attempts to interweave Foucauldian and world-system frameworks so as to explore the colonial regimes of production (Raman, 2010b). Clearly, the panic raised about the discipline being endangered in India (Roy, 2004a, 2004b) is unfounded. New research in economic history has parted ways with the earlier, sectoral mode of analysis that failed to accommodate adequately the interconnections of agriculture, industry, and trade and services. The focus of many of the new inquiries is not confined to material processes of development, either; mentalities of development are being brought into analysis. While earlier the focus was almost exclusively on regions under direct colonial rule, greater attention is now accorded to the economic history of princely states. The multiplicity of the development experience of social groups within the same region or sub-region is also emphasized,12 apart from that of British and princely India and of regions and sub-regions within the country (Raman, 2010a; Rammohan, 2010). Analyses of microregions are conducted for close, ethnographically sensitive readings of the past economy. Hitherto neglected or faintly recognized actors—outcastes, tribal people and women—are being brought into the centre-stage of economic history. Towards this end, new methods like fieldwork-based economic history are being explored enthusiastically (Lindberg, 2001; Rammohan, 2006). Yet, the field of economic history of India also has a long way to go. Most importantly, considering that over half a century has passed since colonial rule ended, there is need to extend the time

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limit of analysis to the post-colonial. How has the economy changed from the colonial to the post-colonial period? The post-colonial period itself comprises two distinct phases, those of planning and liberalization. What do these shifts entail in terms of the economic lives of the people? What are the continuities and discontinuities in structures, processes, relationships, environs, mentalities and actors? New questions may be asked, for instance: Which politicaleconomic processes culminated in the Union Carbide massacre in Bhopal in 1984? What connects the suicides of the handloom crepe weaver of Kerala in the 1970s and of the Bengal weavers in the 19th century? How are the indigo peasants of the central Gangetic plain and the Bt-cotton farmers of Telengana related in the time– space of economic history? If paucity of material was not a stumbling-block for the economic history of South Asia even in the early 1960s (Morris and Stein, 1961, p. 206), it is even less so today. Post-independence improvement in the statistical system in terms of coverage and the degree of precision is remarkable. Further, the post-1960 period has witnessed a boom in institutions involved actively in research in economics and development studies. This has resulted in a vast literature on varied aspects of the economy—including major debates such as those on the mode of agricultural production, livestock, industrial growth, planning and liberalization—that the economic historian may use, among other materials and with the necessary discretion, as his/her source. Also enabling the economic historian to move forward is the new, post-colonial scholarship in history, social anthropology and political science. The trajectory of conversations so far in the economic history of South Asia leads to three important conceptual-methodological questions. First, what is the economic historian’s concept of the economy? Second, which economic theory and historiography would contribute to a better understanding of the economic past? Third, which human sciences shall economic history converse with in the present conjuncture of transdisciplinarity? Does the economic historian view the economy as a set of activities in relation to the production and distribution of goods? Or, does s/he view it as comprising not merely economic activities, but also social relationships involving varied economic actors that enable these activities? Is the economy seen as a technical system of resources and market, or is it understood as a social system in

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which power relations determine the growth and division of economic surplus and the working of the technical system itself? Is the economic historian concerned merely with prices and productivity and with individual actors such as the firm and the consumer? Or does his/her concern lie with value and with collective actors such as labour and capital, caste groups and women? Does s/he consider it important to look at the connections of the cultural and the economic? The choice of economic theory, historiography and transdisciplinarity are derived from the economic historian’s conception of the economy itself, which is an irredeemably ideological question. a

Notes 1. Kuhn (1962) deployed the Greek term ‘paradigm’ to reject the then dominant way of viewing scientific progress as occurring through cumulative advance of knowledge. Alternatively, Kuhn viewed scientific progress in terms of abrupt jumps in frameworks of knowing—paradigmatic shifts. The current use of the term paradigm (including in this chapter) is more inclusive and is often synonymous with such terms and expressions as school, conceptual framework, dominant theory, model, discourse, axiom-sets, founding assumptions and an established set of questions sought to be answered by a research programme. For a critique of Kuhn’s assumed hierarchy of paradigms and the notion of paradigmatic shifts as the route of scientific progress, see Feyerabend (1975). 2. The first bibliographical review of the economic history of India published in 1929 noted that it was ‘a new subject of study’ (Moreland, 1929, p. 130). The second major review published in 1961 noted that ‘work in Indian economic history has not been cumulative in any degree’ (Morris and Stein: 206). Systematic scholarly inquiries begin from the mid-1960s. The most recent bibliographical review by Roy (2004b) is an advance over the earlier reviews in that it introduces a taxonomy of different schools of economic history and maps their ideological domains. Rammohan (2005) offers a critique of Roy (2004b). 3. See, for instance, Hardiman (2000) and K. Ghosh (1999). 4. Nationalist ideology comprised different strands and assumed varied hues. The nation was imagined in umpteen different ways: as modern and secular (by Ambedkar, Nehru and others); as Rama Rajyam (by Gandhi; literally, Lord Rama’s country); as classless (by communists);

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6. 7. 8.

9. 10. 11.

and as Akhanda Bharat (by the Hindu right wing; an India that comprises besides its present territory several other neighbouring, sovereign nations). Again, nationalist strategies as articulated by the masses were often different from the way the political organizations conceived of these. Subsuming or appropriating the diverse identities of caste, class, religion and gender and forging a homogeneous discourse of the Indian nation was a complex, protracted and in many ways an incomplete process. The studies on the urban elite are confined mostly to British India and ignore its trajectory in princely India. An important exception is Jeffrey (1976), who traces the rise of a modern, urban, intellectual elite from among the Nayars in Travancore towards the end of the 19th century. Jeffrey’s primary interest, however, is in the decline of their traditional dominance preceding this period. It may, however, be noted that most of these, except R. C. Dutt (1990 [1902–04], were writings on the contemporary economy and not conceived as works in economic history. For pioneering surveys of economic nationalist thought in India, see Chandra (1982) and Ganguli (1977). This classification is based on their distinctive economic analyses. More widely, and occasionally in this chapter too, these are referred to as nationalist, Marxist and Cambridge historiographies, respectively. Writings in the nationalist mould currently appearing are sometimes referred to as neo-nationalist. The Cambridge historiography has, perhaps, the widest range of synonyms. It is referred to as imperialist or apologist or neo-colonial historiography because it absolves imperialism of all sins; its characterization as liberal-orthodox historiography emphasizes its intellectual lineage as being different from Marxism; the epithet of revisionist historiography formally recognizes its selfclaim of revising both nationalist and colonial historiographies; and the label of faction theory denotes its central social analytic category, faction, which is seen as having fused colonial rule and local consent through a structure of the patron–client relationship and established colonialism as a non-coercive, hegemonic system. For a discussion of the ‘great divide in economic theory’, see Bharadwaj (1994). Morris D. Morris (1969) unravels the arms piles of the rival camps, also including Morris’s first missile: the paper originally published in the Journal of Economic History in 1963. See, for instance A. K. Dutt (1992), who turns to a class of North– South models that assumes an initially identical structure for two regions and examines how differences between them came about. Especially, he draws on Krugman’s 1981 model to reaffirm the deindustrialization hypothesis.

344 a K. T. Rammohan 12. Mainstream economic history of modern India was almost always about western (meaning Bombay) or eastern (meaning Calcutta) India until the mid-1970s. Mahadevan’s studies on south Indian entrepreneurship (1978a and 1978b) were an important harbinger of change. Yet, north-east India was still waiting to be discovered even in the early 1980s. As Purkayastha (2008, p. 172) notes: ‘The first volume of the Cambridge Economic History of India provides an example of the marginalization of Assamese history: here, Amalendu Guha’s illuminating article on the medieval economy of Assam finds space only as an appendix.’

References Amin, Shahid. 2002. ‘Alternative Histories: A View from India’, SephisCSSSC Monograph, Kolkata: Centre for Studies in Social Sciences. Bagchi, A. K. 1975 [1972]. Private Investment in India 1900–1939, Mumbai: Orient Longman. Bharadwaj, Krishna. 1994 [1976]. Classical Political Economy and Rise to Dominance of Supply and Demand Theories, Hyderabad: Universities Press. Bhattacharya, Sabyasachi. 2007. ‘Introduction’, in R. P. Behal and Marcel van der Linden (eds), India’s Labouring Poor: Historical Studies c. 1600– c. 1800, New Delhi: Cambridge University Press, pp. 7–19. Chakrabarty, Dipesh. 1996 [1989]. Rethinking Working-Class History: Bengal 1890–1940, New Delhi: Oxford University Press. Chandavarkar, Rajnarayan. 1985. ‘Industrialization in India before 1947: Conventional Approaches and Alternative Perspectives’, Modern Asian Studies, 19(3), pp. 623–68. Chandra, Bipan. 1982 [1966]. The Rise and Growth of Economic Nationalism in India: Economic Policies of Indian National Leadership, 1880–1905, New Delhi: People’s Publishing House. Chatterjee, Partha. 1984. Bengal 1920–1947: The Land Question, Kolkata: K. P. Bagchi. ———. 1999a [1993]. The Nation and Its Fragments: Colonial and Postcolonial Histories, New Delhi: Oxford University Press. ———. 1999b. A Possible India: Essays in Political Criticism, New Delhi: Oxford University Press. Dutt, A. K. 1992. ‘The Origins of Uneven Development: The Indian Subcontinent’, American Economic Review, 82(2), pp. 146–50. Dutt, R. C. 1990 [1902–04]. The Economic History of India, Delhi: Low Price Publications, vol. 2. Dutt, R. P. 1986 [1940]. India Today, Calcutta: Manisha. Feyerabend, P. 1975. Against Method, London: New Left Books.

Pathways to India’s Economic Past a 345 Ganguli, B. N. 1977. Indian Economic Thought: Nineteenth Century Perspectives, New Delhi: Tata McGraw-Hill. Ghosh, Kaushik. 1999. ‘A Market for Aboriginality: Primitivism and Race Classification in the Indentured Labour Market of Colonial India’, in Gautam Bhadra, Gyan Prakash and Susie Tharu (eds), Subaltern Studies X: Writings on South Asian History and Society, New Delhi: Oxford University Press, pp. 8–48. Ghosh, S. K. 1985. The Indian Big Bourgeoisie: Its Genesis, Growth and Character, Kolkata: Subarnarekha. Guha, Ranajit. 1963. A Rule of Property for Bengal: An Essay on the Idea of Permanent Settlement, Paris: Mouton. ———. 1996 [1982]. ‘On Some Aspects of the Historiography of Colonial India’, in Ranajit Guha (ed.), Subaltern Studies: Writings on South Asian History and Society, New Delhi: Oxford University Press, vol. 2, pp. 1–8. ———. 2009 [1974]. ‘The Agrarian History of Northern India’, in Ranajit Guha and Partha Chatterjee (eds), The Small Voice of History: Collected Essays, Ranikhet: Permanent Black, pp. 119–23. Habib, Irfan. 1984. ‘Studying a Colonial Economy—Without Perceiving Colonialism’, Social Scientist, 12(12), pp. 3–30. Hardiman, David. 1996 [1982]. ‘The Indian Faction: A Political Theory Examined’, in Ranajit Guha (ed.), Subaltern Studies: Writings on South Asian History and Society, New Delhi: Oxford University Press, vol. 1, pp. 198–232. ———. 2000 [1996]. Feeding the Baniya: Peasants and Usurers in Western India, New Delhi: Oxford University Press. Hatekar, Neeraj. 2003. ‘Empire and the Economist: Analysis of 19th Century Economic Writings in Maharashtra’, Economic and Political Weekly, 38(5), pp. 469–79. Jeffrey, Robin. 1976. The Decline of Nayar Dominance: Society and Politics in Travancore, 1847–1908, New Delhi: Vikas. Kuhn, Thomas. 1962. The Structure of Scientific Revolutions, Chicago: University of Chicago Press. Kumar, Dharma (ed.). 1983. The Cambridge Economic History of India, Cambridge: Cambridge University Press, vol. 2. ———. 1985. ‘The Dangers of Manichaeism’, Modern Asian Studies, 19(3), pp. 383–86. Lindberg, Anna. 2001. Experience and Identity: A Historical Account of Class, Caste and Gender among the Cashew Workers of Kerala, 19302000, Malmo: Prinfo/Team Offset & Media. Mahadevan, Raman. 1978a. ‘Immigrant Entrepreneurs in Colonial Burma— An Exploratory Study of the Role of Nattu Kottai Chettiars of Tamil Nadu 1880–1930’, Indian Economic and Social History Review, 15(3), pp. 329–58.

346 a K. T. Rammohan Mahadevan, Raman. 1978b. ‘Pattern of Enterprise of Immigrant Entrepreneurs: A Study of Chettiars in Malaya, 1880–1930’, Economic and Political Weekly, 13(4/5), pp. 146–52. ———. 1992. ‘The Pattern of Industrial Control in Colonial Madras: Some Critical Observations on the Relative Position of Indian and Foreign Capital, 1930–50’, in Arun Ghosh, K. K. Subrahmanian, Mridul Eapen and Drabu Haseeb (eds), Indian Industrialisation: Structure and Policy Issues, New Delhi: Oxford University Press, pp. 333–64. Markovits, Claude. 1985. Indian Business and Nationalist Politics 1931– 1939: The Indigenous Capitalist Class and the Rise of the Congress Party, Cambridge: Cambridge University Press and Mumbai: Orient Longman. Moreland, W. H. 1929. ‘Recent Work in Indian Economic History’, Economic History Review, 2(1), pp. 130–36. Morris, M. D. 1963. ‘Towards a Reinterpretation of Nineteenth-Century Indian Economic History’, Journal of Economic History, 23, December, pp. 606–18. ———. 1969. Indian Economy in the Nineteenth Century: A Symposium, Delhi: Indian Economic and Social History Association and Hindustan Publishers. Morris, M. D., and Burton Stein. 1961. ‘The Economic History of India: A Bibliographic Essay’, Journal of Economic History, 21(2), pp. 179–207. Mukherjee, Aditya. 2002. Imperialism, Nationalism and the Making of the Indian Capitalist Class 1920–1947, New Delhi: Sage. ———. 2010. ‘Empire: How Colonial India Made Modern Britain’, Economic and Political Weekly, 45(50), pp. 73–82. Pandian, M. S. S. 1995. ‘Beyond Colonial Crumbs: Cambridge School, Identity Politics and Dravidian Movement(s)’, Economic and Political Weekly, 30(7/8), pp. 385–91. Purkayastha, Sudeshna. 2008. ‘Restructuring the Past in Early-TwentiethCentury Assam: Historiography and Surya Kumar Bhuyan’, in Aquil Raziuddin and Partha Chatterjee (eds), History in the Vernacular, Ranikhet: Permanent Black, pp. 172–208. Raman, K. Ravi (ed.). 2010a. Development, Democracy and the State: Critiquing Kerala Model of Development, London and New York: Routledge. ———. 2010b. Global Capital and Peripheral Labour: The History and Political Economy of Plantation Workers in India, London and New York: Routledge. Rammohan, K. T. 2005. ‘Economic History as Human Science’, Economic and Political Weekly, 40(26), pp. 2859–63. ———. 2006. Tales of Rice: Kuttanad, Southwest India, Thiruvananthapuram: Centre for Development Studies.

Pathways to India’s Economic Past a 347 Rammohan, K. T. 2008a. ‘Coir in India: History of Technology’, in Helaine Selin (ed.), Encyclopaedia of the History of Science, Technology, and Medicine in Non-Western Cultures, Berlin, Heidelberg and New York: Springer-Verlag, vol. 1, pp. 596–900. ———. 2008b. ‘Cashewnut Processing on the Malabar Coast’, in Helaine Selin (ed.), Encyclopaedia of the History of Science, Technology, and Medicine in Non-Western Cultures, Berlin, Heidelberg and New York: Springer-Verlag, vol. 1, p. 462. ———. 2009. ‘Modern Bondage: Atiyaayma in Post-Abolition Malabar’, in Jan Breman, Isabelle Guerin and Aseem Prakash (eds), India’s Unfree Workforce: Of Bondage Old and New, New Delhi: Oxford University Press, pp. 69–95. ———. 2010. ‘Caste, Public Action and the Kerala Model’, in K. Ravi Raman (ed.), Development, Democracy and the State: Critiquing Kerala Model of Development, London and New York: Routledge, pp. 25–39. Rammohan, K. T., and R. Sundaresan. 2003. ‘Socially Embedding the Commodity Chain: An Exercise in Relation to Coir Yarn Spinning in Southern India’, World Development, 31(5), pp. 903–23. Robb, Peter. 1981. ‘British Rule and Indian Improvement’, Economic History Review, 34(4), pp. 507–23. Rothermund, Dietmar. 1988. ‘Problems of India’s Arrested Economic Growth under British Rule’, in C. J. Dewey (ed.), Arrested Development in India: The Historical Dimensions, New Delhi: Manohar, pp. 3–11. Roy, Tirthankar. 2000. The Economic History of India 1857–1947, New Delhi: Oxford University Press. ———. 2004a. ‘Flourishing Branches, Wilting Core: Research in Modern Indian Economic History’, Australian Economic Review, 44(3), pp. 221–40. ———. 2004b. ‘Economic History: An Endangered Discipline’, Economic and Political Weekly, 39(29), pp. 3238–43. ———. 2005. Re-thinking Economic Change in India: Labour and Livelihood, London and New York: Routledge. Simmons, Collins. 1985. ‘De-industrialization, Industrialization and the Indian Economy’, Modern Asian Studies, 19(3), pp. 593–622. Tomlinson, B. R. 1998 [1987]. The Economy of Modern India 1860–1970, New Delhi: Foundation Books. Vijayabaskar, M. 2001. ‘Industrial Formation under Conditions of Flexible Accumulation: The Case of a Global Knitwear Node in Southern India’, Unpublished PhD dissertation, Thiruvananthapuram: Centre for Development Studies.

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About the Editors D. Narayana has published extensively in international journals. A recent paper on a topical issue, ‘Intensifying Infant Mortality Inequality in India and a Reversal by Policy Intervention’, was published in the Journal of Human Development (vol. 9, no. 2, July 2008). His latest book, co-edited with Slim Haddad and Enis Baris, Safeguarding the Health Sector in Times of Macroeconomic Instability: Policy Lessons for Low- and Middle-Income Countries, was published by the Africa World Press (Trenton, 2008). D. Narayana also recently authored the Kottathara Panchayat Human Development Report, brought out by the HDRC Unit, Kerala State Planning Board, Thiruvananthapuram, in December 2009. Raman Mahadevan is a senior economic and business historian who has made significant scholarly contributions to modern south Indian studies, especially in the area of industrial and capitalist development in colonial south India. He has several publications to his credit in reputed journals like the Economic and Political Weekly and the Indian Economic and Social History Review. He was co-editor of and a contributor to the volume The South Indian Economy: Agrarian Change, Industrial Structure and State Politics 1914–1947 (Delhi: Oxford University Press, 1991). Besides academic writing, Raman Mahadevan writes in the media about business and politics and is also a reviewer of books. Over the last several years he has been focusing attention on the more contemporary period, some of these concerns being reflected in his fortnightly column ‘Past is Present’ that appeared in the Financial Express in 2006. His forthcoming book is titled Fortune Seekers: The Journeys of the Nattukottai Chettiars.

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Notes on Contributors Arindam Banerjee is currently Consultant at the Research and Information System in Developing Countries, New Delhi. Prior to this, he was with the Centre for Development Studies at Thiruvananthapuram. He earned his doctoral degree in economics from Jawaharlal Nehru University; his dissertation was on the dynamics between production relations in Indian agriculture and the persistent agrarian crisis. His current research interests relate to agricultural production relations, trade in agricultural goods, bio-fuels and food security. C. P. Chandrasekhar is Professor at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. His areas of interest include the role of finance and industry in development and the experience with fiscal, financial and industrial policy reform in developing countries. He is the co-author of Crisis as Conquest: Learning from East Asia (Orient Longman), The Market that Failed: Neo-Liberal Economic Reforms in India (Leftword Books) and Promoting ICT for Human Development: India (Elsevier). He is a regular columnist for Frontline (his column is titled ‘Economic Perspectives’) and Business Line (where he writes a column titled ‘Macroscan’). Tharian George K. has been concerned with policy-oriented research on the plantation crops sector during the past three decades. He is currently attached to the Rubber Research Institute of India, Kottayam. N. Krishnaji held academic positions at the Indian Institute of Management, Kolkata; the Centre for Development Studies, Thiruvananthapuram; the Centre for Studies in Social Sciences, Kolkata; and the Centre for Economic and Social Studies, Hyderabad. His published work relates mainly to Indian economic problems in the areas of population, food and agriculture. C. S. Krishnakumar is a demographer and is currently Project Associate with the Centre for Development Studies Thiruvananthapuram.

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After securing his PhD from the University of Kerala in 2007, he has been closely involved with the Kerala State Planning Board in the preparation of the human development reports for the districts of Wayanad, Kottayam, and of the Madappally panchayat. His current area of research includes human development, rural livelihood and reproductive health. He has published scientific papers in both national and international journals. He has also co-authored a few research reports on reproductive health in Kerala. Prabhat Kumar is a research scholar at the Centre for the Study of Regional Development at Jawaharlal Nehru University, New Delhi. He completed an MPhil in Applied Economics from the Centre for Development Studies, Thiruvananthapuram. His areas of research include migration, regional disparities, public finance and livelihoods. His interest in migration includes its historical dimensions and spans internal as well as international migration from India. K. Narayanan Nair is an established developmental economist and is at present Director and Professor at the Centre for Development Studies, Thiruvananthapuram. His scholarly contributions include several books and articles in both national and international journals of repute, such as Current Anthropology, the Economic and Political Weekly and the Indian Journal of Agricultural Economics. Notable publications include Resources, Institutions and Strategies: Operation Flood and Indian Dairying (in association with M. R. Doornbos) and Alleviating Poverty: A Case Study on Local Level Linkages and Processes in the Developing World (edited jointly with Vineetha Menon and P. R. Gopinathan Nair), among many others. His current research interests include globalization and development, poverty and vulnerability and decentralization. K. Navaneetham is Professor at the Centre for Development Studies, Thiruvananthapuram. He has also been Visiting Assistant Professor at the American University of Beirut and Post-doctoral Fellow at the National University of Singapore. He has recently coedited Poverty, Nutrition and Mortality: A Comparative Perspective, published by CICRED, Paris. He has published several articles in national and international journals, covering a wide range of subjects including population, health and development issues in India. His main areas of interest are population, human development, health and development.

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S. Neelakantan, a law graduate, taught economics in government arts colleges in Tamil Nadu for nearly one and a half decades before taking up research on property rights and economic change at Madras University. He joined the department of economics of the Bharathidasan University, Tiruchirappalli, in 1979, and continued in this capacity till 1990. In 1986–87 he went to Washington University, St Louis, as a Fulbright Fellow. He was Director of the Madras Institute of Development Studies during 1990–95. He has written a primer titled New Institutional Economics and Economic Change for the Indian Economic Association Trust. Having retired, he now lives in his native hamlet. Rajeswari S. Raina is Senior Scientist with the National Institute of Science, Technology and Development Studies (NISTADS), New Delhi. She has been researching the societal dimensions of science and technology, specializing in agricultural and rural innovation. Her background in the sciences and economics provides her the unique advantage of effectively navigating the critical interface between development policy and scientific knowledge. Her current research focuses on policy and institutional reform as well as capacities for: (a) innovation for inclusive development in India and China; (b) bio-innovation systems; and (c) changes in the agriculture–environment interface. As a widely published author and a policy analyst, she collaborates with several national and international organizations. S. Irudaya Rajan is Chair Professor, Ministry of Overseas Indian Affairs (MOIA) Research Unit on International Migration at the Centre for Development Studies, Thiruvananthapuram. With more than two decades of research experience in Kerala, he has coordinated five major migration surveys (1998, 2003, 2007, 2008 and 2009) in Kerala (with Professor K. C. Zachariah), and has published books and articles on the social, economic and demographic implications of international migration. He is a member of the National Migration Policy drafting group appointed by the MOIA. He is editor of the annual series India Migration Report brought out by Routledge. K. T. Rammohan, Reader, School of Social Sciences, Mahatma Gandhi University, Kerala, has authored two books: Krishnarajinte Patramargam (2005) and Tales of Rice (2006). The founding editor

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of Kerala Padanangal, the first journal of interdisciplinary social sciences in Malayalam, he has published in the Economic and Political Weekly, the Indian Journal of Labour Economics, Monthly Review, World Development and Development and Change, and has also contributed to the Encyclopaedia of the History of Non-Western Science: Science, Technology and Medicine (2006), India’s Unfree Workforce: Bondage, Old and New (2009) and Development, Democracy and the State: Critiquing the Kerala Model of Development (2010). K. Srinivasan is a leading demographer in India and has made valuable contributions in the areas of population studies and programmes for over four decades. As Senior Professor and Director of the International Institute for Population Sciences at Mumbai from 1978 to 1992, he helped expand the academic and geographical scope of the Institute by making it a Deemed University and training a large number of students at the Institute from other countries in Asia. He has published 13 books and has over 107 research articles in national and international journals. He is currently Honorary Professor with the Institute of Social and Economic Change, Bangalore. A. Vaidyanathan is a renowned scholar who has made significant contributions to the discourse on issues concerning planning and development strategy, agricultural and bovine economy, irrigation and water management, employment, poverty and the quality of socio-economic data. He has worked in the Planning Commission, the Food and Agriculture Organization, the World Bank, the Centre for Development Studies at Thiruvananthapuram and the Madras Institute of Development Studies. He is currently Honorary Fellow of CDS. Some of his notable publications include India’s Agricultural Development in a Regional Perspective, India’s Agricultural Growth: Role of Technology, Incentives and Institutions, Water Resource Management: Institutions and Irrigation in India, Management of Water Resources: Contemporary Issues in Irrigation and Tanks of South India.

Index a 353

Index Acemoglu, D. 9 Acharya, S. S. 113 agricultural loan accounts: commercial bank, of 198 Agricultural Prices Commission 108 Agricultural Produce Cess Act, 1940 105 Agricultural Produce Cess Fund 106 Agricultural Research Service (ARS) 106 agricultural research system, India’s: comprehensive view of 117–18; reorganization of 106 agricultural science 109; history of 102; relationship between Indian states and 117 Agricultural scientists: responsibility of 116 Agricultural Scientists’ Recruitment Board (ASRB) 106 agriculture: decline of 7; growth in, post-reform period 114; India, in: Sen on 87; during pre-Gupta period 24; trend growth, of inputs in 114 agro-climatic conditions: China, in 71 Ahmad, Jaleel 208–9 Allahabad Bank 186 All-India Coordinated Research Projects (AICRP) 103, 106, 111 anaemia: among women 282–83 ancestral property: extension of rights of inheritance 24 Antrobus, H. A. 150, 153, 168 arable land 99 Assam: BPL rate in 7 Assam Tea Company 167 Athreya, V. B. 73 Austin, Granville 30

Bagchi, A. K. 135, 139, 144–45, 166, 170, 210, 228, 330 Baker, C. J. 136, 144 Balakrishnan, K. G. xv Banerjee, Arindam 9–11, 46 Bangladesh: foodgrain production in 85 banking centres: distribution by region 196; redistribution of 195 Banking Companies Act, 1949 201, 204 banking on fiat 126 banking structure, in India: evolution of 200 banking system, of India: during global financial turmoil 182; government-led expansion of 185–88 bank notes 126, 183 Bank of Bengal: establishment of 183 Bank of Bombay: establishment of 183 Bank of Hindusthan: establishment of 183 Bank of India 187 Bank of Madras: establishment of 183 bank(s): classes of: non-scheduled banks (see Non-scheduled banks); scheduled banks (see Scheduled banks); registration in India 199 Bardhan, Pranab 213 Basu, Kaushik xv bazaar economy: colonial India, of 133 below the poverty line (BPL): India’s population living in 7–9 benami (false substitute) 35, 89 Bengal famine 85, 245

354 a Shaping India Bernstein, Henry 150, 156, 174 Bharat Krishak Samaj 107 Bhat, Mari 238 Blyn, George 91, 93, 275 Boserup, Ester 86 Brass, Tom 150, 156, 174 breast-feeding 282 British West Indies: Indian indentured labour in 299–300 business community(ies): evolution during early 1950s 131 business group: pre-emptive behaviour of 212 capitalist penetration: into agarian economy 87 Capitalists, in colonial India: Marxists on 330–1 Cargill Investors Services 171 caste dimension: of land reform, on Independence eve 28–30 Caste Removal of Disabilities Act of 1850 25 Cauvery water dispute 60 Central Banking Enquiry Committee 187 Central Bank of India 187 Central Water Commission 108 Centre for Development Studies (CDS) xv, 59 Chalmers, Alan 115 Chandrasekhar, C. P. 127, 206 Chaudhuri, Pramit 213 Chetty community: role during preindependence period 134–36 child mortality 266 children: mortality trends among 283 China: agarian changes in 72–73; land reforms in 69–72 China tea trade: abolition of East India monopoly on 167 Claeson, Mariam 266–67 Clark, A. W. 268

Coale, A. J. 239 Coastal trading firms 125–26 Code of Civil Procedure (1859) 26 Code of Criminal Procedure (1861) 26 Coimbatore: agrarian economy of 136; two-way flow of capital 137; cotton markets in 136 Coimbatore Agricultural College 137 colonial commercialization 2 colonial hegemony: structuring of 1 colonialism 1 Colonial Sugar Refining Company (CSR) 301 Commercial banks: agricultural loan accounts of (see Agricultural loan accounts, of commercial banks); distribution of branch offices, by region 194 commercialization: Indian economy, of 1–2 commodity markets 88 Consultative Group on International Agricultural Research (CGIAR) 118 Contract, See Kangani system Contract Act, 1872 26 coolie catchment 298 corporate capital, in India: during independence 141 corporate property 24 Cotton Cess Act, 1923 102 Cotton Committee (1917) 102 couple protection rate: trends in 261 credit account(s) 203 Cropped Area per Person (GCAP): British India provinces, in 91 Crude birth rate (CBR): estimation of 238 Cummings, Ralph W. 108

Index a 355 Daviron, Benoit 170–71 Dead capital 42 debt-financed manufacturing demand: implication of 224 Deccan Debt Relief Act of 1879 27 Department of Agricultural Research and Education (DARE) 106 deposit account(s) 203 deposit banking, in India 126, 183; growth of 184 De Soto, Hernando 42 Dutt, Rajani Palme 326 dying across states: variability in probability of 286–88 dying, in India: trends in probability of 281, 283–85 economic growth, of India after independence: characteristics of: accompanying of, higher growth across states 3–4 Economic History of India 324–25 economic history, of modern India: cliometric history 330–33; emergence of 339–42; paradigms of past 324–30; questioning of paradigms 333–37; subaltern study 337–39; tracing of 323 economic sphere, of India: during 1947 1 economic transformation process 297 economy, of India: at independence 208; during 1980s, features of: increase in fiscal stimulus 217; liberalization of imports of capital goods 217; systematic resort to, commercial borrowing from abroad 218 ecosystems: rural areas, in 99 effective couple protection (CEP) 242; distribution of Indian states by 243

Emigration Act. 1983: section 22 of 312 entrepreneurship: historiography of 133 European merchant capital: dominance of 150 European trading firms: historical role of 167 Exchange banks: India, in 183 Factory-based modern industrialization, See Manufacturing sector, in India Factory employment: contribution during independence 3 Family planning: indicators at state level 262–63; programme, evolution of 238–41 Famine Commission (1901) 103 female sterilization 240 fertility: current: levels of 242–45; trends of 245–49; determinants, in Indian states 249–54; districtlevel analysis: fertility indices at district level 255–57; multivariate analysis 254–55; indicators at state level 262–63; post-independence initiatives to reduce: contraceptive, use of 241–42; family-planning programme, evolution of 238–41 Fertilizer Committee 108 Fifth Pay Commission 221 Fiji: Indian indentured labour in 300–2 financial intermediaries: developing countries, in 182 First World War: economic development during 2 Food Corporation of India 108, 113 food production: increase in 85; population impact on 84 food security 113

356 a Shaping India food supply(ies): restriction on domestic 85 Ford Foundation 104, See also Integrated Area Development Programme (IADP) Forest Act of 1878 27 Forest Dwellers Restoration of Rights Act of 2006 20 Formal agricultural research, in India: origin of 102 formal property system: West, in 42 Free migration 296, 305–7 Gadgil, D. R. 131 Ganesh Bank 204 gender discrimination 40 George, K. Tharian 126, 149 Ghose, Aurobindo 142, 211 global financial meltdown 182 globalization 2 Goldman Sachs 171 Gopalakrishnan, R. 138 Gopal, Lokhitwadi 324 Gough, Kathleen 73 Government of India Act (GoI Act, 1936) 28; section 299 of 30 Govind Ballabh Pant University of Agriculture and Technology 109 Green revolution 22, 99, 113 Gross domestic product (GDP) 7, 217, 220, 225, 252, 332 Guha, A. C. 190 Guhan, S. 73 Guilmoto, C. Z. 254–55, 270 Gujarat: BPL rate in 7 Handloom sector 139 Haryana: BPL rate in 7 Hazareesingh, K. 298 Hazari, R. K. 142, 211 Henry, Louis 237 Hindu Gains of Learning Act of 1930 28 Hindu Law of Inheritance Act (1929) 28

Hindu Succession Act (1956) 40 Hindu Succession (Amendment) Act of 2005 40 Hindu Women’s Right to Property Act (1937) 28 Hoover, E. 239 Household Groups: distribution of owned area by 53 housing loans: trends in 226 Imperial Agricultural Research Institute (IARI) 102, 104 Imperial Bank of India 126, 182– 83; nationalization of 188–92; opening of branches during 1921 185 Index of Industrial Production (IIP) 208; decline in industrial growth 225; growth rate among industry groups 224 India: agarian changes in 69–72; land reforms in 69–72 Indian Bank of Madras 187 Indian capitalist(s): criticism during post-Independence 129 Indian Companies Act, 1882 26 Indian Constitution: article 31 of 30; framing of 30 Indian Council of Agricultural Research (ICAR) 101, 103, 106, 111 Indian Council of Social Science Research (ICSSR) xv, xvi Indian Evidence Act (1872) 26 Indian Forest Act, 1927 27 Indian industrialization: historiography of 133 Indian industry: characterized by high degree of concentration 211 Indian Institute of Population Studies 254 Indian Penal Code (1860) 26 Indian Registration Act (1866) 26 Indian Trusts Act (1882) 26

Index a 357 Indian Veterinary Research Institute (IVRI) 105 Indo-American Committees on Agricultural Research 104 Industrial Development and Regulation (IDR) Act of 1951 141 industrialization process: colonial India, in: features of 3; periodizing after independence 207; routes to 139; state intervention, to influence 206 Industrial Licensing Policy Inquiry Committee 129 infrastructure sector: state role in 213 Integrated Area Development Programme (IADP) 104 International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD) 115 international commoditization: Indian labour, of 297 international liquidity: increase in 219 Iyer, G. Subramania 325 Iyer, L. 9–11 Janakarajan, S. 73 Janmi 325 Jeyaranjan, J. 60–61 Jogi, R. L. 113 Johnson, S. 9 Jose, A. V. 71 Joshi, G. V. 325 Kangani system 296; labour recruitment, of 302–4 Karnataka: tenancy reforms in 68 Kautsky, Karl 87 Kerala: foodgrain production in 85; tenancy reforms in 68 Kerala Research Programme for Local Level Development (KRPLLD) 60, 76

Kisan Sabha workers: conference in Allahabad 29 Klein, Ira 268, 270–73, 275 Kothari, Ashish 39 Krishi Vigyan Kendras 111 Krishnaji, N. xv, 21, 56, 83, 266 Krishnakumar, C. S. 266 Krishnamurthy, J. 64, 208 kulak budget 107 Kumar, Dharma 49 Kumar, Prabhat 295 Labour: indenture from India 296–98 Laissez-faire approach 106 Lakshmi Bank 201 Lakshmidyan 324 Lakshmivijayam 325 land: concentration: of land ownership 47–48; implications for improvement, to access 62–64 Land Acquisition Act of 1894 26, 40; section 23 of 41; section 24 of 41 land distribution: changing pattern of 50–56; factor and processes of 56–62; through tenancy reform 57 landownership: changing locus, in rural India 73–77; implications of changing 77–80; passing to middle and depressed classes 69 land reform(s): caste dimension, on Independence eve (see Caste dimension, of land reform on Independence eve); China, in (see China, land reforms in); impact on rural economy 57–58; India, in (see India, land reforms in) Land reforms legislation: and increase in cost of transaction 30–36 land revenue: Hindu and Mohammedan laws during pre-British India 24

358 a Shaping India land revenue system: during colonial rule 10 Land rights: India, in: before British 23–25; under British 25–28 land tenure system: British India, in; mahalwari system 25–26; permanent settlement system 25; raiyatwari-in-principle system 25; temporary settlement system 25; in India during past 9 Lenin, V. I. 87–88 Liberalization process 143 licensing system 141 Limitation Act, 1859 26 Limited liability joint-stock banking 126, 183 loan(s): share of southern and western india in 195 longue durée approach 126 Macro-centric history 133 Madras presidency: estimation of land concentration 49 Mahadevan, Raman 125, 129 Mahalwari system 19 maistry system, See Kangani system Male agricultural workers (MWA) 92 malnourished: Indian children under five 99 Malthusian model 85 Malthus, T. R. 83–86 Mansabdars 24 manufacturing sector, in India: contribution during independence 3; growth rate of 207, 222 marginalization process: landholding, of 46, 64 Marion Parker Review Committee 107 marriage 237; indicators at state level 262–63 Marumakkattayam laws 24 Marwari path 131

Mass banking 192 maternal malnutrition 282–83 Mauritius: indentured labour in 298–99 Merrill Lynch 171 migration: industrialized countries, to: magnitude and composition 306–12; Middle East, to: magnitude and composition 312–17 Minimum support price (MSP) 108 Mining: contribution during independence 3; growth rate of 207 Ministry of Agriculture 105, 107 Ministry of Health and Family Welfare 254 Ministry of Labour 312 mixed economy 206 Model Act, 1966 109 modern India: importance of economic history 1 modern industrialization process 132 modern industry, in India: spread of 132 Monopoly Inquiry Commission 129, 141, 211 Montague–Chelmsford reforms 104 mortality transition, in India: phases of 289 mortality trend(s), in India 84; during colonial period: high mortality phase (1872–1921) 268–73; relative stability phase (1920–1947) 273–76; convergence of 285–88; declining rate after post-independence period 266; since independence: declining mortality phase (1947–70) 276–77; rapid reduction phase (1971–2001) 277–81; stages of life 281–85; in urban areas 266 Mukherjee, Aditya 132, 329, 340 Mukherjee, Mridula 132

Index a 359 Nag, Moni 237 Naidu, Chandrasekara V. 73 Nair, K. N. xvi, 46 Nandigram: agitation in 41 Naoroji, Dadabhai 325 Narayana, D. 73, 127, 182 Natal: Indian indentured labour in 300–2 National Board for Wildlife 38 National Dairy Research Institute (NDRI) 105 National Family Health Survey (NFHS-3) 242; fertility levels 244 National Malaria Control Programme 276 National Policy on Resettlement and Rehabilitation for Project Affected Families 39 National Population Policy (2000) 242 National Sample Survey (NSS) 50; on landless rural households 68 National Seeds Corporation 108 National Seminar on Indian Economy: Historical Roots and Contemporary Development Experience xv Navaneetham, K. 266 Neelakantan, S. 19, 23 Negotiable Instruments Act (1881) 26 neoliberal reform programme 220 Net sown area per person (NSAP) 92; decline in 94–95; variable changes in 96; variations among districts ranking 97 New York Mercantile Exchange 172 Non-resident Indians (NRIs) 218 Non-scheduled banks 199 Organization of Petroleum Exporting Countries (OPEC) 172, 218

Overarching process 150 Ownership distribution: land, of 52 Palai Central Bank 201 Panchayats (Extension to Scheduled Areas) Act of 1996 20, 38 pan-Indian market 132 Pant, Govind Ballabh 27 Pathak, Neema 39 Patnaik, Utsa 27, 58, 99, 209–10, 217 Per capita income: India, of 4 Per capita state domestic product (PCSDP): Bihar, of 4; Gujarat, of 5; Haryana, of 5; Maharastra, of 5; Orissa, of 4; Punjab, of 5; Rajasthan, of 4; Uttar Pradesh, of 4; West Bengal, of 5 Permanent settlement system 19 personal loans: growth and share of 226 plantation sector, in South India: European capital role, in evolution and consolidation: consolidation and vertical integration phase (1870–1947) 156–58; evolutionary phase (1833–1869) 153–56; Harrisons & Crosfield evolution (1844– 1947) 164–65; James Finlay Group evolution (1765–1947) 161–62; mercantile phase (1600–1833) 152–53; Volkart Brothers evolution (1851–1947) 159–60; focus of 151; internal and external dimensions of 150; involvement phases, of European trading capital in 168–69 Polanyi, M. 116 population, of India: feature of 237; growth rate, after preIndependence period 90, 94–95

360 a Shaping India post-reform growth: India, in 220–24 pre-Gupta period: agriculture during (see Agriculture, during pre-Gupta period) private banks: nationalization of 183 private international financial system: role in recycling financial surpluses 218 private investment: in Andhra during post-independence era 138 private property: abolition in China 72 privatization: common property, of 38–39 Project for Intensified Regional Research on Cotton, Oilseeds and Millets (PIRRCOM). see All-India Coordinated Research Project property rights 19; battle in courts about 36–37 Public Distribution System 108, 113 public investment 129 public sector: role in industrial development 213 Punjab: BPL rate in 7 Punjab National Bank 187 Push-factor theory 137 Quarrying: growth rate of 207 Raina, Rajeswari S. 99 Raiyatwari system 10, 19, 203 Rajan. S. Irudaya 295 Rajasthan: BPL rate in 7 Raj, K. N. xv Ramakrishna 137 Rammohan, K. T. 323 Ranade, Mahadev Govind 325 Rao, G. N. 73 Ray, R. 49

Regional differentiation 1 Registrar General of India (RGI) 267 Report on Improvement of Indian Agriculture 103 Reproductive and Child Health Programme (1995) 242 Research and development (R&D) resources: State government contribution towards 105 Reserve Bank of India 126; failure of scheduled banks, in 1960 201; persuasion and guidance, policy of 201 Right to Property 19 Robinson, James A. 9 Royal Classic Mills Ltd 138 Royal Commission on Agriculture (RCA) 102 Rural Banking Enquiry Committee (RBEC) 187–88 rural households: increase in 20, 50 Rural India: life expectancy at birth in 293 Sample Registration System (SRS) 242, 267; fertility levels 244 Scheduled banks 199 Scheduled Castes 29 Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 39 Science and Technology (S&T) system 99; agricultural story, in India 100 Sen, Amartya K. 87, 283 Singh, Charan 107 Singur: agitation in 41 Sivaraman, B. 110 size classes: distribution of owned area by 51 slavery abolition 295 small peasant economy: Marxism on survival of 87

Index a 361 small peasantry: existence in capitalist society 88 Southern banking: resilience of 197–203 Special economic zones (SEZ): development by private sector through 41; impact on Indian economy 5; land granted for 41 Srinivasan, K. 237 Stamp Act (1862) 26 State Bank of India 190; constitution of 190; expansion by 1969 183; branches in rural areas 126; Gujarat, in 192; Haryana, in 192; Maharashtra, in 192 State Bank of India (Subsidiary Banks) Act, 1959 190 State Boards for Wildlife 38 state-engineered expansion, of industry: problems in 209 state policy: initiatives for realization, of aim: control on capacity creation, production and prices 208; massive public investment 208; step-up in rate of savings 208; widening and intensification of, protection offeringto manufacturing 208; principle aim of 127, 208 State Trading Corporation 108 stop–go policy 210 stridhan 40 Subramanian, A. 8–9 succession: systems of 24 Sudra landlords 29 Suez Canal opening: impact on Indian economy 132 Sundari, T. K. 73 Swaminathan, M. S. 107, 113 TB control programme 277 Tea Committee (1934) 167 Technical Cooperation Mission (TCM) 103–4

Tenancy legislation: replacement by simple lease agreements 34 Third World countries 85 Thorner, Daniel 28–29 Timmer, Peter 43 Tinker, H. 297–299, 301 Tiruppur: industrial history of 138 top right cell: meaning of 96 Total fertility rate (TFR): estimation of 238; India, in 249; for rural areas 248; trends in 245–47 Trade liberalization 220 Trading capital: legacy of 167–73 Transfer of Property Act (1882) 26 triangular trade 150 Tribal land rights: Independent India, in 37–40 Tropical Asia: differences among colonies of 149 Tropical product market(s): establishment of standards 171 two-India phenomenon 8 ul-kuthak(a)i (“inside tenure” ) 74 Union Public Service Commission (UPSC) 106 United Planters’ Association of South India (UPASI) 175 United States Agency for International Development (USAID) 105 United Western Bank 204 University Education Commission (UEC) 109 UP Zamindari Abolition Committee: cultivators, in Indian conditions 29 Urban India: life expectancy at birth in 294 urban male mortality: declining rate of 266 US government: threatening to cancel, PL 480 shipment to India 107

362 a Shaping India Uttar Pradesh Agricultural University 108 Vaidyanathan, A. 67 Vanniars: consolidation of landholding 61 Vasectomy method 239–40 Vishwanath, Ramakrishna 324 Vysia Vacuum 134 Weeding out process 126 West Bengal: tenancy reforms in 68

west coast vultures 168 widow marriage: prohibition of 237 Wild Life Protection Act (WLPA, 1972) 38 World Trade Organization (WTO) 167 Yanagisawa, Haruka 73 Young Farmers’ Forum 107 Zamindari system 10; abolition of 67