September 16, 2023


Crisis in the Bread Basket

Investment and agriculture in Punjab

In the run-up to the general elections of 2014, Narendra Modi was hailed across mainstream quarters of journalism and policy-making as the crusader of economic reform and growth in India, a spirit that was only bolstered by the resounding majority the Bharatiya Janata Party (BJP) received. Almost a decade on, the spell has worn off. Contrary to his initial image as the “strongman” who can “unleash” India, Modi’s economic interventions can only be described as policy misadventures. Overall, investment in the Indian economy has declined, while foreign capital inflows have increasingly come in the form of short-term private equity or venture capital. While industrial growth has been slow for decades, recent indicators suggest that the country may be actively deindustrializing. After two decades of “jobless growth,” a record high unemployment rate suggests that the economy may be actively shedding jobs. 

At the same time, agriculture’s share in the country’s GDP has been steadily declining, exemplified by the state of Punjab, where, between 2020 and 2021, protests erupted around three new farm laws that threatened to unsettle the existing agrarian regime. The mobilizations evoked agricultural land as a lifeline of last resort, a source of protection and security when all other ventures failed. Today, Punjab’s political economy is at a crossroads: agriculture is not as stable or profitable as it used to be, and industry is incapable of providing employment and economic diversification. 

The trajectory is symptomatic of what the development scholar Subir Sinha has termed a “sustained state of deferral” of “mature,” competitive capitalism in postcolonial India. Defying the conventional development narrative, increased investment in the agricultural sector has not automatically led to industrial development or increased employment. Looking back at the long history of land and agricultural change in Punjab, it seems clear that the further privatization pursued under the Modi government is unlikely to reverse course. The trajectory of regional development depends on many intermediating and contingent socio-economic and political factors, most significantly the links between corporations, farmers, and landless farm workers. With more than half of the Indian population dependent on agriculture as their main source of livelihood, the nature of land investments offers important lessons for capitalist development and political change.

Complicating the bread basket

Modern Indian Punjab was carved out of the larger colonial province of Punjab in the aftermath of independence and partition in 1947, with a large share going to Pakistan. The current political boundaries of the Indian Punjab state were fixed in 1966 through the linguistic reorganization of state boundaries.

In the post-independence years, the state experienced rising land investments in response to a consolidation of land holdings and resulting tenant evictions. The colonial government had treated Punjab as an agricultural frontier, commercializing land and experimenting with innovations in agricultural production. This groundwork was cultivated by central government policies in the mid 1960s, which guaranteed procurement of wheat and paddy, implemented a remunerative Minimum Support Price (MSP), and drew on the existing market network to extend research and technology adoption by farmers. Punjab’s Green Revolution was arguably the most successful in the country, with astronomical growth in yield for wheat and rice following the 1970s. This was accompanied by a robust agricultural market infrastructure, good roads for connectivity, and a growing ancillary industry in agricultural inputs and machinery. 

The triumph of the Green Revolution meant that Punjab’s countryside was, and still is, routinely stereotyped through the image of lush green fields worked by tractors, irrigated by tube wells and owned by prosperous farmers. But this picture is incomplete. Green Revolution technologies were input-intensive; they demanded enormous amounts of water and led to the introduction of fertilizers and pesticides. Given the time-sensitivity of the production cycle, the early years of the Green Revolution increased labor costs and in later years, led to growing mechanization. As a result, the cost of production increased significantly. By the 1980s, yields had begun to stagnate and scientists had begun to warn about the dangers of the depletion of groundwater levels by the continuous cropping of wheat and paddy, the latter being especially water-intensive and unsuitable to the semi-arid ecological conditions of Punjab. 

These developments were accompanied by the nationalization of Indian banks in 1969, which, alongside cooperative societies, made formal credit for agriculture more readily available. This credit was unevenly distributed, however, and larger farmers gained more access to credit due to political connections and control over local cooperative institutions. Smaller farmers were increasingly pushed towards indebtedness and sometimes landlessness, leading to the present state of increased land concentration in the region.

As per the 2011 Agricultural Census of India, the most recent available, Punjab has a much higher concentration of what the Indian government defines as semi-medium (2-4 hectares), medium (4-10 hectares) and large (over 10 hectares) farmers (cultivating their own or leased land) than elsewhere in the country. In Punjab, they make up 66 percent of all farmers, compared to the national figure of approximately 15 percent. In my research in Ludhiana district in 2014–15, I found that medium and large farmers were more likely than smaller farmers (operating on 0-4 hectares) to make capital investments—by purchasing tractors, tube-wells pumps and other agricultural machinery—and to employ attached labor.

These tendencies worsened with time. As the scale of production grew, the intensity of capital accumulation increased, while labor conditions deteriorated. At the same time, land holdings have fragmented over successive generations. The MSP too has not kept pace with the rising costs of production, and scholars have pointed to methodological flaws in its estimation, although it remains somewhat remunerative. Public agencies procuring crops like wheat, paddy, and cotton have become more stringent in applying quality norms. Failure to meet these norms leads to price deductions. Together, these developments have led to a rise in informal land leasing or tenancy arrangements to increase profits. These strategies have had diverse outcomes—families who own land and have left farming charge high annual lease rates that significantly add to the costs and risks of tenant farmers. As a result, tenant farmers take on major debts as a result of drops in crop prices or damage due to unforeseen weather events or disease. The underestimation of land lease rates is one of the ways in which the MSP is deemed inadequate by farmer unions

Land and caste

Farmers and landowners in Punjab predominantly belong to the agrarian Jat caste, but the state also has a large Scheduled Caste or Dalit population—comprising 32 percent of the total, over a third of whom reside in rural areas, where they are largely landless farm workers. Even in the few areas they might have land, their holdings are quite small. Historically, rural Dalit men and women worked as agricultural wage workers, including under forms of attached labor, in Jat-owned farms. In the early years of the Green Revolution, the growth and the time-sensitive nature of labor demand led to higher agricultural wages. Since then, farmers have progressively mechanized their operations, reducing agricultural wage work. Harvesting of wheat and paddy is now entirely mechanized through the use of combine-harvesters, as is the sowing of crops like wheat and potato (but not paddy, yet). Manual weeding has been replaced by the application of weedicides using spraying machines. Some cropping operations such as paddy transplanting, cotton picking, and cauliflower harvesting are entirely manual while others such as potato harvesting involve a considerable amount of labor in picking, sorting, and packing. 

While the Green Revolution firmly established agricultural land as a space for enterprise for dominant caste Jat farmers, it increasingly devalued it as a space for wage income for Dalit farm workers. This is not to say that land does not provide any sustenance to Dalit workers. My research indicates that Dalit women gather fuelwood for cooking and fodder for their animals from private farm land and common lands in the village. In a context where non-farm employment is also limited, many Dalit men and women continue to value any amount of agricultural wage work they might get. 

The Green Revolution gave rise to the New Farmers’ Movements in Punjab (and elsewhere) in the 1970s and 1980s, represented in the various factions of the Bharatiya Kisan Union (BKU). Large Jat farmers, the prime beneficiaries of the deepened commercialization of agriculture brought about by the Green Revolution, were the leaders of this movement. The demands of the movement thus focused on input and output prices and the timely sale of crops from wholesale markets. These issues were, and still are, relevant for smaller farmers who are also drawn into the circuits of commercial agriculture, even if often on adverse terms. But other issues like land reforms and equitable access to institutional credit were absent from the agenda. Nevertheless, the common Jat identity was crucial to maintaining farmers’ unity. 

The corporate turn

Corporate agribusiness investments in Punjab have not typically been directed into land ownership for agricultural production, but they have instead taken alternate forms. Overall, these investments have failed to generate employment opportunities or ensure stability for farmers and farm workers; in some cases, they have led to more precarity. But examining the specific nature of corporate investments offers a sense of the region’s development trajectory. Given that land holdings are fragmented—for example, due to the division of landed inheritance among sons across generations or, less commonly, land titles being held in the name of women of the household to avoid the land ceiling or get tax concessions—any efforts to acquire a large area of land would require transactions with several landowners and potentially involve conflicts over dispossession and compensation.

Ownership of land can be less attractive for corporations that do not intend to make fixed investments. For these reasons, it appears that agribusiness companies are not interested in land ownership. The Mukesh Ambani-led Reliance Industries Limited (RIL), for instance, entered into an agreement with the Punjab state government in 2006 to acquire over 1000 acres (404 hectares) for a “farm-to-fork” project. It was scrapped by the latter in 2009 as the company did not make any of the promised investments in the state. In 2021, it declared it had no intention of buying agricultural land in the state for contract or corporate farming. Although corporations less frequently employ direct control of land for production, there have been cases where they lease in and purchase agricultural land for value-addition activities upstream or downstream.

In place of direct land ownership, Indian and multinational corporations have come to dominate the market for inputs for production such as seeds, fertilizers and pesticides. The share of the private sector in India’s seed market was reported to have increased to almost 65 percent in 2020-21. Punjab is no exception in this—farmers purchase seeds from private companies like Bayer, Syngenta, Mahyco, and Nuziveedu and engage in contract farming to produce seeds of vegetables like cauliflower, carrots, peas, and potatoes for private seed companies. The most obvious effect for farmers is in terms of the costs of cultivation. Seeds from private companies are, unsurprisingly, more expensive than those sold by public sector networks. Moreover, the companies push hybrid seeds which need to be replaced every year, or at least once every other year, in order to have good yields and often need to be supported with better irrigation and costly pesticides and fertilizers.

Some exceptions exist. For instance, a private seed company and farmers I interviewed in Ludhiana district explained that farmers resisted the use of hybrid seeds for cauliflower in the winter as it would not grow well. However, in the summer, hybrids ruled. Critics are right in pointing to the adverse effects for farmers (and the ecology) of being locked into expensive, corporate-led technological packages. But in my research, some farmers—especially (but not exclusively) those who can afford the costs and associated risks—pointed to the higher, more stable yields from such seeds. 

Contract farming—where farm goods are sold to a company at a predetermined price—has also been a much-discussed and trialed strategy of corporate agribusiness expansion in Punjab’s countryside. It began in the mid-1990s with PepsiCo contracting out tomato production for its processing plant in Hoshiarpur district. In subsequent years, a host of corporations, both Indian and multinational, followed suit and used contract farming to cultivate cereals, vegetables and oilseeds. Contract farming continues to be projected by the central and state governments as well as corporations as a promising strategy for agricultural development. The agrarian scholar Rithika Shrimali has argued that this should not be surprising as it allows companies to control land, exploit farmers and labor, and thereby accumulate surplus without making fixed investments in land, all without dispossession. 

Yet many of these projects were abandoned, and contract farming remains a relatively marginal mode of crop production. Several studies have shown that companies prefer large farmers for contracted arrangements, as they are more able to invest in the expensive inputs and technologies required to meet the contracted standards, and this approach allows corporations to minimize their transaction costs in arranging for large volumes of produce. But this does not mean that companies would necessarily exclude small farmers. My research on potato contract farming in Ludhiana district showed how some large farmers were able to use contract farming to expand their surplus and invest in more land or other businesses like trading and cold storage. Still, the risks remain high, as companies could renege on contracts if prices in the open market fall lower than what they contracted for.

Where in operation, contract farming strongly shapes the possibilities of subsistence and accumulation from agriculture. At the same time, it should not be considered as the sole determinant of agrarian change as contracted crops may be one of two or three crops being cultivated by a differentiated group of farmers who are also hedging their risks and seeking opportunities as best as their circumstances allow. In fact, my research suggests that one of the ways in which farmers often hedge risk while contract farming for crops like potato (for which there is no MSP or public procurement) is making sure they also cultivate wheat (also their food crop) and paddy—crops for which they can receive the MSP and thereby secure some stable income.

Weakened industry

Punjab’s relatively weak industrial development provides important context for the changing legal provisions around who can use, control, and acquire agricultural land. Some commentators have argued that Punjab’s land laws should be liberalized to facilitate long-term land leasing and enable the state to move towards industry. In line with the recommendations of the Niti Aayog, the Indian government’s policy think-tank, they have called for the removal of land ceilings and upper limits on land holdings, which are applied to facilitate equitable redistribution of land holdings. In 2019, the Punjab government introduced a new land leasing bill proposing a complete liberalization of land leasing and allowing corporations to lease land for fifteen years, but this has yet to become formal law. Two years prior, the government made provisions to allow non-agriculturalists to acquire agricultural land to develop industries or for infrastructural works as long as they notify the district “within a year from the date of acquisition”—in other words, after acquisition. 

These efforts can be read as what the anthropologist Tania Li describes as “assembling a resource” for corporate investments. The expectation that capitalist agriculture would lead to industrial development and employment was not realized in Punjab. At the turn of the century, Punjab was performing worse industrially than all its neighboring states. While the state has historically had a strong presence in textiles, sports, liquor and malt beverages, and also steel, over the past few decades, factory closures and capital flight to other states with better incentives have hindered the industrial sectors. Subsequent state governments have held “Investor Summits” to attract business and investment from the corporate sector, but these have failed to achieve the desired results. The lack of dynamism across the economy in turn has led to growing unemployment, especially among the youth, who are thoroughly disenchanted and in search of immigration opportunities. 

Scholars have pointed to various explanations for Punjab’s weak industrial development, including India’s quasi-federal structure and the power of the state’s mercantile castes in preventing agrarian castes from diversifying. In an earlier article, I discuss the electoral strength of the agrarian castes, which have forced the state government to make policies that favor agriculture at the expense of industry. These political factors have shaped the form of development in the region. Corporate investments in the post-Green Revolution era have magnified costs and risks for small farmers, as well as the precarity of landless workers. With agrarian capitalism defined by patterns of caste and land ownership, and political power held by dominant agrarian castes, much of the rural population is left dependent on a declining sector. 

Building resistance

The agrarian crisis in Punjab has intensified, with severe socio-economic and ecological consequences. Industry has seen a reversal, and corporate investments in agriculture have been unable to catalyze sustained development, alternative forms of employment, or economic diversification. The varying forms of these investments—namely corporate domination of input markets and the uneven emergence of contract farming—have only heightened costs for small farmers. At the same time, they have facilitated the accumulation of profits for large companies while the risks associated with fixed land investment are borne by farmers.

In response to these trends, at the turn of the century, newer farmer-led BKU factions such as BKU (Ekta Ugrahan) and the Krantikari Kisan Union began raising issues specific to small farmers. Most of these unions are left-leaning, but they also draw on progressive Sikh values (sikhi). BKU (Ekta Ugrahan) in particular views redistributive land reforms as crucial to laying the foundations for a more equal society. Through alliances with farm labor unions like the Punjab Khet Mazdoor Union, BKU (Ekta Ugrahan) has attempted to build solidarities between small Jat farmers and landless Dalit laborers. While this unity is in fledgling form—and is certainly not pursued by all unions—it reflects a shared precarity. Both small farmers and landless workers struggle to earn a sustainable living through agriculture, experiencing chronic indebtedness, growing poverty, social stigma, and increased rates of suicides.

The strains on agrarian accumulation and subsistence have led farmer unions to increasingly oppose land acquisitions for infrastructure projects that fail to award farmers fair compensation. In recent examples, unions have protested against acquisitions for a proposed economic corridor and a thermal plant. They argue that once dispossessed of their land, farmers are unlikely to gain alternative remunerative employment given the broader economic conditions. In these struggles, farmers also evoke land as the source of food for the nation, nurturing the nation’s soldiers and workers. Nonetheless, landless Dalit farm workers face a distinct and often more difficult reality, even confronting extreme violence from dominant caste Jat farmers in efforts to claim village common lands. 

The farmers’ protests of 2020–21 reflected these caste and class dynamics, demonstrating that cross-sectional solidarity and joint mobilizations are necessary to confront the Modi government’s authoritarian moves. While many unions avoid electoral contests, their leaders still oppose the Modi government, which they see as a threat to the very survival of an oppositional civil society space. More significantly, growing solidarities have sought to reclaim the welfarist function of the state, demanding protection from the vagaries of the market through economic support and social security. The potential of these emerging joint efforts remains unclear, but they ultimately reflect a deep dissonance between India’s agrarian capitalism and its wider stagnating economy. With large swathes of the population facing diminished livelihoods and bleak futures, the current path can no longer be sustained.

Over the past two decades, Brazilian media and political discourse have exalted the uncontroversial success of a magical entity known as “agribusiness.” Closely associated with the rise of commodity exports…

Read the full article

“The systemic, long-term nexus between the political elites and big business will not go away anytime soon,” wrote journalist M. K. Venu  in 2015. Writing in the aftermath of Obama’s…

Read the full article

Pranab Bardhan is Professor Emeritus of Economics at University of California, Berkeley. Among the foremost global scholars of development, distribution, and trade, his twelve books and more than one hundred…

Read the full article