Abstract
In their influential paper for the National Council of Applied Economic Research, Chatterjee and Kapur raised some fundamental questions about Indian agriculture and why it has not transformed with economic development. They identify six important ‘puzzles’ in Indian agriculture, one of which is the political economy puzzle. This puzzle refers to the fact that farmers have not been able to leverage their power of land and numbers to economically benefit themselves. The essay utilizes the political settlements framework to understand the underlying causes of this puzzle. Such analysis is important as it recognizes the historical and sociocultural traditions to explain the economic phenomenon of the backwardness of Indian agriculture.
Introduction
In his fictionalized memoir, ‘The Insider’, India’s ninth Prime Minister P. V. Narsimha Rao highlights the power of rural landlords in India, stating ‘He just could not see how he could take away lands from the landlords and survive as chief minister’ (Rao, 2000, cited in Baru, 2021). This succinctly restates Indian traditional wisdom that ‘land is power’. Something similar to this, albeit with additional factors, happened in 2021 when the Modi government was forced to back down and withdraw the three farm reform acts in response to the pressure from farmers’ protest.
The bulk of the Indian labour population is employed in agriculture, therefore this power of the land should have combined with the power of numbers to make farmers a highly potent force in Indian politics. This is partly true and is visible in the numerous subsidies and support policies that have been put in place and regularly increased to benefit the agricultural sector, particularly the landholder class. Still, somehow, farmers have not successfully used this power to benefit them economically and their income has languished. Chatterjee and Kapur (2017) called this paradox the political economy puzzle of Indian agriculture. This essay uses the political settlements (PS) framework to understand the causes of this puzzle.
The PS approach, as developed by Mushtaq Khan (Ingram, 2014; Khan, 1995; Tadros & Allouche, 2017), is a framework that seeks to understand how political power is distributed and exercised in a given context, and how this affects economic outcomes. It emphasizes the role of political actors, particularly elites and non-elites, in shaping the nature of governance and development outcomes. This approach argues that understanding the incentives and constraints faced by these actors is crucial for designing effective policies and interventions in these contexts.
After this introduction, the essay is organized as follows: the second section will discuss the PS approach in more detail and how it has evolved. The third section will provide an overview of the political economy puzzle in Indian agriculture identified by Chatterjee and Kapur (2017). The fourth section will use the PS framework to understand the reasons behind this puzzle. The fifth section will acknowledge the limitations of the PS analysis and its application in the Indian context. The sixth section will provide a conclusion.
Political Settlements: A Strong but Unsettled Concept
Like terms such as ‘empowerment’, ‘poverty reduction’, ‘sustainability’ and ‘gender’, PS has become a buzzword in the field of development policy. In recent years, organizations such as the Department for International Development (DFID), World Bank, Organization of Economic Cooperation and Development, European Union and Australia’s Department of Foreign Affairs and Trade have increasingly used the term and jointly invested in over a million pounds of research on PS (Kelsall et al., 2022). However, the definition of PS, its history, and its use in the field of policy have all been controversial to the point where it was thought that abandoning it would be the best course of action (Ingram, 2014; Tadros & Allouche, 2017).
Despite all the differences, there have been many attempts to reappropriate the concept by scholars belonging to various disciplinary traditions such as comparative politics, international relations, sociology, international law, peace studies, conflict studies, political economy and development studies (Tadros & Allouche, 2017). It is also not very difficult to find some common elements in the different definitions offered by different scholars and organizations. Ingram (2014) recognizes three such similarities. First, PS are primarily about organizations and how they exercise power. Second, they are formed by elites. Lastly, PS are not only limited to the formal institutions but also cover the informal institutions that are central to a political system.
The concept of PS has a long history, dating back to Oppenheimer’s work on ‘Atomic Weapons and American Policy’ in 1953 where it was used to indicate the lack of political agreement on armament policy (Oppenheimer, 1953, p. 525). However, it was not until the mid-1990s that it evolved into a framework, with Mushtaq Khan’s critique of the New Institutional Economics approach which sought to impose development models from developed countries onto developing countries (Ingram, 2014; Khan, 1995; Tadros & Allouche, 2017). He defined PS as ‘inherited balance of power’ (Khan, 1995, p. 1) and ‘balance of power between the classes and groups affected by that institution’ on which any state is based (p. 10). Building on it, UK DFID defined PS as ‘the forging of a common understanding, usually between political elites, that their best interests or beliefs are served through acquiescence to a framework for administering political power’ (cited in John & Putzel, 2009).
Defined as such, the PS analysis is useful for various reasons. First, it can aid in comprehending why core state functions are carried out by different states in different ways. Second, It also explains why equivalent institutions in various states produce different outcomes. Third, the focus on elite bargaining helps to explain the relationships between processes of development and poverty eradication as well as the trajectories of state fragility and resilience (John & Putzel, 2009).
One of the main strengths of the PS approach is its emphasis on the dynamic and complex nature of political settlements. It recognizes that power is not fixed or predetermined, but rather the result of ongoing negotiations and struggles among different actors. It also focuses on the historical and cultural context in which politics and governance take place (Khan, 2017). This is important as it recognizes that the legacy of colonialism, for example, can have a significant impact on the distribution of power and resources in a country. Similarly, the approach highlights the role of social norms and institutions in shaping political outcomes. By taking these factors into account, the PS approach provides a more nuanced and comprehensive understanding of politics and governance in developing countries.
The Political Economy Puzzle of Indian Agriculture
Historically, India has been a primarily rural society with farming being the main occupation and economic foundation for the majority of the population. In the early 1950s, 70% of the Indian population was involved in the agricultural and allied sector contributing to up to 57% of country’s total GDP. While the contribution has come down significantly to 20.2% of GVA in 2021, the share of workforce employed in agriculture is still as high as 43% (Ministry of Agriculture & Farmers Welfare, 2021; Sharma, 2015; World Bank, 2022).
Indian farmers and agricultural labourers constitute nearly a half of the country’s labour force, yet they have been unsuccessful in influencing government policies that would benefit them. Despite the large numbers of farmers in India, the agricultural sector has only grown at 3.1% from 1992 to 2013, compared to the overall economy’s growth rate of 6.9%. The majority of Indian farmers still experience low and unstable income and the number of farmers’ suicides has increased and the agriculture sector, on the whole, is in distress (Chand et al., 2015; Sharma, 2015). Additionally, the farm sector continues to lack appropriate infrastructure, technology, credit facilities and market information which impacts its productivity and income. The land reforms have been, at best, limited, and the land and resultant wealth has been concentrated among a small number of wealthy farmers while the rest keep on producing on small and fragmented landholdings, if any. These are only some of the problems of the highly unorganized Indian agriculture sector. Surprisingly, there has been no major movement to pressure governments to work on these issues. Even the high-profile 2021 farmers’ movement was not primarily focussed on these issues, but on the repealing of the controversial farm laws.
This inability to convert the power of land and numbers into economic power has been referred to as the ‘political economy puzzle of Indian Agriculture’ by Chatterjee and Kapur (2017). The next section will employ the PS framework to understand this political economy puzzle more.
Insights from Political Settlements Analysis
Indian agriculture is diverse and complex, with various categories based on function, caste, and land size. For simplicity of the analysis in this essay, the agricultural population is divided into two groups: ‘Landed agricultural elites’ (LAE) and the ‘rest,’ which includes those with up to 2 hectares of agricultural land. LAEs are defined as those with over 2 hectares of agricultural land. To put this in perspective, the all-India average of landholding size is 1.08 hectares (Department of Agriculture, Cooperation & Farmers’ Welfare, 2021).
During colonial times, the British Zamindari system established a hierarchy of power and privilege based on land ownership and control. The zamindars, who were at the foundation of the colonial revenue system, became powerful institutions themselves, often having their own armies and forts. Despite the abolition of the Zamindari system after India’s independence, the zamindars were able to maintain their economic power and social and political influence through democratic institutions by getting elected to state legislatures and parliament. This allowed them to retain their power and influence, and from as early as the 1960s, the Congress party was dominated by land-owning castes like the Reddys, Jats and Marathas (Baru, 2021).
The significance of these wealthy farmers, or LAE, has been acknowledged by Bardhan (1984) who describes India’s PS (although with different terminology) as a ‘functioning deal between business interests, [wealthy] farmers, and state bureaucracy’ (cited in Mehta & Walton, 2014). These LAE make up 11.8% of total agricultural households (Ministry of Statistics & Programme Implementation, 2021).
Due to the historical relationship between wealth and caste (Bharti, 2018), the LAE belong to similar castes, that is, the Savarna castes (so-called upper castes). This increases their organizing power, ultimately increasing their bargaining power in both regional and national contexts. On the other hand, the ‘rest’ of the population is divided among various lines. Approximately 40% of them own less than 0.4 hectares of land, 40% own between 0.4 and 1 hectare, and the top 20% own 1–2 hectares of land (Ministry of Statistics & Programme Implementation, 2021). This division also means significant differences in caste, which reduces their ability to collectively act to secure benefits for themselves.
The power of the ‘rest’ was further reduced by two major events in the 1990s: the implementation of the Mandal Commission’s recommendations, which expanded reservation benefits to the Other Backward Classes (OBCs), and the 73rd Constitutional Amendment Act, which established Panchayati Raj as the third level of administration in villages (Chatterjee & Kapur, 2017). These local elections for panchayat offices led to increased hostility between different castes due to caste politics, further weakening the organizing capabilities of the ‘rest’. The LAE, who mostly belong to Savarna castes, were not significantly impacted by these events as they were more focused on national or state-level politics rather than local panchayat offices. Some may argue that the implementation of the Mandal Commission report further increased the animosity between LAE and the ‘rest’ because LAE mostly belong to Savarna castes and did not benefit from it while the rest did (Table 1).
Average Area (ha.) Owned Per Household by Each Social Categories.
It is argued that only a certain section of farmers, the LAE, find themselves among the power elites and are able to influence policies at the national and state levels. These LAE have different interests than the ‘rest’ of the population. Due to their power and influence, subsidies for inputs such as electricity, water, fertilizer, and credit are regularly revised upwards. However, policies such as land reforms and bringing agricultural income under taxable income, which would negatively impact the LAE, are less likely to be implemented. The LAE have the power to organize, and therefore, policies that harm them to benefit the ‘rest’, which is almost 90% of the agricultural population, have a lower probability of being implemented.
Let us examine the issue of land reform in India more closely. There is a strong case for land reform in India, as evidenced by numerous studies in the literature. Rural inequality in India is alarmingly high, with a study in Uttar Pradesh showing that a single landlord can hold over 50% of land in some villages (Das & Srivastava, 2021). This inequality is rooted in both caste oppression and the legacy of colonialism. Following independence, efforts were made to limit land ownership and redistribute excess land to the landless. This would have seriously affected the LAEs. However, these efforts were not implemented in all states, particularly in those where the majority of the population relies on agriculture. Additionally, the ceiling for land ownership was set too high to make a significant impact, and the LAE found ways to circumvent the laws through loopholes such as ‘benami’ transactions (Mearns, 1999, p. 10).
Another example of LAE blocking important reforms in the agricultural sector is the lack of a tax on agricultural income. The government does not tax any amount of agricultural income under income tax laws, with the exception of a plantation crop grown in six states. This benefits both the LAE and urban elites, as LAE do not have to pay taxes on their large agricultural incomes and urban elites use this provision for tax evasion. Previous attempts to implement an agricultural holding tax, as recommended by the Raj Committee in 1960s, have been met with heavy criticism from the left and LAE, ultimately leading to the abandonment of the idea which has never been picked up again. The lack of agricultural income tax has also encouraged urban elites to retain landholding as a tax shelter, further solidifying the alliance between urban and rural elites (Baru, 2021; James, 2004).
However, it is important to acknowledge that the OBCs within the Dalit community have experienced significant progress in recent times in terms of accessing land-related power. They have arguably achieved this progress by organizing themselves and leveraging their numerical strength. Initially, they managed to ascend to the LAE class and subsequently influenced various policy decisions in their favour. In contrast to the Savarnas, who historically amassed land power through centuries of caste-based oppression, scholars like Jaffrelot (2000) and Mohanty (2001) attribute the OBCs’ rise as a landholding class to their active involvement in popular movements and struggles in post-independent India, such as the Bihar movement of 1974. The following section will identify the shortcomings of the previous analysis, specifically in regard to the limitations of using a PS approach to understand the complexities of Indian agriculture.
Limitation of the Analysis
The above analysis has the limitation of oversimplifying the reality of Indian agriculture by dividing the population into LAE and the ‘rest’. This classification ignores the diversity and complexity within these groups, including the presence of different values, sub-castes, and political affiliations among the LAE. However, the analysis is still valuable as it focuses on the comparative ability of these groups to organize themselves and the impact that has on their bargaining power in relation to the ‘rest’.
The PS analysis fails in recognizing researcher bias in identifying who are considered ‘elites’ and ‘non-elites’. It also fails to take into account the role of gender in determining the effectiveness of policies by overlooking the fact that focusing on elites often results in an exclusive focus on a predominantly male group of actors. Kabir, cited in O’Rourke (2017), notes, ‘He spoke of the men who owned the land and those who labored on it … but he never spoke of the women in the village. When he was asked why not, his answer was simple: he had not seen any’.
Conclusion
In conclusion, the PS framework is a valuable tool for understanding the political economy puzzle of Indian agriculture raised in Chatterjee and Kapur (2017). Using this framework, the essay has attempted to understand the reasons behind the paradox of Indian agriculture, where farmers have not successfully used their power to economically benefit them despite having the power of land and numbers. The reason is that power is concentrated in a small group of farmers whose interests do not align with the majority. As a result, necessary reforms that would harm this powerful group are not implemented, negatively impacting the rest of the sector. While the essay recognizes the limitations of the PS analysis in the Indian context, it argues that understanding the incentives of this powerful group is crucial for designing effective policies and interventions.
Footnotes
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The author received no financial support for the research, authorship and/or publication of this article.