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3. Second Agricultural Reform and Farmers' Movement

 

3-1 Change in Agricultural Policy

 

As shown in Figure 1-4 earlier, despite the strained supply demand situation in foodgrains during and before the 1960s, the terms of trade between agriculture and industry moved disadvantageous to agriculture under the industry-oriented economic policies in which foodgrain prices, as wage goods, were kept low by means of imported foodgrains. But the terms of trade became increasingly advantageous to farming after the agricultural crisis as government measures promoted the Green Revolution in which agricultural subsidiaries increased and the buying prices of foodgrains were raised.

The conversion to agricultural-oriented government policies changed the areas, such as the northwest India, with established infrastructures, into the granaries of the country. Part of the result can be observed in relation to institutional credit to Agriculture (Table 1-10). The rates of borrowings from public financial institutions in Punjab and Haryana are relatively high, as well as the share of agricultural capital investment in the total loans. As a result the expenditures for fixed capital formation are the greatest. The fixed capital formation per farming household were Rs915 in Punjab and Rs652 in Haryana, whereas those in Bihar and West Bengal were Rs43 and Rs54 respectively. This is how the close relationship started between the newly emerging well-off farming class and a Government taking the agriculture-oriented policies - through the support price system and various subsidiaries.

The Green Revolution resulted in drastic decreases of foodgrain imports, and saved India from the Ricardian external trap. Such subsidiary policies, however, would provoke a financial crisis.

Taking this situation into account, The Committee on Taxation of Agricultural Wealth and Income revealed that Punjab's agricultural taxation was only 0.42% of its agricultural income, and proposed an income transfer from wealthy farmers by taxation.

 

 

 

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