nabanita mitra growth of the rural non-agricultural sector...
TRANSCRIPT
Growth of the Rural Non-Agricultural Sector in West Bengal and Haryana:
Contemporary Issues and Historical Perspective
Nabanita Mitra1
Abstract
Deep structural changes have been taking place in rural India over the last few
decades. There has been an expansion of a rural non-agricultural sector: a phenomenon
also observed in other developing countries. In India, the character and the causes
for the growth of the rural non-agricultural sector in the states of West Bengal and
Haryana are distinct. While Vaidyanathan’s residual sector hypothesis (lack of
opportunities in agriculture) seems to be the reason for expansion of the rural non-
agricultural sector in West Bengal, Mellor’s hypothesis (growth of agricultural sector
leads to growth of non-agricultural sector) seems to be at work in rural Haryana. This
has resulted in different outcomes in terms of monthly per capita consumption
expenditure, employment trends, per cent of rural population below the poverty line
etc. in these two states. This study attributes these differences to historical
reasons that owe its origin to India’s colonial past and more contemporary happenings
such as the grant of land rights or state’s role in pushing rural development. It
explores the historical perspective like the colonial land revenue system, types of
crops grown in colonial times and the resultant dependence on world markets as well as
land rights of cultivators to explain regional disparities in growth of the rural non-
agricultural sector in India.
Introduction
Employment data collected over various rounds of National Sample
Survey reveal that rural India has been undergoing a structural
transformation. It shows (Figure 1) there has been a shift of
the male workforce from the primary sector to other sectors in
rural India. This trend when read in conjunction with the fact
that rural to rural migration stream in India has the dominant
share of internal migrants it follows that not only urban India;
1 Research Scholar, Department of Humanities and Social Sciences, IIT Guwahati Email: [email protected]. I thank Dr.Debarshi Das, Associate Professor, Department of Humanities and Social Sciences, IIT Guwahati for his guidance.
but also rural India provides employment opportunities. As
employment opportunities have been declining in the rural
agricultural sector, this rural to rural labour movement seems
to be driven by a growing rural non-agricultural sector (RNAS).
Figure 1: Distribution of usually working rural males by broad group of industry for
selected states and all-India for the 50th, 55th, 62nd, 66th and 68th Rounds
Source: Computed from NSSO 50th, 55th, 62nd, 66th and 68th Quinquennial surveys on Employment and
Unemployment in India
Regional disparities do exist in growth and composition of this
sector across India. As shares of rural and urban sectors in
State Domestic Product are not computed in India, this paper
examines parameters like rural MPCE, rural wage rates,
performance of rural agricultural and non-agricultural sectors
etc. to understand the regional differences in character and
causes of growth of RNAS in India. The states chosen for this
study are the eastern state of West Bengal and the north-western
state of Haryana. West Bengal has been a choice for this study
as its rural non-agricultural sector is expanding. In the period
2010 to 2011, West Bengal emerged second in India in the number
of rural enterprises and third highest in terms of employment in
such enterprises (NSS 67th Round, 2012). What is triggering this
change in West Bengal’s rural sector? Is this rural
transformation an outcome of agricultural prosperity, in line
with Mellor’s (1961) theory or is it a fall-out of low
0 10 20 30 40 50 60 70 80
P S T P S T P S T P S T P S T
1993-‐94 1999-‐00 2005-‐06 2009-‐10 2011-‐12
Haryana
West Bengal
all-‐India
employment elasticity in agriculture, in line with
Vaidyanathan’s (1986) postulate? Haryana has been a choice for
comparison, although it is small in size relative to West
Bengal, as it is one of the first states in India to achieve
Green Revolution, has a significant rural non-agricultural
sector and figures high in rural monthly per capita expenditure.
In this paper, attributes like moderate to high levels of rural
income, use of technology in agriculture, regularity of jobs and
earnings, levels of capital investment in rural enterprises have
been identified to characterize agricultural prosperity-led RNAS
growth. Data corresponding to these attributes are examined and
collated with findings from literature, village level surveys to
arrive at the causal relationship between the rural agricultural
sector and growth of the rural non-agricultural sector in West
Bengal and Haryana. We then show that contemporary differences
in economic performance of the rural sectors of these states are
not only attributable to post-colonial measures like period of
initiation and character of land reforms; but also an outreach
of colonial history. Banerjee and Iyer’s analysis (2005) on
impact of British land revenue system on present-day economic
performance in landlord and non-landlord governed areas provides
the premise for this claim.
The structure of the paper is as follows: Section I of this
paper gives a brief overview of the states of West Bengal and
Haryana. Section II discusses findings that provide an
understanding on the status of the rural economy in West Bengal
and Haryana. Section III examines role played by agriculture in
growth of RNAS in West Bengal and Haryana. Section IV explores
impact of history and post-independence land reforms for
different economic outcomes in the agricultural sectors and
growth of RNAS over the last few decades, in West Bengal and
Haryana.
I. West Bengal and Haryana: An Overview
West Bengal has an area of 88752 square kilometers. As per 2001
Census, it has a population of 80.176 million of which, 72.03
per cent resides in rural areas. The major share of the
workforce is dependent on agriculture. 65.95 per cent of land in
West Bengal is cultivable and significant portion of it grows
paddy, the principal crop of the state. (Statistical Abstracts,
2008, 2010). The State Domestic Product of West Bengal improved
since the 1980s with a sharp increase in agricultural output and
productivity. The rate of growth of SDP at constant prices was
5.20 per cent in the period 1980-1990 and 7.24 per cent in the
period 1990-2000. Although rate of growth of agriculture
plateaued in the ‘90s, post-90s both organized and unorganized
manufacturing output and service sector output grew. West Bengal
ranked twentieth in India in Human Development Index in 1991 out
of a total of thirty two states and union territories (Haryana
Development Report, 2009; West Bengal Development Report, 2010).
Haryana has an area of 44212 square kilometers. It has a
population of 21.144 million according to Census, 2001 and 71
per cent of its population is rural. In the decade 1991-2000 it
posted a high decadal growth rate of population of 28.43 per
cent. About 72.82 per cent of land in Haryana is cultivable and
wheat is the principal crop of the state. Like most states of
India, major part of the workforce continues to be in
agriculture. The rate of growth of SDP at constant prices was
6.68 per cent in the period 1980-90 and 6.71 per cent in the
period 1990-00. In 1991, Haryana ranked sixteenth in India in
Human Development Index out of a total of thirty two states and
union territories(Haryana Development Report, 2009; West Bengal
Development Report, 2010).
II. Rural Economies of West Bengal and Haryana
This section delineates the parameters examined to assess the
current status of rural economies of West Bengal and Haryana.
The rationale behind choice of these parameters and the findings
follow.
a. Parameters: Rationale and Findings
i. Rural Monthly Per Capita Consumption Expenditure
(RMPCE)
This parameter is chosen as it provides an idea about the
rural purchasing power viz. the average rural income
irrespective of whether the person is self-employed2,
receives regular wages3 or is a casual labourer4. The rural
purchasing power is an indicator of the economic status of
the rural sector. The thinking is that a region with
relatively higher rural purchasing power also demands
goods/services over and above food items. Hence, it will
favour a RNA sector.
Haryana besides Punjab and Rajasthan consistently figured
among the top five in RMPCE (at constant prices) in the
period 1972-73 to 2004-05. West Bengal lagged Haryana and
did not figure among the top five states; however, West
Bengal figured among the top five in rate of growth of
RMPCE (Table 1). This indicates that rural purchasing power
2 Self Employed Persons are those who operate their own farm or non-farm enterprises or were engaged independently in a profession or trade on own-account or with one or a few partners were deemed to be self-employed in household enterprises 3 Regular wage/salaried employee: These were persons who worked in others’ farm or non-farm enterprises (both household and non-household) and, in return, received salary or wages on a regular basis (i.e. not on the basis of daily or periodic renewal of work contract). 4 Casual wage labourer: A person who was casually engaged in others’ farm or non-farm enterprises (both household and non-household) and, in return, received wages according to the terms of the daily or periodic work contract, was a casual wage labourer.
has been improving in West Bengal: the real RMPCE in West
Bengal improved by 108.09 per cent in this period (Chand,
2007).
Table 1: Rural Monthly Per Capita Consumer Expenditure (RMPCE) (Rs) at constant* prices in the time periods 1972-73, 1977-78, 1983, 1987-88, 1993-94, 1999-00, 2004-05 * adjusted for inflation using deflators derived from state specific poverty lines for each of the years.
State 1972-73 1977-78 1983 1987-88 1993-94 1999-00 2004-05 % Growth 1973-2005
Haryana 70.07 77.77 85.6 87.24 82.26 98.35 103.92 48.31
West Bengal 38.45 50.99 53.99 64.05 68.82 70.77 80.01 108.09
all-India 44.17 60.15 62.28 68.11 67.85 73.66 77.83 76.21
Source:Chand,2007
ii. Wages and Growth of Wage Rates
In developing economies, rural wage rate is a significant
parameter as it impacts the macro economy. Low real wage
rates could “increase the derived demand for labour”; but
it reduces the effective demand “….and the strong negative
acceleration effect of a lower level of effective demand
may well outweigh the higher profitability of investment
associated with a lower real wage rate and keep both
investment and effective demand in a depressed state”
(Bhaduri,2006). Regions with relatively higher levels of
wage rates are likely to strengthen demand for produce from
various rural sectors and promote their growth.
Usami’s study (2011) on rural agricultural and non-
agricultural wages in India in the period 1998-99 to 2008-
09 shows that Haryana has figured among the top five states
in men’s rural real wage rates in this period. Similar
trends were observed by Chavan and Bedamatta (2006) in
Haryana, for male agricultural labourers in the period
1990-91 to 1999-00 and they found that Haryana has been
having relatively high agricultural wage rates since 1964-
65. In the period 1998-99 to 2004-05 agricultural wage
rates increased in Haryana, “a state belonging to a high
wage rate region” as well as West Bengal “a state belonging
to a low wage rate region” (Usami, 2011). In the period
2008-09 West Bengal improved its ranking in agricultural
wage rates in India, however in the period 2005-06 to 2008-
09, wage rates for different agricultural operations either
declined or remained constant in West Bengal; it increased
in Haryana. The difference in wages for different
agriculture operations in these two states is substantial;
but wage rate differential for rural non-agricultural jobs
is steeper in these states. The wage rate of a mason in
rural Haryana was 75.5 per cent higher than his counterpart
in West Bengal in 2008-09.
To understand the probable reasons for differences in rural
wage rates and RMPCE in West Bengal and Haryana, the next
section examines agricultural productivity and marketed
surplus to output ratio (MSR), as agriculture continues to
be the dominant employer in these states.
iii. Agricultural Productivity and Marketed Surplus Ratio
In the early ‘70s yield of total foodgrains in Haryana and
West Bengal was comparable (Table 2); however in successive
decades this differential increased and in 2007-08, it
peaked to 35.45 per cent.
Haryana is ahead of West Bengal in the marketed surplus to
output ratio (MSR) for some important food grains like
rice, wheat and bajra shows that (Table 3). Haryana’s much
higher MSR for rice is possibly because rice is not a part
Table 2: Yield in kgs/hectare of Food grains from 1970-71 to 2007-08
Cereals Pulses Total Foodgrains
West
Bengal Haryana West Bengal Haryana West
Bengal Haryana
1970-71 1304 1456 564 713 1224 1235
1980-81 1443 1743 452 628 1358 1518
1990-91 1792 2703 615 733 1735 2347
2000-01 2297 3153 800 622 2231 3060
2001-02 2490 3235 704 794 2424 3128
2002-03 2438 3184 695 655 2374 3103
2003-04 2484 3182 840 719 2421 3068
2004-05 2542 3196 740 793 2479 3092
2005-06 2481 3158 785 622 2423 3045
2006-07 2575 3497 703 824 2511 3393
2007-08 2578 3531 793 602 2525 3420 Source: http://planningcommission.gov.in/sectors/agri_html/selagri/T1.19.xls
of its staple diet. It is observed that West Bengal’s MSR
for rice shows a decline from 68.4 in 2006-07 to 67.72 per
cent in 2010-11. Haryana’s MSR for wheat, a food grain
Table 3: Marketed Surplus-Output Ratio (MSR) of Important Food Crops
(Based on cost of cultivation scheme data) per cent of total production
Rice Wheat Bajra
States 2006-07 2007-08 2010-11 2006-07 2007-08 2010-11 2006-07 2007-08 2010-11
Haryana 99.05 95.18 97.09 72.5 81.5 83.54 82.6 81.49 80.93
West Bengal 68.4 64.45 67.72 - - - - - -
all-India 79.17 78.61 80.65 66.1 61.9 73.2 72.21 61.78 67.38
Source: GOI,2012 cited in Shah and Makwana,2013
that is an integral part of its diet has improved from
72.5 per cent in 2006-07 to 83.54 in 2010-11 (Shah and
Makwana, 2013).
Observed higher agricultural yield and MSR in Haryana,
undoubtedly leaves Haryana farmers with more returns than
their counterparts in West Bengal and results in higher
wage rates and consumption expenditure for the rural
workforce. This propels growth of non-farm activities more
so, when technology is deployed in agriculture.
iv. Use of Technology in Agriculture
Level of use of technology in agriculture is an indicator
of development of the agricultural sector. Increased
productivity of technology based farming is likely to
increase owners’ surplus, which perhaps results in
agriculture-led rural occupational diversification and
development.
Table 4: Use of technological inputs in Agriculture in West Bengal and Haryana
States Tractors (No./000Hc.)
Pumpsets (No./000Hc.)
Fertilizer Consumption (Kg/Hc.)
% of Total Cropped Area Irrigated
Cropping Intensity (%)
198
2 199
2 200
3 198
2 199
2 200
3 198
0 199
0 200
3 1980-83
1990-93
2003-06
1980-83
1990-93
2003-06
Haryana 170 444 549 71 143 155 71 175 307 62 76 84 153 164 181
West Bengal 3 12 34 37 54 119 49 136 226 25 54 52 132 160 176
Source: Bhalla and Singh,2009
The findings are West Bengal lags Haryana on all counts in
use of technological inputs in agriculture: use of tractors
in agriculture in West Bengal is particularly low. Use of
pump sets improved in West Bengal in 2003. In 2003-06 only
52 per cent of the cropped area in West Bengal is irrigated
whereas in Haryana it is 84 per cent (Bhalla, Singh,2009).
Given that agricultural sector in Haryana and West Bengal
appear to be at dissimilar levels of development, the next
section examines status of RNAS in these states to
understand whether level of development of agriculture has
a bearing on development of RNAS.
b. Findings on RNAS
Growth of RNAS is a pan-India phenomenon. In the 1980s the
rates of growth of employment in the primary and secondary
sectors in India were slower than the rates of growth of
population; however agricultural wages increased and rural
poverty declined. This paradox is explained by the growth of
employment in RNAS sustained by government’s increased
expenditure in rural areas on rural development programmes and
rural employment schemes (Sen, 1997 and Ghosh, 1996 cited in
Unni, 1998). In the period 1983 to 1993-94 share of rural
incremental labour force in agriculture and allied activities
was 61.58 per cent and in non-agricultural activities 38.43
per cent; the corresponding figures declined to 0.05 per cent
and 99.95 per cent respectively in the period 1993-94 to 2009-
10 (Bhaumik, 2013). Bhalla (2006) finds that although this
sector plays a pronounced role in rural employment, its share
in the nation’s Gross Domestic Product (GDP) has not been
significant.
i. Characteristics of Rural Enterprises
Several village based studies in India and in the states of
West Bengal and Haryana, in particular show that the rural
non-agricultural sector in India is not homogenous. It
comprises mostly of small, owner operated enterprises and
miscellaneous activities spanning manufacturing,
construction, small-time trade, construction, repairs etc.
Chandrasekhar (1993) found in West Bengal rural industries
could be broadly classified into three categories:
industries engaged in producing low cost, low quality items
using traditional techniques (like beedi making, bamboo
work etc.); agro-processing industries (like rice milling
and production of puffed rice) and some modern industry.
Most of these rural industries had low paying jobs taken up
by “lower income deciles of the population”. Whereas
Bhalla’s (2006) village level study in Rohtak, Haryana,
found that major proportion of the rural workforce worked
exclusively in the non-agricultural sector either as casual
labourer or in a second non-agricultural enterprise.
Bhaumik’s (2009) field study reveals exclusive
participation in the non-agricultural sector of West Bengal
was low. In surveyed villages of Haryana, the non-farm
sector had artisan activities, manufacturing and trade and
service enterprises. Construction was a flourishing
activity in Rohtak villages.
The National Sample Survey Report on unincorporated non-
agricultural enterprises in India in 2010-11, shows that in
terms of absolute number, estimated number of rural
enterprises in West Bengal is higher than Haryana. However,
a very high proportion (93.7 per cent) of such ventures are
Own Account Enterprises (OAEs) viz. they do not employ
hired workers on a fairly regular basis in the reference
year. In Haryana the share of OAEs5 is 86.58 per cent making
the share of establishments, (which employ at least one
hired worker on a fairly regular basis in the reference
year) in Haryana, higher than that of West Bengal. Bhalla’s
5 OAEs: Enterprises that do not employ hired workers on a fairly regular basis in the reference year
Table 5: Estimated number of rural enterprises in West Bengal and Haryana in
2010-11
State/UT
rural rural
OAE estbl6. all OAE/state population
estbl./state population
All/state population
Haryana 377514 58539 436054 0.023 0.0035 0.026
West Bengal 4419182 296942 4716124 0.071 0.0047 0.076
Source: NSS 67th Round ( July 2010 June 2011) Key results of survey on Unincorporated Non agricultural Enterprises (excluding construction) in India
(2006) village survey conducted in four villages belonging
to Rohtak and Jhajjar districts of Haryana found that more
than 68 per cent of rural enterprises in Haryana used
motorized equipment. No such substantial claim was observed
in village based studies carried out in West Bengal.
It is evident from official data that average number of
Table 6: Value of Key Characteristics of OAEs in the Rural Sector in Haryana
and West Bengal in Manufacturing, Trading and Other Services category
Avg. no. of workers Fixed Assets (Rs) GVA
hired non-hired owned hired net
addition
Haryana 0 1.3 119042 184252 3287 376115
West Bengal 0 1.2 36025 3905 182 33259 Source: NSS 67th Round ( July 2010 June 2011) Key results of survey on Unincorporated Non agricultural Enterprises (excluding construction) in India
workers employed in rural OAEs and establishments in
Haryana and West Bengal is comparable.
However, a stark difference exists in level of fixed assets
and gross value added (GVA) by rural enterprises of these
two states. Fixed assets in OAEs and establishments in
6 Establishments employ at least one hired worker on a fairly regular in the reference year.
Table 7: Value of Key Characteristics of Establishments in the Rural Sector in
Haryana and West Bengal in Manufacturing, Trading and Other Services category
Avg. no. of workers Fixed Assets (Rs) GVA
hired non-hired owned hired net addition Andhra Pradesh 3.2 1.6 516738 180903 23602 289201
Haryana 3.7 1.2 1059424 1581308 11739 470675
West Bengal 3.2 1.2 196403 32662 6189 192449 Source: NSS 67th Round ( July 2010 June 2011) Key results of survey on Unincorporated Non agricultural Enterprises (excluding construction) in India
Haryana are around 7.64 times and 11.27 times higher
respectively than that in West Bengal. Gross value added by
rural OAEs and establishments in Haryana are 11.31 times
and 2.45 times higher respectively than that in West
Bengal.
c. Trends in Rural Employment
In general, growth in regular wage employment and self-
employment in activities that have substantial returns
implies stability and continuity of employment and hence
income. It is observed that proportion of self-employed in
the rural workforce is particularly high in agriculture in
Haryana. In 2011-12, proportion of self-employed in Haryana
was 617 per 1000 usually employed persons and in West
Bengal it was 446 per 1000. Share of self-employed in the
non-agricultural sector in West Bengal is slightly higher
than that in Haryana. In the rural regular wage category,
the proportion of workers increased from 94 per 1000
usually employed in 1993-94 to 139 per 1000 in 2011-12;
whereas in West Bengal it declined from 95 per 1000 in
1993-94 to 87 per 1000 in 2011-12. In the same period,
casualization of the rural workforce was higher in West
Bengal. In Haryana, there was a marginal increase in number
of casual labourers from 229 per 1000 to 243 per 1000,
whereas the change in share of casual labourers in West
Bengal was much steeper. It changed from 348 per 1000 in
1993-94 to 447 per 1000 in 2011-12. Proportion of
agricultural labourers is high in West Bengal.
It appears that both agricultural and non-agricultural
sectors of rural West Bengal and Haryana are at different
levels of development: on the basis of parameters assessed
rural Haryana seems to be ahead of West Bengal. Crop yield,
marketed agricultural surplus to agricultural output ratio
and adoption of technology in agriculture are higher in
Haryana. In the non-agricultural sector, rural enterprises
in Haryana have a greater value of fixed assets and gross
value added to the economy by such enterprises is higher.
In developing economies, where historically agriculture
provided employment for the major share of population and
the main contributor to the nation’s output, agriculture
determines the nature and reasons for growth of the non-
agricultural sector. The causal relationship between the
agricultural sector and growth of the non-agricultural
sector in these states is discussed in the next section.
III. West Bengal and Haryana: Causal Relationship
Between Agriculture and Growth of RNAS
Vaidyanathan(1986) in his study on whether employment in
RNAS in India is residual in character viz. the rural
workforce will take up these activities as ‘last resort’
due to lack of employment opportunities in agriculture
advanced two propositions for establishing validity of his
hypothesis. The first proposition states that the Rural
Unemployment Rate (RUR) is positively related to the share
of Rural Non-Agricultural Employment (RNAE). The second
proposition states that RUR is negatively related to wage
rate in RNAS or the ratio of the wage rates in RNAS and the
agricultural sector. Murty (2005) furnishes several reasons
as to why the second proposition may not be valid even if
RNAS is residual in character: like rural government
schemes may stymie fall in rural wage rates, those pushed
out of agriculture may get self-employed and do not impact
prevailing wage rates etc. Besides Unni (1991 cited in
Murty,2005) and Mahendra Dev (1990 cited in Murty,2005))
were unable to test the second proposition as data on wage
rates at the regional level were unavailable. The view that
Vaidyanathan’s hypothesis cannot be tested using cross
section data has gained ground (Mahendra Dev, 1990, Unni,
1991, Basant and Parthasarathy, 1991, Visaria, 1995, cited
in Murty, 2005). Given the limitations, another set of
studies analyzed the relationship between variation in
employment in RNAS and agricultural development to
understand the nature of RNAS in India: whether it was a
fall out of lack of employment opportunities in
agriculture. Notable among them is Chandrasekhar’s study
(1993) on West Bengal that shows, when agriculture
performed well the RNAE for the male workforce did not
exhibit variation. More than 80 per cent of the increase in
the “share of non-agricultural workers in the rural male
workforce” in West Bengal occurred between 1977-78 and 1983
(Chandrasekhar, 1993) He explains the rise in male non-farm
employment in West Bengal in 1983 was the low level of food
grain output in West Bengal in 1982/83. It was at the level
recorded in 1967/68 and 29 per cent below the peak recorded
in 1980-81 and this led to male workers moving to the non-
farm sector. Dutta found from his village study in
Bardhaman, a district in West Bengal that the choice of
becoming non-farm entrepreneur decreases as farmers’ wealth
increases. In Green Revolution areas of India namely
Punjab, Haryana, Chandrasekhar (1993) found “impact of
agrarian change on rural non-agricultural” activity tends
to be positive. In West Bengal he did not find any such
defining relationship. Villages Kuchly and Bhagabanbashan
the ‘Green Revolution’ villages in Chandrasekhar’s study,
hardly had push of labour out of the agricultural sector
due to increased demand for labour in agriculture and
increasing returns in agriculture. On the other hand, in
Magurmari a village at a very low level of agricultural
development there was occupational diversification: so much
so that, in spite of having the lowest level of
agricultural output per capita among the surveyed villages,
it had a per capita income close to the Green Revolution
village of Bhagabanbasan. Thus, Chandrasekhar’s study
reveals that in West Bengal there are instances of push
from the agricultural sector due to low employment
elasticity as well as pull from RNAS, in areas which have
not reached the Green Revolution phase.
Whereas in Haryana by 1957 long-time tenants self-
cultivated more than 66 per cent of the area and it rose to
more than 80 per cent by the early 70s. Capital formation
at the farmers’ end led to investment in non-farm ventures:
livelihood diversification became an intrinsic part of
rural development since the 1960s and in the period from
early 1980s to mid-1990s non-agricultural sector growth
rates were twice that of agricultural sector (Bhalla,1995).
Agriculture-led rural development in Haryana appears to be
more aligned to Mellor’s theory. Mellor’s graph of fourteen
countries in Asia (x-axis is the rate of growth of
agricultural sector of each country over rate of growth of
population and y-axis is the rate of growth of the non-
agricultural sector over rate of growth of population)
shows that barring four outliers (Burma, Phillipines, the
Republic of Korea and Singapore) all other countries
(Bangladesh, China, Fiji, India, Indonesia, Malaysia,
Nepal, Pakistan, Sri Lanka, Thailand) show that “91 per
cent of the growth in one sector was correlated with growth
in the other” (Olmstead, Rhode,2007). In developing
countries rural inter-sectoral linkages cannot be ignored
as they are characterized by pronounced agricultural
sectors that impact the macro-economic functioning of the
non-agricultural sector (Rakshit,2009)
Observed difference in the causal relationship between the
agricultural sector and growth of the rural non-
agricultural sector in the states of West Bengal and
Haryana partially owe its origin to institutions and
practices set-up under British rule. The agrarian
structure, land revenue system, state of rural indebtedness
etc. in British India in these two regions is examined to
substantiate this claim.
IV. West Bengal and Haryana: Impact of History,
Post-Colonial Land Reforms on Rural Development
a. Bengal under British Rule
West Bengal, a state located in the eastern part of India,
was part of Bengal Presidency under colonial rule and one
of the first states over which, the British gained
political control. In 1765 the then Mughal emperor granted
rights to the British to collect land revenues of Bengal.
Prior to arrival of British governance in Bengal, the East
India Company had considerably plundered this province.
Post-1757 in Bengal the Nawab was a mere administrative
head. Military power, revenue collection and internal trade
came under the Company’s jurisdiction. However, the
Company’s bankruptcy and Hastings statecraft led to
dismissal of the Company’s hegemony and gave the British
State political control over Bengal by late eighteenth
century (Spear,1965).
i. Agrarian structure: Bengal province did not have a uniform
agrarian structure under colonial rule. The northern parts
had a landlord or zamindar class prior to the Permanent
Settlement Act of 1793. It’s distinct geographical terrain
gave rise to an agrarian structure different from central
and western parts of Bengal. The zamindars granted tenant-
farmers or jotedars right to reclaim large parts of
forested land and in lieu of a paltry amount of rent they
got permanent and transferable rights. Available labour
force mainly comprising of tribals, cleared the jungles and
became the adhiars or sharecroppers and they had no right
to the land they cultivated. At times they owned a
homestead, with some raiyati right. In other parts there
emerged a class of zamindars, with the introduction of the
Permanent Settlement Act. Some parts of such land were held
and cultivated by tenant peasants in lieu of rent and some
parts were cultivated by landless labourers (Bose,1986).
ii. Land Revenue: Land was a source of revenue from Mughal
times and recognizing this, the British introduced
significant changes to maximize their monetary gains from
land in the period 1765 to 1825. They tied proprietorship
of land with taxes and the Permanent Settlement Act (1793)
granted proprietorship to zamindars: this class comprised
of pre-British landlords and those who had gained control
over large areas of land through tax farming. Thus, many
land owners became landlords and they had to pay revenue
fixed forever in lieu of granted property rights. They
decided the amount of revenue to be paid by the peasantry
under their jurisdiction and collected it. They imposed taxes
and levies over and above the rent fixed by the colonial rulers.
The powerful zamindars, enjoyed administrative control of
their units and expropriated the poor peasant’s produce.
The surplus over revenue due to the government was enjoyed
by the landlords. Sometime after 1793, patni rights were
introduced by landlords to ease collection of revenue,
particularly in western parts of British ruled Bengal. In
this system fixed rent leases were granted for perpetuity
to the middle-tier in the rural revenue collection
hierarchy. The Patni Regulation of 1819 legalized rights
and this form of tenancy. Thus, the land revenue system
introduced by the British resulted in systematic
pauperization of the peasant class. Peasants were evicted
when they failed to pay revenue (Bose, 1986; Banerjee and
Iyer, 2005; Roy, 2006). The Bengal Tenancy Act of 1885, the
1928 amendment to the Tenancy Act and the 1938 amendment of
the Tenancy Act went towards curbing the powers of the
landlord in free transfer of occupancy raiyati holdings,
which led to a sharp increase in land sales.
iii. Crops and Markets: British rule commercialized agriculture
in most parts of India. Paddy and jute had the most
commercial value in colonial Bengal. Jute primarily grown
in the eastern parts (now in Bangladesh) was entirely for
the market. Only part of produced paddy (4.5 per cent to
7.5 per cent in the period 1933-34 to 1937-38) the leading
commercial crop in some districts of north and central
Bengal and most parts of west Bengal reached the market
(primarily to meet the demand in other provinces of India
and for exports); the remaining partly got consumed by the
producers and the rest went towards repayment of debts.
Although jute had greater commercial significance than
rice, this paper discusses the market for rice as that was
the more important commercial crop of present-day West
Bengal. The producers’, mostly heavily indebted poor
peasants were compelled to sell their produce when prices
were the least to intermediaries and merchants. Some direct
sales took place from producers to rice mill owners.
Dependence of the western, northern and central parts of
Bengal on the global market was relatively less than the
eastern parts on the global market as it primarily exported
food grains. However, in the period 1933 to 1938, paddy prices
reduced by 50 per cent; debts and rentals “more than doubled in
real terms”. 1941 was marked by scarcity and spiraling prices in
rural West Bengal. The government continued unabated exports of
food items and the rich zamindars hoarded stocks rather than
provide it on credit to peasants, labourers and tenants (Bose,
1986). Thus, condition of Bengal’s rural proletariat further
worsened.
iv. Rural Indebtedness: Bengal province had a thriving rural
credit market comprising of professional moneylenders,
trader moneylenders and landlord moneylenders. The latter
groups joined the fray when moneylending became a lucrative
business with prevailing high interest rates and when
Bengal Tenancy Act of 1885 curbed “rentier landlordism” and
rent collections dropped to almost 50 per cent of the total
rent (Bose,1986). The poor peasants’ surplus went towards
meeting the usurer’s interest. The pauperized peasants,
labourers and tenants who were dependent on the landlord’s credit
for sustenance effectually became a bonded workforce.
v. Infrastructure and Technological Advancements: The British
built irrigation systems since late nineteenth century in
Punjab, Sind, western U.P and Tamil Nadu; but no such
infrastructure was built by them in Bengal province. The
“socially supreme” class in rural Bengal did not invest their
profits to improve means of production and relied on conventional
labour power of sharecroppers and labourers. The surplus
appropriated was used for their own gains: it was instrumental in
making them part of the credit market and grains trade market
(Bose, 1986). Tenants having no security of tenure did not have
the incentive to invest in infrastructure to improve productivity
of their holdings. Surplus produce failed to reside with
subsistence level cultivators generally due to debts and
revenues. Thus, rural Bengal was bereft of much needed
infrastructure by the Colonial rulers.
b. Post-Independence Land Reforms and Rural Development: When
the British left India, agrarian relations had ruptured in
Bengal’s countryside due to continued exploitation by the
landlords, food scarcity, spiraling prices and population
pressure. 1942 witnessed a massive anti-government peasant
upheaval in Midnapur; it was succeeded by the Tebhaga movement:
major peasant unrest prior to India’s independence from colonial
rule. One of its main demands was greater (two-thirds) share of
the produce for the sharecroppers. The Land Reforms Act of 1955
was introduced to meet the demands of sharecroppers. This act
gave sharecroppers permanent, inheritable rights subject to
payment of the legally stipulated share to the landowner, not
leaving the land fallow and not sub-leasing it. The landowner’s
share from a registered tenant could not exceed 25 per cent. This
law was not foolproof and the powerful landowners circumvented
registration of tenants with threats and it did not result in
security of tenure. Bhaduri’s (1973) village based study in West
Bengal in the 1970s shows that kishans, the most under-privileged
tenant category made up 40 to 50 per cent of the peasantry.
They generally had “security of tenancy of not more than one
production cycle”; after harvest generally a portion of kishan’s
share went to the landlord to repay debt. The remnant was not
enough to satisfy his annual consumption needs and he was
compelled to take consumption loans for sustenance. The landowner
was the lender of consumption loans to the poor peasant. Thus,
the kishan was found to be indebted in perpetuity and tied to a
single landowner. When the Left Front Government came to power in
1977, it passed the West Bengal Land Reforms Act and ensured
implementation of its tenets through Operation Barga.
Banerjee, Gertler and Ghatak (2002) point out that post-
reforms the security of tenancy and guarantees of shares of
the produce functioned as incentives to sharecroppers to
improve their efficiency and invest in modern, agrarian
inputs to improve crop yield. The plight of tenants
improved and Bengal witnessed a spectacular turnaround in
agriculture (28 per cent growth of agricultural
productivity) in the 80s; but lack of vision and definition
of accompanying policies on how to sustain this improved
agricultural performance led to plateauing of agricultural
growth rates in the 90s.
c. Haryana under British Rule
Haryana a state located in the north-western region of India
was a part of Punjab province during colonial rule and became
a separate state in 1966. British rule arrived in this region
much after Bengal; then the zamindari form of land tenure
system had fallen out of favour and the goal of the colonial
rulers became “maintaining and strengthening hereditary
proprietary village communities” (Singh, 2001). Parts of
present day Haryana were conquered in 1803 and remaining parts
got annexed after the Sikh wars of 1846 and 1849 (Baden-
Powell, 1892, 1894, Kumar,1982 cited in Banerjee, Iyer,2005).
Then the prevailing agrarian structure favoured the actual
cultivators, both tenants and landowners. The Punjab School
of administration got established by the Lawrence brother, Sir
Henry and John Lawrence: “…land was settled in favour of the
cultivator rather than the chiefs” and necessary
infrastructure built (Spear, 1965).
i. Agrarian structure: Agrarian community in the Punjab
province comprised largely of landowner-cultivators and
tenant cultivators. There was concerted effort to protect
landowners as well as tenants. Indebted landowners could
not be arrested or evicted from land and there was
automatic redemption of mortgages after twenty years.
Tenants were granted security through the concept of
occupancy tenant, whereby a tenant on payment of a rent
fixed by the government got “permanent inheritable and
transferable right of cultivation” (Singh, 2001).
Tenants-at-will were protected under the Punjab Tenancy
Act of 1837. With enactment of these laws, in the period
1860-1890, land sales increased four times and so did
indebtedness. A stratified agrarian structure got created
in the canal colonies: 50 per cent to 80 per cent of the
cultivable land was allotted to peasant proprietors, each
getting 1 square or 25 acres of land, yeoman farmers got
4 to 5 squares of land and capitalist farmers got 6 to 20
squares of land.
ii. Land Revenue System: In Punjab, a village-based land
revenue system called mahalwari evolved. The village body
could be either comprised of a single person or family as
in zamindari or a large number of members, each member
being responsible for a share of revenue that was either
determined by ancestry (pattidari) or actual possession
of land (bhaiachara). Bhaiachara was the prevalent form
of tenure under colonial rule, in present-day Haryana
(Banerjee and Iyer, 2005; Stokes, 1994).
iii. Crops and Markets: When the British took over Punjab
province, the agricultural sector was part of the local
market economy and was subjected to vagaries in price;
customs and trade barriers introduced in the Sikh regime
prevailed. Under British India, wheat, cotton and
sugarcane became the primary cultivated crops and
agricultural produce became part of the global market
economy. Demand for cotton and its cultivation rapidly
increased with the American Civil War and the increase in
demand continued even after the war. Wheat from Punjab
substituted wheat from Russia and U.S.A., after these
countries disrupted their supplies to England. It became
popular as it was “dry and ideal for baking” (Singh,
2001). Punjab wheat entered other European countries when
there was crop failure in the U.S.A. and Russia.
Irrigation facilities and increase in local demand also
boosted sugarcane cultivation. Punjab produced 42 per
cent of British India’s wheat by last quarter of the 19th
century. However, dependence on the global economy proved
costly during the Great Depression of the 1930s, rural
income declined and rural indebtedness increased.
iv. Rural Credit: Indebtedness in rural Punjab increased with
commodification of land and The Great Depression of the
1930s. It appears condition of the indebted in Punjab
province was better than their counterparts in West
Bengal. This is so as before the annexation of Punjab by
the British, there was concerted effort to shield
peasants from moneylenders from Ranjit Singh’s regime.
Peasants were advanced loans by the premier when there
was crop failure to protect peasantry from moneylenders
and landlords. After canals were set up by the British
rulers, land sales increased. To protect peasants from
money lenders, the British passed the Punjab Land
Alienation and Pre-emption Act of 1901 that prevented
free alienation of land.
v. Infrastructure and Technological Advancements: Punjab was
endowed with a rich network of canals, built by the
British in the 19th century. The canal colonies built by
the British helped convert 10 million acres of wasteland
into cultivable land. Over and above the State canals,
private canals, tanks, masonry wells etc. got built. By
late 1930s, irrigated area in Punjab province was above
15 million acres that was one-third of total irrigated
land in British India. Advent of canals gave rise to new,
modern canal colonies with well-paved roads and drainage
systems. Measures were undertaken to make Punjab a part
of the global economy. There was an increase in water,
road and rail transport, telegraph was introduced in
1855, tariff policies were liberalized in 1867 and the
Suez Canal opened in 1869. Inheritance increased land
fragmentation that impeded use of technology (canal
irrigation, mason-built wells) and affected productivity
and profitability. Voluntary consolidation was started in
early 1920s and in 1936 the Punjab Consolidation of
Holdings Act was enacted to encourage voluntary
consolidation. To usher technological advancement in
agriculture, the colonial government allotted land to
large owners subject to introduction of agricultural
machinery, tube wells and the same was monitored by
government officials (Ali, 1997 cited in Singh, 2001).
Eventually, Punjab province led the rest of India in
innovations – Persian wheels, iron ploughs, drills found
most widespread usage in Punjab agriculture. Punjab ended
up having a rural economy with occupational
diversification with the new sugar crusher, rope making,
milk processing and many other developed rural
industries. A government agricultural college and
research institute was established in 1907. By 1913, the
highest yielding variety of rice was developed, soon
hybridization was undertaken and by the mid-1930s two new
strains were developed. The measures undertaken by the
British were largely a strategy to “secure colonial
rule”(Adas,1989 cited in Gilmartin,1994) and further
commercialize agriculture, to feed the world market.
d. Post-Independence Land Reforms and Rural Development:
Kairon a visionary was the founding father of rural
development in Post-Independence Punjab province. Land
reforms were introduced and existing rural infrastructure
upgraded (Bhalla,1995). These improvements made adoption of
Green Revolution technologies easier in the subsequent
decade. Consolidation of land was made mandatory and the
East Punjab Holdings (Consolidation and Prevention of
Fragmentation) Act, 1948 empowered the State to enforce
compulsory consolidation of holdings. Studies (Randhwa,
1975, Swaminathan, 1995 cited in Singh, 2001) suggest that
consolidation of fragmented land holdings as the “single
important factor” for success with HYSV (High Yielding Seed
Varieties) during Post-Independence Green Revolution in
Punjab and Haryana. Compulsory consolidation promoted
collective initiatives and resulted in positive
externalities. It led to development of transport and civic
infrastructure. Land reforms, essentially redistribution of
a productive asset, ensured security of tenure and reduce
prevailing land inequality in Patiala and East Punjab
States Union (PEPSU), Punjab Security of Land Tenures Act,
1953 and PEPSU Tenancy and Agricultural land Act, 1955 were
passed. The outcome was a rise in owner cultivated
holdings; it increased from 51.4 per cent in 1947 to over
66.4 per cent in 1957. By early 1970s, Haryana had over 80
per cent of the area under self-cultivation.
Summarizing it can be said that when the British left India,
rural parts of areas corresponding to present-day Haryana was in
a robust state of agricultural development with institutions,
technology and infrastructure in place to aid cultivators. In
the post-independence period, the north-western region of India
adopted a strategy to achieve Green Revolution: a technology
based capital intensive method of reviving agriculture. This was
possible because the area had an existing network of irrigation.
It was also free from Zamindari legacy which the Eastern India
suffered from. Whereas rural Bengal was in a grim state: marked
by abject poverty, a large, rural, deeply indebted subsistence
base and lack of infrastructure. Besides Bengal was hit by some
of the worst famines: Davis (Das,2013) points out that even
under such conditions colonial extraction gained precedence over
granting relief to people ravaged by famine. In the post-
independence period West Bengal in contrast, did not follow a
coherent policy until early 1970s. It was only in late 70s that
land reform measures were taken up seriously. This had the
effect of improving productivity; but it was not the technology-
centric approach of Green Revolution rather more of an
institutional approach whereby one focuses on changing the laws
relating to distribution of ceiling surplus land, tenant
security, panchayat empowerment etc. All this however proved an
impediment to agrarian development in West Bengal because such a
strategy discourages large scale cultivation, which is conducive
for application of technology. Hence when land reform ran out of
steam due to paucity of state support in early 90s, West Bengal
was left with a severely fragmented, stagnant agrarian sector.
Desperation for livelihood resulted in a burgeoning RNAS.
Conclusions
Rural Haryana appears to be ahead of rural West Bengal in
current economic performance. Haryana has higher levels of rural
purchasing power, higher levels of earnings, more agricultural
yield and higher use of technology in agriculture, more output
of rural units. West Bengal’s lag and Haryana’s lead is a legacy
of British rule and post-colonial legislative and policy
formulations. It is true that post-independence land reforms and
legislative enactments at the state-level undoubtedly shaped the
state’s development; but the socio-economic status in which, the
British left the state also had a bearing on its pace of
progress.
In West Bengal, growth of the rural non-agricultural sector
seems to be an outcome of the independent state’s failure to
outgrow the lag created by the colonial rulers in the
agricultural sector of Bengal.
Land reforms reached present-day Haryana two decades before West
Bengal. Agricultural prosperity in the 1960s ushered in
relatively high agricultural wage rates and growth of a rural
non-agricultural sector. Even now agricultural yield and output
of rural units exceeds that of rural West Bengal.
It is undeniable that history is partially responsible in
determining post-Independence trajectories of the rural
economies of West Bengal and Haryana and current economic
outcomes: only further research will help us make more precise
claims.
References
i. Banerjee, Abhijit, Paul V. Gertler, Maitreesh Ghatak.(2002)
Empowerment and Efficiency: Tenancy Reform in Bangladesh, Journal
of Political Economy, 2002, vol. 110, no.2, p239-242, p253-258.
ii. Banerjee,Abhijit, Lakshmi Iyer.(2005)History,Institutions and
Economic Performance: The Legacy of Colonial Land Tenure Systems
in India, The American Economic Review,Vol.95, No.4, Sep.,2005,
pp.1190-1213.
iii. Bhaduri,Amit.(2006)Employment and Development Essays from an
Unorthodox Perspective, Oxford Collected Essays, OUP, New
Delhi,2006.
iv. Bhalla,G.S.,Gurmail Singh.(2009) Economic Liberalisation and
Indian Agriculture: A Statewise Analysis, Economic and Political
Weekly, Vol. XLIV, No.52 (December, 2009), pp. 34-44.
v. Bhalla,Sheila.(1995)Development, Poverty and Policy The Haryana
Experience, Economic and Political Weekly, October, 1995,
pp.2619-2634.
vi. Bhalla,Sheila.(2006)Recent Developments in the Unorganized Rural
Non-Farm Sector, Working Paper No.28, Institute for Human
Development, New Delhi,2006.
vii. Bhaumik,Sankar K.(2009) Occupational Diversification of the Rural
Workers: Some Results from Field Surveys in West Bengal in
Basile, Elisabetta , Mukhopadhyay, Ishita (ed.), Changing
Identity of Rural India : A Socio-historic Analysis.London, GBR:
Anthem Press India, 2009. p 150.
viii. Bhaumik,Sankar,K.(2013)The Changing Employment Scenarios in Rural
India in The Era of Economic Reforms, The Indian Journal of
Labour Economics, Vol. 56,No.3, July-September,2013.
ix. Bose,Sugata. (1986) Agrarian Bengal Economy, social structure and
politics, 1919-1947. New York, Cambridge University Press,1986.
x. Chada,G.K.(2008) The Rural Nonfarm Sector in the Indian Economy
in Gulati, Ashok , Fan, Shenggen (ed.)The Dragon and The Elephant
Agricultural and Rural Reforms in China and India. OUP, New
Delhi, India, 2008. p 343.
xi. Chandrasekhar,C.P.(1993) Agrarian Change and Occupational
Diversification: Non-Agricultural Employment and Rural
Development in West Bengal, The Journal of Peasant Studies,
Vol.20, No.2,January 1993, pp.205-270.
xii. Chand,Rattan.(1995)Inequality in Consumption Expenditure in
Indian States 1973-2005, National Seminar on NSS 61st Round
Survey, NSSO, Ministry of Statistics and Programme
Implementation, Government of India, New Delhi, October, 2007,
pp.21-33.
xiii. Chavan,Pallavi,Rajshree Bedamatta.(2006) Trends in Agricultural
Wages in India 1964-65 to 1999-2000, Economic and Political
Weekly, Vol. 41, No. 38 (Sep. 23-29, 2006), pp. 4041-4051.
xiv. Das,Debarshi.(2013)The Empire and its Disasters, Economic and
Political Weekly, Vol. XLVIII, no. 15, pp.26-28.
xv. Dutta,Subrata.(2007)Non-Farm Entrepreneurship of Farmers in West
Bengal: A LISREL/Logit Analysis, Indian Economic Review, New
Series, Vol. 42, No. 2 (July-December 2007), pp. 231-253
xvi. Gilnartin,David.(1994) Scientific Empire and Imperial Science:
Colonialism and Irrigation Technology in the Indus Basin, The
Volume of Asian Studies, Vol.53,No.4,Nov.,1994,pp.1127-1149
xvii. Haryana Development Report, Planning Commission, Government of
India, 2009.
xviii. Johnston,Bruce F.,John W.Mellor.(1961) The Role of Agriculture in
Economic Development, The American Economic
Review,Vol.51,No.4,Sep.,1961,pp.566-593.
xix. Murty, C.S.(2005) Rural Non-Agricultural Employment in India The
Residual Sector Hypothesis Revisited, Working Paper No.67, Centre
for Economic and Social Studies, Hyderabad.
xx. NSS Rounds 50,55, 62, 66, 68 on Employment and Unemployment
Situation in India, NSSO, Ministry of Statistics and Programme
Implementation, Government of India, New Delhi.
xxi. NSS 67th Round ( July 2010 June 2011) Key results of survey on
Unincorporated Non-agricultural Enterprises (excluding
construction) in India
xxii. Olmstead,Alan L,Paul W.Rhode.(2009) Conceptual Issues for the
Comparative Study of Agricultural Development in Lains, Pedro,
Pinilla, Vicenta (ed.), Agriculture and Economic Development in
Europe Since 1870, Routledge,Oxon, 2009.
xxiii. Papola,T.S.,Partha Pratim Sahu.(2012)Growth and Structure of
Employment in India Long-Term and Post-Reform Performance and the
Emerging Challenge, Institute for Studies in Industrial
Development, March,2012.
xxiv. Rakshit,Mihir. (2009) Understanding the Indian Economy in
Rakshit, Macroeconomics of Post-reform India, Oxford University
Press, New Delhi, p. 15-54.
xxv. Rawal, Vikas, Madhura Swaminathan and Niladri Sekhar Dhar.(2008)
On Diversification of Rural Incomes: A View from Three Villages
of Andhra Pradesh , The Indian Journal of Labour
Economics,Vol.51,No.2,2008, pp.229-247.
xxvi. Singh, Himmat.(2001)Green Revolutions Reconsidered The Rural
World of Contemporary Punjab, OUP, New Delhi,2001.
xxvii. Spear, Percival.(1965) A History of India, Volume Two, Penguin
Books, New Delhi.
xxviii. Stokes, Eric.(1994) Dynamism and Enervation in North Indian
Agriculture: The Historical Dimension in Ludden, David (ed.)
Agricultural Production and South Asian History, OUP, New
Delhi,1994.
xxix. Unni, Jeemol.(1998) Non-agricultural employment and poverty in
rural India - A review of evidence, Economic And Political
Weekly, 33( 13), pp A36-A44.
xxx. Usami, Youshifumi.(2011)A Note on Recent Trends in Wage Rates in
Rural India, EconPapers, Vol.1, Issue 1,pp.149-182.
xxxi. Vaidyanathan, A. (1986) Labor Use in Rural India - A Study Of
Spatial And Temporal Variations, Economic And Political Weekly,
21(52), pp A130-A146.
xxxii. West Bengal Development Report, Planning Commission, Government
of India, 2010.