BECE - 214

Agricultural
Indira Gandhi Development in India
National Open University
School of Social Sciences

Block

2
INDIAN AGRICULTURE : INSTITUTIONAL
PERSPECTIVES
UNIT 4
Land and Agrarian Relations During the Pre-Independence
Period 5
UNIT 5
Land and Agrarian Relations During the Post-Independence
Period 19
UNIT 6
Panchayati Raj and Local Self Government 35
Expert Committee
Prof. G. S. Bhalla Prof. Madhu Bala
Professor Emeritus School of Social Sciences
Centre for Studies in Regional Development Indira Gandhi National Open University
Jawaharlal Nehru University, New Delhi New Delhi
Prof. D. Narasimha Reddy Prof. Narayan Prasad
Formerly in Central University of Hyderabad School of Social Sciences
Hyderabad Indira Gandhi National Open University
Prof. S. S. Gill New Delhi
Director General Dr. Kaustuva Barik
Centre for Research in Rural and Industrial School of Social Sciences
Development, Chandigarh Indira Gandhi National Open University
Prof. V. C. Mathur New Delhi
Principal Scientist, Division of Agricultural Dr. B. S. Prakash
Economics, IARI, PUSA, New Delhi School of Social Sciences
Prof. S. K. Singh Indira Gandhi National Open University
Formerly Director, SOSS, IGNOU, New Delhi
New Delhi Sh. Saugato Sen
Sh. I. C. Dhingra School of Social Sciences
Formerly in Shaheed Bhagat Singh College Indira Gandhi National Open University
Delhi University, New Delhi. New Delhi

Course Coordinator
Dr. B. S. Prakash, School of Social Sciences, Indira Gandhi National Open University, New Delhi

Content Editing
Prof. S.K. Singh
Formerly Director, SOSS, IGNOU
New Delhi
Block Preparation Team
Unit Writers Language/Format Editing
Unit 1 Dr. Iqbal Singh, Univ. of Delhi Dr. B.S. Prakash
Unit 2 Dr. B.S. Prakash Dr. B.S. Prakash
Unit 3 Dr. B.S. Prakash Dr. B.S. Prakash

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BLOCK INTRODUCTION
Institutions play a very important role in promoting development. They refer to rules
and arrangements (for carrying out various transactions) in which either a certain provision
is guaranteed by customs/traditions or law. For instance, legislative provision for ensuring
the payment of minimum wages is an institutional arrangement. Again, in the case of
agriculture, institutions meant for promoting the marketing and credit services are specific
arrangements meant to promote the development of agricultural sector. In the absence
of such institutions, one would not know where to go and how to seek these services.
However, the mere establishment of institutions would not suffice. Their monitoring is
also important. Thus, regulatory/monitory bodies also form important component of
institutions. In this block, we take a look at the kind of institutional arrangements which
existed during the pre- and the post-independence period which together established
the agricultural sector’s foundation in India. We also study about a major amendment
made in our constitution which was aimed at instituting decentralised governance for
the overall development of rural areas in general and agricultural development in particular.
The Block comprises of three units.
Unit 4 provides an account of the ‘land and agrarian relations’ that existed in the pre-
independence period. Under this, we will specifically study about the concept of village
community, impact of British rule on Indian agriculture, nature of agrarian structure and
tenancy, etc.
Unit 5 deals with the same theme as unit 4, but looks at the changes that were introduced
in the years after attaining independence. The efforts made to address the issues of
agricultural sector under the different Five Year Plans, the issue of land reforms and
experience in its implementation, etc. are dealt with in this unit.
Unit 6 deals with the subject of ‘Panchayati Raj and Local Self Government’. After
nearly four decades of planning, in the beginning of 1990s, a major step to empower
local self governments to take the reins of their development by means of elected
‘panchayats’ was taken. In what way this was sought to make a major difference?
What has been the experience in this regard after nearly two decades of this initiative?
These issues are discussed in this unit.
UNIT 4 LAND AND AGRARIAN
RELATIONS DURING THE
PRE-INDEPENDENCE PERIOD
Structure
4.0 Objectives
4.1 Introduction
4.2 Ownership of Land During the Pre-British Period
4.2.1 Land Revenue System
4.2.2 Intermediaries and Land Rights

4.3 The Village Community

4.4 Advent and Impact of British Rule
4.4.1 Land Revenue System
4.4.2 Eastern India: Permanent Settlement of 1793
4.4.3 Northern and Central India: Zamindari/Mahalwari Systems
4.4.4 Western and Southern India: Ryotwari System

4.5 Commercialisation of Agriculture

4.5.1 Impact of the Depression of 1930s
4.5.2 Indebtedness and Land Transfers

4.6 Agrarian Structure and Tenancy

4.6.1 Agricultural Labourers
4.6.2 Agricultural Growth

4.7 Let Us Sum Up

4.8 Key Words
4.9 Suggested References for Further Reading
4.10 Answers/Hints to Check Your Progress Exercises

4.0 OBJECTIVES
After reading this unit, you will be able to:
 outline the system of ownership of land as it prevailed during the Pre-British
period;
 discuss the changes in the land revenue system, distinguishing them for inter-
regional differences, as they prevailed during the period of British rule in
India;
 explain the concept of ‘commercialisation of agriculture’ and the factors that
contributed to its erosion during the period of 1900s; and
 describe the inter-relationship that existed between the agrarian and land-
tenure structures with its consequences on agricultural growth in India during
the British period.
Indian Agriculture :
Institutional Perspectives 4.1 INTRODUCTION
Technological factors such as fertilizers, new varieties of seeds, controlled irrigation
and scientific implements play an important role in agricultural development. But
‘institutional factors’ such as owner or tenant cultivation, absentee landlordism,
burden of land revenue, indebtedness of the cultivators, etc. also play a significant
role in stimulating or obstructing agricultural growth. In fact, application of
technology in agriculture itself substantially depends upon the kind of institutions
which exist in a particular region. Further, the more successful forms of peasant
agriculture have emerged where owner-cultivation was dominant. Also, since the
existing land and agrarian structure is the result of gradual process of evolution
(influenced by social, political and economic factors), it is essential to get a historical
perspective on the evolution of tenurial structure in India. It is in this perspective
that the present unit is included in the beginning of second block so as to help
appreciate the contents of the subsequent unit on the corresponding developments
in the post-independence period.

4.2 OWNERSHIP OF LAND DURING THE PRE-

BRITISH PERIOD
An important question discussed by the economic historians is on who owned the
land in the earlier times: is it the peasant, or some intermediaries or the king? Most
scholars today agree with the view that the king was not the owner. Numerous
mughal government documents refer to private persons (called maliks) as owners.
But the crux of the matter is whether in substance, i.e. not merely in name, the
peasant’s right was such as to deserve the application of the term ‘proprietary’ in
its strict juridical sense. In fact, there was general recognition of the peasant’s title
to permanent and hereditary occupancy of the land he tilled. In cases where the
peasant holding the title to the land was found incapable of cultivating land (or had
abandoned it altogether), then the land was given to another peasant for cultivation.
But if at any time, the original owner recovered his ability to cultivate it (or came
back), the land was to be restored to him. On the other hand, there was no
question of real free alienation (i.e. the peasant had no right to sell the land), which
is an essential feature of modern proprietary right. The readiness with which
authorities recognized the peasant’s right of occupancy and the anxiety they showed
to prevent him from leaving the land were both natural in an age when land was
abundant and peasants scarce. Sale of land was also not so much an issue because
there was no scarcity of land. In fact, the rights which in essence constitute
ownership, were not as a rule vested in one person, but were distributed among
the various parties (like tenant, land owner, share cropper, etc.) connected with
the land.

4.2.1 Land Revenue System

During the mughal period, the land revenue system mainly depended on the crops
grown and its assessed value in quantified terms. The value of the production of
each crop was estimated based on the ‘yield per unit of land at the current
harvest’ multiplied by the ‘quantity of area under that crop’. Land revenue was
then calculated on the basis of a proportion fixed for the purpose. Since this
method left some discretion with the officials, the system was modified to a method
6 of notifying a standard schedule for different crops. As the major aim of the
Mughal administration was to take away the bulk of the peasant’s surplus, the Land and Agrarian
Relations During the Pre-
methods evolved were such as to ensure not only the highest revenue but also the Independence Period
binding loyalty of the peasant to the king.

4.2.2 Intermediaries and Land Rights

While theoretically, the king was the sole claimant to the land revenue, in practice,
the assessment and collection of the revenue was made by the members of a small
ruling class. These were intermediaries who were of two types viz. the jagirdars
and the zamindars.
The Jagirdars
The jagirdars were the king’s officers enjoying land-gifts. They held certain ranks
(called mansabs) granted by the emperor. Each rank entitled its holder (i.e.
mansabdar) to a particular amount of pay. The pay was to be realised by collecting
the revenue from a certain amount of land given by the king (as Jagir). The land
so given had an estimated value based on its potential to grow/yield agricultural
crops. It was the responsibility of the jagirdars to collect the revenue from the
peasants from out of the crops grown on the land. The surplus, over and above
the amount of pay fixed by the king to the jagirdars, was to be turned over to
the state i.e. the king. The ranks given to the jagirdars were not inheritable though
in normal practice the kins of higher rank-holders were allowed to continue with
their titles. The temporary character of Jagir strengthened the control of the
emperor over the jagirdars.
The Zamindars
The zamindar is a Persian term which means holder of land (zamin). The basic
right of zamindar was his claim to impose certain levies on the peasants over and
above the land-revenue assessment like house tax, forest produce tax, water tax,
etc. These were specified in the sale deeds among the rights transferred to the
zamindars. The zamindars, like the jagirdars, were supposed to collect the tax
from the primary cultivators, in return for an allowance of one-tenth of the
collections, given either in cash or by way of allotment of revenue-free land. The
zamindari right was like a property inherited according to the laws and customs
governing the inheritance of other properties.
Thus, during the mughal period two groups of revenue extractors viz. jagirdars
and zamindars, whose involvement in direct agricultural production was almost
nil, were of enormous importance. While what the producer was supposed to pay
was fixed in law, what was actually taken depended on the powers and inclinations
of jagirdars and zamindars. During the declining days of the Mughal empire, this
system became quite oppressive.

4.3 THE VILLAGE COMMUNITY

A notable feature of village life in pre-British period was the combination of
agricultural work with manufacturing. Production was mainly for direct use and the
surplus after payment of revenue was marketed. Relationship of the village with
town was largely one way i.e. it hardly received anything in return (except salt and
kerosene) and provided for almost all of its needs from within the village. Normally,
the peasants of the village claimed the same ancestry and so belonged to the same 7
Indian Agriculture : brotherhood (bhaichara). This fraternity feeling, deep rooted to the social system
Institutional Perspectives
of the village by blood- ties, bound the peasants in unity in a far stronger manner
than could be expected from mere neighbours. Authority in the village was exercised
by a group of elders, traditionally a council of five persons, called the panchayat.
Contrary to the view that peasants had common ownership in land, many scholars
have opined that the individual families had their separate holdings and only the
forest and grazing grounds were commonly held. Views also differ over the
homogeneous nature of peasantry as economic differentiation within the peasantry
had reportedly emerged during the mughal period. It is pointed out that in northern
India, as also in other parts of the mughal empire, there were some large cultivators
raising crops for the market and there were many small peasants who could barely
produce food-grains for their own subsistence. Also, beyond this differentiation
among the peasantry, there were sharper divisions on the basis of upper and lower
castes. Depending on their resources in seed, cattle and money, peasants could
cultivate larger or smaller plots. Larger land holdings were linked to, and often
resulted from, superior position or status secured either as headmen or as members
belonging to dominant elements of the village.
Check Your Progress 1 (Answer in 50 words in the space given below)
1) Do you think that, during the pre-British period, the peasants who were
actually tilling the land enjoyed the ‘ownership rights’ in the strict juridical
sense?
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2) How was the value of production of crops estimated during the pre-British
period?
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3) Name the two types of intermediaries who collected the land revenue during
the pre-British period? What was the major difference between the two?
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8
4) What were the major factors that kept ‘the village community’ unified as one Land and Agrarian
Relations During the Pre-
‘single self-contained entity’ during the pre-British period in India? Independence Period
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4.4 ADVENT AND IMPACT OF BRITISH RULE

As we noted above, before the Britisher’s invaded India, the village community
was a self-contained place with a mix of agriculture and manufacturing activities.
During the British rule there was widespread destruction of village industries leading
to shifting of artisans to agriculture mostly to work as agricultural labourers. Some
of its immediate consequences were: (i) formation of land market, (ii) rising rents,
(iii) indebtedness, (iv) formation of layers of intermediaries, (v) frequent famines,
(vi) impoverishment of a section of the population, etc. We shall, in this section,
take a look at the major impact of British rule on some selected areas of economic
importance to the agricultural development of India.

4.4.1 Land Revenue System

A number of modifications were introduced in the land revenue system during the
British Period. For instance, the East India Company took over the financial rights
of Bengal, Bihar and parts of Orissa in the year 1765. The company’s sole interest
was to collect maximum revenue to: (i) finance its trade and commerce, and (ii)
maintain the army for strengthening and expansion of its rule in the country. To
realize higher land revenue, the zamindaris were auctioned to the highest bidders.
This policy greatly altered the composition of landed society as many old zamindars
could not compete in the new system. The highest bidders at the auction were
invariably people having association with the new administration through participation
in trade and commerce. The peasants were thus kept totally out of this change and
were also literally robbed by the unscrupulous zamindars. This reckless process,
which continued till the permanent settlement in 1793, resulted in frequent famines
and loss of human life. Large areas of land were rendered waste.

4.4.2 Eastern India: Permanent Settlement of 1793

The Permanent Settlement of 1793 in Bengal and Bihar declared the zamindars
‘proprietors of the land’ and fixed their dues to the state. This move was considered
to ensure not only the security of revenue but also the prosperity of the company’s
commerce. The time period coincided with the time of Industrial Revolution in
Britain for which a thriving commerce from India, with agriculture in particular
providing a variety of goods for export, was considered important. The creation
of private property in land was expected to establish the right conditions for
investment in agriculture by the rich natives with ownership of large stretches of
land. An associated objective was the creation of a class of loyal supporters (i.e.
zamindars) to provide greater stability to the British rule.
However, the expectations were only partially fulfilled. As far as the creation of
a class of loyal supporters was concerned, the British substantially succeeded. But
9
Indian Agriculture : the zamindars, new (i.e. those who became zamindars to get the benefit of
Institutional Perspectives
British patronage) as well as old (i.e. who were already functioning as such and
continued to do so), failed to become agrarian capitalists but turned into feudal
landlords. Thus, capital was invested not for agricultural development but for
purchasing land. Further, in course of time a long chain of intermediaries came into
existence between the state and the tiller. The zamindars were expected to pay
a fixed sum as revenue (i.e. the permanent settlement) to the government which
in 1793 amounted to 90 percent of the revenue collected by the zamindars. With
increase in prices, the value of the income of zamindars got further eroded. The
state also lost as its revenues in money terms were fixed. As rents were not
regulated, the peasants were the worst hit and any increased value of agricultural
produce was appropriated by the zamindars. The Bengal model was, therefore,
not replicated in Orissa and Assam as the British realized that freezing the land
revenue by a permanent settlement affects them the most with revenue from land
being the most important of all its sources of income. In view of this, in Orissa and
Assam settlements, the revenue demand from land was not kept fixed but increased
from time to time.

4.4.3 Northern and Central India: Zamindari/Mahalwari

Systems
The revenue system followed in Northern India was a mix of both the zamindari
and mahalwari systems. While the basic unit for revenue assessment in the
zamindari system was the ‘primary cultivator’, in the mahalwari system the unit
of revenue assessment was the ‘village’. Initially, the Bengal type of permanent
settlement was followed in the Northern region. After 1811, considerations of
enhancement of revenue led to the abandonment of fixed revenue system. However,
the mahalwari system was experimented in some parts of Punjab and ‘united
provinces’ making the payment of revenue the joint responsibility of both the
individual cultivator and the village proprietary body (i.e. the gram sabha). In the
central parts of India, in the early decades of British rule, a policy of ‘excessive
assessment’ was adopted. Under this, the lands were assessed so high that payment
of revenue became impossible. This rendered many people impoverished. Following
strong protests and condemnation, in 1834, a longer settlement for twenty years
was made which continued till the early 1860s. Later, under a new settlement in
1864 in the Central Provinces, revenue-payers were recognized as the proprietors
of the land with a right to sell or mortgage their property. Tenancy rights were also
conferred on the cultivators. Further, a system of land revenue, limited to one-half
of the rental of estates in principle, was implemented. However, in practice, it was
rarely adhered to at the time of assessment/collection.

4.4.4 Western and Southern India: Ryotwari System

The system of revenue collection adopted in the western province was the ‘ryotwari
system’. Under this, the settlement was normally for a fixed period of 30 years.
Under the ryotwari settlement, the ‘ryoti cultivator’ was recognized as proprietor
and the land revenue was fixed permanently based on the estimated value of the
gross produce. The cultivator was allowed to sub-let, mortgage or transfer the
land either by gift or by sale deed. Further, a ‘ryot’ (i.e. the tiller-cultivator) could
not be evicted as long as she/he paid the revenue. Likewise, even in the Madras
Presidency (excluding coastal Andhra where permanent zamindari system was
10
introduced) the ryotwari system was instituted. All uncultivated lands were deemed Land and Agrarian
Relations During the Pre-
to be under the control of the state which could let them out to be cultivated at Independence Period
freshly assessed rates. Though the system favoured peasant proprietorship, it also
accommodated large land owners, as was the case in the Malabar region of
Kerala.
Check Your Progress 2 (Answer in about 50 words in the space given below)
1) What were the immediate consequences on ‘the village community’s’ cohesive
character on account of the Britisher’s policy on village industries?
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2) What were the two basic motives behind the collection of land revenue from
the agricultural class by the British? What was the approach adopted for the
realisation of these objectives?
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3) Why was the Bengal model of ‘permanent settlement’ for revenue collection
not followed in Orissa and Assam?
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4) What were the basic units of revenue assessment under the zamindari and
the mahalwari systems? As compared to these two systems, under the
ryotwari system, what were the basic rights conferred on the ‘ryot-tiller’?
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5) What were the two expectations of the British behind the creation of ‘private
property’ in land? To what extent was this realised and why?
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Indian Agriculture :
Institutional Perspectives 4.5 COMMERCIALISATION OF AGRICULTURE
Commercialisation (see Key Words) of agriculture during the British rule was
rendered possible with the coming of railways. Peasants were allowed to produce
both for sale in distant markets and export. The period was also marked for major
changes of both qualitative and quantitative dimensions. Qualitative changes (besides
the introduction of railways) included: (i) removal of constraints such as market
imperfections in the form of multiplicity of weights and measures; (ii) improving the
obsolete/risky transportation systems; and (iii) minimizing the extensive use of
barter as a method of trade. These measures enabled closer integration of global,
regional and local markets. India thus began specializing in agricultural exports.
Quantitative changes, on the other hand, included: (i) increase in value of exports
by nearly 500 percent between 1870 and 1914; (ii) non-manufactured goods
accounting for 70-80 per cent of total exports from India; (iii) increase in the area
cropped in most regions during the period 1870-1920; (iv) growth in marketable
crops like wheat, cotton, oilseeds, sugarcane, and tobacco; etc. As a result of
these, not only the agricultural prices rose but even the rent, both in nominal and
real terms, increased. Thus, commercialization of agriculture not only led to increase
in the scale of land transfers and land prices, it also increased the number of credit
transactions.
The benefits of commercialisation of agriculture once again reached only to some
influential segments of the society. In the process, it created a wider gulf between
the poor peasants and the rich landlords. For instance, commercial expansion of
agriculture during the later years of 20th century gave way to new crops, new
transport networks and increased market activity. Developments in these required
access to resources like credit, power, storage/transport facilities and markets.
Owing to the protection that the colonial government gave to influential class of
agriculturists and landlords, the control over these resources could be dominated
by these groups enabling them to reap maximum benefits/profits. Tenancy legislation,
such as the Bengal Tenancy Act of 1885, which gave occupancy rights to those
who had held tenancies for twelve or more years, with the right to sublet,
strengthened the position of this important stratum of rural society. Economic
success thus became a privilege of those who could use their position in society
to secure favoured access to credit, markets and infrastructure.

4.5.1 Impact of the Great Depression of 1930s

The benefits of commercialisation in agriculture began its decline during the period
of Great Depression. Export prices fell more sharply than import prices turning the
terms of trade against agriculture. This led to increased export of privately owned
gold, most it as distress selling, to meet the demands for rent and land revenue.
It was also influenced by the bankruptcy of traders and indigenous bankers whose
business had suffered due to liquidity crisis. This led to a rise in the real cost of
capital with even the rich farmers forced to cut down on capital intensive methods/
practices. Labour cost also increased forcing the families having large land holdings
to cut down on hired labour. Due to similar conditions elsewhere, employment
opportunities outside agriculture also was lacking. Depression, thus strengthened
the power of rich landlords even more. Thus, propertied class could gain from the
consequences of depression whereas the poor peasants suffered badly.
12
4.5.2 Indebtedness and Land Transfers Land and Agrarian
Relations During the Pre-
Rural indebtedness was by itself also generally widespread under the British rule. Independence Period

Commercialisation increased the need for credit because of higher investment

requirements. Other factors which contributed to increased indebtedness varied
for different classes of people. These included: (i) buying food before harvests
(particularly by the peasants growing non-food crops); (ii) paying rent and revenue
in cash; (iii) meeting the marketing requirements of cash crops; (iv) financing the
higher input costs of commercial crops like sugarcane, cotton and tobacco; etc.
Amidst these developments, there were crop failures leading to cultivators, and
sometimes even zamindars, finding themselves unable to repay loans. These led
to distress sale of land holdings. Such sales increased in number over the years.
Indebtedness thus forced the conversion of many peasants to become poor
agricultural labourers.

4.6 AGRARIAN STRUCTURE AND TENANCY

Land ownership and tenurial structure underwent important changes during the
British period. Agrarian structure in different regions displayed considerable
diversity. In Eastern India, landlords owned the bulk of land. In Ryotwari areas
of Madras and Bombay presidencies, considerable peasant proprietorship existed.
Elsewhere, conditions ranged between these two types of situations. The thrust of
the British revenue settlements had often been to consolidate middlemen’s claims
into landlord-ship. Commercialisation reinforced this impulse. As agricultural prices
rose, landlords and moneylenders bought peasant held lands. The peasants who
thus lost land were not, necessarily, driven out of land. The old peasants cultivated
their sold plots as tenants on a crop sharing basis.
During the later half of the nineteenth century, in South India, the area under
cultivation increased faster than the population. Large irrigation works were
completed on the Godavari and the Krishna. The cultivation of cash crops like
cotton, groundnut and oilseeds increased. Between 1881-82 and 1915-16, prices
of agricultural commodities increased faster than other prices and the terms of
trade moved in favour of agriculture. The burden of land revenue fell. The cultivator
was able to invest in land. Progress was rapid in some regions, notably in the
Krishna-Godavari delta. This led to tremendous increase in prices of land. The
rich peasants widened the sphere of their activities and invested in rice mills, mica
and other industries. They extended their money lending business and went into
banking.
In Western India, during the late 19th and early 20th centuries, there was rise of
the rich peasantry leading to increased stratification of the peasantry class. Here
also, the cultivation of cash crops such as sugarcane, tobacco, groundnut and
cotton expanded. The small section of the cultivators who had a surplus to market
sale, made large profits and invested them back in agriculture. The investments
were made in irrigation, buying carts and seeking better markets for their grains
outside their local area. These rich farmers, who had been able to seize the new
market opportunities, often replaced the traditional moneylenders as sources of
credit in the village. They also purchased the land of small cultivators who were
often in heavy debt.
In Eastern India, the zamindars committed such excesses that the government 13
Indian Agriculture : was forced at times to intervene to stop a possible revolt. Two major tenancy acts
Institutional Perspectives
were enacted in Bengal after the Permanent Settlement: the Rent Act of 1859 and
the Bengal Tenancy Act of 1885. Under the tenancy Act, occupancy rights were
conferred on those ryots who had been in possession of any land for twelve
consecutive years. Such ‘occupancy ryots’ did not necessarily cultivate their
holdings on their own and many of them, especially some big ryots, further leased
out their lands on share-cropping basis. This was mainly motivated by the difference
in the rents paid by the occupancy-tenants and share-cropping tenants which
yielded a huge profit to the former. This was possible as there was no legal
protection against increase of rent by the non-occupancy tenants. The situation
was so bad that in 1948, the Zamindari Abolition Committee Report stated that
in the North-Western provinces greater part of land (i.e. more than half of total)
was held by such a small group of large landholders amounting to just 1.3 percent
of the total population.

4.6.1 Agricultural Labourers

Contrary to the view that in the traditional village economy of pre-British India,
there was a much smaller segment of persons working solely as agricultural labourers
on the lands of others, the census data suggested a significant increase in the
proportion of ‘wage labourers’ in the agriculture. Two factors identified to have
contributed to this were: (i) de-industrialisation; and (ii) dispossession of peasantry.
Further, the landless labourers mostly came from the lower castes. Despite the
increase in the number of agricultural labourers, the agricultural wages remained
stable. Factors which contributed to this included: (i) increased area brought under
market crops; (ii) work on railway construction/expansion; and (iii) canal excavation
works. All these factors also contributed to an improvement in the social status
of the depressed castes to which most of the agricultural labourers belonged. The
element of compulsion and force in their employment became weaker and various
forms of social oppression (such as enforced dress codes and codes of conduct
with respect to upper castes) became weaker too. Migration within and outside
agriculture (e.g. plantations, mines, urban services, public works, etc.) increased.
The situation of agricultural labourers thus improved to a great extent.

4.6.2 Agricultural Growth

The network of relationships among the various groups of persons depending for
their livelihood from land was such that it was not providing incentives to invest
in land. Substantial proportion of agricultural production was reserved for the
parasitic right holders who received income without participation in agricultural
work. No surplus/incentive was left with actual cultivator for investment. The
cultivators also avoided risk and resisted change due to their poor economic status
and lack of incentives. This complex network of legal, economic and social relations
served to produce an effect, which Daniel Thorner termed as ‘Built-in-Depressor’.
The net result was that agricultural growth varied from low growth to near stagnation.
During the period of 1891 to 1947, agricultural output rose by just 0.37 percent
per annum significantly lower than the population growth rate of 0.67 percent per
annum. In particular, growth rate of food grains output was a mere 0.11 percent.
After 1921, population growth accelerated to over 1 percent per annum but food
grains output could not grow fast enough. As a result, the per capita output fell
14 markedly. Commercial crop output, however, increased rapidly - nearly doubling
its output over the period. Land and Agrarian
Relations During the Pre-
Independence Period
In general, the output growth was higher in ryotwari and mahalwari areas.
Greater Bengal was the area where land tenure structure was most retrogressive.
There were layers of parasitic intermediaries living on rental incomes. Though in
Punjab also area under tenancy was quite high, tenants were mostly small owners
who leased land from landowners and lived in the village supervising their cultivation.
Tenancy in Punjab was basically a method of labour mobilisation by those owners
whose holdings were bigger than what could be cultivated with family labour. An
important source of agricultural growth in Punjab was the expansion of irrigation
works and total area under agriculture. Though in India as a whole the British
were neglecting irrigation works, yet in Punjab there was a tremendous investment
in irrigation. More specifically, the area irrigated by government canals during
1901-02 to 1939-40 in Punjab increased from about 4.5 million acres to 12.5
million acres and the area in agriculture from 23 million acres to 31 million acres
during this period.
In areas where agricultural growth was stagnant, two factors are identified as
responsible for it. These are: (a) the structure of rights to land; and (b) resource
endowments. In the zamindari areas, the benefits of commercialization weighed
more heavily in favour of renters who did not cultivate land directly. In the ryotwari
settlements, a section of the peasantry tended to benefit more. Thus, an adverse
combination of superior rights and non-agricultural background was responsible
for lower investment and lower increase in land productivity. The resources -
water, land, and people - were unequally distributed across space, owing to both
natural and manmade factors. The rice-growing regions like Bengal, Bihar, and
eastern UP were having high population densities whereas southern rice regions
like Cauvery delta and the Godavari-Krishna delta did well commercially. Both
these areas of south shared two points of distinction viz. (a) good irrigation which
made it possible to combine rice with dry-season crops, and (b) lower population
densities.
Millet-growing dry regions had land in plenty. When canal irrigation made lands
cultivable (as in Punjab and Western UP), the dry areas were better placed in
terms of average land per peasant. These conditions enabled diversification into
cash crops, such as wheat and cotton, in areas hitherto specialized in millets. Such
manmade conditions of progress, however, became available only on a limited
scale.
Check Your Progress 3 (answer in about 50 words in the space given)

1) What were the major qualitative changes that came to be introduced in the
direction of ‘commercialisation of agriculture’ during the British period?

........................................................................................................................

........................................................................................................................

........................................................................................................................

........................................................................................................................

........................................................................................................................
15
Indian Agriculture : 2) What were the four major quantitative changes that was evidenced on account
Institutional Perspectives
of policies to increase ‘commercialisation of Indian agriculture’?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
3) Which factors contributed to a decline in the progress of ‘commercialisation
of agriculture’? How were the poor peasants affected by these?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
4) Which parts of India prospered least in agricultural development during the
British period? What were the factors that contributed towards this?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
5) What major change in the demographic structure was noticed during the
years of 1900s? Did this have any adverse effect on the average wage level?
Why?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
6) What did Daniel Thorner mean when he termed the prevailing agrarian situation
during the last years of British period as ‘built-in-depressor’? What was the
net effect on the growth of Indian agriculture during the years of 1900-1940?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................

4.7 LET US SUM UP

The unit began with a brief overview of the situation that prevailed on the land
ownership and tenancy structures during the mughal period. It subsequently dealt
16
with the issues and circumstances which shaped the Indian agriculture during the Land and Agrarian
Relations During the Pre-
period of British rule. The contents bring forth the fact that development of Independence Period
agricultural sector was more directed to suit the interests of the imperial government
and in its process created and left behind deep social divisions in the Indian polity.
A significant evidence of this self-serving motive of the British is seen in the
deliberate destroying of industries that co-existed in the pre-British times making
the traditional village economy of those times a self-supported holistic economic
entity. However, conferring the proprietary rights to the tiller-peasants, expansion
of the non-farm sector like railways, marketing networks, etc. to make the
agricultural sector commercially develop, supportive investment in irrigation made
in some provinces, etc. are examples of positive steps taken to promote agricultural
development in the pre-independent years. Nonetheless, poor peasants have had
to endure suffering to the point of impoverishment, mainly due to the patronage
extended to the rich landlords by the British, despite the significant profits generated
from the agricultural sector. The ryotwari system, as an institutional alternative,
have fared better than the zamindari system with the mahalwari system also
appearing to have done reasonably well. Bengal as a region or province has had
a relatively less progressive status which has been termed by some writers as
retrogressive. The unit has served to provide the background needed to understand
the nature of inheritance in respect of the large agricultural economy by the post-
independence policy makers in the country.

4.8 KEY WORDS

Mahalwari system : A system of revenue assessment/collection in which
the unit of assessment was ‘village’. Under this
system, the payment of revenue was the joint
responsibility of the primary cultivator and the village
heads i.e. gram sabha.
Ryotwari system : This is a system in which the ‘ryot’ i.e. the cultivator
is recognised as the proprietor of land. In this system,
the land revenue was fixed permanently based on
the estimated value of the gross produce. Though
the system favoured peasant-proprietorship, it also
accommodated large land owners.
Jagirdars/Zamindars : Two class of intermediaries who collected land
revenue to the mughal kings by the cultivators.
Commercialisation : The word has acquired different meanings at different
times and has evolved in response to different stimuli.
Earlier, growing of cash crops like cotton, sugarcane,
jute, tobacco, etc. (that were grown exclusively for
the market i.e. outside of self-consumption) had been
considered synonymous with commercialisation.
Over time, even food grains were produced for the
market due to cash needs of the farmers. This
transition has been hastened by the green revolution
which increased the marketable surplus. Favourable
price policy for food grains has also contributed to
this transition. 17
Indian Agriculture :
Institutional Perspectives 4.9 SUGGESTED REFERENCES FOR FURTHER
READING
1) Dharma Kumar and Meghand Desai (eds.) (1982), The Cambridge Economic
History of India, Cambridge University Press, Chapter 2.
2) Irfan Habib (2006), Indian Economy: 1858-1914, Tulika Books, New Delhi,
Chapter 3.
3) Tirthankar Roy (2006), The Economic History of India 1857-1947, Oxford
University Press, New Delhi, Chapter 4.
4) Tomlinson, B. R. (1993), The Economy of Modern India 1860-1970,
Cambridge University Press, New Delhi, Chapter 2.

4.10 ANSWERS/HINTS TO CHECK YOUR

PROGRESS EXERCISES
Check Your Progress 1
1) See section 4.2, 1st para and answer.
2) See section 4.2.1 [yield per unit of land × area under that crop].
3) See section 4.3 and answer.
4) See section 4.4 [same ancestry, brotherhood, fraternity feelings, blood-ties,
etc.].
Check Your Progress 2
1) See section 4.4, 1st para (i) to (vi) and answer.
2) See section 4.4.1 and answer.
3) See section 4.4.2 and answer [because with price increase, the fixed settlement
yielded less revenue from land].
4) See section 4.4.3 [primary cultivator and village]
5) See section 4.4.2 and answer [establish the right conditions for investment in
agriculture by the rich natives and creation of a class of loyal supporters].
6) See section 4.4.4 and answer [sub-letting/mortgaging/transferring by gift/sale
deed].
Check Your Progress 3
1) See section 4.5, 1st para, and answer.
2) See section 4.5, 1st para, and answer.
3) See section 4.5.1 and 4.52 and answer.
4) See section 4.4.3 [primary cultivator and village].
5) See section 4.5, last para and answer.

18 6) See section 4.6.2 and answer.

UNIT 5 LAND AND AGRARIAN
RELATIONS DURING THE POST-
INDEPENDENCE PERIOD
Structure
5.0 Objectives
5.1 Introduction
5.2 Agrarian Structure at the Time of Independence
5.3 Efforts Made Through the Plans
5.4 Land Reforms and Agricultural Development
5.4.1 Concept, Nature and Significance of Land Reforms
5.4.2 Conditions Necessary for the Success of Land Reforms
5.4.3 Tenancy Reforms and Ceiling on Land Holdings
5.4.4 Consolidation of Smaller Land Holdings
5.4.5 Impact of Land Reforms on Poverty and Productivity

5.5 Current Debate and Future Perspective

5.6 Let Us Sum Up
5.7 Key Words
5.8 Selected References for Reading
5.9 Answers/Hints to Check Your Progress Exercises

5.0 OBJECTIVES
After reading this unit, you will be able to:
 outline the agrarian structure which India inherited at the time of independence;
 indicate the various initiatives taken in our Five Year Plans on improving the
land and agrarian relations in particular, and agricultural development in general;
 explain the concept of land reforms;
 identify the conditions necessary for the success of land reform policy;
 examine the performance of ‘tenancy reforms’ over the period 1951-1991;
 review the trends which suggest the results of implementation of land reform
measures in the post-1990s;
 state the reasons why ‘ceiling on land holdings’ has not succeeded in India;
 assess the impact of land reforms on poverty and productivity; and
 suggest the new directions in which the policy perspective need to be
reoriented.
19
Indian Agriculture :
Institutional Perspectives 5.1 INTRODUCTION
In unit 4, we noted that the British government exploited the agrarian base of the
Indian economy to serve its imperial interests. The first Indian government which
was formed immediately after independence, therefore, had to pay special attention
on strengthening the agrarian base of the economy. The primary task was to take
measures to restructure the institutional mechanisms of Indian agriculture which
had become weak due to the feudalistic roots that had set into the system. Towards
this end, in one of its first steps in this direction, the government in 1949 made
a Constitutional provision to institute ‘land and tenancy reforms’. Since these
reforms had to be designed taking into account the regional sensitivities, the central
government left the task of adoption and implementation of these reforms to the
respective state governments. In the years following, the successive Five Year
Plans provided consistent policy guidelines and financial support to the state
governments to implement the land reform policies at the grass root level. This
resulted in varying levels of achievement limited by the regional socio-political
constraints and initiatives taken by the state governments. What is the extent of
achievement that could be accomplished till the beginning of 1990s when a major
policy shift on liberalising the economy was ushered in? As we moved on, for
close to two decades now on this new economic policy path, how has the
restructuring of the agrarian base progressed in the country? And in view of the
continued importance of the agricultural sector to the Indian economy even at this
juncture, with close to 52 percent of total population continuing to be dependent
on it for their sustenance, in what direction should the policy focus be reoriented
to strengthen the agricultural base of the economy? These are the issues to which
we shall address in this unit.

5.2 AGRARIAN STRUCTURE AT THE TIME OF

INDEPENDENCE
At the time of independence, India faced a major challenge of setting right the
disturbed agrarian relations as promised during the independence struggle. The
agrarian structure inherited from the British period varied from peasant-proprietorship
in a small proportion of total cultivated land to landlord-owned domains in a
relatively large area of land. The land distribution at the time of independence was
so skewed that while just 7 percent of land owners held 53 percent of total land,
28 percent of small and marginal farmers (defined as owning less than 2.5 hectares
or 1 acre of land) owned just 6 percent of total land. The tenurial (i.e. the period
and the conditions under which a land is leased out to a tenant to cultivate on a
share-cropping basis) and administrative practices varied significantly throughout
the country. Broadly, however, as noted in the previous unit, the system that
prevailed could be classified under two heads viz. (i) the zamindari; and (ii) the
ryotwari systems. While the zamindari system was characterised by many
intermediaries (i.e. between the state and the actual land tiller), the ryotwari
system was, at least in its design, marked for peasant-proprietorship. Nonetheless,
the system not only reduced the holdings to such uneconomic proportion, but it
also killed any incentive for investing resources to yield higher returns.
Against this background, establishing the twin objectives of achieving social equity
and ensuring economic growth were the priority for the new Indian government.
20
The agrarian structure at the time of independence could thus be summarised to
have been characterised by: (i) large number of parasitic, rent-seeking intermediaries; Land and Agrarian
Relations During the Post-
(ii) different land revenue/ownership systems prevailing across states; (iii) small Independence Period
number of land lords holding a large share of land, leasing out land on exploitative
share-cropping basis; and (iv) a large number of actual tenant cultivators working
under insecure tenancy conditions with exploitative production relations. The policy
makers had, therefore, to contend with the two critical issues of: (i) eliminating the
intermediaries by effecting new tenancy contracts that would motivate the farmers
to adopt better production methods/practices; and (ii) re-establish the land records
which were in extremely bad shape giving rise to a mass of litigation.
To set right the distorted situation, the Indian constitution under Article 39
provisioned that ‘the ownership and control of the material resources of the
country (primarily land) should be re-distributed so as to serve the common
good’. With this as the goal, a national ‘Planning Commission’ was established to
lay down policy guidelines through a series of Five Year Plans. Instituting a new
‘land policy’ was to be one of the important components to be incorporated in all
its plans. The plans prepared and implemented, therefore, broadly aimed at: (i)
reducing disparities in income and wealth; (ii) eliminating exploitation by providing
security to tenants; and thereby (iii) achieve social transformation through equality
of status by providing opportunities for different sections of the population to
participate in development initiatives.

5.3 EFFORTS MADE THROUGH THE PLANS

It is possible to identify India’s ‘land policy’ to have gone through four distinct
phases since independence. These are: (i) the first phase over the years 1951-
74 focused primarily on ‘land reforms’; (ii) a second phase over the period 1974-
85 in which the attention was shifted to increasing the cultivated land (by bringing
the uncultivated land into its hold); (iii) a third phase (1985-97) with the focus
shifted towards ‘water and soil conservation’; and (iv) the fourth and the current
phase (i.e. 1997 onwards) centred on debates about the necessity to continue
with land legislation. The latest phase is driven by an introspection on the inadequate
achievement of the desired re-distribution of land resource over more than four
decades of implementation by legislative measures. The lack of progress is
contrasted with the effectiveness of ‘demographic and economic forces’ in bringing
about an improvement in the conditions of small and marginal farmers. In the
foregoing paras, we shall briefly review the specific initiatives taken in the Five
Year plans by way of specific issues focused upon and policy prescriptions adopted
to tackle them.
First Phase (First Plan to Fourth Plan: 1951-1974)
The major issue in the first plan (1951-56) was to increase the area under cultivation.
For this, vast uncultivated lands, locked under large size-holdings, were aimed to
be brought under cultivation. Village commons were to be brought under
‘community development (CD)’ networks. In order to achieve these, the land
reform thrust was to: (i) abolish intermediaries; (ii) restore land rights to tenant
cultivators; and (iii) increase land use efficiency. In the second plan (1956-61), the
concern was to reduce dependency on rain-fed irrigation by an increased thrust
on irrigation-agriculture and also focus on increasing low land productivity. In the
third plan (1961-66), the focus was on ‘food security’. For this, bringing the
21
Indian Agriculture : cultivable waste land under cultivation and backward regions into mainstream
Institutional Perspectives
were emphasised. With continued emphasis on food security, in the fourth plan
(1969-74) also, incentives were created for diverting land towards food crops.
The policy thrust from the second to the fourth plan were, therefore, to: (i) expand
training and extension services through CD; (ii) develop irrigation facilities through
minor and major irrigation projects; (iii) integrate land policy approach by ‘area
development’ and ‘soil conservation’; and (iv) implement ‘land ceiling’ Acts to
consolidate land holdings.
Second Phase (Fifth and Sixth Plan: 1974-1985)
In the second phase, during the fifth plan period (1974-79) the focus was on
tackling the issue of ‘degraded land management’. Under this, the policy thrust
centred around implementing drought-prone and desert area development
programmes. During the sixth plan (1980-85), in addition to continuing the focus
on development of under-utilized land resources, attention was also on extending
the beneficial reach of ‘green revolution’ to areas which were lagging behind in
picking up the demonstrated benefits from it. The policy thrust was on implementing
‘land and water management programmes’.
Third Phase (Seventh and Eighth Plan: 1985-1997)
During the seventh plan period (1985-90), the focus was on managing ‘soil erosion’
and combating ‘land degradation’. The policy thrust was on taking a long-term
view of land management in addition to wasteland development. In the eighth plan
(1992-97), the major issue focused was on development of ‘dry land and rain fed
areas’. A special effort was made on ‘peoples participation in land management’
at village level. The policy emphasis was, therefore, on implementation of watershed
development programmes with an ‘agro-climatic regional planning’ thrust.
Fourth Phase (Ninth Plan Onwards)
During the ninth plan period (1997-2002), a re-thinking on the utilisation of land
reforms set in. Agricultural growth had reached a phase of sluggishness and the
fact that the ‘green revolution’ had failed to spread beyond a handful of states had
received wider acknowledgement. There was criticism that not only the land ceiling
and tenancy laws had not served its intended purpose but had rather proved
counter-productive serving only to kill the land market. Nevertheless, the policy
focus continued on bringing the underutilised land under cultivation. A decentralised
land management system with the empowerment of ‘panchayati raj institutions’
to manage the village lands was emphasised.
The above brief review suggests that even after 50 years of independence, the
core issue continues to revolve around a just distribution of land resources. The
land policy, however, has changed its emphasis to a fresh debate on the need for
a new phase of land reforms. The central issue throughout the Five Year Plans has
been on ‘land policy’ focused both on its ‘re-distribution’ and ‘optimum utilisation’.
It is not that the efforts of five decades were entirely unsuccessful. But its success
remained area-specific with a wide gap between potentials and actual yields. To
understand this, we must now turn for an assessment of the specific efforts made
under land reforms.

22
Check Your Progress 1 (answer in about 50 words using the space given) Land and Agrarian
Relations During the Post-
Independence Period
1) Mention the two twin objectives of the first Indian government for establishing
a sound agrarian structure? State the two critical issues with which the
government had to deal with in this respect?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
2) What were the three aims/objectives of the newly constituted ‘planning
commission’ for bringing about the desired change in the agrarian structure in
India?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
3) Identify the four broadly demarcated phases/periods of India’s ‘land policy’?
Is there a ‘drift’ in this thrust of late? Why?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
4) Mention the four distinct areas of policy thrust during the course of first four
five year plans?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................

5.4 LAND REFORMS AND AGRICULTURAL

DEVELOPMENT
Within the limits of five year plans’ objectives/focus, and the specific policy thrust
given to achieve them in terms of programmes/schemes, in very brief, we have in
the previous section outlined the basic thrust of the plans on land re-distribution
and management. In doing this, we have used the terms ‘land policy’ and ‘land
reforms’ interchangeably. This is because the former is so much inexplicably
intertwined with the latter that the two have almost been treated synonymously in
the context of India’s land policy planning and implementation. We shall, however,
deal more specifically with ‘land reforms’ now beginning with an elaboration on 23
Indian Agriculture : its meaning and definition. Subsequently, we shall deal with its other dimensions
Institutional Perspectives
like: nature and significance, arguments for and against in terms of two hypotheses
that have been put forward (called farm-size hypotheses), progress made in India,
ceiling laws on land holdings, etc.

5.4.1 Concept, Nature and Significance of Land Reforms

Conceptually, the term ‘land reform’ is concerned with changing the institutional
structure governing man’s relationship with land. The institutional structure refers
to changing of laws, regulations or customs on land ownership. Note that in using
the word ‘customs’, even the non-formal methods of influencing the changes were
also considered as long as they could bring about the changes in the desired
direction. In more simple terms, land reforms basically refers to re-distribution of
land for agricultural purposes from the rich to the poor. In the context of agricultural
development in India, it has mainly been advocated and implemented as a major
instrument of government mediated policy for bringing about a more rational agrarian
structure in the country.
The economic rationale for land reforms has been extended on two grounds viz.
(i) as a means of production for the large landless poor for whom a piece of land
on a stable ownership means providing the basic economic resource needed for
producing the food needed for his and his family’s sustenance; and (ii) the motivation
to produce a surplus for earning income through sale/profit (from the land on
which the investment of ‘human efforts’ is made) should be assured to accrue to
the individual actually toiling on it. At another level, it needs to be recognised that
it is a deeply involved political process for the success of which the willing
cooperation of all major political parties is very much essential. This is in view of
the fact that a redistribution of land rights would alter the relationships within and
between communities in a region impacting on the socio-political influence vis-à-
vis electoral outcomes. This fact also, therefore, explains why the earliest
constitutional provision soon after independence, considered it prudent to leave its
implementation to the initiatives of the respective state governments who are better
able to cope with the caste and social sensitivities of the issue. The economic
significance of land reforms can, therefore, be reduced to its two critical dimensions
viz. (i) equity by which land as a basic resource is used to tackle poverty of poor
unskilled rural labour; and (ii) efficiency by which intangible factors like motivation
or incentive to produce more is also taken care of by conferring ownership rights
on land tilled by a poor farmer. We will explain the efficiency argument more in
terms of the two farm-size/productivity hypotheses below.

5.4.2 Conditions Necessary for the Success of Land

Reforms
The two hypotheses called ‘farm-size hypothesis’ and ‘tenant-efficiency hypothesis’
are based on certain empirical observations. The first, called the farm-size
hypothesis, is based on the observation that ‘smaller farms yield larger output’ i.e.
the farm-size is inversely related to output (see also ‘key word’). Implicit in this
observation is the fact that on smaller farms family labour would suffice, or even
if some outside labour is hired there would be effective supervision, whereas in
larger farms, hiring of outside labour would be a necessity. The second hypothesis,
called the tenant-efficiency hypothesis, rests on the two empirical observations
24 that: (i) landlords owning larger farms would generally not do self-cultivation but
lease out their land to tenant farmers on a share-cropping arrangement; and (ii) the Land and Agrarian
Relations During the Post-
sharecropping arrangement is generally exploitative in nature killing the tenants Independence Period
motivation to put in sincere labour. Therefore, a tenant-owner (i.e. a tenant given
the ownership rights to a small farm which he can self-cultivate) has the incentive
to contribute more than when he is working on a sharecropping arrangement.
Note that associated with both the incentive to produce more in the tenant-
efficiency hypothesis or the higher output yield associated with the farm-size
hypothesis, there is the common issue of maximising the output. Given that the
implementation of land reforms needs the state to act as regulator, the two
hypothesis (also called as stylized facts) raises the question of ‘whether the
policies (or the incentive structures) can be so framed/designed that the market
forces can generate the stimulus required for producing maximum output or
alternatively minimise the productivity losses’? Alternatively, although the ‘rent-
extraction’ (i.e. exploitative character of share-cropping arrangement) and the
‘incentive trade-off’ (i.e. if the tenant is offered the incentive to produce surplus
by ownership rights to his land) explanations provide a rationale for the above two
hypotheses, is there any further explanation available for the effectiveness of ‘tenancy
rights’ in ‘smaller holdings’? The answer to this question lies in the underlying
assumptions that govern the two stylized facts. For instance, the quality of land is
not homogeneous and the farmer’s ability vis-à-vis their skills are also not
homogeneous. This means, under the condition of homogeneity assumption the
two hypotheses may ensure higher returns or output. But since such assumptions
rarely prevail in reality, the higher output realisation is often violated. Thus, under
conditions of homogeneity the case for ‘land reforms’ would be upheld but to the
extent that heterogeneity of factors invariably prevail, land reform measures will be
less effective. The policy challenge is, therefore, to establish suitable incentives by
appropriate institutional mechanisms so that the conditions necessary for higher
productivity is generated in the market.
In the above context, it is relevant to note the argument made by the Peruvian
economist Hernando de Soto. In his publication ‘The Mystery of Capital’ published
in the year 2000, Soto advanced the view that with the ensuring of ‘property
rights’ to a poor farmer’s land by the state, the farmer’s ability to access institutional
credit is increased. With this, the poor farmers are better empowered to ensure
their own welfare, contributing in the process to both alleviation of poverty and
promotion of economic growth. In other words, establishment of suitable institutions
would ensure the twin concerns of equity and efficiency. However, since tenancy/
land reforms cannot succeed without the political support, it is necessary to
simultaneously work on ‘political reforms’ along side the ‘institutional reforms’.
The two together would then ensure the conditions necessary for the success of
‘land reforms’.
The two conditions of political and institutional reforms, for the establishment of
a good political and institutional structure, identified as essential for the success of
‘land reforms’ are applicable to any country/context in general. Related to these
two broad factors, in the Indian context, some specific factors which have
contributed to the poor performance of land reform measures can be identified.
These factors, as can be seen, are subsumed in the above two broad factors but
their explicit mention provides a clear picture of the position that has obtained in
India. The first is the ‘absence of pressure from below’. This refers to the 25
Indian Agriculture : unorganised and therefore passive/inarticulate voice of the poor peasants which is
Institutional Perspectives
also a pre-requisite for the effective implementation of land reforms. This is mainly
due to the crippling social and economic condition of the poor which can be
improved only by concerted efforts over a long time period. The second is the
‘administrative apathy’. There has been a general neglect of efforts needed to
forge a suitable administrative organisation equipped by systematic in-service training
and periodic orientation courses that is essential for the successful implementation
of land reforms. There has been an utter lack of conscious effort to post able and
dedicated men with faith in land reform to key positions in the administrative set-
up. And in very few cases where some actions were taken by some officials, they
have been hastily transferred which is but a substantiation of administrative inaction/
failure. The third factor has been the ‘absence of correct and up-dated land
records’. This is compounded by the deficiencies in the reporting system which is
weak and irregular. Fourth, there is a lack of attention paid to a comprehensive
concurrent evaluation in the absence of which it has not been possible to identify
obstacles and take timely remedial measures. It can be clearly seen that all these
factors are but a part of political and institutional weakness to remove which
reforms on these two major fronts is the only answer for an effective implementation
of land reforms.
Check Your Progress 2 (answer in about 50 words within the space provided)
1) What does the term ‘land reforms’ basically connote?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
2) State the two grounds on which the economic rationale for ‘land reform’
measures rest?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
3) What are the two arguments on which the two hypotheses for the efficiency
of land reform measures are made? What is the basic assumption underlying
these arguments under which the two hypotheses can be expected to hold?
........................................................................................................................
........................................................................................................................
........................................................................................................................

26
........................................................................................................................
4) What would you say is the answer to both the concerns of ‘equity’ and Land and Agrarian
Relations During the Post-
‘efficiency’ in a situation where heterogeneity of factors is an unavoidable Independence Period
reality?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
5) State four specific factors which have hindered the successful implementation
of land reforms in India.
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................

5.4.3 Tenancy Reforms and Ceiling on Land Holdings

The land reform legislation in India consisted of four major planks: (i) abolition of
intermediaries; (ii) tenancy regulation aimed at improving the contractual terms
(including crop shares); (iii) ceiling on land holdings with a view to redistributing
the surplus land to the poor; and (iv) consolidation of numerous small uneconomic
landholdings. Of these, abolition of intermediaries, which had been completed by
1960, is generally agreed to be the more successful component of the land reform
process in India. In other respects, the progress made varies across states. Raj
Krishna (1961) groups the land reform measures into four classes viz. (i) liberative;
(ii) distributive; (iii) organizational; and (iv) developmental. While the abolition of
intermediaries comes under the ‘liberative’ class, tenancy reforms and ceiling on
land holding come under the ‘liberative and distributive’ measures. Application of
‘technological advance’ and spread of ‘extension services’ to make them accessible
on a wider scale come under organizational and developmental classes respectively.
The major planks of tenancy reform were five: (i) security of tenure; (ii) termination
of tenancy (salvation from old and freedom to recall the new) ; (iii) allowing for
resumption for personal cultivation by the landlord; (iv) regulation of rent; and (v)
confirmation of ownership rights. Various state laws were enacted between 1960
and 1972. However, due to diverse and complicated nature of agrarian structure
in different states, no uniform guidelines could be formulated. The consensus on
the policy of tenancy reforms in fact favoured neither complete expropriation of
landlordism nor absolutely favoured the interests of the tenants. The national
guidelines (post-1972), however, included the following measures for adoption by
the states:
 security of tenancy to be conferred on the actual tiller-cultivator;
 for share cropping, fair rent to be fixed in the range of 20 to 25 percent of
gross produce;
 land-owners to be permitted to cultivate land for personal use with due
27
safeguards taken for discouraging ‘absentee landlordism’;
Indian Agriculture :  surrendering of tenancy rights to be permitted with mutual consent;
Institutional Perspectives
 in respect of some specified areas, the landlord-tenant relationship to be
ended and the tenant cultivator to be brought directly under the state;
 disabled persons, defence personnel, etc. to be exempted from leasing their
land;
 the term ‘personal cultivation’ to be unambiguously defined wherever landlords
are allowed to remove tenants to resume self-cultivation; and
 oral tenancies to be abolished and tenancy records to be duly maintained.
Debate on Complete or Near-Complete Ban on Tenancy
The issue of ‘complete or near-complete ban of tenancy’ (as was sought to be
done in some states) has been the most controversial of all the issues in India. The
main issue is preventing landlords from leasing out their land under conditions that
are unfavourable or exploitative to tenants. In light of this, it is argued that even
if tenancy is technically allowed, provisions giving long-term and protected rights
to tenants would have the same impact as a ban on tenancy. In view of this, it was
pointed out that permitting termination of tenancy under some circumstances like:
(i) tenant has failed to pay rent for a year within the time stipulated in the law; (ii)
the tenant has been proved to be using land for purposes other than agriculture;
(iii) the land has been rendered/made unfit for cultivation; (iv) the tenant is not
personally cultivating the land; and (v) term of the lease period has either elapsed
or the landlord has sought to personally cultivate; should be allowed. In recognition
of the merits of this argument, some states have made provisions for termination
of tenancy under specified circumstances. The National Commission on
Agriculture (1976) also asserted that given India’s ratio of agricultural land per
capita, tenancy cannot and should not be totally banned. There are also studies
which have revealed that a total ban on tenancy adversely impacts the poor.
Empirical data shows that the total area under tenancy did not vary much between
1962 and 1971 (it remained around 10.6 percent) but declined sharply by 1981
to 7.2 percent (Table 5.1). Although there is an increase in the ‘area under
tenancy’ over the period 1981-91 (from 7.2 percent in 1981 to 8.3 percent in
1991), going by the trends in the ‘number of holdings’ there is evidence of decreased
tenancy holdings over the period 1971-91.
Table 5.1: Changes in Leasing of Land in India (percent)

Class of 1961-62 1970-71 1980-81 1990-91

Farmers No. Area No. Area No. Area No. Area
Small 25.1 14.0 27.8 14.6 17.9 8.5 14.9 8.5
Marginal 24.1 16.6 27.0 18.9 14.4 9.7 9.3 8.7
Medium 20.5 9.6 20.9 8.7 14.5 6.6 13.1 6.9
Large 19.5 8.3 15.9 5.9 11.5 5.3 16.7 19.4
All sizes 23.5 10.7 25.7 10.6 15.2 7.2 11.0 8.3
Source: NSSO, Report No. 407, 48 th Round.
Note: Percentages are to total land. No. refer to ‘number of holdings’.

28
Ceiling on Land Holdings Land and Agrarian
Relations During the Post-
Independence Period
Legislation on ‘ceiling on land holdings’ was implemented in two phases: 1955-72
and 1973 to present. Policy on ceiling on landholdings were guided by three
economic compulsions viz. (i) there was evidence for inverse size-productivity
relationship i.e. larger the size of land holding smaller will be the productivity; (ii)
there was also evidence for large land holders to leave some area fallow leading
to uneconomic land use; and (iii) large proportion of poor being dependent only
on land for their survival, available surplus land should be judiciously distributed
to ensure the concerns of social justice and equity. In view of this, the first Five
Year Plan suggested the concept of ‘economically viable holding’ defining it as
about ‘2 acres for self-cultivation’. As noted in unit 2, ‘small and marginal farmers’
in India are defined as farmers owning ‘1 to 2 hectares of land’ and ‘less than 1
hectare of land’ respectively. Since 1 hectare is equal to 2.5 acres, the definition
of economically viable holding provided by the first Five Year Plan means that a
farmer must be at least a ‘marginal farmer’. Data on ‘distribution of operational
holdings by size of land’ shows that the proportion of marginal farmers in India has
risen from 56.4 percent in 1980-81 to 61.6 percent in 1995-96 and 63.0 percent
in 2000-01 (Table 5.2). The corresponding position for small farmers, although
increasing, is less steep as compared to the marginal farmers. Going by the
corresponding declining trends for the medium, large and very large classes of
holdings, the trends for ‘marginal farmers’ are possibly indicative of the effect of
implementation of ‘ownership rights’ in the post-1980s/1990s.
Table 5.2: Size Distribution of Operational Holdings (percent)
Class of Farmers/Holdings 1980-81 1995-96 2000-01
Marginal (less than 1 hectare) 56.4 61.6 63.0
Small (1 to 2 hectare) 18.1 18.7 18.9
Medium (2 to 4 hectare) 8.0 7.0 6.6
Large (4 to 10 hectare) 9.1 6.1 5.4
Very large (above 10 hectare) 2.4 1.2 1.0

Source: Ministry of Agriculture, 1994-95 and Agricultural Statistics at a Glance, 2007.

The implementation of this part of land reforms has suffered due to loopholes or
ambiguity in definitions of terms like: (i) retrospective transfers; (ii) large number
of exemptions; (iii) basis of fixing land limits; etc. Acquiring surplus land was thus
ineffective and hence the redistribution insignificant. Among the major factors
which led to this poor state of implementation is the ‘village level politicization of
the issue’. Many critics are of the view that the entire exercise of land ceilings has
only served to distort the land market. They, therefore, argue that it is essential to
allow full play of market forces through either an outright abolition or gradual
phasing out of the ceiling and tenancy laws. Despite the limited success in the
redistribution of surplus agricultural land, ceiling laws have succeeded in keeping
a check on concentration of land in the hands of a few.

5.4.4 Consolidation of Smaller Land Holdings

Of all the components of land reforms, consolidation of smaller land holdings has
received least attention. During the earlier 1970s, a NSS report had observed that
‘many landowners had held several fragmented parcels of land scattered across
the villages’. In view of this, the exercise of consolidation of smaller land holdings
29
Indian Agriculture : was under debate. Although legislation on consolidation of smaller land holdings
Institutional Perspectives
was adopted by as many as 15 states, the implementation of these laws failed
mainly on account of ‘lack of political will and administrative difficulties’. Three
states in which consolidation laws were reasonably better implemented are: Punjab,
Haryana and U. P. It is pointed out that demographic and economic pressures
naturally cause fragmentation of land causing increased marginalisation of holdings.
Due to this reason, it is reported that the number of holding smaller than 1 hectare,
and especially smaller than 0.5 hectares, have been increasing over the years.
While this process is causing serious concern, there are some stray instances (in
Karnataka and Maharashtra) where a few groups of small and marginal farmers
have recently come together to cultivate crops like strawberries, tomatoes, rose
onions, etc. on ‘contract basis’ with a price for the produce agreed in advance
with the contractor. This approach is, therefore, suggestive of a way out to overcome
the viability threshold to cultivate such investment-intensive crops. This experiment
provides an institutional alternative to consolidation of holdings.

5.4.5 Impact of Land Reforms on Poverty and

Productivity
Holding political factors as more determining of the success of implementation of
land reform measures, many studies by independent researchers have revealed
that in the left-wing led governments of West Bengal and Kerala there is a stronger
evidence of favourable impact of land reform measures on poverty and productivity.
The results of these studies also reveal that a strong political will for implementation
in the left-ruled states have marked for a positive impact of land reforms. There
are many other studies which have reported that due to ‘reduced public investment
in agricultural infrastructure’ in the post-1991 years, there is an adverse impact on
agricultural productivity/development. These results reinforce the need for
strengthening of institutions (including political institutions) and renewed public
investment for the successful implementation of land reform policies.
Check Your Progress 3 (answer in about 50 words in the space provided)
1) Mention the four major planks of land reform legislation in India.
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
2) What are the five major planks of tenancy reform?
........................................................................................................................
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........................................................................................................................
30
3) State the five circumstances under which permitting of ‘termination of tenancy’ Land and Agrarian
Relations During the Post-
was sought to be allowed. Independence Period
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
4) Mention the three factors which have contributed to a poor performance of
the implementation of ceiling on ‘land holding laws’.
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
5) Which two determinants have been identified as positively influencing the
implementation of land reform efforts by the empirical evidence of independent
researchers in India?
........................................................................................................................
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........................................................................................................................
........................................................................................................................

5.5 CURRENT DEBATE AND FUTURE

PERSPECTIVE
Proper land records continue to be a major problem even after many decades of
land reform implementation. Efforts made towards computerization of land records
have proved partially helpful. There is a general consensus for liberalising the land
market. There is also a debate on increasing the ‘land ceiling limits’ owing to the
consideration that large farms would attract greater investment. This is considered
vital in the current situation where effective participation in the world market has
become the need. For this, pooling the small holdings of small/marginal farmers to
form formal/informal groups of producers, on the lines of some experiments
conducted in Karnataka and Maharashtra with ‘contract farming’ arrangement so
as to ensure marketing of produce, risk coverage, etc. is pointed out as needed.
Given the paradox between the fear of landlords on losing their titles to tenants
in one-one-one contracts and the continued state of ‘tenurial insecurity’ of poor
lessees due to severe constraints on land leasing, an alternative by way of public
land banks (PLBs) has been suggested by a Working Group on Disadvantaged
Farmers for the consideration of the government in the Twelfth Plan. Under this,
the PLBs would take ‘deposits’ of land parcels from owners wanting to lease out
their land, with full freedom to withdraw their deposit after a fixed period. The
deposits of land to the PLBs would be entirely voluntary with the owners not
wanting to deposit being free to lease out their land directly. Under a small
payment as incentive to be paid to the depositors (the rate of payment to be 31
Indian Agriculture : derived based on a percentage of prevailing average land rents in the panchayats),
Institutional Perspectives
the PLBs would lease out land under its command to designated categories of
farmers such as marginal farmers, women, dalits, tribals, etc. Other incentives
suggested to attract deposits include: (i) minimum return even for fallow land; (ii)
an additional rent for land that gets leased out; (iii) development of the land
deposited by soil conservation works to be undertaken under MGNAREGA or
other means; etc. For those leasing in land, PLBs would provide benefits such
as: (i) a guaranteed lease for a defined period; (ii) a calibration of rent with land
quality; (iii) lower transaction cost and uncertainty than currently faced by small
farmers in negotiating leases, etc. The PLBs, thus, would help match the land
supply and demand. On the supply side, it would address the concerns of
landowners and bring under-used or fallow land into farming. On the demand
side, it would provide small/marginal farmers access to land for which they cannot
compete in the open market by themselves. The proposal, if implemented, amounts
to the filling up of a glaring gap that presently exists in ‘the way forward to break
the dead lock in the area of land reforms and agricultural development’.

5.6 LET US SUM UP

The unit began with a brief review of the state of agricultural sector inherited at
the time of independence and in its light the major challenges that confronted the
new Indian government in rejuvenating the agrarian foundations of the economy
immediately after independence. The various initiatives taken by the government,
through its planning exercise, was briefly reviewed. The specific efforts made in
restructuring the agrarian relations through tenancy/ceiling laws over the five decade
period of its implementation and the current thinking on what needs to be done
to reorient the policy thrust was subsequently assessed. The key areas for present
policy action identified as required include: legalising the land/tenancy market,
contract farming, , etc. As such interventions involve serious implementation issues
relating to political and institutional aspects, for any significant success on the
agrarian restructuring, it is necessary to undertake measures for both ‘political and
institutional reforms’ in a mutually complementary manner.

5.7 KEY WORDS

Land Reform : Refers to changing of laws, regulations and
customs on land ownership. It modifies or
replaces the existing institutional arrangements
governing possession and use of land. It is a
deeply political process due to which, for its
success, both ‘polit ical reforms’ and
‘institutional reforms’ are simultaneously
required.
Tenancy Reform : This is a component of land reforms in which
aspects of tenancy relationship is regulated.
This is advocated on account of a stylized
fact called ‘tenant-efficiency’ hypothesis which
says that under conditions of secured tenancy
the efficiency of farmer and productivity of
32 land will both improve.
Farm-size Hypothesis : The hypothesis states that the farm-size is Land and Agrarian
Relations During the Post-
inversely related to productivity i.e. as the farm Independence Period
size increases the output from the farm would
decrease. The hypothesis is based on two
significant findings about farming in India i.e.
crop yield per unit area declines with increase
in the size of the holdings and that gross
returns from farm production remain constant
over different size ranges when all input
factors, including land, are taken into account.
It, thus, follows that small farms are more
efficient production units from the point of view
of yield, employment and overall output. It is,
however, necessary that farms do not get
reduced beyond a certain level, making it
difficult for the operators to find full time
employment for themselves and their family
and for securing minimum consumption needs.
(NCA, 1976, p-67).
Institutional Reform : Refers to a broad set of rules and regulations
which govern the socio-economic transactions.
Under well structured and established
institutional arrangements, the cumulative
functioning of economic transactions is
expected to yield optimum results or outcomes.

5.8 SUGGESTED REFERENCES FOR READING

Besley, T. and Burgess, R. (2000), Land Reform, Poverty Reduction and Growth:
Evidence from India, Quarterly Journal of Economics, 15 (2), May: 389-430.
Maitreesh Ghatak, Land Reform in India, in The Oxford Companion to Economics
in India, ed. by Kaushik Basu, OUP. ([Link]
Maitreesh Ghatak and Sanchari Roy (2007), Land Reform and Agricultural
Productivity in India: A Review of the Evidence, Oxford Review of Economic
Policy, Volume 23, Number 2, pp. 251-269.
National Commission on Agriculture (NCA) 1976, Part XV, Agrarian Reforms,
Government of India, New Delhi.
Raj Krishna (1961), Land Reform and Development in South Asia, in W. Frochlich
(ed.) Land Tenure, Industrialisation and Social Stability: Experiences and Prospects
in Asia, Wisconsin, USA, The Marquette University Press.

5.9 ANSWERS/HINTS TO CHECK YOUR

PROGRESS EXERCISES
Check Your Progress 1
1) See section 5.2 first para and answer.
33
2) See section 5.2 third para and answer.
Indian Agriculture : 3) See section 5.3 first para and answer.
Institutional Perspectives
4) See section 5.3 first para and answer.
Check Your Progress 2
1) See section 5.4.1 first para and answer.
2) See section 5.4.1 second para and answer.
3) See section 5.4.2 first and second paras and answer.
4) See section 5.4.2 third para and answer.
5) See section 5.4.2 last para and answer.
Check Your Progress 3
1) See section 5.4.3 first para and answer.
2) See section 5.4.3 second para and answer.
3) See section 5.4.3 third para and answer.
4) See section 5.4.3 fifth para and answer.
5) See section 5.4.5 and answer.

34
UNIT 6 PANCHAYATI RAJ AND LOCAL
SELF GOVERNMENT
Structure
6.0 Objectives
6.1 Introduction
6.2 Conceptual Outline
6.3 Evolution of Panchayati Raj Institutions (PRIs)
6.4 The Constitution Amendment Act: 1992 (CAA, 1992)
6.5 Role of PRIs in Agricultural Development
6.5.1 Crop Development
6.5.2 Credit and Cooperation
6.5.3 Crop Insurance

6.6 Review of PRIs Progress in Post-2000 Years

6.7 PRIs and Land Acquisition
6.8 Let Us Sum Up
6.9 Key Words
6.10 Selected References for Further Reading
6.11 Answers/Hints to Check Your Progress Exercises

6.0 OBJECTIVES
After reading this unit, you will be able to:
 relate the concepts of ‘institutional economics’ with the developmental issues
in general and agricultural development in particular;
 present a historical perspective of the evolution of the Panchayati Raj
Institutions (PRIs) in India;
 outline the major provisions of the 73rd Constitutional Amendment Act, 1992
(CAA, 1992);
 enumerate the main recommendations of ‘institutional significance’ made in
the Task Force Report on PRIs in 2001;
 review the PRIs functioning in the post-2001 years; and
 explain the issue of ‘land acquisition’ discussing its main features in the
proposed Land Acquisition Act.

6.1 INTRODUCTION
In the previous unit, we noted that for a successful implementation of land reform
measures, it is necessary to institute simultaneous reforms on the ‘political’ and 35
Indian Agriculture : ‘institutional’ fronts. We also noted that in the agrarian structure of the Indian
Institutional Perspectives
economy there is a predominance of small and marginal farmers. Due to the
vulnerability of such large number of poor farmers to volatile market behaviour,
the market oriented policies of the government being pursued since 1991 has
affected the agricultural sector in a manner that it has attracted the concerns of
policy planners and researchers alike. In realization of this, the government has
reoriented its developmental strategy to make it more ‘inclusive’ in its character.
However, in the debate on market versus state, the role of the government is
stressed more for establishing conditions that enable markets to function efficiently.
Against this background, in the present unit we will study about an important
measure taken by the Indian government by way of a Constitutional Amendment
Act, 1992 [CAA, 1992]. Aimed at empowering the grass root level unit (i.e.
village) by the creation of Panchayati Raj Institutions (PRIs) for decentralized
development by local self-governance, the Act marks a major step in democratising
the system of governance in India. We will also study about the major
recommendations of a Task Force (constituted in 2001 for reviewing the functioning
of the PRIs after close to a decade of the enactment of CAA in 1992) on the need
to institute specific mechanisms to enable the PRIs to contribute in making the
agricultural sector more resilient. Finally, we will make a brief reference to the
ongoing debate on ‘land acquisition’ indicating how the PRIs can play an effective
role in this regard. We shall, however, precede the study of these three major
aspects by taking first a brief look into the conceptual framework provided by
‘institutional economics’ linked to the issues of economic/institutional development
followed by an overview of the evolution of PRIs in India.

6.2 CONCEPTUAL OUTLINE

Institution: Institutions refer to mechanisms established to curtail the opportunistic
behaviour of people in their day to day transactions in the society. Broadly,
institutions are of two types: internal institutions and external institutions. Internal
institutions evolve out of experience gained over time. Such experiences, which
have served as solutions to complex issues in the past are, over time, incorporated
to serve as customs, ethical norms, conventions in matters of trade, etc. They,
thus, serve the community as ‘accepted norms’ for conduct of social and business
transactions. Violations of internal institutions are normally dealt with informally
e.g. social exclusion. External institutions, on the other hand, are formal sanctions
imposed/enforced through political and administrative machinery (e.g. laws enacted
through legislations). ‘Institutions’ in general are, thus, rules of human interaction
which constrain opportunistic and erratic individual behaviour making transactions
predictable. The exploitative behaviour by landlord against the poor tenant is thus
an example of the absence of an effective institutional norm (either social or legal).
Panchayati Raj: The term ‘panchayat’ literally means an assembly of ‘five wise
respected elders’ whose opinions and views are accepted and binds the individuals
in a community to settle disputes and transact business. In the traditional sense of
‘panchayati raj’, as advocated by Mahatma Gandhi and construed by him in the
sense of ‘gram swaraj’, it referred to a decentralised form of government in
which each village was not only responsible for its own affairs but also served as
an institutional system enabling villages to function as autonomous (i.e. self-
dependent) administrative units. In the modern sense of the term, panchayati raj
36 refers to a system of governance in which ‘gram panchayats’ at the village level
constitutes the basic unit of administration in a system having three levels viz. Panchayati Raj and Local
Self Government
village, block and district.
Transaction Costs: A relevant question is: why should there be institutions or
what happens if there are no institutions? The fundamental objective of an individual
is to make profits and that of a state is to increase its ‘wealth’ (i.e. national
income). In the absence of institutions, social or legal, disputes between parties or
economic agents would prolong and conduct of businesses suffer. The objective
of an institutional system is, therefore, to establish rules of law whereby disputes
are first controlled and when they arise settle them in a manner that the losses to
the individual/economy are minimum. Viewed in this light, institutions serve to
reduce the ‘transaction costs’ in the economy by instituting a set of rules aimed
at constraining the behaviour of individuals in the interest of maximising the nation’s
wealth or the individual’s profits. It is in this light, that the renowned institutional
economist Ronald Coase postulated that: ‘in the absence of transaction costs, any
allocation of property (i.e. property ownership rights in which property could be
of any kind i.e. physical, intellectual, social, etc.) would be equally efficient’ (Coase
theorem). Since such an ideal situation cannot exist in reality, the aim of institutions
are to ensure a system in which the allocation would be optimal i.e. the solutions
are maximising-minimising in nature (maximising profits, minimising losses or
constraints).
Information Asymmetry: The transaction costs for parties involved in a business
or settlement of contract/dispute will directly vary with the information possessed
by the parties to the contract. This is, however, basically dissimilar in its
characteristic i.e. it is not absolutely similar for all parties engaged in a transaction
or dispute. The objective of an institutional mechanism is to reduce this information
asymmetry. For instance, an illiterate farmer would not know the actual terms of
his contract with the landlord who can manipulate the same to inflict loss to the
poor tenant-labour. On the other hand, an educated farmer can be vigilant and
protect his own interests. The state’s objective in such a situation must be to
expand educational and informational services through institutions and campaigns
thereby empowering the less advantaged.
Property Rights: We already know from unit 5 that clear title for properties
empower the land holder to access institutional credit. However, the granting of
such clear property rights would not be favoured by political parties who thrive
on the incentives that exist in capitalising on the situation accruing out of class
divisions/interests. Political reforms are, therefore, the bridge that paves the way
for cleaner political goals/objectives based on a respect for individual’s right to
freedom and occupation/income. Institutional reforms and political reforms taken
together, therefore, serve to minimise the ‘information asymmetries’ and ‘transaction
costs’ in a society/economy. The joint effect of both these minimisations, is the
creation of a propensity for the state to establish a clearer structure of property
rights. Alternatively, while a system of prevailing property rights is an index of the
quality of existing political structure/system, maturity of political system is ‘both a
necessary and sufficient condition for the development of sound property rights in
an economy’.
Local Governance: Local governance is broadly defined as encompassing the
direct and indirect roles of formal institutions as well as the roles of informal
norms, networks, community organisations, etc. in pursuing collective action for 37
Indian Agriculture : providing an efficient government system. It includes the diverse objectives of
Institutional Perspectives
vibrant living, working and environmentally preserved self-governing communities.
Briefly, it is about enriching the quality of life of the people.
Institutional Development and Economic Development: Informal constraints
like norms of behaviour, conventions, code of conduct, etc. can work well for a
set of situations governed by static levels of technological and demographic changes.
However in the modern times, both the technological and demographic changes
are dynamic in nature. In light of this, internal institutions (i.e. norms and customs)
are necessary but not sufficient conditions for economic development. The central
issue of institutional development is the creation of an economic environment that
induces productivity. This requires efficient evolution of both political and economic
institutions. Viewed from this perspective, economic development can be equated
with institutional development.
Check Your Progress 1 (answer in about 50 words within the space provided)
1) Distinguish between the system of ‘panchayat raj’ government as visualised
by Mahatma Gandhi with that of its ‘modern’ connotation.
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
2) How did Ronal Coase postulate his theorem on ‘institutions’? In reality, how
is a compromise struck in this respect?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
3) How does ‘information asymmetry’ affect in agriculture? Briefly indicate with
an example.
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
4) How does the ‘establishment of a clearer structure of property rights’ influenced
by a joint effect of the minimisation of ‘information asymmetry’ and ‘transaction
costs’?
........................................................................................................................
........................................................................................................................
38
 ........................................................................................................................ Panchayati Raj and Local
Self Government
........................................................................................................................
5) Do you agree with the assertion that ‘institutional development means economic
development’?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................

6.3 EVOLUTION OF PANCHAYATI RAJ

INSTITUTIONS (PRIs)
The institution of village panchayat has been in existence for a long time in India.
Until eighteenth century, the panchayats discharged most of the functions influencing
the village community to function as effective units of local administration. During
the British rule, various provinces passed the village panchayat Act. However, the
panchayats formed under these acts were not democratically elected bodies but
were formed by the nomination of members by the government. Even the new
Indian government which adopted its Constitution in 1950 (and made detailed
provisions for democratically elected members to constitute governments at the
union and state levels) left the establishment of local governments without making
it a clear cut constitutional obligation. However, it recognised the importance of
democratic institutions at the grass-roots level and laid down (under Article 40 of
Directive Principles of State Policy) that ‘the states would take steps to organise
village panchayats endowing them with the required powers and authority to
enable them to function as units of local self-government’. The PRIs, thus, became
a state subject under the constitution.
In the community development programmes (CDPs) started in 1952, the PRIs
were assigned the political task of mobilising the people’s participation. Five years
later, in 1957, a committee (Balwant Rai Mehta Committee) was constituted to
assess the extent of popular participation in the CDPs and recommend measures
by which the people’s participation can be increased. The committee recommended
the constitution of statutorily elected local bodies, devolved with necessary
resources/power/authority, in order that a decentralised administrative system can
work under the local bodies. It also recommended that the basic unit of democratic
decentralisation should be the ‘block’. The committee also envisaged directly
elected panchayats for a village (or group of villages) with an executive body
called Panchayat Samiti for each block. This was the genesis of the ‘Panchayati
Raj System’ in India. While affirming the objective of democratic decentralisation,
Pandit Jawaharlal Nehru described the move as ‘the most revolutionary and
historical step in the context of New India’.
Subsequent to the above, almost all state governments (barring Tripura and
Arunachal Pradesh) took various initiatives with the result that the progress made
in block-centred development varied across states. The next major review was
made in 1978 (Ashok Mehta Committee) which recommended ‘institutionalising’
the very design of Panchayati Raj. The recommendation was made following the 39
Indian Agriculture : realisation on the extent of ‘developmental thrust and technical expertise’ perceived
Institutional Perspectives
essential for effective implementation of rural developmental programmes by the
panchayat bodies. Different working groups had been formed for making specific
suggestions and recommendations. One such, a group constituted under the
Chairmanship of M. L. Dantwala (1977) and later another under the Chairmanship
of C. H. Hanumantha Rao (1982) made far reaching recommendations on
restructuring the panchayat bodies. Both the groups were unanimous in
recommending that the basic decentralised planning function must be at the district
level. Two other major recommendations made by them are:
 for decentralised planning to make headway, institutional mechanisms had to
be more broad-based. Such institutions (through panchayati raj institutions:
PRIs) should play a leading role in the district planning process;
 for the above, there should be active involvement of local representatives.
The PRIs should be endowed with a greater degree of autonomy in local
decision making.
The mid-1980s saw the emergence of a more influential movement to revitalize the
local self-government structures in India linking them with agricultural and rural
development programmes. There were two reasons for this. The first was the firm
belief of the government in that: (i) India is too large a country to be ruled/planned
from a central place; and (ii) the responsibility for many functions should, therefore,
be at the local level which would lead to greater accountability in the long run.
Although the government feared that resources allocated could possibly be misused
(i.e. ill-spent owing to proliferation of administrative authorities, etc. on which a
later study had estimated that out of every rupee spent on development only 17
paisa actually goes to the ultimate beneficiary i.e. so much is the effect of leakage
due to proliferation of authorities involved in implementation of developmental
schemes), it was believed that in the long run democratic policies would take care
of such abuse. To check this, as an institutional measure political and economic
enfranchisement of poorer groups like SCs, STs and women was advocated. The
second major reason was that India’s initial agricultural planning systems were
linear in nature (i.e. they emphasised more on canal/tube-well irrigation and HYVs)
which led to the favoured-region/favoured-crop strategy. As this strategy came
to be heavily questioned, the emphasis was reoriented on agro-climatic planning.
Once again, the issue of local participation and involvement of voluntary organisations
gained prominence. The associated issues of ‘resource allocation’ and ‘decision
making’ along with integration of ‘special programmes for employment and rural
development’ with those of ‘agricultural development’ also were prominently focused
upon. These concerns coupled with many other assessment and review studies
made the government to record in its Seventh Plan Document thus: “it is noticed
that wherever PRIs have been actively involved, the implementation of rural
development programmes have been better and the selection of beneficiaries and
designing of schemes have been more satisfactory. Therefore, in order to make the
development programmes more meaningful it is necessary to associate people’s
representatives and for this there is no better instrument to design/formulate/
implement the various employment and anti-poverty programmes than by the
involvement of the PRIs”.
It is therefore as a sequel to the above sequence of initiatives and efforts that the
40 original Panchayati Raj Bill (1989) had aimed not only at decentralising power but
also politically enfranchise the poorer sections like SCs, STs and women who Panchayati Raj and Local
Self Government
form a large part of the landless labourer and artisan population. Further, out of
the total number of seats reserved for such poorer sections, thirty percent of seats
were meant to be reserved for women members of SC/ST community. The
legislatures of the states were also adviced to endow the panchayats with such
powers and authority as are required to enable them to function as institutions
of self-government. However, the process was delayed and many of the original
provisions got watered down owing to many discretionary powers given to the
states. Nonetheless, many of the central features like: (i) compulsory election; (ii)
reservation for socially disadvantaged groups; (iii) devolution of resources and
powers; and most important of all (iv) the allocation of resources at the village
level to the nationwide employment scheme viz. Jawahar Rozghar Yojna (JRY)
remained in the legislations enacted by the state governments. To ensure greater
accountability and participation, the annual action plans for each village were
required to be discussed at the ‘village panchayat’ taking care to ensure that top
priority was given to works benefiting the weaker sections of the community.
Thus, although as a result of all these efforts the panchayats were substantially
involved in the implementation of programmes like JRY, etc., their actual performance
were still not as effective as was intended. In other words, the dominant role
played by government bureaucracies in the implementation process was still a
matter of reality mainly due to the lack of integration of the PRIs into the planning
and implementation stages of developmental work. To remove such inherent
weaknesses in the functioning of the PRIs, the government in 1991 managed to
mobilize the required political support to bring the entire issue of panchayat
system to the centre stage and have a Constitution (72nd amendment) bill introduced
in 1991. The bill was subsequently enacted as 73rd Constitution Amendment Act
in 1992.

6.4 THE CONSTITUTION AMENDMENT ACT,

1992 (CAA, 1992)
The Act defines ‘panchayat’ as an ‘institution’ of self-government constituted
under article 243 B of the Indian constitution. The Act provides for the constitution
of panchayats at the village, block (if the population of the state exceeded 20
lakh) and the district levels (and are distinctly nomenclated as gram sabha,
block panchayat and zilla parishads respectively). The major thrust of the CAA,
1992 are in respect of: (i) according a constitutional status to the ‘gram sabhas’;
(ii) making the panchayats a three-tier administrative structure in which the ‘village’
was accorded the status of basic unit of administration - the other two levels being
the blocks and districts; (iii) endowing the panchayats with the devolution of
power of both administrative and financial nature; (iv) enjoining the state governments
to require the state finance commissions to review the financial position of the
panchayats every once in five years; (v) bestowing the state election commissions
with the responsibility of conducting ‘panchayat elections’ every once in five
years; (vi) provisioning the reservation of seats in the elected panchayats to the
socially under-privileged sections like SCs/STs in proportion to their population;
and (vii) providing for a further reservation of not less than 33 percent of total
seats for women both in the reserved and unreserved categories. The Act provides
for the disqualification of a member of a panchayat if he/she is so disqualified by
any other law. 41
Indian Agriculture : The Act requires the members of the panchayats to be elected by ‘direct election’
Institutional Perspectives
from the territorial constituencies in the panchayat area every once in five years.
The powers, authority and responsibilities of the ‘panchayats’ and its members
are to be prescribed by the states in such a manner that it enables them to function
as ‘institutions of self-governance’. The areas of their function would cover the
preparation and implementation of plans and schemes for overall economic
development with a focus on ensuring social justice. In particular, the Act specifies
29 subjects (under Article 243 G) of which the first seven relates to agricultural
(and allied) development. These are: (i) agriculture including agricultural extension;
(ii) land improvement, implementation of land reforms, land consolidation and soil
conservation; (iii) minor irrigation, water management and watershed development;
(iv) animal husbandry, dairying and poultry; (v) fishery; (vi) social forestry and
farm forestry; and (vii) minor forest produce. The other 22 subjects relate to
‘industry’ and ‘services’ sectors.
Resources for PRIs: The Act, besides providing for grants-in-aid to the panchayats
from the ‘consolidated fund’ of the state, also authorises a panchayat to levy,
collect and appropriate taxes, duties, tolls and fees in accordance with procedures
and limits laid down.
Check Your Progress 2 (answer in about 50 words within the space provided)
1) What was the status accorded to the decentralised governance by the PRIs
in the Indian constitution in 1950?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
2) What would you identify as the ‘genesis of panchayati raj institution’ in
India?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
3) In which plan, for the first time, there was an acknowledgement of better
economic performance in the PRI-administered areas? What was an immediate
sequel of a major importance to this recognition?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
42
4) What were the four central features of the original panchayat bill that was Panchayati Raj and Local
Self Government
retained in the subsequent forms in which it was passed by the different state
government in late 1980s?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
5) Does the CAA, 1992 confer any reservation of seats in the panchayats for
disadvantages sections of population? Mention the specific areas of relevance
to ‘agricultural and allied development’ that the CAA, 1992 include?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................

6.5 ROLE OF PRIs IN AGRICULTURAL

DEVELOPMENT
As said above, and to repeat once again, the CAA, 1992 specifies 29 subjects
of which the following seven relates to agricultural (and allied) development: (i)
agriculture including agricultural extension; (ii) land improvement, implementation
of land reforms, land consolidation and soil conservation; (iii) minor irrigation,
water management and watershed development; (iv) animal husbandry, dairying
and poultry; (v) fishery; (vi) social forestry and farm forestry; and (vii) minor forest
produce. After close to a decade of the implementation of the CAA, 1992, it was
found that the process of empowering the PRIs has not only followed a varied
pattern across states but the process of integrating the PRIs in the planning and
implementation of programmes was yet to establish in many states. In order to
facilitate this process of integration, the Planning Commission in 2001 set up a
Task Force (TF) with two specific objectives. These were: (i) formulate operational
guidelines for the involvement of PRIs in schemes of central ministries and
departments; and (ii) suggest norms for the interface of PRIs with the non-
governmental organisations (NGOs). The latter was considered crucial as the
involvement of NGOs was being increasingly recognised as important for a
harmonious implementation of schemes/programmes. In this section, we will briefly
discuss the specific role recommended for the PRIs by the TF for the implementation
of plans/schemes applicable to the three main areas of agricultural development
viz. (i) crop development; (ii) credit and cooperation; and (iii) crop insurance. The
recommendations included in this section are those relating to: (i) identifying the
specific activities relating to agricultural works; and (ii) specifying the role to be
played by PRIs in coordinating the works.

6.5.1 Crop Development

The implementation machinery consisting of officials of the agriculture extension
and research organisations should plan and implement their programmes under the 43
Indian Agriculture : direct supervision and control of the PRIs. Five phase of activities are identified
Institutional Perspectives
in this regard.
 The first phase of activities involves the identification of the technology in
respect of a crop sought to be extended in a specific area. The PRIs at
appropriate level would provide the farmers’ perception to the research and
technical heads of the organisations involved.
 The second phase would involve the identification of area where demonstration
programmes have to be conducted. The PRIs would play a decisive role in
identifying areas where the new technology is sought to be experimented in
the area of their purview. ‘Block panchayats’ would decide on the selection
of sites in various panchayats, while the identification of the beneficiaries
would be the prerogative of the village panchayats.
 The third phase of events would involve the arrangement of inputs. This
would be done in close consultation with the PRIs at the district/block level
in order that transparency and accountability in terms of effective supply and
distribution can be ensured/monitored.
 The fourth phase would involve the actual demonstration by the technical
functionaries. At this stage, the PRIs at the local level would publicize the
demonstration widely in order to ensure participation of farmers from nearby
areas. The involvement of PRI bodies at the block/district levels would develop
linkages with other programmes so that larger participation of farmers and
effective interface with technical functionaries can be realised. The PRIs can
also provide feedback of the demonstration to the technical functionaries
which would help in incorporating corrective intervention in the subsequent
phase of the demonstration activity.
 The final phase of the sequence of activities would involve the actual distribution
of inputs which would be in the form of certified seeds, mini-kits, farm
implements, machinery, sprinkler sets, micro-nutrients, etc. The involvement
of PRIs at this phase of distribution is crucial both for ensuring considerations
of transparency/accountability/equity, as also to ensure the satisfaction of
beneficiaries in terms of inputs received. This would also help the PRIs to
monitor the activity in the later stages of actual implementation.

6.5.2 Credit and Cooperation

Major activities under this sub-sector includes: (i) distribution of credit to farmers
through primary cooperative societies; (ii) assistance to cooperative institutions for
development of projects by way of working capital; and (iii) infrastructure
development assistance. Village panchayats involvement should be in: (i) the selection
of beneficiaries as per laid down norms; (ii) preparation of credit plan by the
primary credit societies; and (iii) in ensuring that the credit is made available to the
beneficiaries in time. They should also be involved in: (i) expanding the membership
of primary credit societies; (ii) impressing upon the credit takers to repay their
loans in time; and (iii) in extremely genuine cases where the creditors are not able
to repay their loans in endorsing their difficulties to the credit institutions. It should
also mobilise action against wilful defaulters. Block level panchayats role would be
in overseeing the disbursement of credit, developing linkage with programmes
providing other inputs, mobilising creditors to returning their loans and where due
44 to adverse situation repayment is delayed to help in rescheduling the repayment
plan. Additionally, block level panchayats role would be to: (i) identify institutions Panchayati Raj and Local
Self Government
which need credit assistance for carrying out projects; (ii) help them to prepare
project proposals/reports; and (iii) with the help of zilla parishads ensure the timely
dispersal of credits from the credit institutions. They should also monitor the
activities of such institutions to ensure that the assistance received is properly
utilised.

6.5.3 Crop Insurance

The activities under this would include: (i) identification of beneficiaries; (ii)
preparation of claims; (iii) assisting in the expeditious disposal of the claims; and
(iv) ensuring that the beneficiaries receive timely payment of compensation amount.
The village panchayats should be involved in the identification of beneficiaries and
helping in the preparation of the claims after duly vetting the details. The block
level and district level panchayats could play a role in ensuring the expeditious
disposal and settlement of the claims. The village level panchayat could then
ensure the right beneficiaries receive the claim payment without hassles. Further,
they can also help the farmers whose crops have been destroyed/lost in preparing
them for the next cultivation. All these are activities in which there is scope for
a proactive role to be played by the panchayats aimed at gaining the confidence
of farmers so that they can seek their intermediation in matters of insurance
proposals/claims. Over a period of time, the procedure/practice should get
streamlined so that no farmer, or a group of farmers, would undertake cropping
work without duly covering themselves against loss/risks.
The above account conveys that till the year 2001, i.e. after close to a decade of
the enactment of CAA, 1992, such specific role for PRIs was yet to be identified.
The report of the TF delineates similar role for PRIs to four other areas of
agriculture viz. land and water resource development, production of inputs, irrigation
and relief against natural calamities. In the next section, we will briefly review on
how far the required process of integration of PRIs into their expected role of
grass roots level functioning has taken place in the post-2001 years.

6.6 REVIEW OF PRIs PROGRESS IN POST- 2000

YEARS
One method of assessing the PRIs progress is to see the ‘size and significance of
local self government (LSG)’ in terms of empirical indicators like: (i) relative share
of LSG’s expenditure vis-a-vis the overall public sector expenditure; and (ii) the
share of LSG’s expenditure in the total GDP of the country. The progress made
in this respect by India can also be further understood if we take a comparative
picture of the same vis-a-vis other countries which have already instituted similar
decentralised governance structures. A comparative profile of the combined share
of local governments (which includes the share of PRIs and urban local bodies
(ULBs); see ‘key words’) for the early years of post-2000 years reveal that the
share of India was far lower than that of OECD countries and Brazil (Table 6.1).
As a proportion of GDP, the total expenditure of local governments was even less
for India at just 1.7 percent as compared to the 6.5 percent for Brazil and 13.8
percent for the OECD countries. While this is the picture that obtains in an
international comparative perspective, within the country in the post-2002 years,
there is an indication of improvement in the per capita expenditure (PCE) of the
45
Indian Agriculture : Table 6.1: Size and Significance of Local Governments
Institutional Perspectives
Percentage of Local
Countries Government Percentage of Local
Expenditure to Government
Total Public Sector Expenditure to GDP
Expenditure
OECD 20-35 13.8
Brazil 15 6.5
India 5.1 1.7

Source: Oommen, 2010; Notes: (i) OECD: organisation for economic cooperation and
development; (ii) data relates to around years 2002-03.

PRIs from an all-state average of Rs. 356 in the year 2002-03 to Rs. 779 in
2007-08. The divergence in the inter-state position in this respect is also coming
down. For instance, in 2002-03, the minimum-maximum ratio was 75.7 (the PCE
for Bihar was lowest at Rs. 18 and highest in Maharashtra at Rs. 1,364). This
minimum-maximum ratio slid down to 61.8 in 2007-08 with the PCE for Bihar
being once again the lowest at Rs. 48 and for Karnataka Rs. 2,967. Incidentally,
the comparative profile reveals that the CAA, 1992 has had least impact in Bihar
with the situation for other states like Rajasthan, Punjab and U. P. also being no
better. In this context, it is important to note that the thirteenth union finance
commission has made the observation that ‘while it is for the union and state
government/finance commissions to help the process of decentralised planning and
governance with funds, functionaries and technical support, what is witnessed
during the last 15 years is a manifold growth of parallel agencies that transgress
the functional domain entrusted to local governments and distort their role in the
federal structure of India’. The observation and the indicators available, therefore,
suggest that India has a long way to go in effectively strengthening the constitutionally
guaranteed role of the PRIs (and ULBs).

6.7 PRIs AND LAND ACQUISITION

As we have studied in unit 1, structural change in the labour force distribution of
an economy, particularly in an agrarian economy, takes place over time with the
low productive agricultural sector giving way to the more productive non-agricultural
sector. In such a situation, in addition to the labour force, the land required for the
expansion of the non-agricultural sector also comes forth from the agricultural
sector. As we now know, the land to a substantial measure is held in fragments
by a number of small/marginal farmers who are either dependent on their land for
a living or in other cases they are simply held by absentee landlords. The issue of
land acquisition in such a situation carries an important social dimension particularly
for the poor small land holders. In light of this, the government has been placing
in the public domain for debate a draft ‘Land Acquisition and Resettlement and
Rehabilitation (RandR)’ bill (2011) for comments and exchange. The major point
of relevance to include the salient features of this bill in this unit is that the proposed
bill makes it mandatory that ‘gram sabhas’ be consulted and a R and R package
be executed before the proposed land is acquired/transferred. In view of this, we
shall briefly refer here to the salient features of this bill which are as follows.

46
 1) The R and R package would necessarily have to be executed for land Panchayati Raj and Local
Self Government
acquisitions which are in excess of 100 acres.

2) The law prohibits the purchasing of multi-cropped irrigated land.

3) The state government would not have any role in acquisition of land
normally; however, the government would do so only if the intervention
benefits the general public.

4) To safeguard against indiscriminate acquisition, the bill requires the setting

up of a committee by the states. The committee would examine the clause
of ‘public purpose’ from a ‘social impact assessment’ point of view.

5) If the land acquired is not put to use for the purpose for which it was
initially approved within five years of its acquisition, the land would be
returned to the original owners.

6) The consultation process with the ‘gram sabha’ is made also with a view
to establishing conformity with other laws like Pachayat Extenstion to the
Scheduled Areas (PESA) Act, 1996, the ‘Scheduled Tribes and Other
Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006, etc.

7) The bill, whenever made into an Act, shall have primacy over 18 other
laws, all pertaining to ‘land acquisition’. Its provision will, therefore, be in
addition to and not in derogation of the safeguards provisioned in the other
laws in place.

8) Both the land owners and livelihood losers will be compensated. Every
affected family would be entitled to one job or a cash compensation of
Rs. 2 lakh. Those who lose their house in the land acquisition process
would be provided a constructed house of specified dimension/area.

The bill is under debate with the critics arguing that the original provisions which
were favouring the affected people are being diluted. The Eleventh Five Year Plan
notes that the present arrangements of resettlement and rehabilitation (R&R) are
detrimental and prejudicial to the interest of the tribals. This is because the ‘corpus
of tribal land’ is declining rapidly under the new economic dispensation. The issue
of ‘land acquisition’ has thus become a major controversy in which the debate on
R and R measures are the only humane dimension for which the social activists are
strongly fighting for. From the point of view of agricultural development, it will
have a serious impact on the land utilisation profiles.
Check Your Progress 3 (answer in about 50 words within the space provided)
1) In what respects the involvement of ‘village panchayats’ are identified as
useful in the matter of ‘crop insurance’?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
47
Indian Agriculture : 2) Which two empirical indicators tell us about the extent of PRI integration into
Institutional Perspectives
its assigned role from an international perspective? What empirical indication
suggests that there is an improvement in the functioning of PRIs in India in the
post-2001 years?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
3) Under what situation, the proposed legislation on ‘land acquisition’ has provided
for a provision for the state government’s intervention? In what manner the
process of ‘land acquisition’ likely to impact agricultural development in India?
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................

6.8 LET US SUM UP

The unit underscored the importance of institutional development for advancing the
goals of economic development in general. In this, the importance attached for the
establishment of PRIs-centred growth of rural development policy thrust has been
a particularly major development of the ‘inclusive growth’ concerns shown by the
government in recent years. Notwithstanding this side of political and institutional
advancement, there is also an open acknowledgement of the growing alienation of
the already marginalised sections like the scheduled tribe communities. Integrating
such socially and economically disadvantaged sections of people into the mainstream
of economic process, by suitable compensatory and R and R clauses introduced
in Acts like that on ‘land acquisition’, has been an important policy focus of recent
times. These developments would impact seriously on the nature of land utilisation
pattern and agricultural development in India. However, despite the constitutional
status accorded to the PRIs in 1992, even after more than 10 years of the Act
being passed, there is very little indication of any achievement on the part of PRIs
by way of assuming their due role in the manner in which the Act had envisaged.
But towards the middle of the decade of 2001-10, some empirical evidence on
increased per capita expenditure (PCE) of PRIs has become available. More
importantly, the difference between the best performing and the least performing
states, in terms of PCEs, has started declining. It is also important to note that the
gram sabhas have been given a prime of place in deciding about the creation of
assets in the various activities under the MGNAREGA in rural areas (see unit 25
for more details). As a consequence, the PRIs have a vital role to ensure the
generation of employment opportunities for the poor and the marginalised in villages.
In view of all these things, if the institutional foundations of PRIs gains roots in the
coming years, there is a good scope for the development of rural India in general
and its agricultural sector in particular.
48
 Panchayati Raj and Local
6.9 KEY WORDS Self Government

Panchayati Raj : Refers to a system of governance in which

‘gram panchayats’ at the village level
constitutes the basic unit of administration in a
system having three levels viz. village, block
and district.
Property Rights : Refers to the level of institutional advancement
in a society/economy. It is said that the system
of prevailing property rights is often an index
of the quality of existing political structure/
system. Maturity of political system is ‘both a
necessary and sufficient condition for the
development of sound property rights in an
economy’.
CAA, 1992 : Marks a major legislative landmark in
according a constitutional status for the PRIs
to steer the issues of local development by a
direct involvement of people in a democratic
manner.
Land Acquisition : Is presently a major issue in the context of
land required for expanding the base of non-
agricultural sector in the country. The process
is expected to make a serious impact on the
land utilisation profile vis-à-vis the share of
land available for agricultural purpose.
Urban Local Bodies(ULBs) : This is a parallel decentralised administrative
system for municipal governance just like the
PRIs are expected to provide the same for
the villages. Like the 73rd amendment gave
the constitutional status for the PRIs, the 74th
CAA provided the ULBs with a similar status
for decentralised administration of urban areas.

6.10 SELECTED REFERENCES FOR FURTHER

READING
1) Alagh, Yoginder, K., ‘Panchayati Raj and Planning in India: Participatory
Institutions and Rural Roads’, Asian Institute of Transport Development,
New Delhi.
2) Planning Commission (2001), Report of the Task Force on Panchayati Raj
Institutions (PRIs), New Delhi. December, 2001.
3) Oommen, M. A. (2010), Have the State Finance Commissions Fulfilled
Their Constitutional Mandates (EPW, July 24, 2010) and The 13th Finance
Commission and the Third Tier (EPW, November 27, 2010).

49
Indian Agriculture :
Institutional Perspectives 6.11 ANSWERS/HINTS TO CYP EXERCISES
Check Your Progress 1
1) See section 6.2 and answer.
2) See section 6.2 and answer.
3) See section 6.2 and answer.
4) See section 6.2 and answer.
5) See section 6.2 and answer.
Check Your Progress 2
1) See section 6.3 and answer.
2) See section 6.3 and answer.
3) See section 6.3 and answer.
4) See section 6.4 and answer.
5) See section 6.4 and answer.
Check Your Progress 3
1) See section 6.5.3 and answer.
2) See section 6.6 and answer.
3) See section 6.7 and answer.

50