Prevalence of Semi-Feudal Relations and Intensification of Parasitic Extraction of Agricultural Surplus under Neo-Liberal Policies – Guruprasad Kar

Green revolution imposed on the unreformed agrarian structure of India did not develop capitalism in rural India. It only created the market for inputs through which a large chunk of the agricultural surplus could be siphoned off by the foreign and indigenous monopoly capital. On the other hand, as Ranjit Sau once commented, the green revolution reproduced almost the same semi-feudal class relation that existed during British rule only at a slightly higher technical level of production. Specially, the caste system, an integral part of the Indian semi-feudalism still plays a significant role in the social structure that make ruthless exploitation of agricultural labourers, landless and poor peasants mainly belonging to lower castes, possible. This offers an opportunity to a large section of the big landholders to adopt the practice
of parasitic extraction of surplus in various forms without being involved in organizing the production process through investment. Moreover, in the period of globalization, the program related to any kind of land reform has been completely abandoned with the dream that market force will use all the factors of production related to agriculture in the most efficient way. In line with this approach, there is a
corresponding group of economists that have started to characterize the present system of Indian agriculture as capitalist and in their opinion any further program of land reform will jeopardize the development of the productive force. Even some leftist people have gone to the extent of declaring that in the period of globalization, imperialist financial capital is in the forefront in breaking semi-feudal relations and there by playing a progressive role so far as development of productive force is concerned. All these things seem to be sheer nonsense in the light of existing reality. Of course, during the last two decades there had been some quantitative changes regarding the number of people dependent on agriculture, commercialization of agricultural produce, importance of tenancy, but analysis of these features in the concrete condition shows that there is a semi-feudal rider behind all these development. In the predominant atmosphere of semi-feudal parasitic extraction through various interlinked markets, the prevalent small peasant economy remains at the level of simple commodity production which, again, has been in deep distress for the last two decades due to the liberalization of the economy resulting in huge number of suicide
deaths hitherto unknown in rural India. Moreover, a retrogressive process like subdivision of holding due to population growth shows the deepening crisis of pre-capitalist formation that hinder the process of transfer of land from pretty producers to potential capitalists facilitating organized large scale farming by capital investment. In particular, this process could not abolish extreme land inequality and hence can in no way render distributive land reform irrelevant.


The study of the nature of production relations in Indian society has got prominence in the academic circle after the Naxalbari peasant uprising. Though, the communist party of India described the transfer of power in 1947 as sham independence and identified Indian society to be semi-feudal and semi colonial, the leadership operationally considered it to be a free capitalist country with some remnant of feudalism. Still a section of the party workers used to take initiative to develop democratic struggle against feudal oppression among the peasants. Naxalbari peasant uprising in 1967 possibly was the outcome of such continuous effort and after this uprising there had developed a number of intense peasant struggles throughout India. Influenced by these struggles, in the 70’s and 80’s of the last century, there had been interesting debates among the economists regarding the nature of prevalent production relations in Indian agriculture. The debate gave birth to divergent views but very few of them came to the conclusion that Indian agrarian relations could be considered as capitalist. The enormous field studies and corresponding observations by economists provide an enriched literature for further studies in this direction.
With this background, there is a recent trend among some well known economists who do not deny the failure of land reform and accept the presence of various semi-feudal traits like usury and scrupulous trading, but still think that the prevalent production relation in Indian agriculture has more in common with peasant capitalism than with semi-feudalism. In their opinion, sheer population growth along with
subdivision of holdings have created a condition in which the land in the hands of big landlords has declined alongside tenancy and most of the surplus is extracted from people with very little or no cultivable land. Hence, they argue, the system functions in a capitalistic fashion. In their opinion, any further program of land reform would weaken the productive forces by reducing the farm size to an uneconomic level (Basole and Basu, 2011, Basu and Das, 2013). N.Majumdar (Marxist Intellection, August 2014) has come to the almost same conclusion by invoking some theoretical jargons that go beyond Leninist concept of imperialism. They not only consider Indian social system to be essentially capitalistic (however distorted it is) but has made a more general assertion by saying, “If in the first half of the 20th Century, retaining feudal relations in the backward countries were indispensable condition for the survival of imperialism, in the second half of that century, the decimation of feudal relations became an indispensable condition for its survival.” In this article, we have no scope of dealing
with this general assertion but we cannot understand how imperialism as a world system can work towards abolishing the pre-capitalist relations in backward countries which is one of the crucial conditions of its existence. Anyway, some capitalist elements started appearing
in Indian agriculture from the British period itself without, however, transforming it to capitalism. After the departure of the British, these elements may have grown further due to various factors like peasant movements, certain steps towards land reform, the introduction of green revolution by introducing some imported modern inputs and commercialization. In this context it is not that important to indicate the presence of some scattered capitalistic factors in Indian agriculture. Rather, the most important thing is to study the various social classes and their mode of operations that work as fetters in the development of productive forces compatible to capitalist system. The transformation of pre-capitalist forms of production to capitalism implies fundamental change in the labour process itself. As Lenin notes, “ the very growth of commodity production destroys the scattered condition of small economic units that is characteristic of natural economy and draws together the small local markets into an enormous national (and then world) market. Production for oneself is transferred into production for the whole of society: and the greater the development of capitalism, the stronger becomes the contradiction between this
collective character of production and the individual character of appropriation” (Lenin, 1999). In this context, the present study intends to reveal the characteristic features of prevalent agrarian relation along with the operation of big monopoly (indigenous and foreign) capital in the Indian economy that embraces the continuation of various shades of semi-feudal relations. The feudal system is generally identified with big landlords, the serf system, rent collection and natural economy. In a semi-feudal economy, due to the penetration of capital and the
operation of various markets in the context of the international capitalist system, the feudal traits are, no doubt, somewhat weakened and hence in some aspects it may appear capitalist. That is why it is important to reveal how essentially feudal categories still may remain operational through the functioning of various capitalist traits relating to capital investment, commercialization, and wage labour and market operation. We hope to show that the domination of small scale production based on family labour, along with various non-economic forms of exploitation, neither corresponds to capitalist development, nor is a transitional phase moving towards capitalism. As we have said, the whole discussion regarding agriculture cannot be isolated from the operations of international finance monopoly capital. Lenin pointed out how this capital promotes reaction in both economic and political sense and the consequence of its actions for backward countries is the continuation of pre-capitalist relations in some or other way. If someone thinks that in the period of globalization, the operations of imperialist capital in backward countries are breaking semi-feudal relations, then it would imply an overall progressive role of imperialist capital. Neither economic facts nor global politics shows any such change in the character of imperialist capital. Rather the converse is true. It continuously reproduces the relative backwardness of the backward countries by encouraging as well as integrating various pre-capitalist relations in its overall global operations. In particular, operation of global capital in the neoliberal era has intensified various parasitic extraction of surplus in rural India resulting in enormous suicide death by Indian farmers. Specially, in the era of globalization and neoliberalization the question of land reform, that was even officially considered to be progressive step, has been completely abandoned as if only commercialization and the free market can solve everything. Notably, it has been found that peasant suicide in India has been larger in number where commercialization is more intense. Actually, commercialization (otherwise a feature of capitalism) when forced on existing relations of production encourages the growth of various parasitic forces like scrupulous traders and usurers that do not organize production but pauperize the peasants to an unbelievable extent without thereby transforming them into proletarians. So commercialization in the Indian context does not work in favour of capitalist development and, more importantly, in the context of reduced government investment in agriculture under the pressure of neoliberal imperialism, private investment and, hence, capital formation in agriculture is on the decline for last few decades.

Colonial Production Relation:

Before being colonized by British rulers, the feudal production relation was predominant in the subcontinent. History shows that at different
phases different people came from outside and ruled the Indian region and but finally were assimilated with the indigenous population. But British ruler was an exception who had a homeland of its own and considered this region to be their colony from whence surplus had to be extracted and sent to their homeland. In fact, this drain of surplus from India to Britain accelerated the process of initial accumulation
necessary for igniting the industrial revolution. In this context, it is interesting to know what kind of production relation was established in the Indian region due to the actions of the British colonialists. Again the history shows that British rulers destroyed all the embryonic elements in Indian society that could have led the society to capitalism. The British rulers not only destroyed comparatively developed indigenous handicrafts industry throughout India, which had the potential to give birth to capitalist manufacturing, but they also initiated a process in agriculture where almost all the surplus generated was taken away by the British rulers sharing a miniscule part with pro-British feudal lords. Due to the enormous destruction of indigenous industries like textile establishments, a large number of artisans and workers had to fall back on the land for their livelihood. According to W.W. Hunter, “In Bengal there was in the last century more cultivated land than there were husbandmen to till it. The landlords at that time were competing for tenants…It is (now) the husbandmen who have to compete with each other for land.” (Patnaik, 1999) The creation of a new class of landlords mainly from higher castes who were completely alienated
from agriculture, the payment of huge rent in cash combined with partial commercialization, the forcible introduction of some cash crops along with deindustrialization have created havoc for the Indian peasantry. Each of these gave rise to, apart from landlords, some new parasitic classes like usurers, crop traders and a large section of intermediaries that could fatten themselves by their cooperation to the colonial extraction. Due to their control over multiple markets of land, labour, credit and output, they could increase this extraction beyond the limits possible in any single market. All of these processes led to a new type of feudalism that can be termed ‘semi-feudalism’. In this colonial system, trading capital, money lending business with an exorbitant rate of interest, and capital to purchase land with the aim of collecting high rent, could all flourish by serving the imperialist plunder of the colonial rulers. Naturally, all these different classes that were born in British period played a reactionary role in the context of developing the productive forces. In the absence of any alternative, the peasants were rendered helpless before these parasitic classes who took away not only the surplus but a part of the necessities for sustaining
the family. The appropriation of the whole surplus from agriculture by these classes and the destruction of the indigenous handicraft industries actually pushed back the development of the productive forces in Indian society. Another class that flourished during British rule is the class of big merchants from some commercial castes and communities that used to serve the interest of British capital by supplying chief raw materials and selling industrial goods from Britain. At a later phase some of them turned into big capitalist while keeping their subservient position to British rulers and British capital intact. In keeping correspondence with these two classes namely big capitalists and landlords, there appeared certain native political collaborators that were mainly from traditional upper castes sometimes with feudal background and enjoying English education that could intervene on behalf of British rulers in case of unrest created by indigenous oppressed people (R.U.P.E. 1997).

Post Colonial Agrarian relation: Capitalism or semi-feudalism?

It’s true that after the departure of British rulers in 1947, a greater share of the surplus produced in agriculture could remain with the producers thereby improving their condition a little compared to the situation that prevailed in colonial period. However, the class relation that was formed during British rule remained virtually intact. The land reform that was taken up had nothing to do with demolishing
the political, cultural and economic power of the landlords. Though there was some legislation implemented regarding land reform, because of the lack of will on the part of the new rulers, the landlords could use their political and social power to retain most of their lands in the name of ‘self cultivation’ by evicting the tenants hitherto enjoying tenancy rights. Despite a large number legislations (based on Jamindari Abolition Act, 1950) involving land reforms by various states from 1950 onwards, the actual area that was declared surplus was less than 2 percent of the cultivated area and that, too, mostly of poor quality, could not be distributed among the landless. Such is the land reform about which Indian civil servant and scholar P.S. Appu’s comment is worth mentioning; “India is the only country where the judiciary has played a crucial role in frustrating and stultifying land reform laws” (Thakur and Singh 2009). Finally, the land reform resulted in the large scale eviction of tenants. Landowners’ immediate and understandable (in hindsight) reaction to most of the reforms was to eject tenants on a massive scale. After a thorough study, P. S. Appu estimated that tenant families were evicted from 33 percent of India’s agricultural land as a result of the post-Independence tenancy reform legislation (Appu 1966). The other parasitic forces like usurers and traders could also maintain their sway over the rural areas by using their control over multiple markets. The tendency of the small producers to cling to their small plots of land as a defense against destitution further reduces the possibility of concentrating lands by middle and rich
peasants who are potential entrepreneurs in capitalist farming. The characterization of Indian society as semi-feudal originated from discussions in the communist movement from the 1950’s onwards. Of course, all the left parties do not assign the same meaning to the
term ‘semi-feudalism’. There are different opinions regarding the nature of existing production relations and those opinions can broadly be divided into two fundamental perspectives;

1. There exist feudal relations in the society but these are in the process of decay either through natural capitalistic development or through the penetration of Indian big capital and imperialist capital. Although there may exist some remnants of semi-feudal oppression, at present this is not principal.

2. Through penetration of imperialist capital, commercialization and various reforms from the colonial time itself, feudal relations transformed into semi-feudal relations and along with this a deformed capitalist relation in certain areas has also arisen which stands in the way of free capitalist development. Hence through natural economic development the society would not be transformed into a capitalist society. Only after completing certain fundamental democratic tasks, can Indian society can get rid of these production relations and move forward.

The first position is mainly upheld by various parliamentary left forces, whereas various factions of Marxist-Leninist groups uphold the second one. On the other hand, during the 1960s peasant struggle, there was a parallel process in certain areas of Indian society popularly known as the ‘green revolution’. The aim of the green revolution was to transform agriculture by introducing modern inputs like high
yielding seeds, tractors, fertilizer etc. along with the development of infrastructure (such as irrigation) by the government. After the green revolution, Indian agriculture, for the first time, saw the application of imported modern technology in agriculture along with some significant growth in the production of some selected crops in certain areas. In light of all these developments, some economists were expecting to see capitalist development in Indian agriculture. On the other hand A. Rudra and his collaborators, based on their collected data, tried to establish that no significant features of capitalist development had emerged even in the areas covered by the program of the green revolution (Majid, Talib & Rudra 1969). The work of Rudra generated an interesting debate regarding the nature of prevailing
production relation. In contrast to Rudra’s static approach, Utsa Patnaik (Patnaik 1971) emphasized the study of the new dynamics that appeared in the agricultural sector in certain parts of the country that might lead to capitalist entrepreneurship. At a certain point, however, she lost her confidence and started to point out the weaknesses of the dynamics generated in the unreformed agriculture. As she observed, “…What is the extent and nature of the development of the capitalist tendency within Indian agriculture? This is the question to which my paper has been addressed. My own tentative answer to this question has been advanced already: the capitalist path in India’s agriculture is one dominated by a socially narrowly based “landlord capitalism” with semi-feudal features, of caste subordination of workers, which is capable of raising the level of productive forces only under certain exceptional conditions, and which acts as a long run fetter on agricultural growth, and hence on the overall growth of the economy” (Patnaik 1986). Around the same time, another group of economists were trying to establish that the character of Indian agriculture is indeed semi-feudal. Amit Bhadhuri in 1973, based on data he collected from some villages
in West Bengal, came to the conclusion that “The dominant character of the existing production relations in these villages can best be described as “semi-feudal”. This term “semi-feudalism” is used here to convey that the existing relations of production have more in common with classical feudalism of the master-serf type than with industrial capitalism” (Bhaduri 1973). He highlighted the following four features as decisive; share cropping, perpetual indebtedness of the small tenants, concentration of two modes of exploitation, namely, usury and landownership, in the hands of the same economic class, and the lack of accessibility for the small tenant to the formal credit market. Analyzing the correlation among these aspects, he tried to establish that in such a state of production relations, the dominant class will run the economy in a way that perpetuates the necessity of consumption loans for the tenants even at the cost of hindering technological development. A similar conclusion was drawn by P.H. Prasad following his survey of some parts of rural Bihar. He observed, “The semi-feudal bondage that exists in most parts of rural India is caused mainly on account of the fact that the vast majority of the poor peasantry
remains in ‘perpetual deficit’. This results in a unequal exchange which gives the big landowning class, the main constituent of the rural rich, enormous economic benefits, such as cheap and assured labour, better terms of leasing out land, benefits obtained through what is known as ‘distress sale’ and acquiring poor peasant lands for almost nothing. The enormous economic power which in the process gets concentrated in the hands of the rural rich not only allows them to dominate over the economic activities of the area but also makes them politically very powerful. They claim the bulk of the benefits that flow in the area either in the name of ‘development activities’ or ‘welfare of the rural poor’” (Prasad 1976). N.K. Chandra further sharpened the argument put by Bhaduri by pointing out one more important factor that helps perpetuate this semi-feudal relation even if there is some technological development. Indeed, there had been some technological improvement in parts of the country due to investment by landlords in the atmosphere created by the green revolution. He insisted that the missing element in Bhaduri’s analysis is the existence of massive unemployment in the countryside. Hence the bargaining power of the
sharecropper remains very low insofar as the landlords can employ hired agriculture workers for cultivation at a very low cost. The concluding remarks made by Chandra are illuminating; “We may then infer that labour surplus on a scale that is probably unparalleled
in human history is perpetuating the semi-feudal set up. Limited progress along the road to ‘modernization’ cannot be ruled out. Without vigorous measures to reduce considerably that surplus, we fail to see how one can get out of the vicious circle, or how capitalism can strike deep roots” (Chandra 1974). The lack of independence of various markets related to agriculture has appeared in Bhaduri’s analysis but
the preponderance of the interlinked character of markets across the whole agricultural sector has been emphasized by Krishna Bharadwaj. She made the following observation; “…The power of the dominant party to exploit in interlinked markets is very much more than in markets taken separately. There are conventional limits to exploitation in any one single market. For example, the crop share is conventionally
laid down….. There are also limits to exploitation set by the sheer minimum survival needs of the exploited party. With interlinked markets, exploitation can be spread over markets (such as intervening in an output market on the basis of a credit tie) and even across generations, when the labour of future generations is committed by the debtor or tenant” (Bharadwaj 1994). On the basis of Kautsky-Lenin formulation of
capitalist development in agriculture, Ranjit Sau observed, “With unemployment in the countryside day by day, the big landowners do not feel the urge to engage in farming based on wage labour; leasing-out land to impoverished tenants is a much more lucrative proposition. On the other hand, the poor peasant hangs on to his little parcel of land at great cost to himself and the family, as the only other alternative
to him is to plunge into all the uncertainties of unemployment. His tenacious holding on to the tiny pieces of land occasionally frustrates the ambitions of the successful capitalist farmer who might have a covetous eye on the adjoining areas” (Sau, 1976).

In the context of weak infrastructural development including poor irrigation facility, he further observed, “….Under such circumstances, the crop, rather than the land, gravitates capital; trading in crop is much more attractive than investment in land” (Sau, 1976). When most of the economists were analyzing internal dynamics, the alliance between the semi-feudal mode of production and imperialist monopoly capital
was explicitly exposed by N. Sengupta who noted, “Imperialism first of all allies itself with the ruling classes of the previous social structure, with the feudal lords and the trading and money-lending bourgeoisie, against the majority of the people. Everywhere imperialism attempts to preserve and perpetuate all those pre-capitalist forms of exploitation (especially in the villages) which serve as the basis for the existence of
its reactionary allies.” Regarding the so called capitalist development by the program of green revolution, he further observed, “The other part is the prevalence of the surviving feudal mode of production and feudal social formation – the semi-feudal aspects of the agrarian formations. The survival does not occur in pure forms. Instead, it occurs in an assimilated form, running over a variety of proportionality between the feudal mode and capitalist mode, becoming sometimes as advanced as almost capitalist and sometimes as backward as only a marginally altered form of the pre-capitalist (feudal) mode” (Sen Gupta, 1977).

Characteristic features of production relations in Indian agriculture

Let us now have closer look at the predominant features of the production relation in rural India based on which some left political parties as well as some prominent economists identified Indian society to be semi-feudal. Of course a section of the economists were skeptic about semi-feudal characterization but they were equally skeptic regarding any true capitalist development in Indian agriculture. To begin with, we
describe the features that are generally emphasized to establish the capitalist nature of prevalent production relations in Indian agriculture.

1. The decrease of large land holding (more than 10 hectares) indicating the decline of landlordism.

2. The presence of large number of agricultural labourers along with effectively landless peasants that cannot sustain their family without laboring for other. Hence, the form of exploitation is mainly through wage labour.

3. The decrease in the share of households dependent on agriculture.

4. The decrease of tenancy in the case of poor farmers, and the presence of reversed tenancy that works for capitalist profit.

5. Markets for inputs, outputs, labour and land operate in rural areas along with commerce. In sum, a large part of the agricultural produce goes to the market.

It is to be noted that the decrease of large land holding had been compensated by the increase in output per hectare and hence one cannot simply say this is a clear sign of decline of landlordism. Any way, if capitalist relation could grow unhindered there is no doubt that the features described above would gradually be predominant and at some stage capitalist market relations would dominate the production relations. It is a fact that during the 1970’s, there had been some sign of growth of a new dynamic class of peasants in some pockets as a result of various government measure like public investment, expansion of formal credit, subsidies to agricultural inputs, procurement of crop, etc. But all these steps limited to few regions by themselves cannot guarantee capitalist development if there is no parallel process of destruction of the semi-feudal fetters residing in the very class formation of the society. In the absence of such process, there remains every possibility of those resilient pre-capitalist relations to reassert themselves, in a favourable condition, even in those
regions where they seemed to have been weakened. In this context, the more scientific approach would be to dig the surface further in revealing the actual relations that prevail among the people involved in the system of production. For this purpose some other crucial facts have to be taken into account that acts as fetters in the path of capitalist development.

a) Land inequality still has strong presence in Indian agriculture. 7.2 per cent rural households own 46.7 per cent of the cultivable lands.

b) Indian Agriculture is dominated by small farming and according to latest Agricultural Census the average size of the agricultural holding is 1.15 hectares. The agriculture still consists of subsistence farming with more than 50 per cent of the food crops being retained for the peasants’ own consumption (Aspects of Indian Economy, 2017).

c) Extreme land hunger among the majority of the peasantry in the absence of any possibility of alternative employment.

d) Agriculture still accounts for more than 50 per cent of the total work force in India.

e) The extensive and perpetual state of indebtedness of the small peasantry and agricultural workers.

f) The prevalence of traders and money lenders where sometimes land owners themselves can function as money lenders or traders or both.

g) The various markets related to agriculture namely, the lease market, the credit market, the agricultural input market and the agricultural
commodity market do not function independently as happens in a capitalist system, but they are interlinked in a way that resembles semi-feudal features.
Land concentration in few hands by itself cannot determine the nature of production relations. It could also be a sign of capitalist development where production is socialized with labour power being a commodity. But in the Indian scenario, this is not the case. With the exception of a few areas, large land holders usually do not organize large scale production. The most profitable avenue open to them is to lease some parts of the land to poor farmers (sometimes through oral contract) and practice their own farming on the rest by employing labours where most of them, if not all, are in semi-feudal bondage in some form or another. The incredible poverty of the small and landless peasants establishes the possibility of making larger gains by rent collection through land leasing and through the practice of usury. Further, a large part of the surplus of big landowners is invested in trading or usury rather than being invested in production with the aim of expanded reproduction. After the green revolution, the prices of agricultural inputs like chemical fertilizer, high yielding seeds, tube wells, and pesticide keep rising for which the cash requirements for cultivation reached eleven times higher than that required in the old method
in 1976 (Sau 1976). In particular, at later phase when water management was left to individual, it only creates a condition of huge drain of surplus filling the coffers of pump-set companies and petroleum industries. The new situation impelled less prosperous peasants to seek sizable loans to meet the rising cost of production. In this particular situation, for large landholders money lending became more lucrative
compared to profit earned by investing capital in production and, indeed, the more affluent section of the rich peasantry took to usury. In this context, Ranjit Sau (Sau, 1976) cited an illustrative example: Maghar Singh, a big peasant at Manpur, a place undergoing green revolution, put it this way, “As a tractor, my money will turn into iron, lifeless and ossified; as a loan, it lives and grows.” According to his estimate, “An acre of land costs Rs. 20,000. The gross yearly produce on it would be Rs 2,000 – 2,500. If one wishes to avoid management
worries, one could lease it on crop sharing basis, on Batai. The return then would be half the gross produce, that is, Rs 2,000 – 2,500 a year. A far more attractive alternative, however, is loaning that Rs 20,000 and letting it fetch, even a low rate, say 20 percent per annum, Rs 4,000.” So instead of a capitalist polarization where land could be concentrated in the hands of rich entrepreneur peasants and another
section of the population would turn to wage labour either in agriculture or in industry as an outcome of green revolution, the existing semi feudal relations in some or other ways survived along with some distorted capitalist features. Amitabha Chakrabarti has summarized the scenario by saying, “The Indian government sponsored imperialist penetration in agriculture not only created a vast potential market for industrial capital in India with fertilizer, pesticide, farm machinery & HYV seeds.……This created a newer class alignment of forces in rural area with landlord trader moneylender nexus as a social base for imperialist investment in agriculture without any fundamental change in existing structure of agrarian economy” (Chakrabarti, 2013). It is to be carefully noted that the presence of a large number of agricultural labourers and landless peasants in rural India is not the outcome of the process of capitalist polarization. Rather, it should be identified as pauperization which is the outcome of a specific process peculiar to the Indian caste system that prohibited lower castes, especially dalits, from enjoying any property rights since long past. Actually, there had always been a large overlap between landlessness and the traditional ‘untouchable’ castes, a fact which enhanced their poverty, misery, and exploitability (Srinivas, 2003). Even if we look at the 1931 census, 31.2 percent of the population was dependent on agriculture as agricultural labourers, a proportion comparable to a developed country at that
time. Wage labourers in India are almost exclusively from the lowest caste and tribes and under the caste based social discrimination they have to work in a semi-bonded condition. Anand Chakravarti observed, “It is one of the ironies of underdevelopment that those who labour for the landed do not function in a typically free labour market. The presence of large labour force, the relative absence of employment
opportunities outside agriculture, and the power of dominant castes inhibit the freedom of labourers to bargain for better terms and conditions or to opt for other employers in a different setting….Therefore, the life chances of labourers are conditioned by the culture of exploitation operated by dominant castes rather than by the forces associated with a free labour market.” (Chakravarti, 2003). Again, if one only sees the markets operating in Indian agriculture without considering the concrete conditions in which the markets operate, he may
miss the actual production relation that dominates. In a capitalist system, markets of various factors like land, labour, capital, credit are of, course, and linked with each other but only through impersonal market prices. Based on the availability of these factors and the tension between supply and demand, their prices are automatically and simultaneously determined at some equilibrium which makes full use of all of them. According to textbook economics, in equilibrium, every resource will have the same marginal productivity in all uses, which equals to the market price of the resource. So the various producers and their decisions are linked by impersonal movements of prices. The final decision that one makes is decided by the impersonal workings of various markets. In Indian agriculture, the markets are there, but their
function depends on various noneconomic factors determined by various dominating classes. When one considers a single market, there may be limits to exploitation sometimes determined by convention or tradition, but when the dominant party uses the various markets that are interlinked, he can extend his exploitative hold over different markets. There is a tendency to indentify this kind of operation of interlinked markets with capitalist monopoly formation (Basu and Das, 2013). This would seem to be absurd, however, since in concrete situations the
form of exchange is not always dictated by capitalist categories like price, interest, etc., but often in terms of personalized services and other forms of precapitalist exploitation that will be made more explicit in the discussions below.

Let us now see how the presence of the market can be compatible with semi-feudal exploitation. On the basis of interlinked markets, the poor farmers are exploited in a way that is intrinsically semifeudal in nature. As discussed above, due to severe colonial exploitation there had been a large number of small farmers’ families that remained in the condition of permanent destitution.

a) These farmers need consumption loans as well as loans for initial expenditure for farming;

b) there are regular seasonal fluctuations in the prices of crops. Under these two conditions, once they enter in the credit market, they are compulsorily involved in other markets against their interest. For example, if they take loans from usurers or a landlord, the time of payment is decided in such a way that these farmers are forced to sell, sometimes under prior commitment, a larger part of their produce primarily to collect the cash needed for repayment. Sometimes, they have to repurchase the same with a higher price.

In this context, a dramatic example cited by Bhaduri is worth mentioning; “the price of a local unit, a mound of rice (39 kg) just after the harvest was Rupees 20 in the local market which rose to about Rupees 60 about three months later when the particular peasant borrowed in kind. His lender used current market prices to reckon his outstanding debt and fix repayment in kind, so that for each mound of rice borrowed at high price season (Rupees 60/Rupees 20) 3 mounds of rice had to be paid back just after the harvest, implying a 200 per cent own rate of interest over a few months” (Bhaduri,1983). Another important observation was made by Prasad based on his study in Bihar. He observed that the amount of loans advanced to the poor peasants generally exceeds the repayment capacity of the peasants. This is unusual
in the operation of credit mechanism that works in capitalism. In his words, “The big landowning class, however, does not insist on full payment even in the long run. … It uses this debt obligation to force upon the direct producers a system of unequal exchanges, thereby deriving enormous economic benefits such as cheap and assured labour for its own cultivation and better terms for leasing out land. It, thus, appropriates almost the entire value to itself” (Prasad, 1974). These are extreme examples and might have weakened over the years due to various factors including incessant peasant struggles. But these examples provide basic materials in understanding the form and content
of the exploitation in Indian agriculture based on the combination of feudal mode of exploitation, commercialization and working of (interlinked) markets. Some other forms of exploitation in the interlinked market operations are as follows:

(1) There are some regions where moneylenders are also merchants. In such cases credit is extended on the condition that a particular crop that the merchant trades has to be cultivated and debt has to be repaid by selling the crop to that trader on prefixed terms favourable to the merchant. This is a common practice in the sugarcane belt in India.

(2) There are many cases of tenants being exploited by interlinked land and labour markets. They are committed to render free or underpaid labour services on the landlord’s land as a part of the lease contract. As such, the tenant cannot avail himself of opportunities to hire himself out at a higher wage even when such opportunities arise. Sometimes the input traders can sell their inputs at a higher price to the peasants that are indebted to them. The interlinked market for credit and labour seems to entail the most severe pre-capitalist exploitation and it is intimately related to the caste system prevalent in Indian society. There are examples where interest free credit is offered to extremely poor families belonging to lower castes and tribal people and the debtor lapses into bondage, committing not only his own but even his family’s labour and sometimes even that of the next generation (Bharadwaj 1994). The overall picture that emerges shows that though classical form of landlordism has declined over the years due to various factors including incessant peasant struggles, the basis of surplus extraction in
the rural economy, in the main, still remains the land ownership unlike capitalist countries where the basis is capital. The land ownership still remains the key in exercising the economic and social power in rural India that facilitates surplus extraction in various noneconomic
forms that we identify as semi-feudalism.

Neoliberal progamme intensifies parasitic extraction of surplus

In the light of the experience of last three decade, it is clear to everyone that all the programmes of globalization are directed to ruthless extraction of surplus of laboring people all over the world. Hence there is no doubt that Indian economy in general and Indian agriculture in particular, cannot remain outside the orbit created by the leaders of globalization in a situation where Indian economy has been increasingly
integrated with the program of globalization. But, one wonders how horrible the situation might turn in Indian agriculture where program of globalization had been imposed on an existing semi-feudal structure. According to Nikitha Sattiraju, “Over three lakhs farmers have committed suicide in India since 1995. A majority of them were concentrated in five major agricultural states of the country – Maharashtra,
Madhya Pradesh, Andhra Pradesh, Karnataka and Chhattisgarh. Even Punjab recorded a high number of 449 farmer suicides in 2015, next only to Maharashtra. Farm suicides have been steadily increasing over the years. On an average, around 15,400 farmers ended their lives each year between 1995 and 2003. This number increased to more than 16,000 between 2004 and 2012. In a study on Indian farmer suicides, Prof K Nagaraj of the Asian College of Journalism writes that the actual count may be higher, but the police follow a strict definition of farmer which limits official data on the extent of cases. Only those farmers who have a land title to their name are considered. So if a farmer working on his father’s plot or a woman working on her husband’s land kill themselves, they are not counted as farm suicides. Add agricultural labourers and tenant farmers, and the total will surely increase” (Sattiraju, 2016, for details see Sainath, 2015) It is to be noted that the Indian government in the 1970’s and 1980’s took certain steps in the particular situation that developed at that time towards land
ceiling, tenancy right, state investment in agriculture, formal credit for farmers, etc. All of these steps resulted in higher growth and appeared to loosen feudal fetters and open up the possibility of the growth of a new dynamic peasant class. Certain developments in certain areas of the country made some economists think that feudal relationships and feudal institutions were in the process of decay. Careful investigation,
however, shows that these changes had been made in such a way that existing production relations were not disturbed in any fundamental sense. The situation that has been created in the last 25 years after the introduction of new economic policies has proved that how resilient these old relations are that have asserted themselves, sometime in a new form, whenever a favourable condition has been created by the dominance of international financial capital. The question of land reform that still remained a catch word among some section of rulers and economists even in 1980’s became non-fashionable in the era of globalization. It was assumed that the operation of free market force in the absence of any state intervention would solve all problems by utilizing the factors of production in an optimal way. In order to give a free
hand to the market force, all the government aids to agriculture had to be withdrawn. It is important to remember that peasants’ suicide on a wide scale started to happen in the distress created in the age of neoliberal economy holding sway from the 1990’s. But neoliberal policies, in no way, have weakened the semi-feudal relations, rather, the implementation of these policies have strengthened the semi-feudal exploitation in the cloak of market economy to such a level that the living conditions of most of the peasants have declined to abysmal levels. In particular, due to the new economic policies, a substantial part of the meager surplus that is generated in agriculture is continuously sucked by the monopoly financial capital led by big indigenous as well as by big foreign capitalists forcing even some big and middle farmers
into a critical situation. This situation has further worsened due to agricultural trade liberalization. It has exposed domestic producers to the volatilities of international prices of agricultural commodities that have turned agriculture into an unviable occupation. Any rise in international prices can easily be retained by wholesale merchants and their imperialist masters, whereas any fall in international prices can
be passed back down the chain to the peasant who lacks alternative employment and is trapped in debt to landlords, moneylenders and traders. There has neither been any significant movement in the terms of trade in favour of agriculture after the neoliberal reforms, nor have the cultivators gained from more exposure to international markets and prices (De Roy,2017). In the context of globalization, let us now study two most important characteristics of Indian agriculture that generate the base on which semi-feudal relations persist;

1. Persistence of land inequality

2. Intensification of parasitic extraction of surplus

Based on the National Sample Survey (NSS) report (70th round 2012-13, 59th round 2003, 17th round 1961-62) on land ownership among various categories of peasant households, the following features can be noted;

a) The land inequality is significant, the top 7 percent of rural households owning almost 50 percent of the total cultivated area.

b) The total area owned by households owning more than 10 hectares has come down to 5.8 percent from 28 percent in 1961-62. The number of households that own more than 4 hectares has also come down to 2.17 percent from 12 percent in 1961-62.

c) The share of households with less than 0.41 hectares who can be termed as effectively landless has come down to 39.60 percent in 2011-12 from 60.15 percent in 2003.

It has to be remembered that in order to avoid the land ceiling act, land is often held in another (sometimes fictitious) name, thereby hiding the actual inequality in landownership. In any case, as we have discussed earlier, large landholders, in the main, do not adopt capitalist farming and prefer instead to engage in sharecropping, mostly through oral contract, which remains a profitable avenue in the context of the
presence of massive land hungry pauperized peasants. The result of a survey in the state of Haryana shows that most of the big landholders usually cultivate one third or one fourth of their land by employing attached labourers on a yearly basis and parcel out the rest for tenancy (Kumar, 2013). Actually in India it is difficult to see a farm where more than ten wage workers are involved. Had it been otherwise, the trend would have been the capitalist concentration of land in the hands of large landholders. On the other hand, for households possessing more than 10 hectares of land, the average net investment in productive assets is 10.5 percent of the surplus and the rest goes to trade, usury,
speculation, real estate, transport, and education along with extravagant feudal consumptions like wedding ceremonies with dowry and various religious functions (Aspects of Indian Economy, No.46, 2008, See also Srivastava et al, 2012). Recently R. Vijay has observed another ‘structural retrogression’ in Indian agriculture based on the rise of a new kind of landlords (identified as non-cultivating peasant households), who own land but do not cultivate it. In most of the states except Punjab and Haryana, their share in peasant households as well as lands under their ownership are increasing (Vijay, 2012). The absence of the dynamics of capitalist development is also observed from the fact that the share of almost landless households is decreasing, thus implying the weakness of the process of transformation of landless
peasants into agricultural labourers. The number of (marginal farmer) households that own 0.41- 1.0 hectares, has increased significantly. Actually a large number of landless and almost landless peasants have joined the category of marginal households. They are now 43.2 percent of the total households whereas in 1982 they were 9.47 percent and even 19 percent in 2003. Their share of land has also increased to 29.07 per cent from 9.47 percent in 1982. But as their share in households increased significantly, the average area owned by them has actually declined. It appears that the prevalence of small farming has further intensified due to the further slowdown in investment by big peasants (NSS Reports, 37th Round 1982, 59th Round 2003 and 70th Round 2012-13).

The development of capitalist farming could also develop from below in a situation where small farming through free market competition gives rise to a polarization of the peasantry whereby one part of them through accumulation succeeds in becoming capitalist and another part transforms into wage workers. Once we look at the monthly income of peasant households of various categories, however, we see how impossible this development is in the present Indian economy (See table.2). The percentage of farmer’s households whose consumption is higher than farm income is increasing day by day and this is true for the bottom 70 per cent of households. In fact, the percentage of indebted farmer households has risen to 51.9 percent in 2012-13 from 48.60 percent in 2002-03. The debts of farmer households as a percentage of their annual income rose to 61 percent in 2012-13 from 49.6 percent in 2002-03 (NSS Reports, 70th Round 2012-13).
The picture that emerges is the following;

1. A great majority of the farmers that operate on more than half of the total cultivated land cannot meet their subsistence needs from the total farm income.

2. Another small section operating on one fourth of the area is barely able to meet the subsistence.

3. Even if income from all other sources is considered, still the overwhelming majority are unable to meet their basic consumption needs.
It is obvious that the medium, small, and marginal peasants do not acquire any surplus in their hands from farming. Hence there is no scope of capitalist development from below as there is no accumulation that might be invested for the purpose of expanded reproduction.
Though there is no chance of accumulation by small peasants, it does not mean that there is no surplus production by the small peasant. Rather, parasitic forces like landlords, traders, and moneylenders along with unscrupulous politicians and government officials drain away a good portion of the surplus and this surplus does not contribute to the development of production. Strikingly, the policies adopted in the
neoliberal period have intensified this extraction to a new level by strengthening the parasitic forces along with the increasing domination of monopoly finance capital. In the age of globalization public investment in agriculture has been continuously falling and with this private investment as well as capital formation is in decline. In 1980, the share of public investment in total agricultural investment was 42 percent, which came down to 24 percent in 1990 and further reduced to 15 percent in 2011-12. Actually the total public investment in agriculture is 0.4 per cent of the GDP where this sector employs 52 percent of the workforce (Aspects of Indian Economy, No.66-67 2017). But despite
what is said by neoliberal policy makers, private investment in Indian agriculture does not replace public investment, rather public investment induces private investment by developing irrigation, rural electrification, agricultural research, etc.

In the period of liberalization, the operations of the usurer-trader class have been the most destructive factors that forced the peasants and agricultural labourers to commit suicide on a mass scale, a phenomenon which is still continuing. The correlation between commercialization in agriculture and usury has created havoc for the peasants in recent times in India. Due to the expansion of institutional credit to farmers in the 1970’s and 80’s, usury declined to some extent. But since the 1990’s, under the pressure of a neo-liberal dictated program of reducing institutional debt and introducing vigorous commercialization in agriculture, usury has again made a powerful
comeback. In some cases new groups now take part in usury. In various places, traders of agricultural produce, school-teachers, government servants, etc. have involved themselves in this business. Possibly due to the adverse situation in agriculture, purely parasitic extraction has become more lucrative as it can make greater gains when the direct producers are in distress. There has been a strong correlation found
between the commercialization of agriculture, usury and peasant suicide rates.

Further NSS data shows that marginal and small farmers hardly enjoy formal credit and hence they are mainly dependent on moneylenders. The big farmers not only capture the major part of formal credit but a part of this goes to usury for earning a high margin. The greater dependence of marginal and small farmers on the usurer makes the money-lending business far more attractive compared to productive
investment. NSS data indicates that loans from usurers, shopkeepers and traders were at rates of over 20 percent and in some region it is over 30 percent. Strikingly, a NSS survey of farmers in 2013 put the size of the farmer debt at 61 percent of the annual income (Aspects of Indian Economy, No.66-67 2017). Recently, a perplexing report has come from Punjab, the citadel of so called capitalist development, regarding large number of suicides by agricultural labourers. A field survey made in 2014-15 shows 80 percent of the agricultural labour households were indebted, 68 percent of the debt being owed to large farmers. Almost all of this debt was taken for consumption (Aspects of Indian Economy, 2017 No. 66-67). Again, this is an example of interlinked markets for credit and labour where the wage remains at a level such that indebtedness persists and parasitic extraction prevails. A study of the two worst affected districts Sangrur and Bathinda reveals that agricultural labourers made up 39.2 percent of the suicides during 2000-2008 (Bharti 2011).

The other major avenue to plunder the agricultural surplus is crop trading. Traders have been a dominating force from the time of British rule, but with the weakening of government procurement under the policy of liberalization and globalization, the situation has turned so grim that there is no single day where we do not get news of agitation by farmers against the crash of market prices for some of the crops
they produce. Seasonal fluctuation in crop prices has been a general phenomenon in the Indian agricultural market. But there are many who consider it to be a general rule of the market where tension between demand and supply decides everything. Mostly these analysts don’t bother to think that this fluctuation may be profoundly related to the prevalent backward social production relations. In a competitive capitalist economy, if in a particular sector the market price depressed year after year reducing the profit rate, investment would naturally go elsewhere. But that cannot happen for Indian agriculture since for the poor peasant there is no other option open for their survival.

We have already discussed the fact that the interlinked market plays a role according to which small peasants are invariably forced to make distress sales. As the initial capital required for cultivation is increasing day by day, a large section of traders adopt usury and plunder surplus both from inputs and outputs. Due to a paucity of funds traders provide credit and force peasants to buy inputs like fertilizer and pesticides at higher prices. According to an estimate, a large number of small and marginal peasants are forced to buy fertilizer at a much higher rate, 17 percent higher on average due to indebtedness to traders or due to failure to access it at subsidized rate (Aspects of Indian
Economy No-66-67, 2017). On the other hand, to pay the debt they have to sell the crops immediately after the harvest at low price. In the neoliberal era, it is assumed that commercialization would be beneficial for the peasant. It is noticeable that peasant suicides in this period have been concentrated in regions of greater commercialization, and particularly among peasants growing commercial crops such as cotton.
The pattern of semi-feudal exploitation that generally operates through interlinked markets takes various forms in various regions. Broadly, the form can be divided in the following way;

i) In regions with less commercialization, the parasitic extractions of surplus mainly take the form of rent and interest on consumption loans. For example in the state of Bihar, one-third of the cultivable land comes under sharecropping and this extortionist arrangement provides negative impulses to the use of technology and thereby retarding the growth in agricultural production. In another one-third owned mainly by large landholders, it is the feudal syndrome of rent seeking that gives them both hassle-free income and social status (Bandyopadhyay 2009).

ii) In regions with high commercialization, usury linked to trade in inputs and outputs plays the main role in surplus extraction. The continuous price rises in inputs do not increase the surplus in the hands of farmers to any significant degree but fattens the business run by big capital that operate through the web of local traders and large landowners. In particular, the functions of moneylenders and trader
are such that if there is any possibility of gain due to price rise for the crops in the market, the benefits are fully captured by these classes whereas any fall in price could easily be passed back down to the actual producers.

As the neoliberal ruling class withdraws from public investment, the activities of these parasitic classes are intensifying and their grip on the peasant has further tightened. So in contrast to the mainstream view, all the steps taken by the neoliberal regime are acting as fetters to the development of productive force in agriculture and are prohibiting the possibility of the emergence of any dynamic class forces in agriculture.
Strikingly, tenancy is on the rise in the neoliberal. NSS data has for some time been showing a decline in tenancy, thanks to the eviction of tenants from 33 percent of the agricultural land in the name of ‘self cultivation’ by the landlords. In the absence of organized farming, however, it is obvious that tenancy would surely exist (hidden both by landlord and tenant, the landlord fearing tenancy right and the tenant
fearing eviction) but it has gone underground making the tenants even more insecure. Strikingly, tenancy has increased once again, from 7 percent in 2003 to 12 percent in 2012-13 according to official statistics. In some of the states this increase in tenancy is extraordinary: from 9 percent in 2003 to 34.96 percent in 2012-13 in Andhra Pradesh, from 8.9 percent to 25.59 percent in Bihar, from 13 percent to 19.29 percent in Orissa, from 6 percent to 15.61 percent in Tamil Nadu and from 9.3 percent to 16.21 percent in West Bengal over the same period (Rumba 2015, Muraly and Vijay 2017). At the same time the attitude of the government has also changed regarding tenancy. According to Niti Aayog Expert Committee report, “land leasing laws framed in the wake of independence have lost their relevance today. Lease farming is an economic necessity and not a symbol of feudalism, as it was thought before.” They further observed, “Tenancy results from a voluntary agreement between the land owner and the tenant to lease out and lease in land for mutual benefit” (Aspects of Indian Economy, No.66-67, 2017).

Those who consider present tenancy is capitalist in nature should take a look at the composition of the tenant farmers. The 70th NSS data suggest that out of total tenant households, 57.7 percent were landless or near landless farmers, 22.37 percent were marginal farmers, 24.54 percent were small farmers, all of which clearly shows that the tenancy market (63 percent of the tenanted land) is dominated mainly
by landless, marginal and small peasants. Although middle peasants are leasing in 19.64 percent of the tenanted land, 70 percent of it is leased in by peasants owning 2 to 3 hectares of land. On one hand this shows land hunger among the masses of poor peasantry and on the other hand the reverse tenancy is not at all prominent. Many incidences of reverse tenancy may be the outcome of interlinked markets where
leasing land at depressed rates may be forced upon the indebted small peasant (Aspects of Indian Economy, No.66-67, 2017).

Indian Big Capital: Continuation of colonial extraction of huge surplus

When analyzing the production relation in a backward country, one should note Lenin’s observation regarding the role played by industrial capital, “It is the development of capitalism in the manufacturing industry that is the main force which gives rise to, and develops, capitalism in agriculture.” In the age of domination of imperialist finance capital, the export of capital to backward countries has been important
phenomena. As an outcome of this development, manufacturing industries developed to some extent in backward countries under colonial and semi colonial condition. Hence in a backward country the progressive role of manufacturing industrial class that had emerged in a colonial or semi-colonial condition, has to be judged not merely by its organization of production that any way looks capitalist but by its role
in developing independent capitalist development that undermines feudal and semi-feudal relations. In an environment dominated by imperialist finance monopoly capital, there is every possibility of this class to be subservient to finance monopoly capital and in
some or other way. In that case this class effectively obstructs the full-fledged development of capitalist relation by continuously reproducing the condition of dependence on imperialist countries for capital and technology.

This is a well known historical fact that in the colonial period Indian big capital played no progressive role in undermining feudal relations of production either by their economic activity or by their political activity. Actually, big capital was not only subservient to imperialist monopoly capital but was deeply connected economically and politically with feudal forces. In particular, whenever there were any significant peasant struggles that could undermine colonial rule, the big bourgeoisie used to co-operate the colonial ruler in suppressing the struggle. In contrast to the opinions held by parliamentary left, the character of Indian big capital has been extensively studied by Suniti Kumar Ghosh (Ghosh 1990) who emphasized its comprador character and the fact that this class enriches itself by serving foreign monopoly capital. Unlike western development of capitalist class, the background of these entrepreneurs was trade and finance in British India. In this context, modern industries that developed in India were heavily dependent on imported technology, which had a negative impact on employment generation as it further destroys small indigenous industries without creating the possibility of absorbing the surplus population in large capital goods industries. As these industries started with investment of huge capital and imported technology without passing through a phase of large numbers of small firms competing for markets as happened elsewhere, they could hold a monopoly position from their very inception in British India. The big capitalist class, by using its monopoly position and its service to foreign monopoly capital, continuously obstructs the growth of numerous small manufacturing units that not only employ large section of the working population but has the potential of generating indigenous technology.

The colonial force, with the aim of perpetuating colonial extraction, ruptured the necessary linkages among different sectors of the economy that normally facilitate capitalist growth. This prevented accumulation in some important sectors like agriculture and diverted the surplus to other sectors that were effectively plunders. This process stunted the growth of sectors that employ a larger work force and exaggerated the economic centrality of other narrow sectors. This pattern of development correspondingly created certain native classes, and specifically, the Indian big bourgeoisie whose interests have been inextricably linked with the interests of imperialist capital. Naturally, after the transfer of political power, the path of development adopted by Indian rulers has been geared towards maintaining that linkage (Rao 1995). Even after the transfer of power in 1947, India’s big capital has shown no urgency in implementing thorough land reform that could revolutionize
production relations and thereby strengthen the base upon which indigenous capitalist production could develop alongside a strong internal market. Instead they played a reactionary role fearing the emergence of numerous entrepreneurs among different nationalities, and thereby losing the vast market that they have monopolized with the assistance of colonial rulers. The big capitalists, with their monopoly position, have developed the habit of garnering large profits by continuing their dependence on foreign technology and with this practice technological
dependence have been continuously reproduced. Naturally, with such restricted markets, India’s big manufacturing capital could not flourish so that the surplus population in agriculture might be absorbed in an economical way. As the market remains very weak, the industrial production of India is geared towards the demands of a relatively affluent minority of the population.

In the period of globalization the reactionary role played by big capital becomes even more intense with the direct assistance of imperialist monopoly capital. As the crisis of the market intensifies internationally as well as nationally, the government’s policies are geared
towards implementing the following programmes;

a) Ruthless plunder of assets of people including their meager productive assets like land, forest and minerals so as to make windfall profits.

b) Privatizing most of the public sectors and thereby facilitating windfall profits for corporate sectors by simply grabbing them at a nominal price.

c) Implementing policies such that big capitalists along with international monopoly capital can grab a substantial part of the surplus generated in agriculture through trade in inputs, contract farming and the entry of corporate capital in retail.

d) Whereas subsidies are discouraged in agriculture and as well as for other consumer items for people, more and more subsidies are provided to big capital in the form of providing enormous chief bank credit, reducing taxes and waiving restrictions on import and export.

e) Doing away with labour and environmental laws. Special economic zones have been established in order to surpass the law of the land involving tax, export-import duties, labour and environment.

f) Encouraging consumption credit to upper middle class consumers to increase sales of luxurious commodities and thereby filling the coffers of big capital.

Have all these played a greater role in reducing unemployment? No. Strikingly, despite the clamor about rising GDP, there has been only a
marginal increase in manufacturing employment. Manufacturing employment reached to 12.2 percent in 2004-05 of the total work force compared to 10.7 percent in 1983. Again, the medium and big factories that are considered to be the organized or factory sector (according to official definition; employing 10 or more workers using power or 20 or more workers not using power) employ a miniscule part of the total work force, hardly 1.5 percent (Aspects of Indian Economy, No.44 2008). And this is not all. Within the organized sector, the share of informal workers is on the rise. Actually with the program of globalization, international finance capital, with the aim of garnering huge
profits, has created a new international division of labor. As a consequence, in countries like India with relatively backward production relations, there had been planned informalization of the formal sector workforce along with shifting a significant proportion of production processes to the informal sector thereby making windfall profits by exploiting the cheap labour (Kerswell & Pratap, 2016). The share of informal workers (those without employment stability and social security, such as ‘casual’, ‘contract’, ‘apprentice’, etc.) in the organized sector rose to 58 percent in 2011-12 from 41 percent in 1999-2000 (Aspects of Indian Economy, No.58, 2014).

Actually one of the crucial conditions for the recent spurt of huge profit for corporate sector is vast pool of informal sector employment or semi-employment.

a) It provides a range of cheap goods and services that enter into corporate sector production.

b) It also provides cheap goods and services that help keep down the wage bill of the corporate sector.

c)It acts as a ‘reserve army’ that keeps the wage at the level of bare minimum. This explains how the share of ‘organized sector’ in the national income has risen when its share in employment has fallen (Aspects of India Economy, June, 2017). One has to remember that a semi-feudal economy, not a capitalist economy, can only provides the material basis upon which such vast pool of informal sector employment is possible when needed.

The work forces (more than 10 percent) who are employed in unorganized manufacturing sector is working in primitive conditions, at very low wages, using very backward techniques. Of course, there had been an increase in the share of the work force in the service sector, up to 24 percent in 2004-05 from 17.60 percent in 1983 (Aspects of Indian Economy, No.44, 2008). Here again the large majority are low paid workers but some sectors like restaurants, telecommunications, finance, real state etc. employ a good number middle class jobs.

When there is big claim about capitalist development by upholding the decrease in the share of the Indian workforce in agriculture, the actual picture is different. The decrease does not signify any real development as these workers have neither been absorbed by the
industrial sector nor by any meaningful employment in service sector. Strikingly, the share of the work force in the construction sector, most unproductive sector, has been significant, 10.6 percent in 2011-12 up from 3.1 percent in 1993-94. The participation of large number of rural population in this sector is intimately related to the growing indebtedness of the peasants. The majority of construction workers spend their
income on payment of usury debt (Rumba 2015).

In order to expand the market as well as the purchasing power for high valued commodities like houses, cars, and other luxury commodities, an intense program of urbanization has taken place by displacing a large number of people. An impression has been created as though India is fast moving towards a developed economy, where, in reality, this process has actually created a few super rich at the cost of common people thereby further depressing the purchasing capacity of the broad masses and restricting the markets for necessities. The programmes of urbanization that are encouraged for last two decades are in no way based on industrialization. The growth of the urban population is not mainly due to capitalist polarization of the peasantry but due to the massive pauperization and eviction of the peasantry by the ‘development’ project. It is mainly based on thriving real estate business supported by open and hidden public investment. The urban centres have very little industry, and they are mainly based on trade, finance, services and entertainment. A large number of flyovers, bridges, elevated corridors and even bridges across the sea are being built by using public funds for the benefit of automobile owners, automobile manufacturers and construction firms, which again displaces large numbers of poor people. The takeover of agricultural land by the eviction of peasants for Special Economic Zones (SEZ) and other urbanization programmes has drastically reduced the net sown area to 140.9 million
hectares in 2003-04 from 143 million hectares in 1990-91 (Aspects of Indian Economy, No.46, 2008). The urban centres symbolize the imperialist globalization inspired model of development that creates a super rich along with an elite middle class at the cost of the living condition of the vast majority. It is these displaced people who flock to the urban areas in search of jobs. The urban centres, where wealth is
concentrated, create the need for an underclass to service the extravagant life style of the rich.

The government in the neoliberal era not only deprives the agricultural sector of crucial funding, but it also diminishes the small manufacturing sector which actually employs large part (86 percent) of the manufacturing workers. The share of agriculture in bank credit fell from 15.9 percent in 1990 to 11 percent 2006, during the same period the corresponding fall for small scale industry has been 11.5 percent to 6.5 percent. On the other hand, during the same period, the share of personal loans (loan for housing, automobiles, consumer durables, credit card etc.) increased to 23.3 percent in 2006 from 6.4 percent in 1990. Outstanding credit for buying automobiles has risen from Rs. 46,020 crores in 2002-03 to Rs. 108,840 crores in 2006-07. 89 percent of the new cars sold in 2006-07 were bought with credit, with loans covering 79 percent of the value of the purchase (Aspects of Indian Economy, No. 45, 2008). So the increase in the consumption of high valued commodities in recent years is not a symbol of the growth of real purchasing power. Rather, it has been credit-fuelled consumption
with the aim of triggering an industrial boom. Against this scenario of consumption by a narrow segment of the population, the markets for mass consumption like soap, edible oil, biscuits, cloth, footwear, and pencils that are mostly produced in the informal sector are actually shrinking. Starved of investment, the share of the informal sector in manufacturing declined from 37.2 percent in 1999-2000 to 32.6 percent in 2009-10(Aspects of Indian Economy, No.50, 2011).

There has been a huge drain of surpluses legally and illegally due to trade liberalization, opening almost all of the sectors to foreign direct investment and allowing foreign institutional investment that further cripples capital accumulation. The legal transfer mainly consists of repatriated profits and hidden surplus value generated by unequal exchange and foreign direct investment and this amount as a share
of GDP is comparable to that under British rule (Cope 2012 & Aspects of Indian Economy, 2017). Even if one considers only illicit outflows of capital that are carried out mainly through mispricing of trade, that itself is astonishing. Global Financial Integrity (GFI) estimated the total outflow from India very conservatively at $213 billion for 1948-2008. If the funds had earned only the rates of return of US Treasury bonds, the present value would be $462 billion – i.e., twice the size of India’s external debt in that year. According to GFI estimates, more than two-thirds of this outflow took place in the period of liberalization after 1991, and GFI finds a statistical correlation between concentration of income in the hands of the top sections and illicit transfers. Deregulation and trade liberalization not only facilitates astonishing concentration of wealth (73 percent amassed by the top one percent) but also contributes to accelerated illicit transfers abroad ( In the period of globalization and liberalization, the corporate sector has seen a boom for some time
(2003-08) in the past decade that has been reflected in the rise of GDP. But behind the increase were external factors like outstanding foreign inflows (mainly from the US) that were permeating the world in the form of speculative capital seeking larger gain. In India, this
inflow to a large extent financed spending by upper middle classes thereby strengthening the market for housing, automobiles and consumer durables. Though there has been an explosive growth of markets for these commodities, as the tastes of Indian elites are shaped by imitating the west, there had been runaway growth of imports leading to a continuous rise of the country’s trade deficit. This was 10.9 percent of the
GDP in 2012-13, five times higher than that in 2002-03 (Aspects of India’s Economy, 54, 2013). At the same time as the growth of luxury consumption is projected as a manifestation of rapid economic growth in India, the living standards of the vast majority are going down in absolute terms which are evident from data on food consumption. Calorie consumption per person per day has fallen by 106 calories or 5 percent in the rural areas and 51 calories or 2.5 percent in the urban areas (NSS report, No. 513). On the other hand, 87 per cent of the rural population was unable to obtain 2400 calories per day which represents the poverty line in 2004-05. Per capita protein consumption in rural areas has also come down by 5 percent in the same period (Patnaik, 2007). Half of India’s children are malnourished, two-fifths of rural women and one third of rural men, too, are measurably underweight.

The National Commission for Enterprises in the Unorganised Sector, 2007 chaired by Arjun Sengupta, observed, “One of the major highlights of this Report is the existence and quantification of unorganized or informal workers, defined as those who do not have employment security, work security and social security. These workers are engaged not only in the unorganized sector but in the organized sector as well. This universe of informal workers now constitutes 92 percent of the total workforce. We have also highlighted, based on an empirical measurement, the high congruence between this segment of the workforce and 77 percent of the population with a per capita daily consumption of up to Rs. 20 (in 2004-05) whom we have called “Poor and Vulnerable”. The number of persons belonging to this group increased from 811 million in 1999-00 to 836 million in 2004-05”. In sum, under colonial rule the emergence of big capital in India has a different history when compared to its counterpart in advanced countries. After the end of direct colonial rule big capital still continues
its subservient role, the only exception being that now the subservience is to imperialist capital as a whole instead of a single imperialist country. A necessary condition for this continuation of subservience is the existence of pre-capitalist formations that continuously reproduce the conditions of dependence on imperialist capital. In such atmosphere, neither production based on full-fledged capitalist market relation nor bourgeoisie democratic political institution could flourish. Actually these conditions provide the social basis of the prevalent practices
like indiscriminate plunder of natural wealth, misuse of government funds, unscrupulous trade, banking fraud, tax evasion, generation of black money by the rich and specially, these have increased thousand fold in the neo-liberal regime. On the other hand, the parliamentary system in India did not evolve on the ruin of feudalism but it has been imposed from above in one form or another since the colonial time itself with the aim of protecting the interest of colonial masters along with their indigenous subordinate classes. Naturally, the present political system, being a part of superstructure built on such pre-capitalist formation, by itself could not break the prevalent economic relations. Rather the political system led by Indian monopoly capitalists has adapted to the semi-feudal relations along with its corresponding cultures that encourage various obscurantist ideas, religious bigotry, caste hierarchy and untouchability.

In particular, the duality has increased thousand fold in neo-liberal economic regime. On one hand the system is continuously generating the demand for commodities enriched with the application of advanced science and technology of the western countries and on the other hand, superstition, unscientific beliefs, religious violence and caste atrocities are on the rise, and are sometimes directly promoted by the state machinery.


The mainstream economics sees the world consisting of developed and under developed countries without any reference to the definite property relations under which people of respective countries produce their necessities. It considers every individual (as landowner, or as owner of capital or as owner of labour) to be a free actor in the market that try to optimize his earning by utilizing the factors of production that he owns and these actions create an equilibrium that optimally use all the production factors of society. Hence program like land reform never appears in its agenda as according to its formulation, the most appropriate pattern of landownership conducive to optimal productivity will be automatically achieved if there is no intervention by the government (like land ceiling subsidy, procurement of crops etc.) in the operation of the market.

In contrast to this approach, Marxist political economy takes into account the existing relations of production and judge whether it promotes or acts as fetters in the development of social productive force. In the light of this approach, the productive force of a society is determined by the people and tools of production. Though the tools used in production reflect the magnitude of the capacity of human beings to transform nature, they are not the determining factor. It is the people that are decisive. Once again, the people should not be seen merely a producers
in the abstract. People participate in production in a given production relation that has three aspects, namely,

(a) the form of ownership of the means of production,

(b) the position and mutual relation of people in production and

(c) the form of distributionof products. Hence the question of developing the productive capacity of people cannot be considered
in isolation from production relations.

The dualism in the Indian economy wherein the overwhelming majority is trapped in low productivity employment with meager income and a small section is employed in high productivity sectors is not reflective of some transitional phase. It is deeply rooted in the social structure and this dualism is further intensified by separating the question of growth from employment in the neo-liberal regime.

In this background the main problem of the Indian economy seems to be the inability of using the productive power of the vast masses to produce wealth. This happens as the production relations in Indian society and, especially, the determining factor (namely, the form of ownership) remains pre-capitalist in nature. The caste system further accentuates this problem by dehumanizing large groups of people and subjecting them to various forms of medieval oppression. In such a situation one cannot hope to see any homogeneous development of industrial sector due to lack of demand from vast masses. There is no alternative way to create the home market for industrial goods without changing the prevalent production relation so as to increase the purchasing power of the vast masses.

The prevailing backward production relation in India is not something that remains isolated from the economic structure of the rest of the world. It is intricately connected to operation of imperialist finance monopoly capital, which maintains its supremacy by continuously reproducing the subordinate position of indigenous capital of backward countries. Again, this kind of subordination can be continued only when various forms of semi-feudal relations act as a barrier to developing the productive power of the vast masses, thereby restricting the growth of indigenous capital and technological knowhow.

Genuine land reform is the most fundamental program that can break this barrier by uprooting the parasitic extraction. It is a well known fact that in rural India land ownership acts as the key to the exercise of authority. Other factors such as control over other productive assets (like water) and various markets play their role in conjunction with landownership. The diversification of assets for the rural rich is
minimal unlike in developed countries, 73 percent of the assets being land for the richest 14 percent of rural households (Aspects of Indian Economy, 2017). In particular, caste domination is intricately connected to monopolization of land ownership by higher castes and some middle castes and landlessness for lower castes. Obviously, genuine land reform will give a decisive blow to the caste system that has given
further strength to the existing semi-feudal relations in India, by liberating the masses belonging to lower castes from their caste based occupations.

Having been freed from the yoke of parasitic feudal extraction of surpluses by dint of genuine land reform, demand for ordinary commodities would grow among the vast peasant masses with the surplus in their hand, thus providing the market for indigenous industries. The initial technologies required for these industries will have to be consistent with the popular knowhow. It may create a condition that would make it possible to employ the bulk of the potential labour force in producing the material needs of the vast majority. Employment of this vast majority, in turn, would further enlarge the market with widely dispersed demands. This process of development will create a firm ground on which large industries along with people’s control over technology will appear. In this way, linkages among various sectors, these having been fractured in the present economic circumstances, will be reestablished. This will further create a favourable condition whereby the peasant, instead of sticking to a piece of land, would find employment in industries which will generate demand as well as necessary
capital for further industrialization. The program of land reform is also necessary for democratization of the agrarian society without which genuine cooperation or collectivization will not be possible even in the future. Clearly this kind of development would not serve the interest of Indian big capital as it will break the chain using which they have been accustomed to garner huge profit by serving the international finance capital.

There are some recent opinions (Basole and Basu, 2011) which assert that distributive land reform will reduce the size of the average farm further thereby making it unviable for the growth of production. Firstly, this is a mechanical approach that fails to see the necessity of
overhauling the existing class relations that obstruct the proper utilization of productive power of vast masses. Genuine land reform is actually geared to unlocking the fetters that stand in the way of developing the productive forces in India. Secondly, the subdivision of holding, a feature of crisis prone precapitalist production relations, continues to happen in the present system of ownership. Moreover, in India it is well known that the big farm is less productive than the small farm cultivated by the small peasant. At the same time, the essence of land reform means breaking the feudal ownership of land, not the abolition of ownership in general. Even under matured leadership
with progressive attitude towards society land can be distributed in a viable way with the aim of achieving better life for real producers with greater productivity.

The main objective of genuine land reform is not just mechanical implementation of everyone getting a piece of land however small it is, rather emphasis has to be shifted from the mere distribution of existing wealth, to forging conditions for the creation of new wealth and that can only happen on the grave of the existing semi-feudal economic relations.

(Some of the key points in this article have originally been developed in an article entitled, “The Enduring Prevalence of Semi-feudal Agrarian Relations in India” published in ‘Journal of Labor & Society’, June 2018.) – Author.

Acknowledgement: The author highly acknowledges Dr. Zak Cope for his encouragement and his assistance by providing various conceptual ingredients in writing this article and improving the English.

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