Transformation of Indian agriculture after neoliberal reforms: Growth, employment, and food security challenges

Abstract

This paper investigates the structural transformations in India's agricultural sector following the neoliberal reforms introduced in 1991. Although agriculture still provides employment for a significant share of the population, recent years have seen a considerable slowdown in its growth rate. The sector currently faces an unprecedented crisis marked by low productivity, rising rural unemployment, and increasing food insecurity. In the past, agricultural investments were largely driven by the availability of credit and subsidies for modern inputs, particularly during the period of "social and developmental banking" between 1969 and 1980. However, with the onset of liberalisation, the government shifted its stance, advocating for a more commercially driven banking sector, which reduced institutional support for agriculture. While India has achieved an average GDP growth rate of around 7% over the past 25 years, this aggregate figure masks the sectoral disparities. The agricultural sector’s growth has lagged far behind that of manufacturing and services. Unlike the East Asian experience, where industrial sectors absorbed surplus agricultural labor, India’s manufacturing sector has not expanded sufficiently to provide alternative employment opportunities. As a result, rural areas have been left vulnerable, with persistent underemployment and worsening living conditions. This paper emphasizes the importance of a nuanced sectoral analysis to truly understand the impacts of economic liberalisation. Revitalizing the agriculture sector through targeted public investments, institutional reforms, and strengthened rural support systems is crucial for achieving inclusive and sustainable development.

Keywords. Agricultural governance, New Institutional Economics, Contractual arrangements, Farm management, Transaction costs.

JEL. Q12, D23, Q18.

SDGs. SDG2, SDG2.