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INTERNATIONAL BANK FOR REOONSTRUCTION AND IlEVEIDPMENT

THE AGRICULTURAL IlEilEIDPMENT OF INDIA WITH SPECIAL

REFERENCE TO THE FIRST FIVE-YEAR PLAN

ANNEX II

to the

Report and Recommendations of the

Economic Department Maurice F. Perkins

Mission to India

January 30, 19,2

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TABLE OF CONTENTS

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Summary and Conclusions i

I. INTROJ]CTION 1

II. THE FIRST FIVE-YEAR PLAN .3

(1) Price Policy 4

(2) Cash Crops 5

(3) Foodgrains 11

SUMMARY AND CONCLUiIONS

1. The purpose of this report is to appraise the agricultural aspects of the First Five-Year Plan.

2. This plan calls for the following increases in output over the period 1951/52 to 1955/56:-

Cereals Oilseeds Sugar Cotton Jute

7,200 thousand long tons 375 thousand long tons 690 thousand long tons

1,200 thousand bales 2,060 thousand bales

3. The present Indian price control policy, which is expected to be adhered to, in general, during the period of the plan, has attempt­ed to keep agricultural prices from rising. Modifications in this policy in respect to cash crops (oilseeds, sugar, cotton and jute) is believed to have placed them in a favorable position relative to cereals (wheat, rice and millets).

4. For the achievement of the targets, in the case of cash crops, major reliance is placed on private initiative through the price in­centive. In the case of cereals major reliance is laid on government­sponsored and administered schemes for irrigation, land reclamation and clearance, increased use of fertilizer, better seed and an expanded extension service. Here the price incentive, in general, is a subordin­ate factor.

5. From an examination of the various schemes it is provisionally concluded:-

(a) That the targets for the cash crops could be reached but with a greater expansion in acreage and a smaller increase in yields than the plan envisages.

(b) That the expansion in cash crop acreage may, to a certain extent, encroach on land expected to produce cereals, due to the favorable price incentive in the case of cash crops.

(0) That the planned expansion in cereals production is unlikely to be fully attained in view of the possible encroachment of cash crops on cereals acreage and because the expected in­crease in yields may not be attained in such a short period of time.

(d) Possible over-expansion in 1Norld jute supplies, (i.e. in India and Pakistan) may lower jute prices to the point where the price incentive to expand jute production may disappear un-Jer free market conditions.

6. The methods adopted to develop Indian agriculture from a long-term point of view are sound but the results, in the form of expanded output of cereals, are likely fully to accrue more slowly than is ex­pected.

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7. Insufficient factual knowledge is available on the price-cost inter-relationships of crops competing for land and other resources in the various and differing agricultural areas of India. A much closer study of the actual situation is needed before the present price policy can be adequately appraised.

I. INTRODU.qTION

1. The purpose of this report is to appraise the agricultural aspects of the First Five-Year Plan. In order that the reader may properly integrate the plan into the framewo~k' of Indian agricultural institutions and longer term policy, however, a brief survey of the agricultural situation at present is essential.

2. T~,'o-thirds of the population of India is engaged in agriculture. The rural economy is largely self-sufficient except for those districts located near large urban centers and the main transport arteries. The small village community, relatively isolated and having few wants which it cannot satisfy internally, is the social and political basis of Indian life.

3. The most important characteristic of Indian agriculture is the backwardness of its agricultural practices and the relative rigidity of its organization. The land is farmed on an extremely small scale under a scattered strip system reminiscent of medieval European conditions. The methods of cultivation used are primitive and involve a minimum of capital investment. The system of land tenure involving high rent payments to absentee, non-producing intermediaries has not, in the past, been conducive to capital investment in agriculture either on the part of the intermediaries or the producer. In many sections of the country a large part of the natural resources of the soil have been ex- ' hausted and the yields obtained are consequently low. \,i ~ (HvLJ rrt,·tv

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4. Over the past half century or so the introduction of modern methods of public health to a certain degree has reduced the death rate. This has caused a continuous pressure on the soil of an increasing popu­lation which has not been relieved to any great extent by urbanization and industrialization. The consequences appear in a continuing deterior­ation and exb~ustion of the 5011. An expansion in land under CUltivation has occurred but the increase in output has apparently not kept pace with the increase in population.

5. Another important characteristic of Indian agriculture is its substantial dependence upon the monsoons. A failure of the monSoons means widespread famine and death, unless food can be imported. Dams, wells and other irrigation and drainage facilities would permit a much larger proportion of the available water supply to be utilized productive­ly than is the case today. They would go a long way towards offsetting the effects of a season of short rainfall, mitigating the effects of floods in seasons of excessive rainfall, and, in some areas, permitting two or even three crops to be harvesteq, vhere at present only one is obtained. In many of the best agricultural lands of India the provision of adequate water supplies is a prerequisite to other forms of improved cultivation practices.

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6. A wholesale transformation of Indian agricultural organization would be necessary in order that any significant improvement in produc­tion may take place. The essentials for a progressive development are absent in the agricultural organization itself. The tendency at the present time is one of stagnation-. In the words of the Report of the Planning Commission:

I1The conditione of Indian agriculture are typical of a static backward economy, which is unable to expand and keep pace with the growing population".

The necessary transition requires that the motivating force be app~ed by means of outside intervention. This is the task facing the Central and various state Governments in India at the present time.

7. The essentials of administrative schemes for agricultural devel-opment in India may be summarized as:-

(a) provision of legal means through which institutional change may be initiated - here the two most essential reforms relate to the system of land tenure and to the plethora of small, scattered holdings,

(b) provision of funds and direction for capital investment,

(0) provision of an enlarged administrative and extension staff capable of carryi~g out the necessary changes in organiza­tion and of disseminating information and instruction to the producers,

(d) formulation of an adequate price policy whereby the forces of private enterprise may be mobilized to achieve desired goals.

8. The reform of basic agricultural institutions regarding land tenure and farm organization is of a long-run nature and is likely to proceed slowly. Leg1s1ation designed to alter the system of land tenure by reducing the number of non-productive intermediaries and abolishing the practice of rack-renting has been passed and some progress has been made in carrying out the necessary reforms.

9. The widespread system of small, scattered holdings has long frustrated attempts to seeure consolidation or the land in sufficiently large units to permit the formation of a managerial unit capable of economic operation. A solution is of paramount importance particularly where the adoption of modern, technological methods is contemplated. The problem is being tackled through various "Consolidation of Holdings" Aqts. These generally provide for a measure of compulsion in cases where the specified number of cultivators in a village are in favor of consolidation of their land. In the case of the ~tates of Bombay, Punjab and Papsu, however, more radical legislation provides for compul­sion on ctate initiative.

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10. Coincident with the drive for land consolidation, the formation of cooperative farming societies is being encouraged in aL~ost all states. It is hoped thereby to meet the need for an efficient farm management unit. A system of cooperative village management is ,,,iaely regarded as being the best solution to this problem in that it is intermediate be­tween absolute private enterprise and State farming and is likely to prove suitable to the Indian scene.

11. Other essentials for a long-term Indian agricultural policy are contained in the recently announced "Ten-Year Program for Land Transfor ... mation". This centrally endorsed scheme has for its objective the secur­ing of land utilization flon a rational basis so that the available re­sources of land, water and livestock are developed to a maximum extent ll •

The ultimate objective of this scheme is to provide the people with "adequate nouris~~ent, and with a balanced diet". The chief provisions of this program which seek a solution to the long-term problems of Indian agriculture, are five in number:

(1) The concentration of funds and technical facilities on the 48 million acres of crop land i"hieh are irrigated or have adequate rainfall and are thus capable of intensive develop­ment.

(2) The reclamation and/or reso"ring of 10 million acres of fallow and waste land.

(3) The creation of a land army of volunteers supported by an extension service in at least one hundred thousand villages.

(4) A cattle improvement program centering around the provision of 60,000 stud bulls a year and the eradication of rinderpest disease.

(5) A reforestation project.

II. ~ FIR~T FlVE-YEA~~

12. By way of contrast the First Five-Year Plan as regards agricul­ture is more specific and short-run. It covers the period from 1951/52 to 1955/56 and seeks to attain the following increases in output as com­pared 1Jith the base year 1949/50:.

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Production Actual Forecast 1949(20 1955L26

Food grains (thousand long tons) rJ 46,000

Oilseede (thous. long tons) 5,142 Cotton (thous. b$les) £I 2,62S Sugar Cene (theus. long tons)£! 4,938 Jute (thous. bales) gj 3,089

!I Lar~ely rice, wheat, millets. ~ Of 392 pounds each. £! In terms of gur. ~ Of 400 pounds each.

53,200 5,517 3,828 5,62S 5,149

Planned Bxpansion Over the Ba§.~~eriod 1249/50 Absolute Percentage

Amount Increase

7,200 375

1,200 690

2,060

15.6 7.3

45.6 14.0 66.7

13. The means whereby these increases are to be implemented may be classified into two categories: (1) price incentives and (2) direct government aid. On the basis of the degree of price incentive to be provided an important distinction may be perceived between the policy as affecting cas~ crops (sugar, o11seeds, cotton and jute) and that affecting food grains (largely rice, wheat and millets).

(1) Erice Poli£!

14. The basic aim of Inaian price policy since 1939 haa been to pre-vent any significant rise in agricultural prices. This policy is made possible by the absence of a well organized rural and agricultural pressure group; hence it reflects largely the interests of the consumer. As the Indian diet consists primarily of cereals, it has been applied particularly to food grains.

15. Under the First Five-Year Plan it is proposed to continue this price policy. This means that the projected expansion in cereals output of 7.2 million lon? tons will have to be attained without the use of a substantial price stimulus in the form of higher relative prices of food grains. Expanded output therefore will have to be based largely on the increased facilities which are to be made available to the producer by t~e Central and ~tate Governments 1/.

16. In the case of cash crops, however, the plan ph.ces much more reliance on the price incentive. Recent perrrdtted increases in the prices of some cash crops, plus their generally favorable situation rela­tive to ,food grains now felt to exist in most part~ of the country, are

11 In December, h~lever, rice price increases were granted in Madras and i,lest Bengal; ether Ptates may be contemplating a similar step.

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expected to produce, in large part, the necessary incentive to aft

expansion in production. State aid, however, is also to be provided in this spaere largely to encourage and develop a more intensive agri­culture. It is hoped thereby to attain the desired targets by means of greater yields per acre as well as by an expansion in acreage, in oraer to avoid any substantial tenaency towards the planting of cash crops on land reserve for cereals under the plan. In view of these different emphases in policy, this report will deal separately with cash crops and food grains.

(2) Cash Crops

17. (i) Control PolicX. The prices of the three products of sugar cane ~ crystal sugar~ gur 11 and khandsari (brown sugar) - are controlled.. r1inimum prices are also fixed for the purcr....a.se of sugar cane by the sugar mills. In the case of crystal sugar, which is produced in the sugar mills, the Government procures and sells a predetermined quantity of the annual production at controlled rates. Each factory is then permitted to sell its remaining output on the open market without price restriction. In 1950/51 about 88 percent of the total output of crystal sugar was procured by the State and the remaining 12 percent was sold on the free market at prices very much higher than the control­led price.

18. (ii) Recent Pr9duction Tr~. Over the past three years 1948/49 to 1950/51, for which comparable statistics are available, sugar cane production has been expanding. In t.he 1950/51 season, sugar cane production was 12 percent above that of 1948/49 (for an average inorease of 6 percent per annum). This expansion reflects the increasing demand for sugar products and the relative profitability of producing sugar cane.

19. 1.Jith the inception of the above outlined price policy in 1950/51 the production of crystal sugar in the central factories expanded by 14 pe~cent. !his attests to the ability of the factories to realize a sufficient profit margin on the amount of sugar they were permitted to sellon t he free market. Profits have been such that the factories were willing to pay prices above the established minimum for sugar cane in order to draw supplies away from the village gur and khandsari industries.

20. (iii) ~~rgets for Sug!t. The First Five-Year Plan calls for an increase in su~ar production of 690 thousand long tons in terms of gur. This is equal to 6.9 million tons of sugar cane and repre­sents an expansion of 14 percent over the production in the base year 1949/50 (or approximately 3 percent per annum). This expansion is t,"-

11 Gur represents unrefined sugar produced largely in rural areas by the village sugar cane producers themselves. Gur production repre­sents the largest single output of the Indian sugar industry.

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expected to materialize largely in the form of crystal sugar in order to utilize fully the existing capacity of the industry.

21. In order to promote an intensification of sugar production, in addition to the price incentive, the Indian Central Sugar Cane Committee has been seeking to increase the yields through better irrigation facil­ities, improved seed, more fertilizer and an extension service. In Uttar Pradesh, the leading sugar producing state, developmental work has been entrusted to a Cane Commissioner who has been provided with a staff to disseminate a knowledge of better cultivation methods in the field. A number of Development Councils with similar functions in local regions are also in existence.

22. (iv) Appraisal. The planned expansion in sugar cane out. put of 3 percent per annum appears reasonable in view of the average annual increase of 6 percent obtained over the past two years. Moreover, after allolJing for population increase over the period covered by the plan the per capita av~ilability of all sugar cane products should ex­pand by only 6 percent. In overall terms such an increase could be very easily absorbed on the controlled market.

23. Hm.Jever, if the expansion in output should go mainly into crystal sugar, as planned, and if the present proportion of total production per­mitted to be sold on the free, uncontrolled market is maintained, then the expansion in the free market supply lJould amount to 13.4 percent. such an additional supply may have considerable price repercussions on the uncontrolled market, 1.,hich is probably quite narrow, even though crystal sugar consumption by the soft drink market is expanding. Should this prove to be the case and a considerable fall in the uncontrolled price take place, the profitability of central facto~y operations may shrink to the point where further expansion in output is not justified under existing control regulations. Hence, unless increases in production of the rural sugar pr01ucts - gur and khandsari - take place (which is un­likely under the present price regulations) a change in the sugar price policy may be necessary in order to revive the price and profit incentive in crystal sugar production. A definitive statement on the sugar policy would require a much closer study of the actual situation than has been conducted to date.

24. Granted that the planned increase in output is achieved, there still remains the question as to whether or not the target will be attained through an increase in yields, as planned, rather than through an expansion of acreage. The expansion ,,'hieh has taken place in the past two years has been due to an increase in acreage; yields have im­proved but slightly. Thus~ in spite of the campaign of the Indian Central Sugar Cane Committee, inaugurated in 1948/49, little improvement in intensive cultivation practices has occurred. Although better results may be achieved due to an intensification of effort under the Five-Year Plan, it is unlikely in this short space of time that the improvement will be significantly large enough to achieve the desired increases in yield with a minimum of expansion in acreage. The expansion in output, if achieved, is more likely to come about by means of a further expansion in acreage. This point of view may prevail in at least one section of the Indian Government for, in contrast to the official view that increased sugar cane production can be obtained from an expansion in yield, a second

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estimate of increased sugar cane production and acreage by 1955/56 made by members of the Ministry of Food and A~riculture shows an expansion in acreage of 22.2 percent over 1949/50 levels as compared with an in­crease in production of 14.0 percent. This implies a decrease in yield.

B.. OiJ,seeds

25~ (i) Con~l Poligx. There has been a tendency for 011-seeds prices to rise due to increased internal and external d~mand for oils and fats and their products. The basis of oilseed poliey in re­cent years has been to keep the prices of oilseeds in line with compet~ ing crops (largely millets but also cotton and paddy). The methods . adopted have been indirect.. The prices of vanaspati (a vegetable oil substitute for butter and ghee), which utilizes about 20 percent of the Indian ground nut production, have been controlled. Licensing of manu~ facturers has also been instituted in order to keep vanaspati output d~Tn to about 150,000 tons annually. The reason for this is that the Central Government is desirous of maintaining adequate supplies of oilseeds for local village use by means of restricting the oilseed purchases of the vanaspati manufacturers.

26. Other control measures have been the regulation of forward trading, as an anti-inflationary measure, and of exports~ Exports of sesame, rape and mustard seed and their oils are generally not allowed, except in the case of mustard oil to Pakistan. In the case of ground­nuts, linseed and castor seed and their oils, exports are permitted subject to quota restrictions in the interests of an adequate domestic supply and consequently relativelv low internal prices. In addition to these measures, the inflationary effects of Korea on international de­mand, which affected Indian oilseede prices, were neutralized by the imposition of high export duties~

27. (i1) ~t Proguction Trends. Over the past two years 1948/49 to 1950/51, for v!hich comparable statistics are available, oil"!" seeds acreage has expanded by 10 percent. Production in 1950/51, how­ever, did not show any increase due to poor growing conditions in that season. The acreage increase in that year~ h~~ever, would indicate that the price incentive is adequate~

28. . (iii) Planned ~rg~ts for Oilseeds. The Five-Year Plan calls for an increase in oilseedsproduction of 375 thousand long tons exclud­ing the production of cotton seed expected from the expansion in the cotton program. This represents an increase of 7.5 percent over the base year 1949/50 (or 1.5 percent per annum). This expansion is expect­ed to accrue from an increase in yields rather than from a further ex­tension in acreage. A total of 26 million acres is to be sown to oil­seeds by 1955/56 as compared with 25~98 million in 1950/51.

29. . Apart from the price incentive, various schemes have been under-taken by the Indian Oilseads Committee in order to improve yields through an intensification of cultivation. For the most part, .these have taken the form of financial assistance to State Governments to enable them to conduct research on improved seed types and to introduce measures to con­trol pests and diseases.

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30. (iv) AEpraisal. The achieved expansion of oilseeds acreage in the past two seasons leads to the conclusion that sufficient incentive exists for an increase in the supply of oilseeds at the pres­ent time.. Moreover, the planned expansion in production could be achieved on the actual 1950/51 acreage with an improvement of 3 percent in the yield over that actually achieved in the base period 1949/50. Alterna ti vely, 1"i th a maintenance of 1950/51 yields, an expansion in acreage of 9 percent would be adequate to obtain the required supply. This is slightly smaller than the expansion in acreage over the past two years.

3~ On these bases it would appea~ that the prospect for success is bright. In fact the probability is that an over-expansion in acreage will take place, and that moderate success in achieving better yields will result in an expansion in production greater than that called for.

Cotton -~ ....

32. (i) Contr9~ Policy. The advent of World War II, by isolating India from its chief markets for cotton and its sources of supply of imported foodstuffs, created a cotton surplus and a foed shortage. Hence from 1942 onwards the acreage under short staple cotton was reduced and an attempt was made to utilize the land thus freed for an expansion in the acreage of foodgrains. ~uccess, however, was rather limited as a good deal of the land went into fallow rather than into food gra ins •

33. Cotton was placed un~er price control in 1943 and has remained under control since that time, except for a short period in 1948.

34. Partition turned what was an internal movement of cotton from Pakistan to the Indian Union into an international movement: India became a net importer. Hence, to conserve foreign exchange it became desirable to expand domestic cotton in order to raise production to near prewar levels. To this end all restrictions on the expansion of cotton acreage have been removed and the land revenue has been remitted on a1ditional land brought under cotton CUltivation. In addition ceiling prices were recently increased. On the other hand in the latter part of 1950 the export duty on raw cotton was raised by 300 percent, in order to insuJate the domestic market from the sharp increases in cotton prices then occurring on the international market.

35. (ii) Recent Prod~ction Trends. The average prewar Indian Union pToducti0D has been esti~ted at 4.15 million bales (of 392 pounds) on 20 0 9'1 mil1iLn acres. In the period 1945/46 - 1947/48, under the policy '")f rest:"'iction, production had. declined on the average to 2.17 million bales on 11.23 million acres. In the 1950/51 season output in­creased with the removal of restrictions to 2.93 million bales on 13.86 million acres. It is apparent, therefore, that fluctuations in output have bean largely associated with changes in acreage rather than yield.

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36. (iii) Elanned Targets for Cotton. The plan calls ~or an expansion in cotton pro~uction of 1.2 million bales over the base year (1949/50) production of 2.63 million bales. This is an increase of 46 percent, and represents largely a return to near-prewar levels of out­put. The exr.ansion, however, is expected to be achieved on a much smaller acreage than would have been necessary prewar. This means that in addition to an expansion in acreage of 3~g million the yield would have to be increased by 11 percent, as compared with the base period, in order to achieve the planned output on such an acreage.

37. In order to secure-such an increase in yields a program of intensified cotton cultivation has been worked out in collaboration with the Indian Central Cotton Committee. This program calls for an ex­pansion in irrigation facilities, credit facilities for the purchase of fertilizers and improved seed, fertilizer subsidization and the develop-­ment of a cotton extension staff in important producing states. The extension officers are to be responsible for the administration of the program.

38. (iv) Appraisal. The rather large percentage increase in production should not be too difficult to achieve, given the necessary price incentive, in as much as there exist. a fairly large body of cu1 .... tivators who have acquired a knowled~e of cotton production in the pre-1~ar period and who had been forced to restrict their output~

39. It remains problematical, however, whether or not more output can be achieved by sharply increased vie1ds on the planned acreage of only 16 million. Some increase in yields is to be expected but in view of the difficulty in disseminating new techniques among a large number of pro­ducers, it is likely that the achievement of the target will require an expansion in acreage beyond that which is contemplated. An achieved in­crease in yield of 5 percent above the 1949/50 level over the next five years is about the maximum which may be expected in view of the necessary expansion in acre~ge which is probably not as good a quality as that al­ready in cultivation, and in view of the lack of progress to date. To obtain s'-'.ch an increase in yields, an acreage of 17 million would be necess~j'~ and could be achieved. The price incentive, in view of the internati~nal cotton sitUation, likely to continue favorable as appro-priate internal price policies are adopted.

40.. Achiew~ment of the target will not obviate the necessity for cotton i~ports ~ut it 1~ill reduce the overall requirement. Indian cotton is predol!linant:_y short staple so that a large proportion of her require­ments ci nediv!'" &nd long staple cottons nnlst be imported. To a certain degree '·,he ..-lamps tic cottons may be substituted for foreign growths but an .l.;:npc· .. 't marg~_'1 is expected to remain. India ',Tould require about 7CO,OOO :.1'\le5 ;' -)f 392 pounds) of foreign cotton.

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41. (i) Control-folicy. The effect of World W~r II on the Indian jute industry was similar to that experienced by cotton. It became necessary to reduce raw jute production and to expand rice output. With the return of peacetime conditions the problem reversed itself into one of a jute shortage. This was aggravated by Partition 1 . ..rhich separated a large proportion of the raw jute supply in Pakistan from the processing industry in India and converted what was an in­ternal movement of raw jute into an external one. The shortage of raw jute forced the industry to seal l2t percent of its looms and operate on a 42t hour week. A further aggravation occurred when Pakistan's refusal to devalue her currency raised the price of her raw jute in terms of the Indian rupee.

42. Jute and rice compete for the same land in vlest Bengal and other nearby producing states (a new area for jute has recently been found in Travancore). The main problem facing the Indian jute industry has been to secure an additional supply of raw jute by an appropriate price in­centive which, at the same time, would ensure that jute prices did not get out of line in relation to rice prices. This was first attempted by the fixing of raw jute prices by the Indian Jute i'4ills Association, with government approval, at 35 rupees per maund (of 82.3 pounds) for bottoms grade. This policy was abandoned in Harch 1951 after an agreement was signed with Pakistan for the delivery of Pakistan jute to India at a price higher than the Indian internal price. The market then became free. The wave of inflationary fervour follm"ing the outbreak of the Korean war, however, forced jute and jute products prices rapidly up..rards. In order to neutralize this development the Indian Government took steps to reduce the prices which the Indian jute mills could afford to pay for raw jute by raising the export price on jute products. In the case of burlap the duty was raised from 350 rupees per long ton in September, 1949, to 1,500 rupees in November, 1950, The effect was to aid in reducing the price of raw jute to about Rs. 55.

·43. (ii) Recent Production Trends. The average prewar raw jute production, within the boundaries of the present Indian Union, has been estimated at 1.90 million (400 pounds) bales from 862 thousand acres. From this base India has been successful in increasing her output during the past two years. In 1950/51 production was expanded to 3.29 million bales on 1.45 million acres. In the current year, 1951/52, acreage advanced by 48 percent over the previous year due to the sharp rise in prices experienced in the planting season. As a result of the increase in raw jute supplies in both India and Pakistan, the Calcutta jute mills have reverted recently to a 48 hour week but the sealing of l2t percent of the looms still remains in effect. This means an increase in produc. tion of jute products during 1952.

44. (iii) fJanned ~arAet§ for J~~. The plan calls for an in-crease in ra'-1 jute production by 2.06 million (400 pound) bales, or 66.7 percent, over the base year, 1949/50, production of 3.09 million bales.

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45. This expansion is expected to materialize as a result of an increase in acreage from 1.16 million in t.he base year, 1949/50, to 2.0 million in 1952/53 when planned production amounts to 4.60 million bales. Thereafter, production is expected to increase to 5.15 million bales on a constant acreage through an increase in yields of 12 per­cent by 1955/56. According to this estimate, however, yields in 1955/56 would be 3 percent lower than in the base period.

46. This program is to be implemented in close collaboration ,.,i th the Indian Central Jute Committee through the various 8tate extension staffs, who 1.dll aiminister the program. The administrative measures which l.]ill be adopted to secure the planned increase in output include loans and subsidies for the purchase of improved seed and fertilizers, construction of retting tanks, the establishment of seed multiplication farms, demonstration farms for exhibiting new cultivation techniques, more intensive utilization of fallow land, etc.

47. (tv) ~aisal. Under a very favorable price situation the 1951 jute acre~ge in India has expanded to 1.45 million acres. As the target acreage under the plan is only 2. ° million, it l-JOuld appear, with a continuation of present price incentives, that the desired acree.ge would be achieved. As is indicated by estimates of acreage targets to be reached by 1955/56, the desired production is expected to be achieved with no allowance for increased yields t

48. The above conclusion, however, is based upon the assumption that the economic situation in the jute industry remains favorable. The Indian jute policy of expanding production to over 5 million bales would, with the addition of Pakistani production, raise the world supply of raw jute to around 11 million bales. This compares with a supply of 8.1 million bales in 1949/50, which was insufficient to meet world needs except at high prices. Although with full employment the world would undoubtedly utilize such an increased quantity of jute, but only at sharply lower priees thah now exist. 1,Ti th lower jute prices the question would become whether or not, as compared with the price of rice as an alternative crop, it T,!ould be profitable for the jute producer to ~~intain his output at the planned lsvel. It is doubtful that he could do so.

49. It is also problematical whether or not it is profitable for India to pursue such an expansion policy in competition 1tJith Pakistan. The failure of the two countries to cooperate in a uniform jute policy may result in an expanded raw jute production in India and a new jute processing industry in Pakistan. The continued fbsence of a joint and cooperative approach to the problem may "lell result in a situation detri!'lental to both nations. Such mutually contradictory policies as have been pursued up to the present could undermine the security of the ",hole industry.

(3) Foodgrains

50. (i) ~ground. The area covered by the Indian Union has been a deficit food region for some considerable time. The separa­tion of Burma in 19235 and Pakistan in 1947, 1.lith their respective

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surpluses of rice and wheat, converted what was an internal movement of foodg~ins into an external movement with balance of payments im­plications.

51. The Indian food problem is usually considered in terms of cere-als rice, wheat and millets - partly because these grains constitute the bulk of the daily intake of food for a large proportion of the popu­lation and partly because statistical data for other for~s of food products - apart from pulses, sugar cane and oilseeds - are not avail­able.

52. Statistics on foodgrains in India are not particularly good. Lack of production estimates for some Indian states prior to the war and the disruption in the data caused by Partition render estimates since 1947 not strictly comparaole with the earlier data. However, as Central Government allocations of surplus grains are based on the esti~~ted levels of production in the deficit states, it is generally believed that a considerable underestimation of production levels r~s occurred in recent years.

53. In spite of these defects in the data it is generally conceded that the overall domestic food situation is difficult. Although an ex­pansion in the acreage of cereals has occurred over the past decade, production has not shown any upward trend. The report of the Planning Commission takes into consideration that:-

"In spite of substantial imports of foodgrains from abroad in reeent years, per capita availability for domestic consump­tion of cereals is now 10\.J'er than before the war. It

54. During the war concern over the Indian food position was height~ ened by t).,e lack of shipping Hhich isolated India from food surplus areas; since then the rapid rise in cereals prices has added to the problem.

55. The Grow More Food C~mpaigns had their origin in such conditions, when a crop failure and lack of access to foreign supplies of grain re­sulted in the Bengal Famine of 1943. The campaigns developed from mere exhorta tion into a planned program. In ~'1arch, 1949, a three-year campaign to increase cereals production by 4.8 million long tons was launched. The goal was self-sufficiency in 1951.

56. This plan called for the reclamation of 800,000 acres of un­cultivated but cultivable land, improved river irrigation, an exten~ sion of tube-well irrigation and an increased use of fertilizer.

57. The year 1950/51, h01,fever, experienced adverse weather condi tiorJ~ with the partial failure of the monsoon floo'18 and earthquakes in some areas. Production declined from 46 million long tons in 1949/50 to ap­proximately 42 million, and imports in 1951 were stepped up.

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58. Apart from adverse weather conditions, however, the campaign suffered from certain defects. First, little effort itlaS made to link up the prOVision of productive equipment, such as irrigation facilities, with measures to ensure that the installations were properly utilized. Secondly, the program waS widely dispersed so t~at intensive effort in the most promising areas was not possible. Thirdly, adequate trained personnel for extension work WaS not available and what was available had to concentrate on administrative affairs. Finally, the program was not specifically linked to the procurement of marketable surpluees to meet the need of supplies for rationing. Instead, where production was increa.sed, the additional supply tended to disappear in the form of increased consumption by rural areas.

59. (li) Ihe First,Fiv~LPlan as Regards Foodgra~ns. In regard to foodgrains, the Grow More Food Campaign in 1950 was widened into an "integrated crop production program" as a part of the First Five-Year Plan,with a target for increased cereals production of 7.2 million long tons by 1955/56. This constitutes an expansion of 15.6 percent over the 46.0 million ton production level in the base period, 1949/50. It repre­sents a continuation of G.M.F. in that the means to be utilized in achiev­ing the targets in the form of capital investment are similar and, in sorre cases, the same projects are involved.

60. The new program, however, is more realistic than the 1949 G.'c::.F. campaign in that it is admitted that a .3 million ton annual grain import will be needed during the period of the plan. After allowing for this level of imports plus the increase in production envisaged, cereals availability per capita per day under the plan \-[ould total 14.8 oz. This amounts to a 10 percent increase over 1950 availability of 13.5 oz.

61. The absence of an adequate price incentive under the present price control policy requires that the desired output be attained by means of the provision of additional physical and social capital to the productive process. Certain projects and schemes are proposed to this end, as shown in the table below.

Projects and Schemes to Incre~se Foodgr~ --- E!oductionunder the Fire-Year Plan

Major irrigation projects Minor irrigation projects Land improvement end reclamation Manure and fertilizer schemes Seed distribution schemes Other schemes

Total

Expected Additional Foodgrain Productl~·o~n~~ __ __

--nhous~d 100g tons)

1,900 2,000 1,74.3

885 5.30 144

7,202

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62. About 54 percent of the expected increase in production is to materialize from the various major and minor irrigation schemes which include the several multi-purpose dam projects, tube wells, open wells, tanks, pumping installations and new irrigation channels which together are expected to irrigate an additional area of 15.6 million acres by 1955/56. A further 24 percent of the increase is to be attributed to various land development and reclamation projects covering 8.5 million acres. These include the land clearing projects of the Central Tractor Organization and State Governments plus the bringing into cultivation of cultivable but at present uncultivated land. Further, increases are planned by the additional application of fertilizers and improved seed. In the final year of the plan, 467 thousand long tons of fertilizer plus compost are expected to be applied to 10.7 million acres of land to produce an increase of 885 thousand tons of foodgrains. Finally a production of 144 thousand tons of cereals is expected from the appli­cation of other improved cultural practices over an area of 2.6 million acres.

63. Apart from the actual installation of the physical equipment, the burden of disseminating supplies in the form of fertilizer and seed and of providing the necessary administration and guidance required under the plan will fall upon the Extension ~ervice. In order to per­form the expanded functions, an additional staff of 4,293 ',li11 be re­quired. To supply the necessary personnel, new agricultural colleges are to be organized and the capacity of existing ones is to be increased. Trainees are to be given practical experience to supplement their more formal education, and training centers in agricultural extension methods are to be opened with the help~ the Ford Foundation.

·64. Lessons derived from the weaknesses of the Grow More Food Cam~ paign are also being utilized to improve th~ administration of the in­tegrated production plan. In particular, emphasis is to be concentrated primarily on schemes which have been shown to be mOst productive and the work is to be concentrated in intensive belts and linked with procurement.

65. (iii) A~~raisal. The First Five-Year Plan as regards agriculture represents an "integrated" program in the sense that food­grains are no longer considered in isolation but as an integral part of the whole agricultural picture. An appraisal of the foodgrains situation, therefore, requires a prior appraisal of cash crop outlook, particularly as it encroaches upon the foodgrain situation in terms of an expansion in cash crops at the expense of f~odgrains.

66. An unofficial estimate of acreage expansion by crops during the five years of the plan, submitted by members of the Department of Food and Agriculture, is give:p. belO'w. This is compered with actual acreage in the base year, 1949/50 and in 1950/51, the latest year for which sta­tistics are available.

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(million acres)

CroE Expansion in Acreage.over Actual Acreage

1955/56 the BAse Perior! 191,.9[50

1949/50 1950/,l Actual to Expected to 'Pre1iminar;yl \Forecast) 1~50L51 1955/56_

Foodgrains 195'2 195:.4 ~ 201.7 . --2.d_ ~2.-26:0 Oilseeds 24 .. 9 26.0 1.1 1.1

Cotton 12 .. 2 13.9 16.0 1.7 3.8 Sugar cane 3.6 4.1 4.4 0.5 0.8 Jute --1.:2. -l:2 -2:.Q .Jhl.. ~

Total Cesh Crops...kL.,2 ~ ~ ~ 6.5

Grand Total 237.~ 238.~ 220•1 ..bL 12.7 -;} Represents offioiai "final" estimate adjusted to make comparable with

the 1949/50 Ilrevised lt estimate.

67. Expansion in acreage of cash crops in 1950/51 as compare::1 '-lith 1949/50 shows that oi1seeds acreage had already reached the 1955/56 targets and sugar cane acreage was approaching this level. The chief further expansion in~creage to reach the 1955/56 targets involves cotton. Here an additional increase of 2.1 million acres would be necessary. This may occur without affecting the acreage devoted to foodgrains to any considerable extent" '"Then cotton acreage was contracted during the war a large proportion of the land went into fall~.: or othe~~ise remained idle. A reversal of this process, therefore, could oc~~r with relatively small effect on food grains acreage in the cotton producing area.

68. All in all, assuming the 1955/56 acreage targets are reached, a further expansion of 3.9 million acres in cash crops would be necessary to achieve 1955/56 target levels over the 1950/51 actually achieved acreage. Of the target quantity probably 2.5 million represents land which is likely to involve a substitutlop of foodgrains for cash crops. A further allowance for possible over-optimism in yield per acre ex­pansion should be added to this 2.5 millionxres. No adjustment of this nature is necessary in the case of oilseeds as the expected in­crease in yields is modest; in the case of sugar cane and jute, the acreage estimates submitted show no increase in yields for the five-year period as a whole. Hence only in thece.se of cotton is some ad­justment necessary_ Here a further 0.5 million acre allowance vould boost the total acreage under cash crops for l . .,rhich there is e. possibility of encroachment on foodgrains up to. 3 million acres. This represents a relatively small figure in relation to total 1949/50 foodgraina acreage of 195.5 million, but one which could constitute a threat to the attain­ment of foodgraiXl8 target, if an uncontrolled substitution of cash crop acreage for foodgrains acreage ~hould occur.

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, 69. The increase in foodgrains of 7.2 million long tons from the 1949/50 base of 46.0 million tons is expected to be produced on 201.7 million acres of land as compared with 195.5 million in the base period. This represents an increase of 6.2 million acres eccording to the data supplied in the above table. However, data submitted on page 14 in connection with land development and reclamation shows that the planned expansion in foodgrains acreage amounts to 8.5 million. In view of the possibility of cash crop substitution, outlined in the preceding para­graph, it is better to take the 6.2 million acreage expansion figure.

70. The method of arriving at the goal of 7.2 million tons increase in cereals was to calculate the probable expansion in output which would arise from the additional irrigatibn facilities, more land, increased supplies of fertilizers, improved seed and added extension services as contemplated under the plan. ~part from the expansion in acreage (ass~~ed at 6.2 million) the increase in yields from the other measures, which would be necessary to achieve the 7.2 million ton increase, would amount to the equivalent of an average rise in yields over the whole of India of 12.5 percent for the five-year period or by 2.5 percent per annum. This is an exceedingly high rate of increase.

7l. In the United States, over a 45~year period, overall yields of wheat have expanded by only 0.6 percent per annum and rice, by 1.2 per­cent; millets showed no expansion. This is true even though, in the case of rice investment in irrigation has taken place for similar reasons to that desired by India. Comparison with the United ~tates may not be con­sidered as strictly appropriate, in that the levels of output per acre in India are SO much 10\..rer absolutely than in the United ftates that the addition of a given input might produce a much greater increase in yield than l.Jould be the case in a more qeveloped agricultural economy. But there are compensating factors in that the level of technical ability and the commercial spirit of farmers, the services and experience of experi­ment stations and extension workers and the marketing facilities are so much greater in the United ftates that in all probability the extra efficiency so attained would act as a compensatory f~etor. Thus the United states experience may well be regarded as a rough measuring rod for purposes of comparison.

72~ Apart from the question of the abili ty of the Indian nl3.tion to complete the various projects as scheduled (a question which not con-sidered here in view of the magnitude of the task of appraisal), it is highly probable that in calculating the benefits from the projects a large degree of intercoordination among the various factors required for high level production was assumed. This contention is strengthened 1Nhen it is observed that most of the effort is directed to'_Tards a relatively small proportion of the total agricultura] acreage of In'Ua - 15.6 million acres in the case of irrigation projects, 10,7 in the case of fertilizers, and 12.2 in the case of improved seed. A good proportion of each of these projects involves the same acreage.

73. The point made here is that the prov~s~on of certain factors of production in an underdeveloped economy may not automatically achieve the results which similar factors have been observed to achieve in a

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highly developed economy such as the United ~tates or Western F.urops. Bearing in mind the framework of existing institutions and the illit­erate, conservative and unscientific nature of the Indian peasant it is rather optimistic to expect him to be able to handle modern pro­duction facilities so as to achieve such a sharp increase in output over a short period of time.

74. Again it must be borne in mind that the plan envisages the provision of relatively major items of agricultural equipment in the form of irrigation, land clearance etc. It does not consider the relatively minor factors of physical and social capital, usually possessed by the modern farmer. These are essential to en efficient operation of a modern agricultural economy but are difficult to plan.

75. In part, an attempt to fill the gap is made by the provision for an expansion in the extension service. But it is likely to require more than five years, even under ihe present development of extension in India, to achieve the necessary expansion within the extension service itself and to equip it with a sufficientlv trained and experienced personnel capable of rendering adequate help to the peasant c~ltlvator. The weakness in the Indian service in this re~ spect is located in the lower rather than in the upper, administrative ranks of the service. Moreover, a further time lag i~ present in that full public acceptance of an extension service is a relatively slow phenomenon.

76. There still remains largely unsolved the problem of a sufficient pool of capital in the hands of the peasantry. This refers not only to the provision of short- and intermediate-term credit but to the in­dispensible fixed capital requirement needed by the farmer to provide the added equipment necessary to handle additional irrigation and more intensified production in general. Even though this may be small per capita under Indian conditions, it still requires time to produce or acquire.

77. With regard to more deta::J.led administrative aspects of the plan, it 1s apparent from a control point of view tbt the degree of plRnning , is lacking in depth. Many important details are unavailable such as the increase in acreage and production expected from each of the various foodgrains, particularly wheat, rice and millets. Current policy ,·lith regard to prices is based on inadequate information. Insufficient study has been given to price inter-relationships in view of the im­portant role which it plays in the attainment of the cash grains tar­gets. Little is known about the substitutability of competing crops under given price relationships in particular sections of tte country beyond the most general information, so that it is diffic~lt to see hO'..v a successful control policy can be baseel upon the present state of knO'..vledge. A definitive statement on general price policy 140uld require a much closer study of the actual situation than has been conducted to date.

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78. However over-optimistic the plan may be in the short-run with regard to the ability of the Central and state Governments to adminis­ter adequately such a widespread an~ integrated scheme, an~ of the Indian peasant to take advantage of the increased resources made avail­able, nevertheless, from the long-term point of view it is fundamentally sound in principle.

79. The present food situation in India in rel~tion to the growing population has reached a position which calls for bold measures. It would be impolitic at the present time to pursue a more conservative policy purely on the basis of more efficiency in the short-run. In emphasizing expanded irrigation and land reclamation and clearance in the First Five-Year Plan the Indian Government is tackling the problem in a manner which will achieve concrete results and at the same time provide the prerequisites to long-run improvement in agriculture. Without adequate irrigation facilities the other essentials to a more intensified agricultural system are of little avail. Additional working capital, better seeds and insecticides, and the dissemination of improved agricultural techniques are of small advantage unless an adequate suprly of moisture is available.