Declining Public Investment in Agriculture: Impact on Small Farmers

For decades, Indian agriculture was treated as a public responsibility, something the state invested in because millions of livelihoods depended on it. That has changed. Since the 1980s, agriculture has increasingly been reshaped as a market-driven sector, where returns on capital matter more than the welfare of the people who grow the food. This shift has quietly widened the gap between farmers who had access to capital and infrastructure, and those who never did, particularly tribal and small peasant cultivators in India’s hilly and forested regions.

From welfare priority to market commodity 🔗

Agriculture in independent India began as a welfare project. The state saw itself as responsible for protecting cultivators, expanding irrigation, and building the infrastructure that private capital had little incentive to fund on its own. Over time, this role has been rewritten. Under a market economy, agriculture becomes a commodity valued for its returns rather than its role in sustaining rural communities. Public investment, land, and credit flow toward regions and crops that promise profit, while regions with poor connectivity, fragile soil, or difficult terrain, home to a large share of India’s tribal population, are left behind.

Land reforms and the promise of security 🔗

Immediately after independence, the government’s first task was to dismantle the exploitative structures left behind by colonial land revenue systems. At independence, roughly 57 percent of India’s land was under the zamindari system, with intermediaries extracting rent from cultivators who had no ownership rights of their own. The Zamindari Abolition Acts sought to remove this layer, and tenancy reforms tried to fix reasonable rents and give tenants security of tenure. On paper, these measures were significant. In practice, implementation was uneven, and zamindari abolition did not end landlordism or sharecropping in many parts of the country, and large-scale eviction of tenants followed in several states.

Alongside land reform, the newly independent state invested heavily in irrigation infrastructure. Multipurpose river valley projects like the Hirakud Dam in Odisha and the Bhakra Nangal Dam in Punjab were built to expand irrigated area and support the agriculture that would feed a young nation. Jawaharlal Nehru famously called these dams the “temples of modern India”, and they did transform vast stretches of rain-fed land in the states where they were built.

The Green Revolution and its narrow geography 🔗

By the mid-1960s, India’s focus shifted from land ownership to agricultural technology. Two back-to-back droughts in 1965-66 had pushed the country toward dependence on imported grain, and the government responded by promoting high-yielding variety seeds, chemical fertilisers, agrochemicals, and modern irrigation. This period, known as the Green Revolution, transformed food production. Grain output, which had been under 25 million tonnes at independence, climbed toward 131 million tonnes by the end of the 1970s, turning India from a food-deficit nation into one capable of feeding itself.

Who the revolution actually reached 🔗

The gains, however, were not spread evenly. The Green Revolution’s success depended on assured irrigation, credit, and agricultural extension services, resources that were concentrated in Punjab, Haryana, and western Uttar Pradesh. These states already had canal networks and access to groundwater through tube wells, which allowed farmers there to adopt the new seed and fertiliser package quickly. Regions without this base, including large parts of tribal and hilly India, were structurally excluded from the start. Tribal cultivators in areas without irrigation or road connectivity had no realistic way to participate in a model built around high input costs and reliable water supply.

Even government reports acknowledge this imbalance. Agricultural growth in the decades following the Green Revolution has consistently traced back to a small set of well-endowed states, while output growth across large parts of the crop sector remained modest compared to livestock and horticulture, sectors that required less irrigation dependence. For tribal communities practising shifting cultivation or rain-fed farming on marginal land, modernisation simply bypassed them, deepening the developmental gap between them and farmers in the Green Revolution belt.

The market turn: why public investment started falling 🔗

Public investment in agriculture, as a share of the sector’s GDP, rose through the 1970s and into the early 1980s, largely on the back of continued spending on irrigation and rural infrastructure. From the mid-1980s onward, this trend reversed. Government reports note that the declining share of public investment was mainly driven by stagnation in irrigation spending, as a growing share of the agricultural budget was consumed by subsidies for fertiliser, power, and credit rather than new capital creation.

Private capital fills the gap, unevenly 🔗

The 1991 economic reforms accelerated this shift. As the state pulled back from direct investment, private capital formation in agriculture grew rapidly, but this growth was concentrated among farmers who already had access to capital, land titles, and irrigated holdings. Research comparing India’s agricultural investment to other large developing economies found that public investment in Indian agriculture actually declined during the 1980s even as the overall agricultural sector expanded, with private investment only partly compensating for what the state withdrew. For a farmer without land title or reliable irrigation, largely the reality for small and tribal cultivators, this private capital simply did not reach them.

The credit squeeze that followed 🔗

One of the clearest consequences of this shift shows up in rural credit. Following the 1991 reforms, banking sector changes pushed newly liberalised banks to prioritise profitability, and they pulled back from less profitable rural agricultural lending. As one analysis of India’s farm credit system puts it, the vacuum created by retreating institutional lenders was filled by non-institutional lenders charging far higher interest rates. Small and marginal farmers, who lack land titles or a credit history that formal banks require as collateral, were pushed further toward informal moneylenders. Research on agricultural finance in India confirms that a lack of institutional credit at affordable rates remains one of the central drivers of the country’s chronic agrarian crisis, alongside poor irrigation, weak market access, and outdated technology in underserved regions.

What this means for small and tribal farmers 🔗

The combined effect of declining public investment, uneven Green Revolution gains, and shrinking institutional credit has been what agricultural economists Reddy and Mishra described in 2009 as a large-scale agrarian crisis, one where non-remunerative returns on farming pushed cultivators into debt cycles they could not easily escape. For farmers in well-connected, irrigated regions, this pressure was serious. For tribal and small peasant growers in hilly, forested, or rain-fed areas, it compounded an existing disadvantage. These communities were already outside the reach of Green Revolution infrastructure, and now found themselves excluded from the credit and investment systems meant to support them as well.

Environmental costs on top of economic ones 🔗

The intensification that did occur, concentrated in a few high-input regions, brought its own set of problems. Decades of heavy groundwater extraction for irrigation have led to falling water tables in states like Punjab and Haryana, a pattern that has continued largely unchecked since the Green Revolution years. Continuous use of chemical fertilisers and pesticides has also degraded soil health and contributed to water pollution in canal and river systems. Ironically, the very regions that benefited most from public investment decades ago are now dealing with the ecological costs of that intensity, while tribal areas that were never developed in the first place continue to lack even basic irrigation infrastructure.

What do you think? 🔗

What do you think? If public investment in agriculture had kept pace with the market’s growth after the 1990s, do you think tribal and hilly regions could have caught up with the Green Revolution states? And should India’s agricultural policy today prioritise closing this regional gap over further boosting private investment in already well-developed farming belts?

References

1. https://www.legacyias.com/land-reforms-in-india/
2. https://www.drishtiias.com/to-the-points/paper3/land-reforms-in-india
3. https://pubadmin.institute/understanding-public-policy/nehru-agricultural-reforms-green-revolution
4. https://www.drishtiias.com/to-the-points/paper3/green-revolution-1
5. https://www.niti.gov.in/sites/default/files/2023-07/Aggricultrue_Amritkal.pdf
6. https://www.indiabudget.gov.in/budget_archive/es2005-06/chapt2006/chap816.pdf
7. https://www.ers.usda.gov/sites/default/files/_laserfiche/publications/44243/12208_eib37_1_.pdf?v=53280
8. https://www.yalejournal.org/publications/economics-of-indian-farmers-movement-a-study-of-agrarian-distress-and-a-vicious-debt-cycle
9. https://www.orfonline.org/research/improving-access-to-agricultural-credit-new-perspectives