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Indian Economic Policy

Notes of transport made it possible to carry food from one region to the other without much loss of time.
But periods of famine were invariably periods of high food prices and extensive agricultural
unemployment. Therefore, the mass of the poor people found it impossible to purchase food.
Consequently, the earlier famines were described as food famines but later ones are more appropriately
described as purchasing power famines. The Famine Commission (1898) made it abundantly clear
when it emphasized that food was “always purchasable in the market though at high and in some
remote places at excessively high prices.” Two factors were responsible for pushing up food prices :
First, an impending shortage of food meant hoarding and speculation which helped to push up the
price level very fast. Secondly, government did not allow any decrease in the export of foodgrains
even in the lean years. Consequently, the speculator and the Government both accentuated the gravity
of the problem.
Causes of Famines
There is no doubt that the immediate cause of famines was the failure or the unseasonableness of
rains. It is common knowledge that the means of irrigation were undeveloped and rainfall played a
crucial role in agricultural production. Famines were a common occurrence in the dry regions and
areas with a rainfall varying between 15 and 60 inches. The areas affected most by famines were
Bihar, West Bengal, Orissa, Rajasthan. Tamil Nadu. Maharashtra, Andhra Pradesh and Karnataka.
Failure of rains caused an absolute deficiency which resulted in great famines, but unseasonableness
of rainfull also proved destructive to crops and, therefore, created food scarcity. In a country wholly
or mainly depending on rainfall, considered as the most dominant factor determining agricultural
production was the behavior of monsoons.
To understand the real factors which led to the occurrence of famines again and again in India--while
they were banished after 1850 from Europe--it is quite desirable to understand the economic and
sociological transformation that took place during the British rule. Three factors can be discerned in
the Indian agricultural society during the British period :
(1) The destruction of Indian handicrafts : Fierce competition from British manufactures resulted
in the destruction of Indian handicrafts. It stripped the artisan, the weaver and the
handicraftsman of his means of livelihood. Under the circumstances, the unemployed increased
the pressure of population dependent on land. This led to excessive sub-division and
fragmentation of land, the creation of a class of landless labourers and an increase in the rent of
land. Whereas in 1842, Sir Thomas Munro did not deem it necessary to statistically measure the
number of landless labourers because they formed a too insignificant portion of Indian
agricultural population, in 1872 the Census Commission counted agricultural labourers as 18
per cent of agricultural working force. This sudden increase of the agricultural proletariat in
the 30-year period exposed the most vulnerable section of the population in Indian rural society
to the uncertainties of weather.
(2) The new land system : The British created a class of landlords so as to affix responsibility for
land revenue, but the British left the process of rent fixation to the free market mechanism. The
increasing demand for land for a growing agricultural population led to an exorbitant increase
in rents. Land was transformed in this process to an attractive capital asset. Thus, there was a
great desire among the moneylending classes to acquire land. The rise in prices of land enhanced
the value of the security in the form of land against which peasants could borrow. This led to
increase in agricultural debt of the Indian peasantry repeatedly exposed to uncertainties. The
high rates of interest charged by the moneylending classes made it impossible for the peasants
to repay their debts. Gradually lands passed on to the moneylending classes. The dispossession
of the peasantry by the moneylenders added to the process of pauperisation of the cultivating
classes.
Thus, the new land relations which embodied the creation of a class of land owners and a class
of cultivators (whether on a tenancy basis or a daily wage) separated ownership from cultivation.
The landlords were interested in extracting high rents leaving a pittance with the cultivators.
The investment on land fell sharply because the cultivators had to part off with a major portion
of the produce in the form of rent to the landlords and interest to the moneylenders. This created

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