Agricultural

Sector UNIT 6 AGRARIAN RELATIONS AND

MARKET LINKAGES*

Structure
6.0 Objectives
6.1 Introduction
6.2 Agrarian Relations
6.2.1 Land
6.2.2 Labour
6.2.3 Capital
6.3 Changes in Agrarian Relations in India
6.3.1 Land Tenure System
6.4 Features of Agrarian Relations
6.4.1 Contractual License Arrangements
6.4.2 Labour Tenancy
6.4.3 Sharecropping
6.4.4 Land Leasing
6.5 Tenancy Status in India
6.5.1 Legalisation of Land Leasing System
6.5.2 Landless Agricultural Labour
6.6 Types of Markets: Constraints and Linkages
6.6.1 Goods and Factor Markets
6.6.2 Formal and Informal Markets
6.6.3 Primary, Secondary and Terminal Markets
6.6.4 Market Constraints
6.6.5 Market Linkages
6.6.6 Group Formation
6.7 Let Us Sum Up
6.8 Key Words
6.9 Some Useful Books and References
6.10 Answers/Hints to Check Your Progress Exercises

6.0 OBJECTIVES
After reading this unit, you will be able to:

• state the determinants of ‘agrarian relations’ outlining the connotations

of its two constituents viz. land tenure and agrarian structure;
• indicate the consequences of changing ‘agrarian relations’ in India;

90 *
Prof. S. P. Singh, I.I.T. Roorkee
• explain the changes in the agrarian structure of India; Agrarian
Relations and
• enumerate the major reforms initiated in the ‘land tenure system’ in Market Linkages
India;
• discuss the features of ‘agrarian relations’;
• describe the concept of share cropping with its advantages and
disadvantages;
• analyse the trends in the ‘tenancy status’ of India;
• differentiate between the various types of agricultural markets; and
• delineate the issues behind ‘market constraints’ and ‘market linkages’.

6.1 INTRODUCTION
Agrarian relations in India have undergone significant changes since
independence. Feudalistic system of agriculture was abolished by bringing
the Land Abolition Act (1956). This Act made provision for giving the
ownership rights to the cultivators. It was an important step towards agrarian
reform as it ensured right to the tillers and facilitated private investment in
agriculture to boost production and productivity. Since then, a number of
changes in agrarian relations have occurred. Some of them are due to
government initiatives and some others are due to market forces (e.g. land
ceiling, share cropping, land tenancy, contractualisation of agriculture labour,
etc.). The present unit describes the main features of agrarian relations in
India and examines the market linkages (both goods market and factors
market).

6.2 AGRARIAN RELATIONS

Agrarian relations are largely determined by: (i) the land tenure and (ii)
agrarian structure. Land tenure refers to relationship of people with respect to
land. The relationship can be: (i) either legal or customary and (ii) either for
individuals or for groups. It decides how the land is owned, used and
transferred. The term ‘agrarian structure’ denotes a framework of social
relationships in which all agricultural activities like production, marketing
and consumption are carried out. Both these aspects (i.e. agrarian relations
and agrarian structure) are inter-related. The agrarian relations prevailing at a
point of time in any country reflects the influence of historical, political,
social and economic factors. These relations determine: (i) how and by whom
land is cultivated, (ii) what kind of crops can be produced and for what
purpose, (iii) how food and agricultural incomes are distributed and (iv) in
what way or in what terms agriculture is linked to the rest of the economy.
We can understand agrarian relations in terms of how land is linked to labour
and capital markets. These relations can change over time due to change in
mode of production and agrarian structure.

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Agricultural 6.2.1 Land
Sector
The term ‘land relations’ refer to the relationship of people to land. In an
agrarian society, access of a person to land resources is not only critical for
his livelihood but also for his socio-economic status. The most important
form of land relation is ownership of land, which can be in the form of
individual or community ownership. Individual ownership means that the
land owning person has exclusive right on its use, control and transfer.
Community ownership implies that individual members of the community
have access to use the land as per the norms and rules set by the community
(e.g. common grassland). Apart from ownership, land can also be acquired by
a person on rent through the institution of tenancy. Tenancy gives rise to a set
of land relations different from ownership. Another form of land relations is
with the landless labour who may either not be capable of or willing to be a
tenant cultivator. He can work as a labour on other’s farm for wage
employment. He may be attached labour (regular) or casual labour.

6.2.2 Labour
The term ‘agricultural labour’ refers to a person who works on another
person’s land for wages paid in money, kind or share of produce. In case of
wages paid in money or wages paid in kind, the agricultural labour does not
face any risk of cultivation. However, if the labour is paid wages in the form
of share in the produce, he faces the production risk i.e. if farm production
declines, his wages will also decline. In India, a majority of agricultural
labourers come from the socially deprived groups such as scheduled castes
and scheduled tribes. Agricultural labour can be classified into two
categories: permanent labour (attached) and casual/contract labour. The
attached labour generally works on annual or seasonal basis and gets his
wages in cash or kind as per the existing norms. Casual labour is hired on the
market-driven wage rates, as and when required, especially during the peak
agricultural activities.

Labour relations in agriculture has been changing over a period of time due
to various factors like: (i) farm mechanisation and technological change, (ii)
farm diversification, (iii) out-migration, (iv) socio-economic transformation
and (v) public employment programmes (e.g. MGNREGA, affirmative
policies). Rural non-farm employment is expanding and agriculture is
undergoing rapid structural changes with the adoption of new technologies.
All these changes have also affected the labour relations in agriculture. New
form of labour relations has emerged. Earlier attached agricultural labour was
the dominant class of agricultural workers. This got gradually shifted first to
casualisation and still later to contractualisation of agricultural labour. Now,
particularly in agriculturally developed regions, landless labourers prefer to
work as contract labour on piece rate basis rather than on causal labour or on
time wage basis.

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6.2.3 Capital Agrarian
Relations and
Market Linkages
Capital is one of the key factors of production. Capital relations in agriculture
are largely determined by land ownership and tenancy changes. Under the
feudal system, cultivators were mere tenants and did not have ownership
right on the land they cultivated. However, with the development of money
as the medium of payment for labour services, the traditional and customary
relations between the landlord and the cultivators changed to pure money
relations. Still later, after the abolition of Zamindari system, the tenant
cultivators got the ownership right to land. This created the capitalist mode of
farming under which capital relations in agriculture underwent a significant
change. Money lenders emerged as a new class replacing landlords.
Cultivators got an incentive to invest in agriculture (in the form of irrigation,
modern technology, land development and farm machinery) to increase
production, productivity and profit.

In the capitalist mode of farming, demand for external inputs like hired
labour, energy and credit increases. Consequently, there is more flow of
capital to agriculture. Such relations also make for changes in the
relationships of men in production (i.e. transformation in social conditions).
For instance, the cultivator does not grow food only to feed himself and the
small community but starts producing for the market. He thus gets to face
market conditions/risks and technology besides the nature’s risks. Emergence
of modern agribusiness and changes in labour relations like sharecropping,
small-scale capitalist farming, petty commodity producers and
contractualisation of wage labour has made significant changes in the
agrarian relations in India. Rising share of external inputs and energy
intensified production practices has led to declining share of human and
animal energy. Investment in labour saving technology has reduced demand
for labour in agriculture and increased the outflow of rural workforce to
urban areas.

Check Your Progress 1 [answer within the space given in about 50-100
words]

1) What are the two determinants of ‘agrarian relations’? What do they

connote?
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2) How is the term ‘agricultural labour’ defined?
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Agricultural ……………………………………………………………………………
Sector
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3) What are the factors due to which changes in ‘labour relations’ in
agriculture are noticed to come about over a period of time?
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6.3 CHANGES IN AGRARIAN RELATIONS IN

INDIA
Since independence, a number of changes have taken place in the agrarian
structure of India. Prominent among them are: (i) abolition of intermediaries
(zamindars and jagirdars) and conferring ownership on actual cultivators (i.e.
land to the tillers; (ii) ceiling on land holdings and distribution of surplus land
among small farmers and landless labourers; (iii) protection of the rights of
tenants and regulation of rents; (iv) assignment of government waste land
(Bhoodan) to the poor; and (v) prohibition on alienating land allotted to the
poor and the land belonging to tribals. One of the effects of these changes
was a shift in the rural power structure from the elite zamidars to middle
class rich peasants (who earlier used to be tenants of these zamindars). In the
post-independence period, new developments like green revolution (GR),
commercialisation of agriculture, land reforms, spread of literacy and general
awareness, emergence of powerful farm lobbies (in the parliament and state
legislatures), etc. contributed to result in a new direction in the agrarian
relations of India. The scale-neutral and resource-intensive ‘green revolution’
(GR) technology has made remarkable success in the regions endowed with
assured irrigation facilities like Punjab, Haryana and Western Uttar Pradesh.

6.3.1 Land Tenure System

At the time of independence, there were three types of land tenure: (i)
landlord tenure (Zamindari system), (ii) independent single owner tenure
(Ryotwari system) and (iii) joint village tenure (Mahalwari System). Under
the Zamindari system, the intermediary ‘Zamindars’ were granted ownership
right over land and actual cultivation was done by tenant farmers. It was an
inefficient system which did not provide any incentive to the peasants to
improve land productivity. There was a long chain of intermediaries between
zamindars and cultivators who exploited tenant cultivators and made them
impoverished.
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Under the Ryotwari system, the actual land tillers were given formal property Agrarian
Relations and
rights over land. The Ryot was a tenant of the state, responsible for paying Market Linkages
revenue directly to the state treasury. Under this system, cultivators had an
incentive to make investment in land to improve productivity as they had
ownership right. Under the Mahalwari (or joint village tenure system), the
village was identified as a unit of assessment. Though an individual cultivator
in a village was made owner of the land, the villagers were asked to pay the
revenue collectively.

After independence, the land tenure system was reformed with the twin
objectives of achieving social justice and economic efficiency. The major
changes made in the land tenure system were: (i) abolition of intermediaries;
(ii) land ceilings; (iii) consolidation of land holdings; (iv) abolition of forced
labour; (v) tenancy legislation; and (vi) cooperative farming. During the
1950s, all the Indian states abolished zamindari system. Those, who
possessed cultivable land at that time (including tenants and sub-tenants),
were given riyati (owner-cultivator) status. These measures brought about
major changes in the agrarian structure towards commercialisation of
agriculture and commodification of land.

Commercialisation of agriculture means a shift in the agrarian economy from

production for consumption (food crops) to production for market (cash
crops). Agriculture, which was largely supply-driven during the green
revolution period, gradually became demand-driven and diversified more
towards horticulture and dairy products. After abolition of intermediaries and
assigning land ownership to the peasant-cultivators, land also began to
acquire a commodity status. The moneylender, who until then lent keeping a
peasant’s crops in mind, began to see his land as a mortgageable asset against
which he could lend money.

6.4 FEATURES OF AGRARIAN RELATIONS

An understanding of the concept of tenancy system is essential to have an
idea of the main features of agrarian relations. Tenancy and its terms and
conditions reflect the ‘demand and supply’ position of agricultural land
availability. In a country where land market is rigid and distorted, tenancy
arrangements can be made to augment the size of operational holdings rather
than owning the land. Therefore, land-leasing can be a viable option for those
who have labour and/or capital but do not have land to fully use these
resources, and for those who have land but do not want to do farming
because of lack of labour or capital, or no interest in agriculture. In this
section, we discuss the main features of agrarian relations in India.

6.4.1 Contractual License Arrangements

Contractual license is an arrangement which involves the landowner
contracting out all or some farming activities. It may be practiced when the
95
Agricultural land owner faces shortage of resources such as capital or skilled management
Sector
for performing farming activities.

6.4.2 Labour Tenancy

In the labour tenancy arrangement, land owner bears all the production cost
except for labour cost, which is borne by tenant labour. The share of labour
tenant in the produce may range from 20 to 30 percent. This form of tenancy
is quite beneficial to those cultivators who do not have adequate family
labour to do farming.

6.4.3 Sharecropping
Sharecropping is a form of land tenancy where a tenant farmer cultivates the
land for the landlord and the output is shared on some pre-determined basis.
It is quite a old practice which runs on trust, patronage and kinship relations.
The share is decided mutually by both the parties as per the prevailing norm.
It can vary depending upon the sharing arrangement in the cost of cultivation.
It is argued that share-cropping provides a better incentive to efficient
allocation of labour time since unlike the feudalistic system, it enables the
sharecroppers to bargain for a larger share in the produce resulting from an
increased application of labour. However, it discourages the share croppers to
make investment in agriculture development and productivity-enhancing
measures. This is because the land-sharing arrangement being informal, the
landlord can withdraw from the agreement any time and the tenant would not
be able to recover his return on farm investment. The classical economists
postulate that both the sharecropper and the land-owner would shy away
from investment resulting in sub-optimal level of output in agriculture. J.S.
Mill argues that sharecropping, in due course, would prove to be a big
disincentive for investment, as the contractual agreements enable landlords to
appropriate the surplus generated by the tenant by employing additional
labour inputs on the land.

The sharecropping form of tenancy has several advantages and

disadvantages. One of its advantage is that it makes sharing of production
risks equal for both the parties providing incentives to the land-owner in a
situation when monitoring of labour supply is costly. However, being usually
an informal arrangement without a fixed tenure, it discourages both the
parties to make farm investment to improve productivity. But with a cost-
sharing arrangement, it can encourage the tenant to use modern inputs such
as fertilisers, HYVs and irrigation to raise output. This explains why the
landlord might bear a fraction of the cost of inputs. The moot point however
is that if sharecropping is not an efficient form of cultivation, why has it
continued to exist? The most common explanation is that it allows the
landlord and the tenant to share the production risk which is quite high in
regions where agriculture still depends on the vagaries of monsoon. But with
increasing facilities for irrigation and modernisation of agriculture with the
96 introduction of new technologies, and simultaneous reduction in the inherent
risk through crop insurance and greater availability of credit, land leasing on Agrarian
Relations and
fixed rent has become a better option than sharecropping. Market Linkages

6.4.4 Land Leasing

In this arrangement, land owner leases out his land on fixed rent to the tenant
for a fixed or variable time period. This is generally preferred by absentee
landlords. There is a perception that lease-in is done by land-poor farmers
who wants to enhance their farm-size while lease-out is done by the land-rich
farmers. Hence, literature on tenancy arrangements generally highlights the
exploitation of poor tenants. However, in recent years, reverse tenancy is
being practiced in some regions, where small and marginal farmers lease-out
their land to the relatively big farmers. Unlike sharecropping in which
production risk is shared equally by the owner and tenant, in case of land
leasing, entire production risk is shifted to the lessee. Land leasing, especially
on fixed term, encourages the lessee to adopt modern technology and farm
practices to enhance production and productivity. Households having a
limited number of family workers (and/or have fewer assets) are likely to
lease-out their land, while those having more assets and higher numbers of
farm workers tend to lease-in to get the benefit of economies of scale.
Marginal/small farms may find other employment more remunerative than
farming and hence may also lease-out their land. There are many advantages
of a secured tenancy. They are: (i) it incentivises the lessee to make farm
investment; (ii) it removes insecurity from the mind of land owner; and (iii) it
helps to develop the land-lease market. It is generally perceived that the
power balance under the land leasing system remains in favour of the
landowner. However, this is not always true. In fact, in a number of cases, the
reverse occurs. It particularly happens where the landowner holds little land
and/or capital, while the tenant is a big farmer with access to sufficient
capital.

Check Your Progress 2 [answer within the given space in about 50-100
words]

1) What are the three types of land tenure system which were prevalent at
the time of independence?
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2) What were the major changes that were introduced in the land tenure
system after independence in India?
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Agricultural ……………………………………………………………………………
Sector
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3) What were the two measures introduced in the years after independence
which helped turn the agrarian structure in India towards
commercialisation?
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4) What does the terms commercialisation and commodification of
agriculture mean?
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5) In what way sharecropping is better? What are its disadvantages?
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6) What is reverse tenancy?
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7) State the advantages of ‘secured tenancy’.
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Agrarian
6.5 TENANCY STATUS IN INDIA Relations and
Market Linkages
The tenancy status in India has changed during the last four decades. The
share of tenant holdings (in the total operational holdings) has declined from
25.7 percent in 1970-71 to 9.9 percent in 2002-03. Since then it has increased
to 13.7 percent in 2012-13 (Table 6.1). This share has increased across all
categories of farms over the period 2003 to 2013. But its increase is more in
the categories of medium (7 percent), semi-medium (7.7 percent) and large
size holdings (8 percent) as compared to small size holdings (2.9 percent) and
marginal size holdings (3.4 percent). The trend indicates that the capitalist
relations in the Indian agriculture have become dominant in recent years.
Increase in the non-institutional credit and financialisation of agriculture are
pointers to this mode of agriculture in India. The increase in the shares of
operational holdings of small, marginal, medium and semi-medium classes
(over the period 2003-13) shows that ‘reverse tenancy’ has become a
noticeable phenomenon in India in recent years. Some marginal and small
farmers may be better off by leasing out their land while seeking wage
employment within or outside agriculture to maximise their incomes by way
of rentals as well as wage incomes.

Table 6.1: Tenant Holdings (%) by Category of Operational Holdings

Land Size (in ha) 1970-71 1981-82 1991-92 2002-03 2012-13

Landless (≤ 0.002 - - - - 2.6
Marginal (0.002-1.00) 27.0 14.4 9.3 9.8 13.2
Small (1.00-2.00) 27.8 17.9 14.9 10.7 13.6
Semi-medium (2.00-4.00) 24.8 15.9 12.2 10.3 18.0
Medium (4.00-10.00) 20 14.5 13.1 7.8 14.8
Large (> 10.00) 15.9 11.5 16.7 13.8 21.8
All 25.7 15.2 11 9.9 13.7
th
Source: 70 NSSO Round

Over the period 1971-2013, the proportion of sharecropping in the total lease-
in operated area has declined from 48 percent in 1970-71 to 29 percent in
2012-13 while the corresponding area under fixed money has increased from
15 percent to 41 percent (Table 6.2). This has increased the risks of tenant
farmers as the landowners do not have any risk of crop failure. Fixed money
form of lease-in land is preferred where there exists a significant scope for
entrepreneurship. This is because it permits the tenants to capture the returns
expected from their own decision-making while protecting the land owners
against the possible risks arising from the production decisions of the tenants.

99
Agricultural
Table 6.2: Distribution (%) of Lease-in Operated Areas by Terms of Lease
Sector

Terms of lease 1970-71 1981-82 1991-92 2002-03 2012-13

Fixed money 15.4 10.9 19.0 29.5 41.1
Fixed produce 11.6 6.3 14.5 20.3 17.0
Share of produce 47.9 41.9 34.4 40.3 28.7
others 25.1 40.9 32.1 9.9 12.9
All terms 100 100 100 100 100
Source: 70th NSSO Round

6.5.1 Legalisation of Land Leasing System

Restrictive land leasing laws usually make land leasing informal, insecure
and inefficient, and as due to absence of legal sanctity, tenants would not
have access to institutional credit, insurance and other support services. The
restrictive land leasing laws would reduce occupational mobility of the
landowners who may want to shift to non-farm employment but would be
forced to remain in agriculture due to the fear of losing land if they lease-out
and migrate. Therefore, legalisation of land leasing can promote production
efficiency, equity, occupational mobility and rural transformation. It would
benefit the agriculture in several ways. It would: (i) promote transparent and
secured land leasing, (ii) create an incentive for tenant farmers to make
investment in land improvement for productivity enhancement; (iii) make
possible for the tenant farmers to have access to institutional credit, insurance
and other inputs; (iv) encourage the absentee landlords who prefer to keep
their lands fallow (due to the fear of losing land right by leasing out their
land); (v) result in the better utilisation of available land and labour
resources; and (vi) make possible to transfer land from less-efficient farmers
to more efficient farmers and thus improve production, productivity and
income through crop intensification and diversification. Keeping all these
aspects in view, the government has enacted a Model Land Leasing Act
aimed at liberalising the process of legalising the land leasing system in
India.

6.5.2 Landless Agricultural Labour

Landless agricultural labourers are the most precarious and vulnerable
workforce in rural India. In general, they suffer from seasonal unemployment,
job insecurity, poverty, indebtedness, bondage, inability to get statutory
minimum wages, illiteracy, mal-nourishment, lack of access to productive
assets, discrimination, lack of social security and inability to form
organisation. Although they are covered under the Minimum Wages Act
1948, its implementation is very arduous. Their demand is driven by factors
like agricultural productivity, wage rate, crop-season, cropping pattern,
cropping intensity, irrigation facilities, size of operational holdings, farm
100 mechanisation, etc. If other things remain constant, their demand is inversely
related to minimum wages (MWs). If MWs are raised, the demand for labour Agrarian
Relations and
may decline, which in turn pushes the market wages down. Market wages Market Linkages
would be higher/lower than the MWs depending on whether there is
increase/decrease in income (i.e. value added to agriculture or GVA) from
agriculture. The increase in income from agriculture would depend upon farm
mechanisation, expansion of rural non-farm employment, allocation of
government funds to wage employment programmes, unionisation of farm
labourers, expansion of economic activities in urban informal sector, cost of
living in urban areas, etc. Keeping in view the persistence of poverty,
widespread unemployment, lack of access to productive assets and un-
sustainability of jobs for landless agricultural labour due to natural shocks,
agricultural labourers need effective social security provisions.

6.6 TYPES OF MARKETS: CONSTRAINTS AND

LINKAGES
Market is a comprehensive term, which covers many functions such as: (i)
procurement, transportation, grading and standardisation; (ii) storing,
processing, packing, and (iii) supply of commodities to the end-users. All
these activities require integration to reduce the marketing cost, particularly
for small and marginal farmers who have less marketable surplus. Production
of most crops is localised and harvested in specific season in a limited time
period while consumers’ demand is widespread across time and space.
Agricultural commodities, in particular, are required to be quickly procured,
processed and distributed to the end-users so that price stability may be
maintained and commodity losses may be reduced. In this context, effective
linkage of farmers to the market through promotion of several institutions
such as Farmer Producer Organisations (FPOs), contract farming and group
marketing is quite essential. There are different types of markets as outlined
below.

6.6.1 Goods and Factor Markets

On the basis of agricultural outputs and inputs, markets can be classified into
two categories: goods markets and factor markets. Goods markets are those
markets in which agricultural products are sold and purchased whereas in
factor markets, farm inputs are traded. Farmers need various kinds of inputs
to do farming such as seeds, chemical fertilisers, pesticides, farm machines,
labour and other services. Effective linkage of farmers with these markets is
essential to make agriculture a remunerative venture. For instance, in the
absence of effective linkage of farmers to the formal credit market, they are
forced to pay a very high rate of interest on the loans taken by them from the
informal credit market. One of the reasons for indebtedness among the
farmers is due to lack of formal credit to the farmers. Similarly, agricultural
goods markets are controlled by a number of intermediaries who artificially
create huge gap in what the farmers get and what the consumers pay for the
agricultural commodities. 101
Agricultural 6.6.2 Formal and Informal Markets
Sector
Agricultural market can further be classified into formal and informal
markets. Informal markets have few regulations and often no taxation.
Formal markets, on the other hand, operate using standard weights and
measures with transactions which are agreed upon. Further, transaction are
based on clearly defined legal frameworks. A majority of small and marginal
farmers in India with less quantity of marketable surplus, sell their produce in
the informal markets. These are transactions made at the farm gate, roadside
sales, village markets and sales made in the urban wholesale and retail
markets. Sometimes, petty traders purchase from farmers from their home or
farm and then supply it to the urban markets, including regulated mandies.
Informal markets require modernisation through legal enforcement of grades
and standards. They need information and knowledge network to enable
access information related to product quality, price and supply and demand
conditions.

Formal markets are characterised by modern value chain system. Through

such markets, farmers can get proper signals to allocate their cultivable land
for production of various commodities and access support services. To work
within the formal markets, they should meet the quality standards. Formal
markets consist of both public and private mandies and can be electronically
inter-connected. Government has created an electronic trading portal (e-
NAM) to integrate various mandies. This is expected to improve market
competitiveness and efficiency by: (i) eliminating traders’ cartels and price
manipulations and (ii) minimising price gaps between what the producers get
and what the consumers pay. In such markets, buyers and sellers do not need
to interact physically. Trust is reinforced through clearly defined standards
and the market transactions are supported by the legal system.

6.6.3 Primary, Secondary and Terminal Markets

On the basis of location, markets are categorised into primary, secondary, and
terminal markets. Primary markets include periodic markets or hats and fairs
held in rural areas. Many of these markets are now within the purview of the
government regulations. The government charges a small fee from each
participant for which the markets provide some basic infrastructure for
smooth trading. Farmers having little quantity of marketable surplus
generally supply their produce in such markets rather than to the big mandies.
Secondary markets serve as collection centres and as a place for the assembly
of produce by traders who come from distant places. They are usually
situated in urban centres (town and cities) well-connected with road and rail
transport.

Terminal markets are those where sale of goods to retailers takes place. In
these markets, agricultural commodities are finally disposed of to the end
consumers/processing units/exports. They are of two types: primary
wholesale markets and secondary wholesale markets. Primary wholesale
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markets are larger in area and attract many retailers. They also serve as transit Agrarian
Relations and
points to distant small town markets. They are located in important towns Market Linkages
near production centres where the producer-farmers bring their produce for
sale. Secondary wholesale markets are located at points nearer to resident
population.

6.6.4 Market Constraints

Agricultural markets are constrained by: (i) inadequate warehouses, (ii) lack
of grading and standardisation, (iii) inadequate transport facilities, (iv)
presence of large number of intermediaries, (v) malpractices in unregulated
markets, (vi) inadequate market information, (vii) poor access to credit
facilities, etc. To improve marketing conditions, the government has enacted
a model APMC Act. It is aimed at facilitating direct marketing of agricultural
commodities, reducing the multi-layers of intermediates between the
producers and the consumers.

6.6.5 Market Linkages

Activities to link farmers to markets adopt either the ‘top-down’ approach
(which involves identifying market demand and then seeking a group of
farmers to satisfy it) or the ‘bottom-up’ approach (i.e. of identifying farmers
to work with and then finding markets to which they could supply). There
may be several kinds of linkage of farmers to markets like: farmer to
domestic trader, farmer to retailer, linkage through a leading farmer, linkage
through cooperatives, farmer to agro-processor, farmer to exporter, contract
farming, etc. These categories do not however represent the whole range of
market opportunities available to farmers. In India, purchases by government
institutions is an important constituent of the formal market. The above stated
categories are not always mutually exclusive (exporters can also be agro-
processors, agro-processors can also run contract farming operations, retailers
may buy from farmers through traders, etc.).

Farmer’s linkages to factor markets may also be in different forms. In case of

credit market, most of the credit needs (productive or non-productive) are
met through informal sources (e.g. money lenders, input dealers, fellow
farmers, friends and relatives). Farmers also have access to institutional credit
provided by commercial banks, cooperative banks, regional rural banks
(RRBs), etc. Kisan Credit Card (KCC) scheme is one of the most beneficial
schemes for farmers for meeting their short-term credit needs at a low interest
rate. Effective linkage of farmers, particularly small and marginal ones, to the
formal credit markets is essential to provide affordable credit for enhancing
private investment in agriculture and to check exploitation of farmers by the
unscrupulous money lenders.

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Agricultural 6.6.6 Group Formation
Sector
To establish effective market linkage, new forms of institutions, such as
Farmer Producer Organisations (FPOs), Contract Farming and Group
Marketing need to be promoted. Development of farmers groups enables
them to make their produce market-orientated. Through FPOs and group
farming, they can have: (i) better access to farm inputs, technology and
extension services, (ii) reduce transition cost and achieve economies of scale
in both production and marketing and (iii) improve their bargaining power in
the market. In case of contract farming, both farmers and contracting
companies can reduce their market risk by mutually agreeing to sell and
purchase the contracted quantity of produce at pre-determined prices. In
addition, farmers may get from the contract companies new technology, farm
inputs and working capital and expert advice on their usage.

Check Your Progress 3 [answer within the space given in about 50-100
words]

1) State the trends noticeable for its recent setting-in in Indian agriculture.
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2) Distinguish between goods market and factor market.
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3) Enumerate the market constraints faced by farmers in India.
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6.7 LET US SUM UP

Agrarian relations are determined by the land tenure (ownership, tenancy and
labour relations) and agrarian structure (production, livelihood and social
conditions in agriculture). Agrarian relations in India have undergone
significant change since independence. Abolition of Zamindari system, land
104 ceiling, tenancy reforms and protection of rights of tenants are vital agrarian
changes that have impacted the agrarian relations in agriculture. Land Agrarian
Relations and
reforms, green revolution, commodification of land, application of scale- Market Linkages
neutral and resource-intensive farm technologies, contractualisation of
labour, development of rural non-farm activities and public investment on
social sector schemes along with ‘affirmative public policies’ have given new
dimensions to the agrarian relations in India. Tenancy pattern has been
gradually shifting from sharecropping to fixed rent leasing system justifying
the need for legalisation of tenancy system. Effective linkage of farmers with
formal agricultural markets is essential to make agriculture a remunerative
and profitable activity. Farmers must get proper market signals for making
efficient allocation of land and other resources for production of various
agricultural commodities. New forms of institutions such as FPOs, contract
farming, group marketing and e-NAM are critical for establishing effective
market linkages.

6.8 KEY WORDS

Agrarian : Relates to relationship between farmers and landlords on

Relations the terms on which land would be used for agricultural
activities and how the wages or sharecropping practices
would be paid/shared.
Affirmative : These are policies of the government aimed at helping the
Action marginalised by special schemes to bring them to the
mainstream. MGNREGA is an example of this.

6.9 SOME USEFUL BOOKS AND REFERENCES

1) Shepherd A.W. (2007). Approaches to Linking Producers to Markets,
Agricultural Management, Marketing and Finance Service, Rural
Infrastructure and Agro-Industries Division, FOA Rome.
2) Singh, J.P. (2006). Changing Agrarian Relationships in Rural India, Ind.
Jn. of Agri. Econ. Vol. 61, No. 1, Jan.-March.

6.10 ANSWERS/HINTS TO CHECK YOUR

PROGRESS EXERCISES
Check Your Progress 1

1) The two determinants of agrarian relations are: land tenure and agrarian
structure. The term ‘land tenure’ relates to relationship of people with
land. The relationship can be legal or customary. The relationship
decides how the land is used, owned or transferred. The term ‘agrarian
structure’ denotes a system of social relationships in which all
agricultural activities like production, marketing and consumption are
subsumed.
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Agricultural 2) The term ‘agricultural labour’ refers to a person who works on another
Sector
person’s land for wages paid in money, kind or share of produce.
3) The factors are: (i) farm mechanisation and technological change, (ii)
farm diversification, (iii) out-migration, (iv) socio-economic
transformation and (v) public employment programmes.
Check Your Progress 2
1) Landlord tenure (Zamindari system), independent single owner tenure
(Ryotwari system) and joint village tenure (Mahalwari system).
2) (i) abolition of intermediaries; (ii) land ceilings; (iii) consolidation of
land holdings; (iv) abolition of forced labour; (v) tenancy legislation; and
(vi) cooperative farming.
3) Abolition of Zamindari system and granting of owner-cultivator status to
all those who possessed cultivable land including tenants and sub-
tenants.
4) Commercialisation of agriculture means shift in production from food
crops to cash crops i.e. production for consumption (i.e. food crops) to
production for market. With the granting of titles to land tilled, the tenant
now becomes empowered to mortgage it for taking loan/credit. The latter
process is referred to as commodification.
5) Sharecropping is considered good since it gives a bargaining option for
the tenant. But the arrangement being informal, there is the risk that the
landlord may appropriate much of the surplus or renege on his informal
agreement. It allows the landlord and the tenant to share the production
risks.
6) The concept of tenancy was originally construed as the landlord giving
his land on lease to tenant. But in recent times, small farmers are leasing
out their land to big farmers. This has come to be recognised as reverse
tenancy.
7) It incentivises the lessee to make farm investment. It removes insecurity
from the mind of land owner. It helps to develop the land-lease market.
Check Your Progress 3
1) Capitalist relations and reverse tenancy. Fixed money terms of lease has
increased and sharecropping has decreased.
2) In goods market, agricultural products are traded. In the factor market,
agricultural inputs are traded.
3) Inadequate warehouses, transport facilities, etc. (see Sub-section 6.6.4).

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