Institutions and the Punjab Farmer 1: Introduction
(This series analyzes evolution of institutions and their impact on agriculture and the Punjab farmers during the last 150 years.)
Institutions and Organizations
It is necessary to define institutions and organizations. Institutions are the rules (the legal system, financial regulations, and property rights) and the conventions that nurture, protect, and govern the operation of a market economy. These include Kaide-Kanoon and the system under which an economy operates. By contrast, organizations refer to universities, departments, entities, extension services and cooperatives that carry out specific missions in society. The success of policy reforms is crucially dependent upon a good institutional environment. The major development challenge is to craft consistent and transparent institutions that are essential for effective performance of organizations. The agricultural technology (education, research, and extension) system is unlikely to be effective in states/countries that do not have political leaders and farm organizations working together to create and sustain a good institutional environment.
After developing a good institutional environment from 1950 to 1980, Punjab has not been able refine institutional architecture to tackle the emerging challenges during the last 40 years. The situation is compounded by lack of political and administrative will as well as knowledge base on how to craft effective demand-driven organizations to help Punjab farmers, traders, and the micro-enterprises.
Punjab Pessimism
Punjab-pessimism is flourishing today invading the spirit of Punjabis. It reflects a sense of hopelessness well-meaning Punjabis feel about lack of accountability in various spheres of government activity, corruption, unemployment, stagnating agriculture, flight of capital, trade, and industry, poor quality education, bleak future for children and out-migration.Punjab’s miring in surfeit of pessimism stands in stark contrast to optimism of 1950s-1970s. Yet Punjab’s development experience reveals that the pessimism for the geo-strategically vulnerable state in the 21st century was not foreordained.
Partition of Punjab in 1947 produced deep scars of human, social and economic misery. Fifty lakh Sikhs and Hindus returned empty-handed from west Punjab. Five lakh lives were lost. Irrigated fertile canal colonies, flourishing trade and industry remained in Pakistan. Food-deficit, rainfed land cultivated by subsistence farmers became the Indian Punjab. Second and third generations of farmers, who were incentivised by the British to migrate from east to west Punjab to reduce pressure on land, abandoned large tracts of fertile irrigated land in Pakistan. Despite myriad problems, visionary political leadership supported by competent civil service settled the refugees on a war footing. This was followed by operationalisation of enabling policies, structural reforms, and responsive institutional architecture.
Key initiatives included consolidation of land holdings, ownership rights to tenants, construction of Bhakra dam, expansion of canal and tube well irrigation, establishment of industrial estates, schools, colleges, and hospitals. Villages were provided roads and electricity. Expansion of government departments, establishment of agriculture and industry related public sector undertakings and good universities gave a major push to human resource development and rapid growth of agriculture and industry. Urban estates having roads, drinking water and sewerage system were developed around cities to meet housing needs of expanding urban population. By 1980, Punjab was number 1 and 2 in agriculture and Industry respectively. Rural Punjab became breadbasket of the country. Ludhiana became hub of hosiery, cycle, and auto parts industry. Jallandhar gained prominence for leather and sports goods. Amritsar became famous for carpets and eateries. Thousands of micro, small and medium manufacturing and ancillary enterprises came up at Batala, Bhadson, Moga, and Phagwara.
In 1980 Punjab had the highest per capita income and capital expenditure in the country. It was also known for good governance and prudent use of fiscal resources, although politics and religion remained intricately enmeshed.
Development suffered during militancy in 1980s as funds were diverted to major expansion of police force. Tax collections suffered. Scared industrialists and traders diverted investments to other states. Education was impaired. Excise policy increased number of liquor vends, promoting consumption of alcohol. Construction of large number of marriage palaces markedly increased wasteful expenditure on marriage and other ceremonies. Easy bank loans and their diversion to consumption expenditure aggravated farmer indebtedness. Despite Punjab becoming a peaceful state in mid-1990s, no effort was made to reduce the bloated police force. Improvement in electricity supply and setting up of rice and sugar mills were the few bright spots of 1980s.
To outdo opponents in competitive populism, successive governments since 1997 have opened the spigot of state coffers by providing open-ended subsidies of free power, water, and bus travel, writing off farmer loans, shagan, atta-dal and other populist schemes. Tax collections became leakier under pressure from political parties dependent on businessmen and traders.
Development became synonymous with public brick-and-mortar structures, ignoring structural reforms and software side of good governance. Main developments during the last 25 years were setting up of large number of colleges and universities, and construction of government buildings and, often unnecessary, roads by taking bank loans. In the absence of robust quality assurance mechanisms, education imparted by universities, colleges, and schools deteriorated. Successive governments avoided or half-heartedly implemented institutional reforms to improve public services and tax collections. Considerable share of government income was kept outside the budgetary process to promote vote bank politics and avoid scrutiny by the Auditor General. Policies were tweaked to benefit private players at the cost of government revenue. Instead of bringing borrowing and debt under control by taking tough decisions, the can of worms was kicked down the road to create problems for the succeeding government.
Accustomed to benefitting from license-permit raj, many Punjab industrialists did not show the nimbleness to capitalise on the opening-up of the economy. Entrenched anti-private sector stance of politicians, bureaucracy and intelligentsia was a discouragement. Seeing bleak future, smart industrial houses moved out of Punjab. Information technology revolution, ideal for land locked Punjab with high land prices, bypassed the State due to insular ruling politicians surrounded by unimaginative bureaucrats. National trend-setter for enabling policies and institutional innovations, Punjab has spared no effort to stall urgently needed reforms. Retirement of upright and competent bureaucrats and technocrats has created a vacuum as majority of the new recruits, with some honourable exceptions, do not possess the drive and commitment for which Punjab was respected. Preference to vested interests and loyalty over competence for key appointments discouraged upright and capable officers.
The poster boy of Indian agriculture from 1966 to 1985, Punjab has become a laggard staring at a parched future. The primary cause of Punjab’s over dependence on unsustainable low value rice-wheat cycle is a seamless web of Punjab-specific, national, regional, and global factors rather than a single factor such as geography, lack of technology, corruption, or the exploitive economic policies. Decline of robust institutional processes have compromised good governance of agricultural organizations.
