From Food Bowl to Debt Trap: The Political Economy of Agrarian Distress in Punjab–Haryana

-RamphalKataria

 

High Yields, Low Incomes: Understanding Agrarian Distress in India’s Green Revolution Heartland

Abstract

Agriculture is the material foundation of civilization, enabling settlement, surplus and the rise of states. In India, farming has historically underwritten political authority, fiscal systems and food security—from ancient agrarian communities and imperial revenue regimes to colonial extraction and post-Independence planning. Yet contemporary Indian agriculture is marked by persistent unviability and deepening indebtedness. This crisis is most acute in Punjab and Haryana, India’s principal grain-surplus regions, where farm households rank among the most indebted nationally. Drawing on official statistics, agronomic research and political economy literature, this paper argues that agrarian distress is structural rather than episodic. Fragmented landholdings, input-intensive production, ecological exhaustion, price uncertainty, labour displacement and inadequate public investment have converged to erode farm incomes. Institutional credit and welfare schemes have mitigated liquidity stress but failed to restore profitability. Situating Punjab–Haryana within the national and global context, the paper examines why agriculture has become non-remunerative, how debt has become systemic, and what pathways exist to exit the agrarian debt trap. 

“किसान कर्ज़ में पैदा होता है, कर्ज़ में जीता है और कर्ज़ में ही मर जाता है।”

(“The farmer is born in debt, lives in debt, and dies in debt.”)

-Sir Chhotu Ram

1. Agriculture, Civilization and the Indian Historical Trajectory

Agriculture represents the decisive transformation in human history that enabled settled life, surplus production and political organization. In the Indian subcontinent, early agrarian systems along riverine plains supported proto-urban settlements well before the Mauryan state. From the Mauryan and Gupta periods through the Sultanate and Mughal eras, agriculture formed the fiscal backbone of the state, with land revenue constituting the principal source of public finance. Investments in tanks, canals and embankments coexisted with heavy extraction, yet cultivation remained largely organic, labour-intensive and ecologically embedded.

Despite technological limits, pre-colonial agriculture sustained dense populations. Productivity gains were incremental but relatively stable, as farming practices evolved in close relation to local ecologies and customary institutions.

2. Colonial Disruption and Agrarian Vulnerability

British colonial rule fundamentally restructured India’s agrarian economy. Revenue systems such as the Permanent Settlement commodified land, fixed revenue demands and transferred risk to cultivators. While colonial authorities expanded canal irrigation, railways and market access, these interventions prioritised revenue extraction and export integration. Agriculture was exposed to global price volatility without protective institutions, contributing to recurrent indebtedness and famine.

Colonial agrarian policy thus combined infrastructural modernization with systemic vulnerability, a contradiction inherited by the post-Independence state.

3. Post-Independence Strategy and the Green Revolution

After 1947, agriculture occupied a central place in India’s development strategy. Land reforms, community development programmes, public irrigation, input subsidies and the introduction of Minimum Support Prices (MSP) aimed to stabilize production and incomes. The Green Revolution of the late 1960s transformed Punjab and Haryana into surplus-producing regions through high-yielding varieties, chemical fertilizers, mechanization and assured procurement.

Food security improved dramatically. However, the Green Revolution model was capital- and input-intensive, regionally concentrated and ecologically demanding. By the 1990s, yield growth plateaued even as costs escalated. Soil degradation, groundwater depletion and chemical dependence raised the cost of cultivation and increased vulnerability to climate shocks.

The White Revolution diversified rural livelihoods through dairying, yet could not offset declining crop profitability for small and marginal cultivators.

4. Financing Agriculture: From Usury to Institutional Credit

Historically, agriculture depended on moneylenders charging usurious interest. Bank nationalization, the expansion of cooperatives and regional rural banks, and priority sector lending marked a structural shift. Crop loans, Kisan Credit Cards and institutional finance significantly reduced dependence on sahukars and arhtiyas.

Yet institutional credit did not resolve agrarian unviability. As landholdings fragmented and production costs rose, borrowing increasingly financed survival rather than accumulation. Defaults mounted, and land records across states now reflect loan encumbrances—symbolized by ‘red entries’—indicating chronic indebtedness rather than episodic distress.

5. Punjab and Haryana: High Productivity, High Debt

Credit Architecture in Punjab–Haryana — Banks versus Arhtiyas

Agricultural credit in Punjab and Haryana operates through a dual structure. On one hand are institutional sources—commercial banks, cooperative banks and regional rural banks—providing crop loans, Kisan Credit Cards and term loans at regulated interest rates. On the other are arhtiyas (commission agents), who combine input supply, output marketing and informal credit. Despite bank expansion, a significant share of short-term credit continues to flow through arhtiyas, particularly to tenant farmers lacking formal land titles.

Institutional loans are often delayed, documentation-heavy and tied to land ownership. Arhtiyas offer immediate, flexible credit but at high implicit interest rates (often 18–24%), recovered through output price deductions. This interlocking of credit and marketing reduces farmers’ bargaining power and perpetuates dependence. As profitability declined, even institutional credit increasingly financed consumption and debt rollover rather than productive investment, blurring the line between formal and informal indebtedness.

Punjab and Haryana exemplify the paradox of surplus production alongside deep agrarian distress. As of 2026, average outstanding debt per agricultural household in Punjab is approximately ₹2.03 lakh and in Haryana ₹1.83 lakh, far above the national average of ₹74,121. Only Andhra Pradesh and Kerala report higher per-household farm debt.

Table 1: Average Outstanding Debt per Agricultural Household (₹)

State/UT	Debt per Household (₹)
Andhra Pradesh	2,45,000
Kerala	2,42,000
Punjab	2,03,000
Haryana	1,83,000
Telangana	1,52,000
Karnataka	1,26,000
Tamil Nadu	1,06,000
Rajasthan	1,13,000
Himachal Pradesh	85,825
Uttar Pradesh	51,107
Bihar	23,534
Nagaland	1,750
All-India Average	74,121

Source: National Statistical Office; Lok Sabha replies, Ministry of Agriculture and Farmers’ Welfare.

Table 1A: Selected District-Level Stress Indicators in Punjab and Haryana

State District Groundwater Status Tenancy/ Lease Intensity Prevailing Lease Rates (₹/acre/year) Punjab Sangrur Over-exploited High-tenant cultivation 80,000–90,000 Punjab Moga Over-exploited Moderate–High 70,000–85,000 Punjab Patiala Critical Moderate 60,000–75,000 Haryana Kurukshetra Over-exploited Moderate 55,000–70,000 Haryana Karnal Critical Moderate 50,000–65,000 Haryana Sirsa Semi-critical Low–Moderate 35,000–50,000

Notes: Groundwater classification based on Central Ground Water Board assessments; lease rates from state agriculture department surveys and field studies.

The drivers of indebtedness in Punjab–Haryana are structural: shrinking operational holdings, rising input costs, wheat–paddy monocropping, ecological exhaustion, climate volatility and high land lease rates. Over-mechanization and groundwater depletion have further increased capital intensity.

6. Disguised Employment and Rural Labour Stress

Agriculture continues to absorb surplus labour due to the absence of adequate non-farm employment. Educated youth from farm households face limited job opportunities, creating disguised unemployment that depresses per capita farm incomes. Instead of supplementing agriculture, households increasingly depend on farm earnings to sustain non-earning members, intensifying pressure on land and credit.

7. Ecological Stress in Punjab–Haryana Agriculture

Punjab and Haryana illustrate the ecological limits of input-intensive farming. Groundwater extraction far exceeds recharge, with over three-fourths of assessment blocks classified as over-exploited or critical. The wheat–paddy cycle demands heavy irrigation, accelerating aquifer depletion and raising energy costs through deeper submersible pumping.

Fertilizer intensity in the region is among the highest in the country, particularly nitrogenous fertilizers, leading to soil nutrient imbalance, declining organic carbon and diminishing marginal returns to inputs. Despite rising fertilizer use, yield growth in wheat and rice has largely plateaued since the early 2000s, signalling technological exhaustion of the Green Revolution package. Climate variability—heat stress, unseasonal rain and floods—has further increased yield volatility. Together, ecological degradation and yield stagnation have raised costs while capping incomes, deepening indebtedness.

8. Policy Responses: Relief Without Viability

Recent interventions such as PM-KISAN and the Pradhan Mantri Fasal Bima Yojana (PMFBY) provide limited income support and risk mitigation. However, their scale is insufficient to offset rising cultivation costs and price uncertainty. MSP procurement remains crop- and region-specific, and the Swaminathan Commission’s recommendation of MSP at C2 cost + 50% remains unimplemented.

Public investment has also weakened. Budgetary allocation to agriculture has declined relative to GDP and total expenditure.

The Swaminathan MSP Formula (C2 + 50%) — Methodology and Critique

The National Commission on Farmers (2004–06), chaired by M.S. Swaminathan, recommended that Minimum Support Prices (MSP) be fixed at C2 cost plus 50 per cent. The C2 cost concept is comprehensive: it includes paid-out costs (seeds, fertilisers, pesticides, hired labour, fuel), imputed value of family labour, rent paid or imputed for owned land, interest on owned fixed capital and depreciation. The formula was intended to ensure economic viability, not mere cost recovery.

In practice, MSP calculations have relied on narrower cost concepts (A2 or A2+FL), excluding land rent and capital costs. This divergence structurally depresses farm incomes, particularly for tenant farmers and smallholders. Critics argue that C2+50% would raise fiscal costs and distort markets; proponents counter that without assured remunerative prices, farmers are forced into debt-financed production. International experience shows that price support, when combined with diversification and supply management, need not be inflationary. The non-implementation of the Swaminathan formula thus reflects a political choice rather than an economic impossibility..

Table 2: Union Budget Allocation to Agriculture

Year	Allocation (₹ lakh crore)	Share of Total Expenditure
2004–05	~0.86	~6.0%
2014–15	~2.83	~4.6%
2025–26	~1.52	~2.7%

Source: Union Budget Documents; RBI State Finances; MoAFW Expenditure Statements.

Despite agriculture employing nearly half of India’s workforce and contributing about 18% to GDP, fiscal support has not kept pace with rising risks.

9. India in Comparative Perspective

In agrarian economies such as the United States, the European Union, Brazil and China, agriculture is supported through direct income payments, counter-cyclical subsidies, comprehensive insurance and strong extension systems. Non-farm employment absorbs surplus rural labour, reducing pressure on land. India’s relative neglect of rural industrialization magnifies agrarian distress.

10. Policy Implications

The analysis points to the limits of incremental relief in addressing a structural agrarian crisis. First, price policy must shift from ad hoc procurement to assured remunerative pricing through the implementation of MSP based on the Swaminathan formula (C2 + 50%), accompanied by effective decentralized procurement and diversification incentives. Second, public investment needs reorientation toward ecological regeneration—groundwater governance, crop diversification, soil restoration and climate-resilient research—particularly in Punjab and Haryana, where the Green Revolution package has reached its ecological limits.

Third, credit policy must recognize tenancy and de-link institutional finance from land ownership, enabling tenant farmers to access formal credit without dependence on arhtiyas. Simultaneously, rural non-farm employment generation is critical to absorb surplus labour and reduce disguised employment in agriculture. Finally, welfare schemes such as PM-KISAN and PMFBY should be integrated into a broader income-security framework rather than serving as substitutes for structural reform.

Absent these measures, agrarian policy will continue to manage distress rather than restore viability.

Conclusion: From Crisis Management to Structural Reform

The agrarian crisis in Punjab and Haryana signals the limits of India’s production-centric agricultural strategy. Agriculture has become non-profitable due to structural constraints that short-term relief measures cannot resolve. Restoring viability requires assured remunerative prices, diversification away from input-intensive monocropping, ecological regeneration, expansion of non-farm employment and renewed public investment. Without such a shift, indebtedness will remain the defining feature of India’s agrarian economy.

Footnotes

1. National Statistical Office, Situation Assessment Survey of Agricultural Households, various rounds.

2. Government of India, Ministry of Agriculture and Farmers’ Welfare, Lok Sabha Unstarred Questions on farm indebtedness.

3. Swaminathan, M.S. (2006): National Commission on Farmers: Final Report.

4. Reserve Bank of India, State Finances: A Study of Budgets.

5. EPW research on Green Revolution sustainability, agrarian distress and rural labour markets.

 

An Unequal Framework: The Indo US Interim Trade Deal and the Erosion of Reciprocity, Transparency and Strategic Autonomy

-Ramphal Kataria

From Strategic Autonomy to Managed Compliance: Reading the Indo–US Trade Framework

Abstract

The interim trade framework announced between India and the United States in 2025 marks a decisive departure from India’s long-standing trade diplomacy, agricultural protectionism, and claims of strategic autonomy. Unlike earlier trade negotiations—characterised by parliamentary debate, stakeholder consultations, and reciprocal tariff bargaining—this framework has emerged almost entirely through unilateral disclosures by the United States. Official statements from the White House, the US Trade Secretary, and former President Donald Trump’s social media account on Truth Social reveal commitments that stand in direct contradiction to assurances given by India’s Commerce Minister to Parliament and the public. This commentary argues that the framework is neither interim nor reciprocal, but an imposed arrangement shaped by coercive tariffs, geopolitical conditionalities, and surveillance of India’s foreign policy choices, particularly with regard to Russian oil imports. The opening of India’s agricultural sector to genetically modified (GM) soya oil, distillers dried grains (DDGs), maize by-products, sorghum, fruits, nuts, and pulses—confirmed in US fact sheets—signals a structural shift with profound implications for farmers, food sovereignty, and federalism. The paper situates the deal within a broader political economy of unequal exchange, executive secrecy, and declining credibility of India’s foreign and trade policy institutions.

Introduction

The interim trade framework announced between India and the United States in February 2026 has rapidly become one of the most contested economic agreements in recent Indian history. The controversy does not stem merely from opposition politics or farmer mobilization, but from the striking mismatch between what has been officially communicated by the Government of India and what has been revealed—often unilaterally—by the United States government. White House factsheets, Executive Orders, press briefings, and statements by President Donald Trump on his social media platform Truth Social have together painted a picture far more expansive and intrusive than the carefully worded joint statement issued on 6 February 2026.

This commentary argues that the agreement represents a qualitative shift in India–US economic relations: from negotiated reciprocity to imposed conditionality; from calibrated liberalization to sectorally asymmetric opening; and from strategic autonomy to externally monitored compliance. The opacity surrounding the deal has compounded its substantive asymmetry, undermining democratic accountability and eroding the credibility of ministerial assurances.

India–US Trade Relations Before Trump: Negotiated Asymmetry

India–US trade relations prior to the Trump administration were marked by persistent disagreements, particularly over tariffs, agriculture, intellectual property, and digital taxation. India maintained some of the highest applied tariffs among major economies—averaging 30–37% for agricultural goods and exceeding 100% for certain automobiles and dairy products. These tariffs were not accidental; they reflected deliberate policy choices rooted in food security, smallholder protection, and developmental space.

The United States repeatedly challenged these barriers, but disputes were addressed through multilateral forums, retaliatory tariffs, or prolonged negotiations. Crucially, India resisted opening politically sensitive sectors such as dairy, genetically modified food products, and mass-consumption staples like pulses and edible oils. Trade frictions existed, but they were embedded in a rules-based, negotiated framework.

This equilibrium began to unravel with Trump’s return to office and the unilateral imposition of punitive tariffs—reportedly up to 50%—on Indian exports. These tariffs were framed by Washington as “reciprocal”, but functioned in effect as economic coercion designed to force market access concessions.

The Interim Framework: Reciprocity Redefined

According to the White House factsheet dated 9 February 2026, India has agreed to eliminate or reduce tariffs on all US industrial goods and a wide range of food and agricultural products. These include dried distillers’ grains (DDGs), red sorghum, tree nuts, fresh and processed fruits, soybean oil, wine and spirits, and notably, “certain pulses”.

This language is materially broader than that contained in the joint India–US statement, which omitted pulses entirely and restricted red sorghum imports to animal feed. The disappearance of this qualifier in the US document is not a semantic detail; it has direct implications for domestic food markets and regulatory oversight.

In return, the United States has reduced its unilateral reciprocal tariff on Indian goods from 50% to 18%. This tariff continues to apply to roughly 55% of Indian exports. In other words, India has agreed to permanent tariff liberalization, while the US has merely partially rolled back a penalty it imposed unilaterally.

White House Fact Sheet on the India–US Interim Trade Framework

The following excerpts reproduce the language of the original White House fact sheet released in February 2026, as reported by multiple Indian newspapers before subsequent quiet revisions were made. These excerpts are crucial because they constitute the only authoritative public disclosure of India’s sectoral commitments under the interim framework.

“India will eliminate or reduce tariffs on all U.S. industrial goods and a wide range of U.S. food and agricultural products, including dried distillers’ grains (DDGs), red sorghum, tree nuts, fresh and processed fruit, certain pulses, soybean oil, wine and spirits, and additional products.”

“India committed to buy more American products and purchase over $500 billion worth of U.S. energy, information and communication technology, agricultural, coal and other products.”

The above wording was later altered by the White House—references to “certain pulses” were removed and the phrase “committed to buy” was softened to “intends to buy.” Notably, no corresponding clarification or disclosure was issued by the Government of India, even though these products fall squarely within politically sensitive and constitutionally shared domains such as agriculture and food policy.

The contradiction between this fact sheet and repeated public assurances by India’s Commerce Minister that “agriculture has not been opened” represents not a difference of interpretation, but a difference of record. In the absence of any Indian-authored text, the White House document effectively functions as the de facto trade agreement.

Agriculture as the Fault Line

Agriculture has emerged as the most politically and economically sensitive axis of the deal. Despite repeated assurances by the Commerce Minister that farmers’ interests—particularly in dairy and food staples—have been safeguarded, the White House factsheet tells a different story.

The inclusion of GM soybean oil and DDGs is especially contentious. DDGs, a by-product of maize-based ethanol production, have been associated with contamination risks and uncertain health impacts. GM soybean oil remains a politically contested commodity in India, where regulatory caution has traditionally prevailed.

The reference to “certain pulses” is perhaps the most alarming. Pulses are central to India’s nutrition security and farm economy. Even limited tariff reductions can depress domestic prices, as evidenced by India’s experience with edible oil liberalization over the past two decades. Farmer unions have warned that such concessions could undercut incomes and exacerbate agrarian distress.

Foreign Policy Conditionality and the Russian Oil Clause

The most unprecedented aspect of the framework lies outside traditional trade policy. The White House factsheet and subsequent Executive Order explicitly state that the rollback of the additional 25% tariff was granted in recognition of India’s commitment to stop purchasing Russian oil.

More significantly, the Executive Order mandates monitoring by a committee of US secretaries to assess whether India resumes Russian oil imports “directly or indirectly”, with the threat of reimposing tariffs. This represents an extraordinary intrusion into India’s sovereign energy policy and foreign relations. No previous trade agreement has subjected India’s external policy choices to external surveillance.

While Indian officials have insisted that energy procurement decisions remain guided by national interest, the absence of any explicit denial in the joint statement—and the detailed articulation of conditionality in US executive instruments—raises serious concerns about the erosion of strategic autonomy.

Why the Deal, and Why the Silence?

Three explanations help illuminate India’s acceptance of this framework. First, the immediate pressure created by punitive US tariffs threatened export-oriented sectors such as textiles, gems, leather and handicrafts. Second, the agreement reflects a broader geopolitical alignment in which economic concessions serve as signals of strategic compliance. Third, decision-making appears to have been highly centralized, with limited ministerial ownership or parliamentary scrutiny.

The opacity surrounding the deal is particularly troubling. The framework has not been tabled in Parliament. Detailed commitments have not been officially released. Instead, Indian stakeholders have been forced to rely on US disclosures to understand the scope of India’s obligations.

Comparative Perspective: Tariffs and Commitments

Sector / Item	Pre-Trump Indian Tariff on US Goods	Interim Framework Commitment	US Tariff on Indian Goods (Post-Deal)
Industrial Goods	7–15% average	Eliminated or sharply reduced	18% on ~55% exports
Agriculture (Average)	30–37%	Reduced/eliminated on listed items	18%
Pulses	30–50% (variable)	Included (“certain pulses”)	18%
GM Soybean Oil	High / restricted	Tariff reduction permitted	18%
DDGs	Restricted / high	Tariff reduction permitted	18%
Red Sorghum	Restricted; animal feed	No end-use qualifier	18%

Executive Order of the President of the United States – Trade Conditionality and Monitoring of Indian Oil Imports

The following passages are reproduced verbatim from the Executive Order signed by President Donald Trump in February 2026, modifying tariff duties applicable to India. This document formally links tariff relief to ongoing surveillance of India’s foreign policy choices, particularly with respect to Russian oil imports.

“Sec. 2. Tariff Modifications.
Effective with respect to goods entered for consumption, or withdrawn from the warehouse for consumption, on or after 12:01 a.m. eastern standard time on February 7, 2026, products of India imported into the United States shall no longer be subject to the additional ad valorem rate of duty of 25 percent imposed pursuant to Executive Order 14329.”

“Monitoring and Recommendations.”
“The Secretary of Commerce, in coordination with the Secretary of State, the Secretary of the Treasury, and any other senior official the Secretary of Commerce deems appropriate, shall monitor whether India resumes directly or indirectly importing Russian Federation oil… If the Secretary of Commerce finds that India has resumed directly or indirectly importing Russian Federation oil… the Secretary of State shall recommend whether and to what extent I should take additional action as to India, including whether I should reimpose the additional ad valorem rate of duty of 25 percent on imports of articles of India.”

This language is unprecedented in India–US trade relations. For the first time, tariff relief granted to India is explicitly conditional on compliance with US preferences in matters of foreign and energy policy. The constitution of a multi-secretary monitoring mechanism to oversee India’s oil sourcing decisions amounts to a formalization of external supervision over sovereign economic choices.

No Indian official statement, cabinet note, or parliamentary disclosure has acknowledged this provision. The absence of denial is as significant as the absence of explanation. Taken together with India’s withdrawal from Chabahar-related engagements under US pressure and its compliance with sanctions regimes against Iran and Russia, the executive order confirms that the interim trade framework is not merely commercial in nature, but disciplinary in design.

Credibility, Democracy and Strategic Autonomy

Claims that India’s 18% tariff is among the lowest faced by US trading partners obscure the broader context. China continues to import discounted Russian oil without external monitoring, enhancing its industrial competitiveness. India, by contrast, faces higher energy costs and external scrutiny.

The cumulative effect is an erosion of credibility—of ministerial statements, of parliamentary accountability, and of India’s claim to independent foreign policy. Agreements may be unequal; diplomacy often is. But secrecy compounds inequality with indignity.

Conclusion

The interim Indo–US trade framework represents not merely a commercial arrangement, but a structural reordering of India’s economic and strategic posture. Its asymmetries may or may not be defensible. Its opacity is not. What has been agreed must be placed before Parliament and the public in full. Transparency is not a concession—it is the minimum requirement of democratic governance.

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