Explain the impact of economic liberalisation on rural economy in India.

Since July, 1991 the country has taken a series of measures to structure the economy and improve the balance of payments position. The New Economic Policy (NEP-1991) introduced changes in the areas of trade policies, monetary & financial policies, fiscal & budgetary policies, and pricing & institutional reforms. The salient features of NEP-1991 are (i) liberalization (internal and external), (ii) extending privatization, (iii) redirecting scarce Public Sector Resources to Areas where the private sector is unlikely to enter, (iv) globalization of economy, and (v) market friendly state. Research reports reveal that this macro-economic adjustment programme is remarkable for its relatively painless transition compared with similar programmes elsewhere and a large part of the credit for absorption of these shocks is due to the steady increase in agricultural production. The GATT Agreement signed in 1995 will fundamentally change the global trade picture in agricultural sector.

Impact of Economic Reforms Process on Indian Agricultural Sector
Agricultural sector is the mainstay of the rural Indian economy around which socio-economic privileges and deprivations revolve, and any change in its structure is likely to have a corresponding impact on the existing pattern of social equality. No strategy of economic reform can succeed without sustained and broad based agricultural development, which is critical for

raising living standards,

alleviating poverty,

assuring food security,

generating buoyant market for expansion of industry and services, and

making substantial contribution to the national economic growth.

Studies also show that the economic liberalization and reforms process have impacted on agricultural and rural sectors very much.

According to [Bhalla97], of the three sectors of economy in India, the tertiary sector has diversified the fastest, the secondary sector the second fastest, while the primary sector, taken as whole, has scarcely diversified at all. Since agriculture continues to be a tradable sector, this economic liberalization and reform policy has far reaching effects on (I) agricultural exports and imports, (ii) investment in new technologies and on rural infrastructure (iii) patterns of agricultural growth, (iv) agriculture income and employment, (v) agricultural prices and (vi) food security [Bhalla93].

Reduction in Commercial Bank credit to agriculture, in lieu of this reforms process and recommendations of Khusrao Committee and Narasingham Committee, might lead to a fall in farm investment and impaired agricultural growth . Infrastructure development requires public expenditure which is getting affected due to

the new policies of fiscal compression. Liberalization of agriculture and open market operations will enhance competition in “resource use” and “marketing of agricultural production”, which will force the small and marginal farmers (who constitute 76.3% of total farmers) to resort to “distress sale” and seek for off-farm employment for supplementing income.

Marginalisation of Small farmers A

central issue in Agricultural Development isthe necessity to increase productivity, employment and income of poor segments of the agricultural population. Among the rural poor, the small farmers constitute a sizeable portion in the developing countries. Studies by FAO have shown that small _______ _________ _____ ________ _______ ________ _____ _______ ________.
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