Depression1

Depression1 The great economic crisis that hit Bengal and other parts of India in the thirties of the 20th century. The Great Depression that began in the United States in 1929 and soon engulfed the whole world was considered to be the greatest one in the history of the capitalist world and the European domains in Asia and Africa. In India, as in other countries producing primary goods for industrial production, the depression led to a slump in prices and this had an adverse impact on different sections of agricultural population. At the same time, the sharp fall in prices of agricultural products meant a decline in India's export earnings, and thus leading to a negative impact in the traditional pattern of its foreign trade. So far, India had been earning a surplus through the export of primary goods, and it earned gold against exported raw materials. But now a surplus (at a reduced rate though) was earned through the large-scale export of gold. The government of colonial India could have risen to the challenge of the depression by undertaking public works, devaluing the Currency, and following a policy of stabilizing prices and securing credit. But the British colonial government did not do so in the imperial interests.

The upward trend in agricultural prices marked during the late nineteenth century continued, with occasional breaks, till the 1920s. In the case of jute, the highest point reached in 1925/26. The following year saw a sharp decline in jute prices. Thus, in the jute sector downward movement in prices started earlier than the worldwide economic crisis. With the onset of the Great Depression, jute prices suffered yet another round of drastic decline. Indeed, the fall in jute prices was more marked than in jute manufactures. Prices of other crops - aman and aus rice, sugarcane and mustard- also declined. But the rate of decline was much lower than other crops. Rice prices began to recover in 1934-35 and that of jute, the next year. However, the pace was too slow to achieve full recovery until 1939/40.

The falling prices of jute was followed by a sharp contraction in its acreage. Almost the entire area thus released was transferred to alternative crops. Till 1935/36 jute prices remained at about the level of 1930/31. Moreover, the government launched a campaign for the voluntary restriction of jute cropping with the expectation that this would lead to an improvement in the price level. But despite these two negative factors at work, jute acreage began to expand and this trend persisted with a break in 1935/36. This led to a demand for statutory restriction on jute cultivation. In 1934 the provincial government appointed a committee of experts under the chairmanship of Mr Finlaw (hence the Committee was known as Finlaw Committee) to look into the problems of jute growers and manufacturers. Another committee known as Fawcus Committee (after Mr Fawcus) was appointed in 1938. These two committees put in considerable efforts to explain why jute acreage did not decline as much as prices did, and concluded that the crux of the problem lay in the absence of alternative profitable crops. The Finlaw Committee rejected the idea of the compulsory restriction of jute cultivation, but the proposal was strongly favoured by the other committee. Following the recommendation of the Fawcus Committee the government passed the Jute Regulating Act in 1940. Meanwhile acreage under aman and aus rice remained at about the post-depression level. This meant that these two variety of rice and jute continued to dominate (accounting for 90 per cent of the total crop acreage) the overall crop-mix in the province. Acreage under some of the minor crops- sugarcane, wheat and gram- expanded. But this did not have a significant impact on the general pattern.

As for total crop acreage, there was a marginal improvement during the depression years. Thus, if the trend in total crop acreage is taken as the index of the trend in production, total production may be said to have increased in the face of falling prices. The explanation for such a pattern is not far to seek. Firstly, more than 80 per cant of the total crop acreage was being sown with the three kinds of rice, (boro or summer rice being the other category) and the larger part of the rice production was meant for consumption by the members of the cultivator families and transactions in kind. Needless to mention, the slump in the price level was not supposed to have any adverse impact on production meant for such purposes. Secondly, even the smallest peasant cultivators needed some cash to pay rent to the landlords, interest to the moneylenders and to buy essentials like clothing, kerosene, tools etc. Cash needs were naturally much higher for the medium and rich peasants. Such needs had to be met by raising cash crops like jute, and selling a part of the food production in some cases. During the depression such needs did not decline at all and in others did not decline in proportion to the fall in the price level. Thus, subsistence needs and cash burden magnified the marginal utility of every unit of the produce and, consequently, the cultivators expanded crop acreage at rates compatible with the given institutional and technological constraints. Incidentally, even in the United States where agricultural production was primarily meant for market, total crop output increased turning the Great Depression.

Thus, basically the problem lay in the drastic fall in the cultivators' cash income, not in the fact that the falling prices were accompanied by reduced production. As pointed out by one contemporary observer, “Not that the cultivators are getting lesser produce, but what he used to get by selling a maund of jute, he could not get by selling three maunds, what he used to get by selling one maund of paddy, he got by selling three maunds”. This inevitably meant that the agriculturists had to reduce their cash expenditure on such items as payment of rent, social and religions ceremonies, replacement of agricultural tools and implements, purchase of food and, above all, debt-servicing. The decline in food consumption by the agricultural labourers may have been due to more than proportionate decline in the wage rate and/or to the fact that a section of them may have been thrown out of employment by the rich farmers. The question of debt servicing deserves particular emphasis. Firstly, total volume of debt increased. For whereas, according to Bengal Provincial Banking Enquiry Committee, total debt (i.e. principal amount and accumulated interest) amounted to 1000 million Rupees in 1929, the Board of Economic Inquiry estimated that only the principal amount was of the order of 960 million Rupees in 1934. Secondly, and more importantly, with the fall in agricultural income on which depended the repaying capacity of the borrowers the burden of debt increased. Once again, according to the estimates of the Board of Economic Inquiry three-fourths of the rural families were affected by the increased burden of debt and the problem was most acute for 1.7 million families (one-third of the total). The inability of the indebted families to repay their debt created further predicament for them. For the professional moneylenders who used to serve as the shock-absorber in times of economic crisis were no longer in a position to function in this capacity, because they were themselves hit hard by the non-payment of interest and much less the principal. The problem was compounded by the fact that for several reasons the professional moneylenders who had surplus funds at their disposal were reluctant to continue their loan operations. Firstly, in many cases the anti- zamindar and anti-moneylender propaganda launched by the leaders of the kisan movement and Krsak Samitis produced bitter “class-hatred” and resistance to rent-payment and debt-repayment. Secondly, the debt settlement boards constituted by the government under the Agricultural Debtors Act (1935) started operations in April 1937, with a view to scaling down the debt to the repaying capacity of the borrowers. But, for several reasons, the professional moneylenders strongly resented the operations of these Boards. Overall, therefore, the professional moneylenders drastically reduced their loan operations partly due to their inability and partly due to their reluctance to lend. It is true that certain funds were provided by the agriculturist moneylenders and their position was now relatively strengthened. But obviously they could meet only part of the needs of the cultivators. For the slump in agricultural prices meant a drastic reduction in their disposable income. Moreover, they also failed to recover the funds lent earlier.

Statistics on the volume of land transferred through sale and mortgage and their prices during the depression period are not available. Data are available only on the number of sales and mortgages. On the basis of the decline in this latter set of data, it may be concluded that during the depression period there was a decline in the volume of land sold and mortgaged. Perhaps this was due to the decline in agricultural prices. With regard to sale reference has also been made to theBengal Tenancy Act (1928) which made payment of a transfer fee of 25 per cent of the value of land to the landlords obligatory. It is not possible to say whether this conclusion about the trend in the volume of sale and mortgage is a valid one. However, whatever might have been the trend (increase or decline) it seems that not much land was sold during the depression years. This is indicated by the data collected by the Bengal Land Revenue Commission(1938). According to its survey only seven per cent of the total land of the province was transferred over 12 years (1928-1940). It is true that this estimate is based on a small sample. Moreover, there could have been concealment by the purchasers/sellers. But it is unlikely that these data grossly underestimate the volume of land transfer. Incidentally it may also be pointed out that land transfer during the depression years does not seem to have contributed significantly to the extension of sharecropped area in the province. This is suggested by the findings of the same commission. Of the total area transferred only 31.7 percent (ie 2.2 of the total) was operated by the sharecroppers.

Nothing definite can be remarked about the impact of the depression on the industrial productions, given that no composite index is available. Production of cloth (both handloom and mill-made) increased and so did the production of sugar with the establishment of new sugar mills during the depression years. But production in the jute mills which constituted the largest sector in the industrial field of the province declined. This was perhaps due to the jute mills' restrictive practices as mentioned earlier. [M Mofakharul Islam]