The end of Gandhi's dream: India's economic boom and bust

For sale - one farming village: 1,800 acres of fertile arable land, 280 houses. All serious bids considered. An intriguing offer.

Malsinghwala is a village like any other of the thousands across Punjab: a collection of low brick buildings, a dusty road, and fields thick with crops that stretch across an endless flat landscape. Sikh farmers in brightly coloured turbans with ceremonial daggers slung at their sides pass by. Women stagger along the road carrying huge bundles of crops on their heads. A tractor passes by with Bollywood music hammering out of crudely attached loudspeakers.

But a few months ago, an advertisement appeared in the local newspaper. The entire village of Malsinghwala, it said, was for sale: lock, stock and barrel. Not one farm or plot of land. The people had all agreed to sell the whole village as a single lot.

Malsinghwala is one of a spate of villages across India that have suddenly been put up for sale. Similar reports are coming from across India. A thousand miles south, in the village of Dorli, in Maharashtra, farmers have painted "For sale" signs across the backs of their cows and on the trees. In another village in Maharashtra, a banner reads: "This village is ready to be auctioned. Permit us to commit mass suicides." In the village of Chingapur, the villagers invited the Indian Prime Minister to preside over a "human market" to auction off their kidneys. Something is badly wrong in rural India.

"It is debt," says Gurjit Singh, a huge Sikh farmer who stands in the hot sun, handing loose fibres to two elderly men who are painstakingly spinning them into a rope. "We cannot pay our debts. If someone else can come here and make the land pay, we're prepared to work for them."

The farmers of Malsinghwala own their own land. But they are so heavily in debt they would prefer to give that up and work as common labourers. Mahatma Gandhi's dream of a strong, independent Indian society based on its villages is dying under the sizzling Punjab sun.

It is happening even as India is going through an extraordinary economic boom that is transforming it from a third- world country to a global economic power. The economy is growing at more than 8 per cent a year, and the cities are growing from week to week. The US is courting India as a strategic ally, and foreign companies are jostling each other to get a share of the huge potential market here.

India's big companies talk of the country's agriculture as a massive untapped resource, with exceptionally fertile land, and tropical fruits, rice and spices that are considered among the world's best. Insiders say Reliance, one of the major players in India, is planning to move into the farming sector in a big way.

But out here in the villages, there is no sign of India's economic miracle yet. The people are still mired in grinding poverty. It takes seven hours to drive here from Delhi, but it feels like a journey back in time. The road gives way to dirt tracks and the gleaming imported cars that clog the city streets disappear, unable to withstand the rough roads.

Punjab is known as the "bread-basket of India". The most fertile farmland in India has made it one of the country's richest states. But out in the villages, life is harsh. It is searingly hot in summer: the temperature regularly rises to 45C, but the villagers cannot afford air conditioning. "AC? We don't even have a fan," one laughs, then points to a tree. "That is our air conditioning," he says. "We lie in the shade under a tree. It's too hot to move." Everyone in the village is a farmer. The children go to school in a neighbouring village, the villagers shop at a market in another village. Punjab is the home of Sikhism, and everyone in the village is a Sikh - all the men go by the Sikh surname of Singh.

The people here live in communal houses shared by several brothers. Each lives in one or two small rooms with his wife and children, grouped around a central yard where they keep cows and buffalo.

Gurjit Singh is the richest man in Malsinghwala. He owns 14 acres of land. He has debts of £2,500, but he only makes £650 a year, and he has to feed and clothe his three children out of that: he is trapped in a cycle of debt he can never pay off.

He is not the only one. Four farmers have already committed suicide in this tiny village alone, rather than face their impossible debts. The reason, Mr Singh explains, is that the farmers are at the mercy of unscrupulous moneylenders who charge annual interest rates of 24 per cent.

The farmers live hand-to-mouth: they have no capital to buy seeds and fertiliser, so each year they need to take out loans. The deal is simple: the farmers repay the loan with a percentage of the crop. But if a single harvest fails because of poor rainfall, the farmers lose out. Unable to pay off the loan, they face massive interest they cannot pay off. And in recent times, Punjab, like much of India, has endured several years of drought.

"We cannot go to the banks for a loan," Mr Singh explains. "If you go to the bank, the manager demands a bribe for agreeing to the loan. To get a loan of 100,000 rupees [£1,285], we have to pay the manager a bribe of 20,000 rupees." The result is that the farmers are at the moneylenders' mercy. One bad harvest and they face handing over their crops to the money lenders for years just to pay off as much of the debt as they can. As one observer put it: "The moneylenders have effectively got the farmers in slave labour."

There was a major scandal in India two years ago after hundreds of farmers, unable to pay their debts, committed suicide in Andhra Pradesh, in the south. There have been suicides here, too, but the people have decided to fight. Facing the unpayable debts, the panchayat, the village council, in Malsinghwala met and decided to put the village up for sale. Harshikanpura, a couple of hours' drive across the maze of dusty lanes that thread their way through the fields, was the first village in India to put itself up for sale. That was five years ago, in 2001, and at the time it was dismissed as a freak publicity stunt. But in recent months Harshikanpura has inspired a rash of imitators.

However, the villagers' gambit has not paid off. After five years on the market, still not a single buyer has come forward for Harshikanpura. But the villagers insist the offer is still on. They refuse to give a price for the village. They say they will consider any serious offers.

Kunda Singh's brother, Chabiya, and his wife committed suicide rather than face their debts. The couple drank fertiliser, like thousands of farmers across India who have been trapped in the impossible cycle of debt. Chabiya was just 26. Today, his brother, Kunda, is careworn beyond his years. Some of the farmers here have massive debts: some owe as much as £25,000, almost 40 times their annual income. The total debt of all the farmers is more than £500,000.

"We're hoping a big company will buy the land and build a factory here," says Baldev Singh, one of the villagers. "Then we can work in the factory." There is little chance of that. Harshikanpura is right in the middle of India's cotton-growing belt, and no one is going to want to build a factory on fertile land.

But the fact that farmers working in what should be a lucrative agricultural sector are so desperate they want to sell their villages shows that something is dreadfully wrong in Indian farming. Even as India is emerging as an economic force, the villages on which Gandhi dreamt of basing an independent India are struggling and dying. It is the cities that are driving the economic boom, and every year hundreds of thousands of Indians leave the villages and migrate to the already bursting cities looking for a better life.

"They say India is becoming rich but we have not seen any of it," said Gurjan Singh. He has debts of £5,000, but makes only £300 a year. "When George Bush came here he said India was a big economy. He should have come to Harshikanpura, then he'd have seen the truth about India."

Part of the problem in Punjab is that the tradition of dividing a farmer's land between his sons after his death is making some farms so small they are economically unviable. Farms have been divided again and again until the descendants of men who farmed hundreds of acres have tiny plots. One farmer said he had only three acres of land.

That may soon change with Indian big business showing increasing interest in agriculture. The word is that the Reliance company wants to move into the farming sector and buy produce directly from farmers to sell in its own retail outlets, cutting out the middle men altogether. That could be bad news for the money lenders who currently get the crops to pay off their loans.

Insiders say Indian agriculture is performing far below its potential because it is steeped in outdated methods and practices. As much as 35 per cent of Indian produce is spoilt in transportation, for instance.

Changing the way the market works inside India is only the beginning. Analysts say agricultural exports should be doing better as well in a country that produces mangoes, rice, tea and spices that are considered among the best in the world.

If the big companies do move into agriculture, it could be good news for the villagers. But it could also change Indian rural life forever, in a way that will take India even further from Gandhi's ideal, and into the tough commercial realities of modern capitalism.

But in the villages, they are not worried about that. They just want a way out of the cycle of impossible debt.

In his struggle for independence from Britain, Mahatma Gandhi envisaged a panchayat raj, or village republic, to replace the colonial and caste system that held sway across India.

"Independence must begin at the bottom," he wrote in the 1940s. "Thus, every village will be a republic or panchayat having full powers. It follows, therefore, that every village has to be self-sustained and capable of managing its affairs even to the extent of defending itself against the whole world."

In this village model, each collective would be its own democratic entity, with the government of the village conducted by the panchayat of five persons, annually elected by the adult villagers, male and female.

Having witnessed the ravages of colonial capitalism in both India and what was then the Cape Colony, Gandhi developed a deep opposition to the technological advances that in his view made the rich richer and the poor poorer. "In this there is no room for machines that would displace human labour and would concentrate power in a few hands. Labour has its unique place in a cultured human family.

"I have not pictured a poverty-stricken India containing ignorant millions. I have pictured to myself an India continually progressing along the lines best suited to her genius. I do not, however, picture it as a third-class or even a first-class copy of the dying civilisation of the West."