We no longer live in the days of economist Milton Friedman who argued businesses only had a responsibility to their shareholders to increase profits, in an ever more globalised world and economy imply appearing to be pro or anti issues is not merely enough.
The farmers’ movement is occurring at a turning point of India’s socio-economic trajectory. It could spark a real and lasting breakthrough, fuelled by resilience in the midst of compounding crises. But the agricultural problems in India are not new.
The partition of 1947 gave birth to a new India – one that was born into hunger. The roots of India’s Agricultural Policy emerged from seeds of scarcity and decades of drought and famine. For India’s first prime minister, Jawaharial Nehru, the challenges then were formidable.
His responses to them, including an ill-timed free-market experiment, led to huge price variations and short-term hardships for farmers already reeling from the trauma of partition.
The government subsequently went to the opposite extreme, imposing a statist system of agriculture that we still follow today.
The Nehruvian government came up with pro-peasant policies with an underlying strategic understanding that agrarian surplus was necessary for industrial growth. They redistributed land, abolished intermediaries, reduced land revenue and most importantly, granted farming communities greater political power at the state level.
Then came major crop failures in the 1960s, paving the way for the advent of the Green Revolution that advocated modern methods of cultivation. This strategy led to an increase in agricultural productivity but had certain unintended consequences.
Against the backdrop of these tangled narratives, the State decided to control food trade. Over the next two decades, Agricultural Produce Market Committees (APMC’s) were set up by the government with a minimum support price (MSP) for farmers in key crops. MSP established the floor price at which the State would buy from the farmer if they were unable to find better prices in the open market.
The agricultural sector currently employs 41% of the population with 80% of them being marginal farmers. The sector supports the livelihood of more than half Indians, but ironically 10,000 farmers commit suicide annually as agriculture has ceases to be economically viable; over half of the farming community in India is in perpetual debt.
Land reforms, a shift to cash crops, liberalization policies which pushed Indian agriculture into the global markets without a level playing field, government neglect of the sector – they all perpetuate a vicious cycle of poverty.
In September 2020, the Modi government extolled the enactment of three controversial farm bills as a “watershed moment” for Indian agriculture. They were passed hurriedly by way of ordinance and bulldozed through parliament.
The first law makes APMCs essentially redundant. The second sets the ground for contract farming at pre-agreed prices. And the third removes state control over the amount of produce that traders and producers can stock. At the heart of these laws also lies the issue of MSP.
But apart from what the laws entailed, it was also a matter of the process by which they were passed that amounted to the indignation and repudiation of those affected, prompting one of the largest organized protests in history, by about 250 million people.
Consensus and consultation – core elements of democracy – were blatantly ignored in the formulation of the bills. Given the sheer magnitude of the protests, if not the fact that half of its population is engaged in agriculture and allied activities, the undemocratic passing of the bills should raise questions.
In The Shock Doctrine, Naomi Klein underscores the concept of “disaster capitalism” in reference to governments’ tendencies to ram through free market policies in the wake of a major crisis. In India’s current case, the crisis is a compound of COVID-19 impacts and policies that deepen food insecurity and economic inequality.
The government justified the laws as part of a ‘COVID-19 relief package’. But, despite their aim to provide immediate economic relief, such anti-worker liberalization policies will only exacerbate present inequalities. Moreover, introducing economic liberalization in agriculture is inappropriate for a developing country like India.
In western countries, rapid industrialization caused the agricultural sector to decline, but they also experienced a concurrent rise in share of services with little slump in manufacturing. India, by contrast, does not enjoy such symmetrical development.
False negative, false positive
A decline in agricultural income in India does not equate to a decline in the population still dependent on agriculture. The notion that increased agricultural liberalization will increase food security and farmers’ freedom rests on idealistic assumptions that income will be evenly distributed among producers and that the market is perfectly competitive with no dominant monopolies or oligopolies.
In twenty years, employment capacity in agriculture also dropped from 60% to 35%. The suggestion that small farmers be moved to non-farming jobs may merit attention, but the reality remains that job opportunities in the organized sector are largely unavailable. Majority of those forced to leave agriculture now live a hand-to-mouth existence.
The State could have taken two measures to address the problem of India’s sluggish agricultural growth, meagre farm incomes and volatile food prices. First, they could have strengthened the existing procurement system, ensuring that all farmers’ offer to government agencies was bought at the MSP. This would put pressure on the government to build more mandis (marketplaces for farm produce), expand the procurement network, invest in storage facilities and logistics allowing surplus from certain states to get to those with insufficient produce. Meanwhile, India’s current number of mandis is six times less than that needed for every farmer to access government buyers. Second, they could have established a cooperative system between the producer, buyer, and seller.
Instead, on the basis of APMC’s disproportionate marginal benefits, the government decided to dismantle the entire system. This approach is only warranted if policy-makers have tremendous faith in private sector efficiency in handling the entire food-marketing system, not just trade.
Given that trade margins are based on minimising payment to producers and maximising charge for consumers. Propagating for the deregulation of food trade therefore implies advocating for the corporatization of agriculture.
The new bills allow and encourage the entry of big private players into farming since they have better means than small farmers to raise efficiencies of scale and improve labour productivity. Accordingly, they can reduce costs and are also the ones who can profitably sell at a lower price.
Traditionally, farmers transact their produce through middlemen, whom the new bill intends to remove on the pretext of efficiency and empowerment, as if farmers will naturally capture more profits by selling directly to corporations. Quite the contrary, it would only cause a massive power imbalance between buyer and seller. Imagine being wholly dependent on the broccoli you grow in your backyard, and then dictating the terms of sale of your broccoli to a Whole Foods.
The history of agriculture has shown that small farmers cannot compete once big corporates enter. Even contract farming disfavors larger farmers who cannot match the legal resources corporates have at their disposal.
It is unfathomable why the government is resistant to legislating the MSP. If private procurers are going to pay more, the government would not have to pay MSP anyway; it would cost the exchequer exactly nothing.
The problem with food policy is not a particular ideology, but the idea that any single ideology could work. Only a range of solutions, each adapted to and for the benefit of stakeholders, may have a chance to succeed.
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