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In September 2020, India’s Parliament passed three bills designed to change the way the country bought and sold agricultural goods. With its commanding majority in the legislature, the ruling Bharatiya Janata Party (BJP) forced the bills through with little discussion. Such haste and unilateralism are not unusual for the government of Prime Minister Narendra Modi, which sought little input before eliminating all high-denomination cash bills in 2016, for example, or rushing a year later to implement a new goods and services tax. But while those earlier policies caused hardship and sparked some minor protests, the consequences of the farm bills are of another order altogether.
Indian farmers, afraid that the sweeping provisions of the farm bills could imperil their livelihoods, have mounted significant protests. The movement mushroomed in November, particularly in the agricultural heartland of Haryana and Punjab in northern India, near the capital, New Delhi. Thousands of farmers from these states descended on New Delhi and have remained encamped on its outskirts ever since. On India’s Republic Day in January, demonstrators disrupted celebrations by storming the iconic Red Fort in Delhi. The government has attempted to negotiate with the protest leaders, but it has offered only cosmetic concessions, and the talks have made little progress.
The uproar over the farm laws poses a major problem for the Modi government, given that around 41 percent of the Indian workforce is in agriculture. Nevertheless, the bills are long overdue. Much of the policy framework that governs Indian farming was put in place half a century ago. Sluggish growth and stagnating incomes have burdened the country’s agriculture in recent years. Modi’s legislation sought to liberalize the struggling sector by trimming the state’s role in the buying and selling of produce. But by taking a heavy-handed, top-down approach, the government has obscured the necessity of its reforms and stoked vociferous opposition.
The BJP’s farm bills were intended to remake an agricultural policy devised in the middle of the twentieth century. In the late 1960s, in the wake of a near famine in north India, the country set about becoming self-sufficient in food production. To this end, it adopted a plan that came to be known as the Green Revolution, in which the government promoted the use of hybrid, high-yielding, and disease-resistant seeds as well as chemical fertilizers and farm machinery. To ensure that the Green Revolution met its targets, the government gave itself a central role in the farm economy. The plan was successful, insofar as India produced an agricultural bounty that made it self-sufficient in food production by the 1980s.
The Green Revolution transformed agriculture in many parts of the country, but it was not without blemishes. The approach mostly helped those farmers who were already prosperous enough to afford high-yielding varieties of seeds, water pumps for year-round irrigation, and heavy machinery. Smaller farmers and sharecroppers did not share in the benefits to the same extent. The Green Revolution’s policies benefited some Indian states, such as Haryana and Punjab, more than others. Still, India no longer faced the Malthusian nightmare of being unable to feed its growing population, and today India is a food-surplus country technically capable of feeding its entire population and then some.
Nonetheless, Indian farming is once again in crisis. The Green Revolution produced impressive growth in the late 1960s and subsequent decades, but by the 1990s, growth and productivity had declined in the farm sector as incomes stagnated. Experts suggested that the stagnation was rooted in part in farmers’ inability to freely sell their produce. But after decades of subsidies and government-guaranteed commodity prices, a powerful constituency within the farming community resists change.
They do so despite the fact that agricultural subsidies have largely benefited comparatively wealthy farmers who can afford to make the investments necessary to take full advantage of those subsidies. Moreover, subsidized water and electricity have allowed many farmers to invest in lucrative crops such as wheat, rice, and sugarcane without any regard for the steady degradation of the land. And the subsidies have drained the coffers of many state governments, as they cannot recoup the real costs of providing water and electricity. The total costs of these subsidies to the Indian treasury amount to nearly four percent of India’s pre-COVID-19 GDP.
Indian governments have considered liberalizing agriculture since the 1990s. In 2003, the then ruling BJP government issued the State Agricultural Produce Marketing (Development and Regulation) Act—also known more simply as the Model Act—which provided nonbinding guidelines to state governments to reform the farm sector, including opening private (not state-run) wholesale markets for produce, allowing farmers to sell directly to markets, and allowing farmers to set up contracted arrangements with food processors and distributors. In India’s federal system, transactions related to agriculture mostly fall under the purview of states.
State governments have selectively changed policies in accordance with these guidelines but delayed reform where it lacked popular support. In Punjab, for instance, which benefited greatly from the Green Revolution of the 1960s and 1970s, farmers have long resisted any attempt to dismantle the regulated markets that guarantee prices for their produce.
The three 2020 bills seek to use federal law to weaken those state controls and further open the agricultural sector to market forces. The bills promise farmers the freedom to decide to whom and where they sell their produce. They seek to make it easier for farmers to sell to private markets. The bills allow greater freedom for the movement and sale of produce within and between states and make it easier for traders and buyers of all kinds—retailers, wholesalers, supermarkets, and food processors—to directly approach farmers without going through intermediaries.
Economists and policymakers argue that the reforms will boost farmers’ incomes by allowing them to develop direct relations with food processors and retailers. At the same time, food processors and retailers will be able to source the produce they want more easily and efficiently. The government hopes that its legislation will therefore encourage more investment in the food processing and organized retail sectors (food processing is already one of the fastest-growing sectors of the economy).
Concomitantly, the government expects that growth in agriculture will create new jobs. Growth in food processing alone promises to create nine million new manufacturing jobs by 2024. Millions of Indians enter the workforce every year. India needs to create many low-skilled manufacturing and service jobs to absorb these workers, as the information technology and other service sectors in which India has done well tend to cater only to workers with advanced degrees.
India’s 50-year-old agriculture policy desperately needs revision, but the government was too hasty in pushing the bills through last year. The country’s farmers have responded with caution or outright anxiety, not least because they have had a recent bad experience with agricultural reform. Several states adopted some of the reforms of the 2003 Model Act, in the process revealing numerous problems. The state of Bihar, for instance, dismantled regulated markets but was not able to replace them with private ones, leaving a void that hurt small farmers who could not afford to travel great distances to sell their produce. Farmers fear that without adequate safeguards, the corporate sector will find ways of driving prices down, eventually forcing them to sell their land. The protesters further claim that these bills will benefit big agribusiness corporations, including those with ties to the government. The demonstrators in New Delhi are mostly from the nearby states of Haryana and Punjab, but other farmers from around the country have joined them on occasion. Huge farmer protests took place across India in 2018 as well, in response to stagnant incomes, rising costs, and increasing farmer debt.
Nevertheless, the government can ill afford to concede to all the demands of the farmers. Some of them, bluntly stated, are untenable. For example, the Indian exchequer cannot indefinitely sustain its current level of agricultural subsidies, nor should it. The subsidies primarily benefit only a fraction of Indian farmers and have disastrous unintended consequences for the environment. The current trajectory of India’s agricultural economy is neither financially nor environmentally sustainable. Reforms are indeed an existential necessity. However, as Modi and his party may be realizing, resorting to legislation in the form of an executive fiat is hardly a winning formula in a democracy.
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