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Part-1: Introduction to Indian agriculture reforms

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Vinod is a HR leader for a leading tech company in the Silicon Valley. He writes on topics including the economy, science and education. He is an alumnus of IIT Bombay, Cornell University and the University of Wisconsin-Madison.

In this article I propose to make a outlandish case that if the Indian Government has the genuine interests of Punjabi farmers in mind, it makes perfect logic for the Government to pay each farmer, full cost of the foodgrains they may produce in the future and get a promise in return that farmers would not cultivate an additional bushel of rice or wheat. In short, pay farmers to do nothing.

You would be surprised at this comment that the Government should compensate farmers for grains they do not produce, but there is a list of reasons why this preposterous move would be the most beneficial. This essay will also highlight the socialistic and short-sighted nature of Indian agriculture. Doleouts, subsidies and lack of foresight has meant that Indian agriculture has deteriorated into a logjam of vested interests trying to push forward their interests at any cost, with little regard to the welfare of the poor farmers on the ground or their own future.

Farmer protests are nothing new in India. Farmer protests and Jat agitations have been historically led by the same group of leaders. In 1987, Mahendra Singh Tikait brought the Rajiv Gandhi Government to its knees by organizing a blockade of Delhi with 5 lakh people. This number is atleast 10 times higher than the number of farmers protesting today against farm laws. Mahendra Singh Tikait was a populist Jat leader, and certainly not a visionary. The concessions he got in terms of waiving electricity bills for farmers, waiving water charges, higher prices for sugarcane, and farmer loans writeoffs, may have pleased his followers in the short term but set in place a disastrous set of events, which further weakened the tottering Indian agricultural sector. The current condition of farmers is partly attributable to the lack of reform and logical thinking among the spineless leaders of the past.

It would be insightful to locate the origin of Indian agricultural woes. The history of Mandis and MSP goes back to the 1950’s when India faced an enormous food shortage and India was begging every country in the west to send us foodgrains. The US did send ships laden with wheat, inspite of the fact that India was pro-USSR and opposed the US in the name of the defunct Non-Aligned Movement. To help find a long-term solution, the Indian Government worked with the Rockefeller Foundation and researcher Norman Borlaug to create high yielding rice and wheat varieties, colloquially called the Green Revolution in India.

The Green revolution happened in the 1970’s and was predominantly focused in regions like Punjab, Haryana, Uttar Pradesh and Delhi. These places were already well irrigated and close to the centre of power in Delhi. The Government invested heavily in procurement and storage in these regions. These farmer focused initiatives made Punjab the richest state in India by the 1970’s. Even today, an average Punjabi farmer now possesses around a hectare of land worth 2.5 crores and get subsidies totaling 1.2 lakhs a year. But these actions also ended up ignoring agricultural realities in every other state outside this Delhi belt. The consequences of this neglect linger to this day.

The idea of Minimum Support Price (MSP) and Mandis came about in 1955 through the Essential Commodities Act, 1955. Monopoly was given to Mandis in 1965, to become the solely procurer of foodgrains in their defined regions, which typically span hundreds of square kilometers. This was probably an example of Nehruvian overreach to choke the private sector. This was also the same decade when the Monopoly and Restrictive Trade Practices Act came into the picture to choke private initiative with quotas and punish Indian industry if they dared to become efficient. The MRTP act is infamous for pushing India into near bankruptcy in the late 1980’s, until Narasimha Rao and Manmohan Singh rescued India from the clutches of Nehruvian socialism. To argue that the present amendments in farmers laws should be repealed and that one should go back to the disastrous laws of 1955 and 1965 betrays a fundamental lack of understanding of the Indian economy.

Even during COVID, while every sector of the Indian economy has been hit by unemployment, the agriculture sector has been hurt the least. Contrary to expectations, they have done much better than every other sector and the new laws may have helped. After the farmer laws were amended, foodgrain arrival at mandis had fallen by around 20% in just 3 months. This means that while farmers have reduced selling at Mandis, they are already finding better options. Something is clearly working for farmers if they are not selling at Mandis which even promise MSP. Maybe they are getting better prices in the private sector. This possibility that Mandis are losing ground to the private sector offering better remuneration, may have been the real spur behind the current protests. Considering how dire the situation of Indian farmers is, opposition to every type of reform is making India the laughing stock in front of the world.

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Vinod is a HR leader for a leading tech company in the Silicon Valley. He writes on topics including the economy, science and education. He is an alumnus of IIT Bombay, Cornell University and the University of Wisconsin-Madison.
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