Farmers in India held a victory march on Saturday to mark the end of a year-long protest after the government gave in to further demands, alongside its surprising recent rollback of three controversial new agriculture laws.
However, the scrapping of the reforms is not a reason for the sector to celebrate as it remains mired in challenges, including inefficiencies and wastage, while many farmers continue to struggle to turn a profit, experts say.
The new laws were a huge step towards a much-needed overhaul and modernisation of India’s agriculture industry and could have ushered in more investment, the experts add. Protesting farmers, however, insisted the reforms would have left them at the mercy of big business.
“These [laws] could have facilitated agricultural product trade and benefited farmers,” says Anjami Nayyar, an agriculture technology expert and chief executive of consulting firm Knowledge Network Solutions. “The slowdown in agricultural growth has become a major cause for concern.”
India’s agriculture sector accounts for about 15 per cent of the country’s gross domestic product, representing a decline from more than 40 per cent in 1960, according to World Bank data.
India aims to become a $5 trillion economy by 2025 and improving the economic contribution of the industry is particularly important given that agriculture supports the livelihoods of about half of the population.
“Factors like increasing employment in the agricultural sector and improving farmers’ income should be emphasised,” says Ms Nayyar, adding that the government will have a challenge on its hands to convince farmers of the benefits of any future reforms.
“The government should try to increase productivity, reduce costs and prioritise crops with high value, reduce risks and make agriculture sustainable.”
Most farmers in the country are small and marginal growers, who hold less than one hectare of land, official data shows. With little money to invest, they often rely on middlemen to sell their produce, which eats into their profits.
Given the central role the sector plays in the country’s food security, it also means it has become heavily dependent on government subsidies, further pressuring public finances.
India’s three new farm laws, which were passed in September last year, were aimed at addressing these issues by deregulating produce markets. The reforms were focused on changing the way crops were sold and stored, permitting all farmers to sell outside state-run wholesale markets.
The laws were “an economic necessity”, which would have improved “the bargaining power of farmers”, says Vijay Sardana, a Supreme Court advocate and an expert in agri-commodities.
Most farmers were, in fact, in favour of the reforms, Mr Sardan adds. “Now the farmers are back in the trap of middlemen and commission agents.”
However, many farmers reacted angrily when the laws were passed last year, arguing they would bring an end to the minimum prices they are guaranteed at wholesale markets and that big business would offer them lower rates.
In protest, tens of thousands of farmers set up camps at the Delhi borders, where they braved the Covid-19 pandemic, bitter winter weather and the sweltering summer heat, which claimed lives along the way.
The movement was considered the biggest challenge Prime Minister Narendra Modi has faced since he first came to power in 2014 and won re-election in 2019, largely due to farmers’ votes.
The stand-off between the government and farmers prevailed for a year, with Mr Modi insisting the laws were aimed at helping farmers and they would help bring in investment and access to technology to revolutionise the sector.
It, therefore, came as a surprise when Mr Modi last month announced the laws would be repealed, which was passed by parliament on November 29.
But protesters did not back down until December 9, when the government agreed to consider guaranteed prices for all crops, apart from just wheat and rice, and outlined plans to set up a committee to work on the matter. New Delhi also gave in to other farmers’ demands, including retracting legal cases against protesters.
The consensus is that Mr Modi’s climbdown was politically motivated, with key regional elections coming up next year in the country’s northern states, where many of the demonstrators live.
“The repeal of the farm laws has been to appease farmers before major state elections like Uttar Pradesh and Pubjab, which have a huge farmer population and hence a vote bank which cannot be neglected,” says Ashutosh Paarcha, a Supreme Court advocate.
“And going forward there are many other state elections. Hence, I doubt the government will try to bring any version of farm laws anytime soon.”Repealing the farm reforms and increasing the minimum support price universe may damage the future of farmers, small and big alikeBhushan Mahajan, founder, chief executive and managing director of Arthbodh Shares and Investments
Most of the demonstrating farmers were from the northern states of Punjab and Haryana, which are major growers of staples including wheat and rice, and they rely on the state-backed system.
“Price support schemes have proven to be of limited use and it is universally agreed that the farmers need more marketing freedom,” says Bhushan Mahajan, founder, chief executive and managing director of Arthbodh Shares and Investments.
“Repealing the farm reforms and increasing the minimum support price universe may damage the future of farmers, small and big alike.”
It is “a noble reform effort [that] has turned futile”, he adds.
Meanwhile, the rollback of the laws could have a negative impact on investment flows that might have otherwise come into the sector, some industry insiders say.
It also raises concerns about the government’s reform agenda, which can affect investors’ perception of the country, economists say.
“While the direct economic impact of abandoning those reforms is limited, the bigger concern is the signal that it sends about the prospects for other contentious reforms that could make a substantial difference to economic growth over the long term,” says Darren Aw, Asia economist at Capital Economics.https://www.podbean.com/player-v2/?i=yxqin-111817a-pb&from=pb6admin&pbad=0&square=1&share=1&download=1&rtl=0&fonts=Arial&skin=1&font-color=auto&btn-skin=3267a3&size=300
The laws would have benefited the sector, but it was the right move for Mr Modi to repeal them, says Vimal Alawadhi, managing director at Best Agrolife, an agrochemical company in India.
“The decision to roll back the new farm laws was a big surprise for us but a pleasant one,” he says
The “prime minister bears a collective responsibility to take all the stakeholders on board, while making any laws where millions are affected in a negative or a positive way”.
However, “agriculture in India needs reforms in order to improve its profitability”, Mr Alawadhi adds.
“The nation is struggling in the implementation due to political will and at present due to fractured political consensus.”
The government should work on “farm laws accommodating the farmers’ suggestions and concerns”, he adds.
But there is huge amount of work to be done, as factors including climate change are adding to small farmers’ woes and the precariousness of their livelihoods, with flooding increasingly wiping out crops and drought drying up already scarce water resources.
“Raising productivity per unit of land will have to be the main engine of agricultural growth,” says Ms Nayyar. “Water resources are also limited and water for irrigation must contend with increasing industrial and urban needs.”
As the government and farmers go back to the drawing board, it will be an uphill struggle to overhaul the sector, she adds.