Since late November, tens of thousands of Indian farmers have marched to New Delhi and blocked the highways leading into the city, protesting against three bills that passed in both houses of India’s Parliament in September. The demonstrations have since spread to other parts of the country with farmers blocking roads and railway tracks, and limiting the movement of people and goods, including farm produce.
What are the bills in question? Listing them may feel cumbersome, but in the interest of understanding their value—and the immense scale of the protests against them—they are: 1) the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act; 2) the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act; and 3) the Essential Commodities (Amendment) Act.
The first two laws expand the marketing infrastructure provided by India’s state-level governments and allow direct marketing of farm products to processors, aggregators, wholesalers, large retailers, and exporters. The third law seeks to facilitate the production, movement, and distribution of farm produce by removing existing regulatory barriers.
While economists have long acknowledged the need for agricultural reforms in India, the ongoing protests likely have more to do with how the new laws were rolled out: The bills were all passed using the ruling Bharatiya Janata Party’s parliamentary majority, and without suitable consultation with key stakeholders such as farmer unions. The passage of the legislation also displayed all the hallmarks that have come to characterize Prime Minister Narendra Modi’s key decisions, ranging from a botched policy of demonetization in 2016, a hasty rollout of a goods and services tax in 2017, and then a nationwide lockdown with four hours’ notice this year to contain the spread of the coronavirus.
India’s farm policy architecture is a holdover from the 1960s when the country was poor and food insecure. Policies were put in place with food security as the primary goal. While this set of laws allowed India to achieve advances in food production by the 1980s, the farm sector has suffered a decline in public investment, a lack of marketing alternatives, and stagnant rural incomes. Almost everyone, including farmers, agree that India’s farm policies need to change; however, there is little agreement on the details of those reforms. In the early 2000s, the government at the time encouraged Indian states to design and enact reforms, but predictably every state adopted only piecemeal policy changes that did not hurt key interests within the state. As a result, there is no uniformity in policies and laws across the country.
Ostensibly, the laws that the Indian Parliament enacted in September were designed to reduce regulatory interference from the government and to fix that lack of uniformity and create a national policy. The intention was to make it easier to bring private investment—both domestic and foreign—into India’s farm sector. The laws promise to provide more freedom to farmers to trade outside state-designated markets and to private traders to move, distribute, and export farm produce. However, the farmers are apprehensive for several reasons. First, more than 85 percent of India’s farmers own farms smaller than three acres. These farmers mostly engage in subsistence farming and sell their surpluses, when available, to private traders. The average income of farmers has remained low, at just over $1,000 a year, making them highly sensitive to fears over market fluctuations. And while there is a great deal of variation within this group of farmers, they are not likely to benefit from the legislation the government has announced. Past experience with marketing reform from Indian states has shown that small farmers are likely to gain only from well-considered reforms of existing infrastructure—not a complete deregulation that the new laws propose.
The government-appointed Dalwai Committee, which published its final report in 2018, recommended that the government should radically change India’s farming policy ecosystem from a supply-focused, government-led one-to-one that would be demand-focused and market-based. Such a retreat would further reduce public investment into the farm sector. These farmers are also afraid that this changing policy environment and rising corporate power would result in a loss of both land and livelihood.
Another concern about the new laws comes from farmers who sell their produce either to the government or to private traders but who enjoy the security of floor prices guaranteed by the government—officially referred to as the minimum support price. Despite assurances built into the new laws, most farmers deem them to be vague and are less than confident enough to rely on them.
Farmers fear that the new legislation will weaken government-designated markets in which most transactions have taken place in past decades. While many lament the stranglehold the aggregators at these market yards have had over farmers, the existence of these markets and the traders within them offered the advantage of a minimum support price—a floor farmers are afraid they could lose. They see the weakening of the markets as a reflection of the government’s increasing retreat from the farm sector. After all, while the farm sector provides livelihoods to more than half the population of India, its contribution to the Indian GDP has been declining: During the past two decades the percentage of the country’s GDP from the farm sector has declined from 23 percent to 16 percent. Part of the problem lies in the fact that many of the farms are small and thereby cannot benefit from economies of scale. Yet this is the source of livelihood for many farmers who fear that without government intervention they will soon be left to the mercies of the emerging agri-business sector in India.
Most contemporary developed economies have gone through a period where the population is dependent on a declining farming sector even as the strength of manufacturing grows, absorbing labor. But in India, the manufacturing sector has not been able to create much employment. Indeed, for a variety of complex reasons, India appears to have almost entirely skipped this particular stage of economic evolution. Instead, the country focused on service industries and most notably the information technology sector, which almost by design can only absorb a miniscule segment of the country’s burgeoning population. Though technology contributes as much as 8 percent of the country’s GDP, it employs a mere 3.9 million individuals, or less than a third of 1 percent of the population.
Consequently, farm employment is expected to remain a mainstay of the Indian economy—at least in terms of employment—for decades. In an economy that has cratered virtually across the board since the onset of the coronavirus pandemic, the farming sector has provided a much-needed buffer to those who have had to return to their villages. Preserving the agricultural sector, even as it fails to deliver high incomes, has been an entirely understandable rallying cry across much of India, and especially in its breadbasket in the northwest of the country.
Even if one assumes that the government’s intent in pushing through agricultural reforms was well-meaning, the abrupt passage of such sweeping legislation, without adequate consultation, has led to a seeming impasse with a range of farming organizations. Despite several rounds of talks, a deadlock persists. The government may believe that a firm stance toward the farmers, along with some cosmetic gestures, will ensure the protests dissipate before long. But those hopes may underestimate the enduring importance of farming for India’s labor market, especially amid the tumult of the pandemic.
