Farmers’ protest | Image: Reuters
There’s a struggle taking place in the Indian economy today. On the one side are the forces that want a fundamental change—the forces of resurgent capitalism. On the other are the last vestiges of the old order—the populists. The farmers’ agitation is part and parcel of that underlying conflict.
The opposition parties, keen to exploit the current weakness of the government to the hilt, have lent support to the protests, including a call for a ‘Black Day’ today. This is despite the fact that wheat procurement in Punjab has hit a new high, surpassing the target set by the state government. The same holds true for Haryana. Minimum support prices have been raised. Uttar Pradesh has procured double the quantity purchased last year, in spite of a disastrous second wave. Farm leaders have said that one reason for the higher procurement was the scheme of direct payments to the farmers, bypassing the middleman. Clearly, cynical political reasons are at work behind the protests and the support given by the opposition.
But it’s not just a question of higher minimum support prices and increasing procurement benefiting farmers. Everyone knows that it is only a section of farmers in the northern states who benefit from the current arrangement, which itself is the legacy of a time when India had a desperate need to grow more food. As the Economic Survey of 2016-17 pointed out, it is the last bastion of central planning, with input prices for fertiliser, electricity and water set by the state, while output (procurement) prices too are set by the state. In addition, the crop is stored in state warehouses and distribution done by the state through the PDS.
The system didn’t work for most farmers. A government study in 2013 found that 69.4 percent of farming households—those with holdings of a hectare of less—didn’t earn enough from agriculture to cover their expenses. Another 17.1 percent households—those owning between 1 and 2 hectares—had an average monthly surplus of a paltry Rs 891 in 2013. It’s rather obvious that the system being defended by the northern farmers benefited a very small number. The brutal fact is the vast majority of farming households barely earn enough to keep body and soul together.
Clearly, the old system is no longer working. How can it, when farms are divided and sub-divided into tiny plots as a result of the population increasing? And it has also led to the depletion of groundwater and imbalance in fertiliser use has affected the soil.
The classical way in which this problem has been solved is through people leaving unviable farms for jobs in the dynamic manufacturing sector in the cities. That has been the manner in which all economies have developed, from England in the nineteenth century to China in the twenty first. Unfortunately, many developing countries today are in the throes of premature de-industrialisation and the people leaving the farms end up in fetid city slums.
To be sure, the Indian government too is trying its best to attract investment into manufacturing — the production-linked schemes are proof of that. But that will take time and in the meantime the unfortunate fact is that people fleeing unproductive farms eke out a living either in the low productivity construction sector or as delivery boys and watchmen.
On the other hand, the new farm laws could, through contract farming, link farms directly to urban markets. They could help by providing finance and technology to farmers. A paper from the UN’s Food and Agriculture Organisation (FAO), quoted here, said contract farming in China has helped millions of small farmers, offering them a modicum of security and preventing their becoming landless labourers. To be sure, there will be many who will slip through the cracks. But the way to take care of them is by extending income support for those affected, rather than stand in the way of progress.
