The Setback And The Lesson

Context: Reforms in agriculture could get stalled. The tryst with the farm laws should be a lesson to the ruling party about values of consultation and transparency.

Economic and political implications of repealing farm laws

• Agriculture will keep chugging: Agri-GDP growth has been growing less than 3.5% per annum and it will remain same if the path will be continuing.  
• Cropping patterns will remain skewed in favour of rice and wheat, with the granaries of the FCI bulging with stocks of grain. 
• Food subsidy will keep bloating and there will be large leakages.
• Groundwater table in the north-western states will keep receding and methane and nitrous oxide will keep polluting the environment. 
• Agri-markets will continue to be rigged and farm reforms will remain elusive for some time to come unless the promised committee comes up with more meaningful solutions.
• Farmers’ income having not a very happy situation: Average agri-household would be Rs 13,000 p.a.
• Shrinking land holdings by farmers: Average holding size stands at just 0.9 ha in 2018-19, and has been shrinking over the years, the incomes of farmers cannot be increased significantly. 
• Crying for reforms, both in the marketing of outputs as well as inputs: Includes land lease markets and DBT of all input subsidies — fertilisers, power, credit and farm machinery.
• Political gambling continued: There is a political gambling behind this historic decision.
• Demand could be increase for MSP to include a larger basket of commodities.
• Demands could be raised to block privatisation reforms of public sector enterprises or to scuttle any other reform for that matter. 
• Competitive populism can give some succour to the poor in the short run, which they deserve, having suffered badly during the pandemic period. 
• Slowdown in investments: It would slow down the growth and job creation, that could turn out to be a trade-off between short-term freebies and medium- to long-term loss.

Way Forward: 

• Need to take steps to increase rural incomes in a sustained manner.
• Need efficient functioning value chains from farm to fork by the infusion of private investments in logistics, storage, processing, e-commerce, and digital technologies.