The Setback And The Lesson

The Indian Express     20th November 2021     Save    

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.