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 chainsfrom farm to fork by the infusion of private investments in logistics, storage, processing, e-commerce, and digital technologies.