The insured MSP would be a “rocket dose” for the economy
Days after Prime Minister Narendra Modi announced the annulment of the three contentious farm laws, a photo report in The New York Times titled: ‘Once We Leave We Won’t Return’ (November 23, 2021) painted a revealing picture of the devastation market reforms have inflicted on American agriculture. With more and more farmers going bankrupt in the Midwest region, the small farmers who have stayed on the farm are somehow struggling to survive.
“At some point the people raising your food are going to be dead,” Jeff, who operates 800 acres, which is small by US standards, said in the newspaper.
It reminds me of another poignant report in the Time magazine (November 27, 2019) with an ominous headline: “They’re Trying to Wipe Us Off the Map”, explaining how small farmers are on the verge of extinction. Between 2011 and 2018, nearly 100,000 farms were lost in America; with 12,000 of them missing in just two years, 2017 and 2018. “Farm and ranch families face great extinction,” he quoted, citing Nebraska cattle rancher Al Davis , who added: “If we lose the rural way of life, we have really lost a lot of what made this country great.
Not only in America have market reforms in agriculture destroyed the livelihoods of farmers, but in the rest of the developed world the situation is just as alarming. “Every genuine farmer is now unfairly put on a conveyor belt with accumulated debts to honor unless he goes bankrupt, commits suicide or finds another source of income,” one UK farmer said in media.
In March of this year, French farmers hung suicide dolls from trees outside Parliament to draw attention to the severe agrarian crisis that prevails. In Germany, more than 130,000 farms have closed in the past 15 years. In short, free markets have failed to increase farm incomes anywhere in the world and in so doing have allowed big business to gradually take control of agriculture.
This is what worried Indian farmers. The intense protest by farmers at the New Delhi borders, which ended a year on November 26 and ultimately led to the overturning of the three disputed farm laws, is a great relief to the farming community who feared the laws would target to facilitate the resumption of agriculture by the company. With agriculture already in terrible distress for several decades, farmers were able to understand what the entry of large companies into farming would mean for their future, knowing that companies would eventually drive them out.
Disturbed by all kinds of innuendo thrown at them, the protesting farmers have in fact ended up questioning the mainstream economic thinking of sacrificing agriculture for the sake of industry. Knowing that markets have failed to support farm incomes in the developed world, they questioned the economic rationale for letting farm prices be left to the game of the supply and demand principle, which according to market economists, leads to price discovery. But, in reality, it is not.
The demand to make MSP a legal right for farmers, ensuring that no trade is allowed below the advertised price for 23 harvests each year, is in fact aimed at seeking a guaranteed and stable income. This did not happen in Bihar, which rejected the APMC law in 2006. Major economists then predicted that Bihar would be the harbinger of a new market-driven agricultural revolution in the country, attracting private investments, establishing a network of private mandis and efficient markets would result in higher prices for farmers. But 15 years later, nothing like that has happened.
By comparison, markets have failed to increase farm incomes in the United States and the European Union. This can be very well assessed from the latest production subsidy equivalent index prepared by the Organization for Economic Co-operation and Development, which shows that rich countries have heavily subsidized their agriculture with Norway, Switzerland and the Ireland at the top of the table. On the other hand, India, Vietnam and Argentina have negatively taxed their farmers. The prosperity we see in western agriculture is therefore not due to markets but to huge government subsidies, including direct income support. The question I am often asked is, if not for market reforms, what kind of measures are needed to revitalize Indian agriculture. After all, the Situation Assessment Survey-2019 report released in September shows that the average farm income from the crop alone is a paltry Rs 27 per day, the distress on the farm is everything. just scary.
A study by Niti Aayog showed that the growth in farm income between 2011-12 and 2015-16 remained below half a percent each year. Simply put, this means that farm incomes have frozen or declined.
It was the anger built up over the years over the continued inability to provide a living income that drove protesting farmers onto the streets. Reiterating what I have said many times earlier, agriculture has been deliberately kept impoverished to maintain the viability of economic reforms. This is how the economic design is formulated, keeping food prices low in order to control food inflation and also to provide cheaper raw materials to industry. In other words, the farmers had only two roles – as a vote bank and a land bank. This must change. Protesting farmers believe that an income secured through a guaranteed PSM is the only way to lift farmers out of the clutches of growing debt and poverty.
The demand to make PSM a legal instrument has enormous economic implications. In addition to making farming a viable business, thereby reducing the pressure on cities to create additional jobs, higher incomes for farmers would translate into higher economic growth. When the 7th Wages Commission was announced, benefiting around 4-5% of the population, economists called it a booster shot for the economy. Imagine if 50% of the country received a higher income through guaranteed PSM, it would create such huge rural demand, thus acting not as a booster, but as a rocket dose for the economy.
Agriculture certainly calls for a change. Instead of borrowing the failed agricultural marketing reforms from other countries, the protesting farmers gave us a great opportunity to rethink and come up with a desi version of agricultural reforms where a guaranteed price becomes the hallmark of what could lead to a bright future in agriculture.
It is time to listen to the farmers who are protesting.
(The author is an author and food policy analyst)