Indian farmers have lately made international headlines. Popstar Rihanna, actor Susan Sarandon and activist Greta Thunberg have taken up their cause. Ozy, a glitzy Silicon Valley publication posed a provocative question: “Will the World Step In?”
The story playing out in international media appears to be a simple one. Indian farmers are the noble David standing up to an evil Goliath-like government beholden to greedy billionaires. In an era of increasing inequality and decreasing social mobility, this narrative resonates. The fact that elite journalists in New Delhi or New York see the ruling Bharatiya Janata Party (BJP) as a Hindu fascist party adds to its appeal.
Publications such as Ozy convey that Indian Prime Minister Narendra Modi has brought in agricultural reforms solely to benefit large corporations. As per this narrative, the government is in thrall to big business and against poor farmers. Is this narrative true, or is there something more complicated going on?
The Burden of History
Ever since the British Raj, Indian farmers have led tough lives. The colonial power imposed extortionate taxes on farmers, taking away at least 45% of harvests, often confiscating the whole yield. British imperialists took Niccolo Machiavelli’s advice to heart and patronized a new feudal class of landlords to act as their middlemen. They did the dirty work of squeezing farmers, enabling them to escape much of the blame. The British also created an extractive colonial bureaucracy to suck wealth out from India. Few realize that the primary job of the now-glamorous district collector — an elite civil servant who does the job elected mayors do in western democracies — was to collect taxes from poor Indian farmers.
Writing in The World Financial Review last year, Kalim Siddiqui explained in some detail why famine stalked British India. Great Britain industrialized and became a great power partly through ruthless exploitation of farmers in what are now India, Pakistan and Bangladesh, which then comprised British India. As a result, millions died of starvation, and those who survived the famines suffered constant malnourishment.
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The first priority for independent India was feeding its people. Indian farmers were dirt poor with no access to credit, reliable irrigation or modern agricultural tools and farming methods. They were often in the clutches of predatory moneylenders. Yet farmers had experience of mass movements. Mahatma Gandhi led his first satyagraha in Champaran against exploitation by British landlords, mobilizing thousands of poor farmers. In India’s new democracy, farmers might have been poor but, for the first time in centuries, they wielded real political power.
That power has carried over to today. Even as India has urbanized, farmers disproportionately decide elections. A staggering 83.5% of seats in the Lok Sabha, India’s lower house of Parliament, still primarily comprise rural areas. The political power of farmers has given them many benefits. Since 1947, governments have formulated multiple economic policies to overcome India’s colonial-era rural poverty. India abolished zamindari, an indigenous form of landlordship, immediately after independence. It overturned centuries of tradition by abolishing income tax for farmers. A key purpose of the 1969 bank nationalization was to provide cash-starved farmers access to credit.
The Green Revolution
In the 1960s, India launched its famous Green Revolution, which subsidized farmers in India’s northwest region, comprising the states of Punjab, Haryana and western Uttar Pradesh. This part of the country is a flat fertile plain irrigated by Himalayan snow-fed perennial rivers and with relatively large landholdings. Inspired by the American agronomist Norman Borlaug, India’s government encouraged farmers in this region to grow high-yield varieties of wheat, rice and cotton. It also gave farmers massive subsidies for fertilizers, seeds and equipment, investing large sums of capital to build dams and a network of canals and giving farmers access to easy credit. As a result, the farmers of landholding communities in northwest India became the most prosperous in the country.
The Green Revolution ended India’s ship-to-mouth existence. India’s population had exploded after independence in 1947. In a poor country, agriculture was inefficient and rain-fed. A bad monsoon meant poor harvests. Demand would outstrip supply and the specter of famine was never far off. Until production took off in India, the US supplied grains to Indian masses under the Agricultural Trade Development and Assistance Act of 1954, commonly known as PL–480 or Food for Peace. Lyndon B. Johnson limited even critical famine aid to India, demanding the country implement agricultural reforms and temper criticism of US intervention in Vietnam. The Green Revolution provided India with food security after two centuries of rapacious British rule.
Yet like any policy, the Green Revolution had unintended consequences. In 2009, Daniel Zwerdling chronicled how this fabled revolution was “heading for collapse.” With an emphasis on high-yield varieties, the traditional mix of crops grown in the region for centuries has been abandoned. Yields increased dramatically but only through an insatiable thirst for water. Groundwater levels have fallen by 75%-85% over the decade. In Punjab and Haryana, farmers are boring deeper and deeper for water. In 2018, 61% of wells were dug deeper than 10 meters. In a land crisscrossed by rivers fed by Himalayan snow, such water levels mark historic lows. India might have achieved food security at the cost of water security.
Parts of India are not just running out of water. The soil itself is turning toxic. Intense use of fertilizers and pesticides over decades has pumped harmful chemicals into the soil. More than 10 years ago, astute journalists like Daniel Pepper were reporting on villagers who spoke about rising cases of cancer, renal failure, stillborn babies and birth defects. These health problems have increased since. Researchers attribute these conditions to the “overuse and misuse of pesticides and herbicides.” As Pepper reported in 2008, Punjab comprised 1.5% of India’s area but accounted for nearly 20% of the country’s pesticide consumption. Haryana and western Uttar Pradesh suffer similarly high soil pollution and consequent health problems.
Another consequence of the Green Revolution has been the overproduction of cereals. So much wheat and rice are produced that a storage crisis has ensued. India now lacks the capacity to store grains, with millions of tons are stockpiled in poor conditions. In particular, India lacks cold storage facilities for fruits and vegetables because of restrictions on farmers, the stranglehold of Agricultural Produce Market Committees (APMCs) and a lack of incentives for the private sector to invest in the rural economy.
A Soviet Procurement System
After independence, India opted for the Soviet economic model. Five-year plans set out ambitious targets for a command-and-control economy. The so-called quota-permit-license raj emerged, with bureaucrats dictating “which company would produce what, but also the amount of production, as well as the price of commodities.” Agriculture was no different. In a top-down, command-and-control system, the government set targets that farmers had to meet.
In an indigenous twist to the Soviet system, India created the institution of the Agricultural Produce Market Committee. Thousands of APMCs were to run local agricultural markets, known as mandis. Farmers could only sell to APMC-controlled mandis and only at fixed prices. Unlike their American or European counterparts, Indian farmers could not sell wheat or rice on the open market. This prohibition had two reasons. First, APMCs allowed the government to control both production and price in its planned economy model. Second, APMCs were meant to protect farmers from the vagaries of the free market and save them from exploitation.
Over time, APMCs become the new oppressors. Local politicians and special interest groups came to control APMCs. Since they were the only buyers by law, APMC mandis began to set ceilings on what farmers received for their produce, offering precipitously low prices. Commission agents started taking greater cuts. APMCs delayed payments to farmers, forcing them to borrow from “[commission agents], local money lenders and savings for their daily expenses.” In addition, APMCs rarely gave receipts to farmers. This meant that they were denied the option of applying to banks for much cheaper credit. Instead, they were pushed into India’s infamous informal economy and became prey to exploitative lending. Tragically, inevitable and unbearable debt burdens have led to thousands of farmer suicides.
Apart from the APMCs, the government instituted a minimum price support mechanism as part of its planned economy model. New Delhi wanted high and stable production of key crops. Farmers wanted, and still want, stable income. In a pure market system, too much production leads to falling prices. This is not ideal for farmers. Therefore, they are careful to avoid overproduction. So, India’s economic planners instituted a system that provided a floor below which prices would not fall, encouraging farmers to grow crops deemed essential for food security and economic interests.
Over time, powerful lobbies in northwestern India, the heartland of the Green Revolution, pressured the government to put the minimum support price well above the price the market would have otherwise set. What began as limited support to ensure price and production stability eventually morphed into a substantial taxpayer-funded direct subsidy.
Support prices differed widely from one state to another. At the same time, restrictive laws compelled farmers to sell to designated APMCs within their districts. Crossing state and even district boundaries to get a better price for their produce was illegal and could land farmers in jail. For instance, Punjab’s support prices have been higher than those in Bihar. Therefore, Bihari farmers have been illegally selling paddy to markets in Punjab at a price lower than the minimum support price but higher than what they would get back home. A flourishing black market and widespread corruption emerged as a result.
New Agricultural Reforms
In December 2019, the parliamentary standing committee on agriculture published a major report. It concluded that APMC markets were not working in the interest of farmers. Instead, they were reducing competition, causing cartelization of traders and unduly deducting money due to farmers through market fees and commission charges. Corruption and malpractices in APMCs were rife. The committee observed that “there [was] urgent need for radical reform” and asked the government to inform parliament “about steps taken in this direction within three months.” It is noteworthy that the opposition and farmers’ unions agreed with the committee’s observations.
Last year, the government finally instituted long overdue agricultural reforms. Several economists and policy wonks welcomed them, arguing that these reforms would “unshackle farmers from the restrictive marketing regime that has managed the marketing of agriculture produce for decades.” In their view, these reforms promised “to bring the entire world of farming technology, post-harvest management and marketing channels at the doorstep of the farmer.”
The reforms have three key aspects. First, farmers will be able to sell their produce to anyone, including agricultural businesses, supermarket chains, online grocers or, as before, APMC mandis. The key difference from the status quo is that farmers are no longer required to sell only to APMC mandis. A Bihari farmer would now have the legal right to sell in Punjab and vice versa without fear of arrest.
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Second, the reforms have created a framework for agricultural commercial agreements. When farmers engage directly with processors, agri-business firms and large retailers, their counterparties will have to guarantee a price and make timely payments. Third, regulations on farm produce have been simplified and eased. The command-and-control system that determined the crops or quantities farmers would grow is being dismantled. Only in extraordinary circumstances such as war, famine, a natural calamity or an extraordinary price rise will the government have the right to direct production of cereals, pulses, oilseeds, edible oils, onions, potatoes or any other crops.
In 2020, agricultural reforms became inevitable because of the COVID-19 pandemic. A nationwide lockdown caused a massive migration of urban workers back to their villages. This increased pressure on already scarce land — something needed to be done. Restrictive laws on sale, pricing and storage of produce had to go. Therefore, after two decades of endless discussion, reforms finally transpired. They seek to increase investment in agriculture, boost farmer incomes and create a national agricultural market to emerge for the first time since India’s independence.
Who Is Protesting and Why?
From the outset, the reforms have proved controversial. In September, the BBC wondered whether they were a “death warrant” for farmers. Some farmers worry whether the reforms might lead to the end of wholesale markets and guaranteed prices. Currently, the government offers a minimum support price that acts as a safety net for farmers. Even though the government has promised to retain such a price, farmers fear its withdrawal over time.
There is an added fear that big private players will offer good money to farmers in the beginning, kill off their competition and then pay little for agricultural produce. Farmers might go from the local monopsonies of the APMCs to the national oligopoly of Amazon-like behemoths. It is important to remember that the government offers price support only for the staple crops of the Green Revolution. Other crops do not qualify, nor do fruits and vegetables.
Unsurprisingly, the overwhelming number of protesters are farmers from India’s northwest, the region that has benefited most from the old system. In particular, they belong to Punjab, Haryana and western Uttar Pradesh, the birthplace of the Green Revolution. In 2018-19, APMCs procured 73% and 80% of the total wheat production in Punjab and Haryana respectively at a minimum support price. This was higher than the market price, but a hefty chunk of the support price ends up in the hands of middlemen through various fees and charges. Unknown to most, price support does not necessarily mean income support in the current system.
Farmers in the Himalayas, the Nilgiris or most other parts of India never benefited from the status quo. As a result, farmers in 25 of India’s 28 states and all eight union territories have not taken to the streets. The Shetkari Sanghatana, a Maharashtra-based farmers’ union founded by the economist-turned-farmer leader Sharad Joshi, and other unions support the government’s agricultural reforms.
The late Joshi was convinced that “the root cause of farmers’ problems lay in their limited access to the market.” As per this farmer leader, open and competitive markets, instead of a top-down command-and-control agricultural economy, served farmer interests better. Joshi opposed the APMCs, and his organization naturally supports recent reforms. In fact, it wants to go much further. It wants the government to remove the ban on the export of onions and threatened to pelt BJP MPs with onion bulbs if the government fails to do so.
Journalists unfamiliar with rural India, including those working for the market-friendly Financial Times, have failed to capture this nuance. Not all farmers are protesting. Protests are largely confined to Punjab, Haryana and Jat strongholds in western Uttar Pradesh. This northwest region around Delhi comprises less than 8% of the Indian population. It elects 38 out of 543 MPs in the Lok Sabha, but its proximity to the capital gives it disproportionate power. Home to the Green Revolution, it has benefited from massive government spending for decades.
As per the managing editor of the Financial Express, farming households in Punjab get an average of $2,385 per year in fertilizer and electricity subsidies alone. Irrigation subsidies account for another $190 per year. Households in Punjab, Haryana and western Uttar Pradesh benefit from other subsidies as well. To put these figures into context, in 2019, GDP per capita in India was less than $2,100, with most farmers earning a much lower figure.
Many of those protesting are large farmers from northwestern India. Some of their family members are part of the Indian diaspora in Australia, Canada, the UK, the US and elsewhere. Some of them continue to be absentee landlords. They have petitioned their representatives to raise the issue with the Indian government, organized demonstrations and raised the matter with the press. As a result, a narrative has emerged in the English-speaking press that is not entirely unbiased.
On January 26, India’s Republic Day, protesting farmers marched through New Delhi. Some attacked the police, destroyed public property and flew flags on the Mughal-built Red Fort from where prime ministers address the nation. This caused outrage and weakened the movement. However, Rakesh Tikait, a farmer leader, rallied his protesters with an emotive appeal. He broke down in tears and threatened to hang himself if the BJP government did not repeal its reforms. Tikait is the son of the late farmer leader Mahendra Singh Tikait who took over the nation’s capital with nearly 500,000 farmers in 1988. Per the Indian press, Rakesh Tikait is a former policeman with assets worth 80 crore rupees ($11 million), a significant sum for a farmer in India.
It is clear that the likes of Tikait are not poor, helpless farmers crushed by debt, contemplating suicide. They form part of the almost feudal elite that has dominated the APMCs and the rural economy for decades. Many media outlets fail to realize that such farmers have enjoyed price support, subsidies on agricultural inputs, free electricity, waived water charges, cheap credit from the state-led banking sector and no tax on farm income. They are the winners of the old system and are desperate not to lose what they have.
Small farmers in northwestern India have joined large farmers too. They fear the unknown. Since British rule, agrarian distress has been persistent in India. Well-meaning measures like APMCs have backfired. The Indian countryside faces the unique challenge of extreme overpopulation. Low productivity, fragmented landholdings, lack of storage infrastructure, high indebtedness, strangulating red tape and entrenched corruption have held rural India back and caused simmering discontent. Leaders like Tikait are tapping into this discontent much like Donald Trump harnessed the rage of those left behind.
What Lies Ahead?
The government has clearly been shaken by the duration and intensity of the protests. Sustained negative media coverage in the West has rattled New Delhi. For decades, the West in general and the US in particular criticized India’s agricultural subsidies. At the World Trade Organization (WTO), the US consistently argued that Indian subsidies distort trade. The WTO has been a hostile place for India. Over the last three years, Canada raised 65 questions against India’s farm policies. Australia has complained against India’s sugar subsidies. Yet reform has led to brickbats, not plaudits, in Western capitals.
In fact, contrary to many press reports, the government has behaved with remarkable restraint. It did not act against protesters even when they blocked highways and hindered railway traffic. Swarajya, a center-right publication, called for the government to “demonstrate it [meant] business when it comes to law and order.” Yet it did nothing. When British coal miners challenged Prime Minister Margaret Thatcher’s authority, she used mounted police to crack down on them.
In contrast, the Modi government has been rather conciliatory, engaging in 11 rounds of talks with protesters. The government offered key concessions and proposed amendments to its reforms. In the final round, the government even offered to suspend the implementation of its reforms for 18 months. Protest leaders rejected this offer and demanded nothing less than a complete repeal of all reforms. No government was likely to accept such an intemperate demand, especially one that was reelected with a thumping majority in 2019.
The Economist, a longtime critic of Modi and the BJP, takes the view that “agronomists and economists are in nearly uniform agreement” with India’s agricultural reforms. It attributes protests to the “trust deficit” of the BJP government. The publication sees large-scale cold storage as the most obvious benefit of the reforms. Such storage would involve removing limits on stockpiling commodities for future sale. Farmers fear that this could give large companies too much power and undue advantage. They could buy large quantities of produce from farmers within a few days of harvest, hoard this produce and sell it when the price was high.
Such fears of change are only natural. No entrenched system changes without upheaval even when the status quo is untenable. The Indian agricultural system no longer works, economically, environmentally or ethically. Agriculture needs investment. Neither the government nor the farmers have the ability to provide this investment. In the post-1991 world, India’s private sector has been a success. It is the only player in the Indian economy with the ability to invest in the villages. Hence, Modi has called for a greater role for the private sector in an unexpectedly candid parliamentary speech.
Despite the current sound and fury, India’s farmer protests will simmer down. Like the Green Revolution, India’s agricultural reforms will have intended and unintended consequences, both positive and negative.
Finally, it may be prudent to think about agriculture in the global context. Most countries subsidize agriculture in one way or another for reasons ranging from food security to cultural preservation. The country of Jean Jacques Rousseau has championed the Common Agricultural Policy. Even the free-market US is generous with its farm subsidies. If either France or the United States were to implement agricultural reforms, demonstrations would ensue, legislators would face pressure from electors and sections of the media would accuse them of one sin or another. India is doing something that both the EU and the US may need — but have not yet dared — to do.
The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.