Fields of battle: the trial of strength between India’s farmers and its market reformers

By on 14/05/2021
Hundreds of thousands have protested against agricultural reforms, warning that they threaten the livelihoods of India’s vast population of farmers. Credit: Randeep Maddoke/Wikimedia

For decades, the Indian government’s in-house economics think tank has played a key role in liberalising swathes of the economy. But in turning its attention to food production, it may have bitten off more than it can chew. Abhimanyu Kumar reports

In 2014, at the end of his second term as India’s prime minister, Manmohan Singh addressed members of the Planning Commission, a hallowed institution with origins in the early years of Indian independence.

Singh, who built a reputation as an economic reformer as finance minister in the early 1990s, told staff that the institution – an in-house policy body, established in 1950 to help shape economic strategy – should “subject itself to a critical review”, reshaping its approach around “an increasingly open and liberalised economy with greater reliance on market mechanisms.”

Then then-PM – who had worked with the Commission since becoming a member-secretary in 1980 – had challenging questions for the influential body, whose remit had expanded to include allocating funding to states across a range of programmes. “Are we still using tools and approaches which were designed for a different era?” he asked. “Have we added on new functions and layers without any restructuring of the more traditional activities of the Commission?”

A new mission

His successor as PM, Narendra Modi, clearly agreed with Singh’s analysis. Renaming the Commission NITI Ayog – NITI stands for the National Institute for Transforming India, but the word also means ‘policy’ in Sanskrit; ‘ayog’ simply means ‘commission’ – he gave it a firm push away from centralised economic planning, removing its mandates to devise five-year plans and allocate resources. With Modi taking the chair’s role, NITI Ayog would operate as an economic think tank – promoting market-based reforms, supporting economic growth, and changing government’s role from that of controller to enabler.

Punjab’s Sikh community have helped lead the protests. Credit: Randeep Maddoke/Wikimedia

And so the institution – which in its previous incarnation had overseen major reforms of several key economic sectors – turned its attention to agriculture. The country’s biggest employer, the sector provides work for about 60% of the population and generates 18% of India’s GDP. Dependent on heavy government intervention, its economic model increasingly looks like an outlier compared with other sectors. But as these numbers show, it employs vast numbers of people on low incomes – and market-based reforms are thus seen as a threat by millions of people with few other resources or skills to fall back on. The stage was set for a confrontation that has led to months of protests across India, with tens of thousands holding sit-ins at locations around Delhi.

In 2017, NITI Ayog member Ramesh Chand and his colleagues began making the case publicly that the agriculture sector was in immediate need of major reforms.  Too many people were working in the fields in low-productivity jobs and dragging the economy down, they argued, advising that 84 million workers would need to move out of the sector. Focusing on improving efficiency in the value-chain, they recommended connecting “the farm to the factory” – thus weakening the government’s role as an intermediary – and expanding contract farming.

Growing resistance

In June 2019, an Agriculture Task Force was created under NITI Ayog. And last year, the government introduced three new sets of laws governing agriculture – prompting major protests, particularly in the Punjab. By December, huge groups of farmers had reached the borders of Delhi, where they continue a sit-in protest – even as India’s COVID-19 infection rates reach horrifying levels. Negotiations between government and farmer leaders have failed to produce agreement, despite eleven rounds of talks.  

Tractor beams: the protests have been largely peaceful, though there were clashes in Delhi in January. Credit: SFI Social Media/Wikimedia

At the heart of the controversy is the Minimum Support Price (MSP) system, under which the government pays farmers set rates for wheat and rice – distributing some to the poor from government-run shops, and retaining further stocks in case of crop failures. Professor Himanshu of Delhi’s Jawaharlal Nehru University, an expert in agricultural policy, says the three new laws – which cover contract farming and private sector operations in agriculture – permit companies to buy farmers’ produce at whatever rate they choose, regardless of the MSP. In his view, the reforms are designed to reduce the significance of the government’s role in protecting the interests of the farmers. 

For Purushottam Sharma, a farmer leader-cum-organiser from Punjab, the government’s current reforms represent only the latest stage in a long-standing drive to privatise swathes of the agricultural sector. Under India’s 1999-2004 prime minister AB Vajpayee, he says, “the government started introducing reforms in the agricultural sector, by reducing import duties” and strengthening traders’ roles in setting prices. The consequence, he argues, was that many farmers were paid less for their foodstuffs than the costs of production: “This is what led to thousands of farmer suicides in the last two decades.” 

A struggle over India’s future

Chand argues that the protesters haven’t grasped the reform’s potential benefits and are being misled by vested interests, while NITI Ayog chairman Amitabh Kant has claimed that key state administrations are not opposing the reforms. But their opponents show little sign of being persuaded – and there are many of them: in 2016, NITI Ayog’s own survey work revealed that 94% of farmers were in favour of retaining the MSP system.

In Bihar, argues Himanshu, similar reforms initiated by the state government ended up impoverishing farmers rather than benefiting them. The national government’s policy, he argues, leaves small farmers entirely at the mercy of market forces: “As it is, the government pays MSP for only rice and wheat, and not for any other crops among the 10,000 types of crops that are grown by farmers in India. Everything else is sold to private traders in open market,” he says. “The new reforms mean that the government wants to privatise everything.” 

By the time NITI Ayog turned its attention to agriculture, the institution had successfully pushed through major reforms in many fields of the Indian economy, and enjoyed the heavyweight backing of Narendra Modi. But four months into the protests, it’s not yet clear whether the farmers or the government have the stamina and support required to win this contest. In taking on India’s most populous and traditional sector, NITI Ayog has set itself its greatest challenge yet; the outcome is likely to help shape the future of both India’s economic policy, and the government’s in-house economics policy institution itself.

About Abhimanyu Kumar

Abhimanyu Kumar is a journalist based in New Delhi, India. He writes on issues related to politics and governance for Indian and foreign media. He was previously with The Hindu and The Sunday Guardian.

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