The following essay will give a brief introduction to the origins of the current agricultural crisis in India. Knowledge of the origins shall serve as an effective background to understand rising farmer unrest all over India.
What is Liberalisation/Neoliberalism?
India in 1991, in return for financial assistance from IMF and World Bank agreed to implementing a set of prescriptions, under the broad term ‘Liberalisation’. These ‘prescriptions’ were meant to apply to almost every sector of Indian economy but agriculture was the one which had to suffer the greatest impact.
Foremost among the many prescriptions was for the government to make a concerted endeavour to restrict the Annual Budgetary deficit to a stipulated/agreed minimum. In other words, the IMF and The World Bank were not happy with the government diverting a huge chunk of its financial resources towards providing subsidies to the common man which in turn, effectively regulated the market. The cash-strapped government readily agreed to the demand of the international financial institutions, lest monetary assistance be denied.
Dismantling the ‘Welfare State’ :
These ‘prescriptions’, many of the economists warned, inevitably would entail dismantling the entire 40 year old Welfare state which India was such a fine example of.
The government right from independence, under the concept of Welfare State had been diverting a considerable percentage of its revenue towards agriculture, especially through subsidies to farmers. The government, over the years, also had been consistently raising quotas for state procurement of grain at very agreeable prices to farmers. The procured grain purchased at competitive prices was being sold in turn, to the Indian consumer at fair prices through ration shops under the famed Public Distribution System (PDS).
A vast portion of the annual expenditure of the government was marked for construction of dams, building of canals and various other irrigation facilities in order to bring more land into the agricultural ambit.
The government was also keen on capping the prices of seeds, fertilizers and insecticides produced by private manufacturers. On some occasions, the government bore a margin of these costs in order to supplement the needs of the poor farmer.
However, the IMF and the World Bank, from 1991 onwards, wanted agriculture, the only ‘industry’ which employed more than 70 percent of the Indian workforce, to be detached from the Government’s auspices and be placed at the mercy of market forces. The reasons why they pressed for these measures will be explained later.
The Impact of Liberalisation:
Right from the advent of Green Revolution in India in the late 1960s, Indian agriculture, which had hitherto been heavily dependent on organic inputs, had slowly started developing an unhealthy reliance on local and multinational corporations. The new kinds of hybrid seeds which promised increased output per hectare of land, were introduced as part of the Revolution in order to bring about a self reliant agricultural economy. The seeds even though efficient as they were proclaimed to be, were not inherently resistant to insects and pests. This required on the part of the farmer, frequent insecticidal and pesticidal intervention whose scale of use was gradually becoming unprecedented. In addition, new fertilisers, some of them with radioactive constituents, were also introduced to multiply the volume of agricultural output.
The manufacturing companies of these ‘suddenly indispensable’ inputs – hybrid seed, synthetic fertilizer and insecticides, had soon discovered a new and thriving market for their products and were being ushered into hitherto unimaginable levels of prosperity and influence. These companies however, till 1991 had to contend with governmental regulations that kept these prices in check and were waiting in their wings to break these interventionist barriers.
Strictly following the prescriptions of the International financial institutions, the Indian government started relaxing restrictions on the prices of the farming inputs. Also the gradual phasing out of subsidies on these inputs was also being carried out whose impacts were becoming inescapable by the end of the 20th century.
The rising input costs for the farmer started touching levels of unsustainability and the farming community had no other ways than to appeal for institutional credit. Public Sector Banks(PSB) who were hitherto largely entrusted with the responsibility of financing agriculture, had started turning their backs on the hapless farmer. The ‘prescriptions’ had wanted the PSBs to do away with ‘priority sector lending’ and wanted them to focus on financing large scale businesses and industries. This was a double whammy for the farmer who was now driven into the hands of scheming local money lenders, most of whom were usurers.
Inspite of these reversals, the farmer even till this point had harboured hopes that proper Minimum Support Prices (MSPs) fixed by the government and large scale State Procurement could help him offset the escalating input costs. The farmer hence had no inhibitions in taking small loans from local creditors even if the interest rates were unjustifiably high. But the government, to make things worse, was slowly withdrawing itself from the sector allowing a free hand for the markets to fix the prices. Many state governments were instructed not to increase procurement quotas and those states which did not budge were heavily disincentivised by the Union Government. Newer trading methods like Forward and Online Trading manipulated skilfully by middlemen, enabled fixing up of arbitrary prices for the grain, most of which ended up being detrimental to the already cheated farmer. Many demands from various Left parties for the government to intervene and curb middlemen were no longer heeded, as the government was busy negotiating more deals with the International financial institutions.
Problems like escalating input costs, government’s reluctance to take up new irrigation projects and conserve existing ones, lack of competitive prices in the market for the harvested grain were compounded by newer forms of usury developing in the rural countryside. The usurers started sentencing the farmers to new types of ‘contracts’ where the farmer even before sowing, would agree to sell the year’s harvest well in advance to the usurer for a very small, arbitrary sum of money most of which would be consumed as interest to the loan that has not been advanced yet. This type of usury which was already in vogue in a few rural areas not covered by institutional credit, was rapidly becoming the norm throughout the country. These artificial debt traps engineered by local usurers, directly and indirectly abetted by the governments started consuming the lives of farmers by the end of the 20th century.
From then on the annual suicide rates of farmers has only been increasing and the National Crime Records Bureau was forced to collect information under the head ‘Farm Suicides’ every year. The NCRB records show that more than 3 lakh farmers have taken their lives in the last three decades, owing to the escalating agricultural crisis. These crime records are usually supplied by local police authorities and many activists contend that the gap between the reported numbers and real ones is usually very large. The embarassed Modi government recently issued an order to stop collecting and maintaining statistics on farm suicides.
In addition to the alarming issue of farm suicide, one needs to observe the fact that more than 10 million farmers have already moved out of agriculture trying to find other means of employment. If one could take the trouble of asking what profession one of the many North Indian migrants working in nearby eateries were engaged in before they came here, he could easily find evidence to my apparently simplistic contention.
The aims of International Financial Institutions:
To find out any possible solution for the current agrarian crisis, one must find out the factors governing the motives of the International Financial Institutions whose success in driving millions of farmers into poverty, all over the world, remains unparalleled.
Both the IMF and the World Bank are financial institutions funded on a large part by the United States and countries of the Western Europe. These countries which are obviously at the top of the international food chain, leverage their influence on these institutions by forcing the debtor countries to frame policies that would suit the needs of the so called ‘global capital’. In other words, the major multinational corporations, on whose behest the governments of these powerful countries operate, have been wanting access for quite a long time to the huge markets the developing countries could potentially serve as. Hence these corporations force the international lending institutions to offer loans to developing countries on conditions that would allow free and unhindered access to these markets without the intervention of the local governments.
These institutions in turn offer neatly prepared guidelines based on which local governments must operate in order to obtain continuous financial support. The local governments as long as they regulate domestic food prices through subsidies (farm incentives, PDS) unwittingly restrict the profitability of the global corporations. These corporations insist on fixing ‘international’ prices for the grain forcing the local governments to withdraw import duties. As a result, imported wheat from the US, for example, is designed to cost lesser than domestic wheat and hence the consumer is forced to prefer only the imported variety. This brings down the prices of domestic wheat even further, and the local farmer, no longer able to recover even the input cost, is condemned to bear the brunt of it.
I can name a lot of developing countries whose agricultural communities have been ripped apart due to the IMF/World Bank dictated policies of ‘Liberalisation’. The major corporations belonging to the West have successfully been able to penetrate into these countries, destroy the local farming practices along with millions of livelihoods and establish powerful hegemonies even to the extent of dictating the affairs of the local political establishment.
The ‘prescriptions’ and the ruling parties:
One needs to be aware of the fact that no major political party in India excluding the Left, has spoken vocally about the ill-effects of the ‘prescriptions’ of the International financial institutions so far. On the contrary, both the largest mainstream political parties who have had the privilege of ruling India post liberalisation, have only been extremely successful in faithfully implementing the anti farmer dictates of the International Financial Institutions, thereby orchestrating the greatest agricultural crisis, independent India has ever seen.
These parties, whenever in power, have never worked in the best interests of the nation and hence let us not assume that only because they could not find any other means of obtaining the requisite financial support to foot the government’s bills , they had agreed to follow these harmful ‘prescriptions’ of the International financial institutions.
The intentions of these parties become sufficiently clear when you look at recent developments such as American Walmart officials admitting that they had offered bribes to Indian politicians so as to gain a foothold in the massive Indian consumer market. One must not be surprised to learn that these international financial institutions employ people named ‘economic hitmen’ who are sent on missions to developing countries to convince or persuade or bribe or threaten local leaders to bring them into the all consuming web of ‘Neoliberalism’ and accept the ‘prescriptions’ in return for attractive loans and investments, even if there is no contingent need as such.
REFERENCES:
- The Market That Failed – By CP Chandrasekar and Jayati Ghosh
- Globalisation and Its Discontents – Joseph Stiglitz
- Open Veins of Latin America – Eduardo Galeano
- Confessions of an Economic Hitman – John Perkins
By G Waugh
Baradwaj Rangan 
Madan
December 8, 2018
Great article on the elephant in the room that nobody talks about w.r.t Indian economy. However, I am not sure large scale procurement by govt of all food production is sustainable at all. The reason for that can also be traced to why we landed up in the basket case in 1991. There was no other go but for India to go up the value chain to avoid defaulting all over again.
In 1990, our engineering exports were barely over $ 1bn. They have grown to $70 bn last financial year. And agricultural exports have grown phenomenally too, touching $38 bn. Note though that this is all but a very small fraction of our total GDP of $2.7 trillion.
The question, instead, which we should be asking and which Mr Panagariya, ex Niti Ayog head also asked, is why can we not raise our share of world trade. Our exports are STILL just around 2% of world trade. Mr Panagariya asked why can we not double it to 5%. 5% isn’t much but would still be a quantum leap for the economy. As Mihir Sharma also notes, we have to stop being insular and complacent and make ourselves useful in the world. No, not because it would fill the packets of the rich but because it is the only way to provide livelihood to a population of over a billion people.
But to get back to agriculture, what I would instead suggest is breaking the back of the APMCs and liberating farmers to sell to whomsoever and whatever price they choose to. THAT is the real hypocrisy of govt after neo liberal govt that claim to embrace free market policies. How can that be if you set minimum export prices for agricultural products to dissuade farmers from sending away too much stock abroad or import in a big way during shortages which denies farmers any pricing power at all? I am not saying people should starve but the govt is also way too sensitive to the smallest voices of discontent when food prices go up and too insensitive instead to farmers’ plight. But India still lives in the villages and still works mainly in agriculture. If our current population makes supporting a large agriculture welfare state unsustainable, at least truly open up the market to farmers.
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Recovering Macaulay's Perapulla
December 8, 2018
Woaah. I work in agriculture, and I am glad to see this post in BR space. Given the comment I read from Sanjay in the 96 thread dissing Nammalvar, it is good to have a discussion in this space as well. That’s the beautiful thing about movies. You can talk about agricultural crisis and still be talking about movies. Lenin’s “Merku Thodarchi Malai”, IMHO, depicted the broad strokes of agrarian crisis far better than any editorials I’ve read on this topic. I am waiting for “Kadaisi Vivasayi”, and hopes it brings the urgency in addressing this grave crisis.
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Thupparivaalan
December 8, 2018
“I can name a lot of developing countries whose agricultural communities have been ripped apart due to the IMF/World Bank dictated policies of ‘Liberalisation’. The major corporations belonging to the West have successfully been able to penetrate into these countries, destroy the local farming practices along with millions of livelihoods and establish powerful hegemonies even to the extent of dictating the affairs of the local political establishment.”
It would be good if the author could name the countries which were affected by the MNC’s. The protectionist policies had already driven India to turmoil in 1991, and the liberalisation was very crucial in keeping us afloat. What is the author’s alternative solution for the pickle we found ourselves in 1991? More protectionism?
The article reeks of an inherent hate towards MNC’s. No one denies that they want money. The Indian Government knew it and made a decision to open up a portion of economy in return for Aid. It was a calculated call, that kept our economy strong and possibly prevented civil unrest. Entrepreneurs Indian or Foreign are often viewed in a very bad light by everyone that it is still very tough to do good business India despite our huge manufacturing potential. We fare very bad in the ease of doing business ranking that it is a shame.
More than half of our population is in agriculture which isn’t really sustainable anymore. It was fine back in the days when spices and other products were highly sought after by the global empires and we could export the very same. Our produce doesn’t have as much value as it did before. Revolution in farming practices have made sure that global countries can sustain itself more easily, and the game has changed. India has a surplus in food production every year. It is impossible to become a developed country by agriculture alone. The sooner we realise this fact the better. If that was the case we would be wealthy by now. It is a very idealistic notion driven into our brains right from the times of Nehru to the present crop of politicians.
We need to manufacture other goods that we can export. South Korea and China realised that electronics was the new boat to success and jumped on it, and dominate the world market now. You can see the improvement of those nations in stats such as GDP, Poverty rate, etc. We need to create new industries so that all the farmers can transition into, and make farming large scale so that losses incurred in case the failure is low. It doesn’t mean we have to convert all our fields to industries. We are a large country and only a fraction of the agricultural fields are required for production of goods.
I agree is might be dangerous to embrace capitalism fully. Certain sectors like HealthCare, Education need government support and aid. But, the fears expressed by the author remain very archaic. The government is expected to aid farmers, with money out of government coffers. Why is it so? If the farmers can’t produce goods that have a value in the market they need to move to other professions. I agree it might sound cruel but that is the reality of the 21st century. They need to find new skills and the government has to create new industries to employ the same people.
I have gone on a tangent and not addressed the crux of the article and will do so later when time permits.
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Thupparivaalan
December 8, 2018
Madan: The government not making our agricultural market free is a very good point. It strips the farmers of their power and reduces their ability to money.
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G Waugh
December 8, 2018
My dear commenters who need evidences for my assertions might do well to just google the names of the reference books I have mentioned at the end of the essay. Open Veins of Latin America will give enough and more testimony to how countries in South America are being plundered currently by Neoliberal policies. Almost all south American countries and even many African countries are facing agrarian distress like India. Argentina is a great Latin American example just like how Greece is for Europe. You can read the books I have mentioned if time permits.
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Thupparivaalan
December 8, 2018
Well the crisis of the agarian economics of latin and african countries is a complex topic that needs to take into account a lot of factors. Their struggle in the present can not be attributed only to Neo-Liberalism. Argentina is a curious case, and we as a nation sure have lessons to learn from them, but is more a failure of implementation than policy.
I’m pasting an response from a reddit user named Alvise Falier, that I read some time ago.
While it’s more correct to say that Argentina has stopped growing (or rather, has grown very slowly compared to other economies of similar size) it is true that the picture was much different in the first half of the 20th century. Early in Argentina’s industrialization there are comparable parallels to the United States: demand for both skilled and unskilled labor led both countries to welcome a large number of migrants from Europe, while a concurrent frontier culture provided an outlet for geographic expansion, also fueling economic expansion. But while the rest of the world has largely continued growing, and some countries (typically in Asia) that started the 20th with a much weaker industrial base have greatly surpassed Argentina, numerous historians, economists, and political scientists have looked to explain Argentina’s stagnation. I do not believe a definitive reason has been found. Certainly, the unique experience of the 1930s and 1940s in the Southern Hemisphere influenced economic thought in ways that would later prove harmful, however the experiences of populism and military dictatorship also took their toll.
Kathryn Sikkink at Harvard’s Kennedy School of Government, in her 1991 book Developmentalism in Brazil and Argentina, examines how certain political ideas that took hold at the highest levels of government in South America’s two largest countries, Argentina and Brazil, would go on to influence economic performance. Importantly, the loss of major trade partners over the course of the Great Depression and Second World War would ingrain a focus on internal economic development and instill a persistent mentality that saw in international commerce become a secondary consideration. So in the 1930s and especially the 1940s, entrepreneurs in Argentina and Brazil begin producing goods that had formerly been imported and focusing less on goods destined for export. When international trade re-opened in the late 1940s, there was no effort to re-align the economy to again become a major exporter. For whatever factors unique to Latin America (forgive my vagueness, I am after all an economic historian and not a historian of Latin American politics) policies were put in place to protect domestic entrepreneurs and limit the presence of foreign firms (typically limited to capital investments or large infrastructure projects) even though there was no outstanding shock to mitigate (like a global depression or war). The dominant school of economic thought, called “Developmentalism,” wasn’t entirely averse to international trade, but believed that an economy should only be opened up once domestic industries were developed enough to compete on level terms. While this isn’t an unsound economic argument, the fundamental problem was that internal demand revealed itself to be insufficient to develop truly internationally competitive industries, even after substantial investment from the public sector.
The presence of capital owners partaking in what economists call rent-seeking behavior certainly influenced political decision makers adopting developmentalist policies; Sikkink affirms that oftentimes, protectionist policies were adopted first and economic justifications found later. This might be a symptom of the characteristics tied to internal political discourse and decision-making in countries like Argentina. But it’s also true that within international institutions, like the United Nations Economic Commission for Latin America and the Caribbean (CEPAL) developmentalism found broad consensus: most economic growth in Latin America had been fueled by exporting raw materials, and the “traditional” marks of a successful industrialized economy were absent, prompting a belief that promoting industrialization was necessary (as an aside, in later decades some Middle Eastern countries also exporting raw materials would, perhaps learning from the experiences of the developmentalists of the 1940s and 1950s, bypass the “industrialization” phase and instead focus on developing the service sector).
But the “Developmentalists” aren’t entirely to blame for economic stagnation in Argentina and Brazil. Economic historians like Jeffrey Freiden at Harvard generally agree that as late as the early 1970s, Latin American economies were under many metrics comparable to much of Western Europe. So Latin American policymakers of the 1950s might have been justified in thinking internal consumption could drive growth instead of exports; thus limiting openness exclusively to the financial services industry (it could be argued that post-1970s European economic growth born out of the opposite policy —regional integration— was more driven by fear of war, with economics a useful corollary). Political turmoil and isolation (perhaps as a corollary to protectionism) in following decades is also an important factor which not only impacted the ability to implement new policies (leading policymakers to follow developmentalist dogma even when no longer necessary) but also reducing the willingness of foreign investors to back projects in Argentina (lest they be undone or reversed by a military intervention or public revolt).
Political concerns trumped economic concerns (or rather, fed into each other) over the course of Argentina’s spiral into military dictatorship. However, recovery might have been hoped for in the late 1980s and early 1990s as the Argentine government transitioned back into a more solid democracy. International accords like the currency board arrangement pegging the Peso’s exchange rate to the US Dollar also encouraged new interest in Argentina from international investors. However, by the end of the decade the Argentine government would perform the largest default the world had ever seen up to that point. While the details of this event take place precisely one year after this subreddit’s twenty-year rule applies, it might be useful to examine why the Argentine economy did not start growing again once democracy had been re-established.
A conflation of democracy and economic openness has existed in political and academic circles since the 1980s. While it is unclear in what order democracy, economic openness, and access to capital markets influence each other, what is important to point out is that there is a measurable correlation between democratization and access to credit markets in addition to more favorable credit pricing (notably measured in the 2012 “Sovereign Debt and Regime Type: Reconsidering the Democratic Advantage” by Beaulieu, Cox, and Saiegh). Thus Argentina, having recently democratized, in the 1980s found itself rapidly caught up in a global commodities boom. Investments in the developed world had become saturated and returns had become unsatisfactory, so markets began pouring money into commodity-rich economies like Argentina as an antidote. However, both public and private borrowers in Argentina were soon proven unable to service the debt they had taken on (especially after central bank rate hikes in the “West” cut off easy new credit to pay off old credit; as examined together with a multitude of other financial crises in the 2009 book This Time is Different by Harvard scholars Carmen Reinhart and Kenneth Rogoff.). Thus the Argentinean economy had quickly gone from being protectionist to being enormously exposed to foreign financial markets with little time to adjust, the end result being enduring instability.
Other readings you might be interested in (some might be available free)
Albert O. Hirschman. 1968. “The Political Economy of Import-Substituting Industrialization in Latin America” (Hirschman was one of the major thinkers behind of developmentalism)
Werner Baer. 1972. “Import Substitution and Industrialization in Latin America: Experiences and Interpretations”
Jeffrey D. Sachs. 1985. “External Debt and Macroeconomic Performance in Latin America and East Asia”
Sarah Brooks. 2004. “Explaining Capital Account Liberalization in Latin America”
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Anu Warrier
December 8, 2018
G Waugh, a very well-laid-out article on our agrarian crisis. (I was just going to mention ‘Brazil’ to Thupparivaalan when I read your response.) Here in the US, Monsanto drives a lot of policies that are aimed at weeding the small farmer out. And these farming policies, including the unchecked use of pesticides, is killing the bee population in the US. Not to mention the many insects which have already become extinct.
I’m not well-versed with the larger economics of farming, but my grandfather was a farmer, growing his own crops and I know how hard it is if you are dependent on that for your income.
I do a lot of editing work for a Trust that works with farmers, and hence see many research papers showing the harm that hybrid seeds have done/are doing to the environment and the farmers’ economy. The problem with these hybrids is not just that they are not resistant to pests and crop diseases; it is also that farmers had to continue buying seeds every year. Not use the previous year’s crop to sow the next season. There is a movement now to collect heritage grains, native to each area, and slowly build up the supply so that the farmers no longer have to keep buying seed at exorbitant prices each year.
The ‘Green Revolution’ also led to a higher increase in cancer, especially in Punjab and Haryana due to the high exposure to dangerous pesticides and fertilisers.
I think, India’s problem also lies in the fact that while we do produce enough food to feed our people and export the surplus, hoarding, especially of grains, leads to a major deficit.
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TambiDude
December 9, 2018
” India’s problem also lies in the fact that while we do produce enough food to feed our people and export the surplus, hoarding, especially of grains, leads to a major deficit.”
I think you meant wastage in storage. I read somewhere that up to 40% of food produced in India ends up getting wasted due to poor storage and transportation infrastructure.
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shaviswa
December 9, 2018
The reason behind the agrarian crisis is because we have too many people engaged in farming. This means that the spoils ar shared by a larger group making it unsustainable. If the government adopts a fully free market, it is quite likely that the markets will realize that it is cheaper to import food than buy from our own farmers. Which will lead to further drop in demand and completely breaking the economy. The protectionism is actually to protect the Indian farmer and not just the consumer
However, what India needs is investment in drastically improving the supply chain. We need to ensure that the transportation logistics improve, cold storage and other warehousing infrastructure is developed rapidly, and also make micro-credit available to farmers to protect them from evil money lenders. Micro-credit will be possible only if it is based on Aadhar and we need to ensure that this is effectively rolled out and all transactions are governed by Aadhar.
The need of the hour is not to close the doors and return to a socialistic economy that failed the country miserably. It is ensuring that we openore doors but also guard them effectively and efficiently.
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sanjana
December 9, 2018
Each state has its peculiar problem. Surplus or scarcity. Surplus is good if it reduces the price and hunger. An even distribution system in time is needed. Proper godowns are needed to protect foodgrains from rotting.
How other countries are tackling the problem? The use of pesticides and GM?
Lack of rains and barrenness of lands haunts the farmers more. And also unseasonal rains and hailstorms.
Farmers get free power and no incometax. And also loan waivers. And yet they are dying. Because our state capitals are situated far from them and they are not dedicated enough to look into farmers’ problems other than loan waiving as a political weapon. Agriculture ministries are there but they are not doing enough.
The problem need to be tackled at micro level by concerned district collectors with more vigour who should give timely feedback to the respective state governments.
We need farmers more than big industrialists. Not watching them on tv during protests and wondering about traffic jams that maybe caused during one or two days. Industrialists can lobby while farmers can only protest.
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Honest Raj
December 9, 2018
About wastage in storage, our Captain highlighted the issue as far as back in 2002:
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sanjana
December 9, 2018
https://www.jstor.org/stable/4418110?seq=1#page_scan_tab_contents
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krishikari
December 9, 2018
I am thrilled to see this discussion happening here. The complete disconnect and lack of sympathy for the people who grow our food and yet cant afford to eat is astounding. But I know how it can happen, in one generation my family has gone from being self sufficient food producers to pure consumers lacking any connection to the land. Going back to small scale environmentally conscious food growing is possible, it’s what I do now!
And bring on the agriculture themed films! https://youtu.be/lOntLPhu3bo
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krishikari
December 9, 2018
G. Waugh thanks for this succinct summary of what went wrong. Love that one of your sources is Confessions of an economic hitman. A must read for everyone who thinks capitalist free markets are fair play.
There is a whole lot more complexity in India due to the historical caste related access to land. Every country has its own circumstances but even farmers marching in Paris are ultimately protesting about powerlessness. And then we have comments suggesting that farmers should leave the land and farms should be consolidated for efficiency. How much more suffering and displacement will that cause?
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vinjk
December 10, 2018
This line in the essay:
“These ‘prescriptions’, many of the economists warned, inevitably would entail dismantling the entire 40 year old Welfare state which India was such a fine example of.”
India was not a fine example. In fact it was terrible. What’s the meaning of a welfare state if you can’t balance your book at the end of the year. Sure, sectors like agriculture are critical and need support from the government. But subsidy is not the only way to help a sector.
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Madan
December 10, 2018
vinjk : Indeed, capability building like irrigation is more important. One of my colleagues whose hometown is in rural Maharashtra said there has been no irrigation project there in 20 years and as a result, many people have had to move away from farming. And it’s not about budgetary support. Funds were allocated, contacts awarded and money siphoned off with no work. This is my biggest grouse that when it comes to Indian economy, we always talk in a very theoretical way, ahem so called towering view as S Gurumurthy calls it. If Indian govt just properly spent its budget allocations and in a timely manner, things would be so much better.
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vinjk
December 10, 2018
Early this year there was a post by Tyler Cowen about a reality tv show called ‘The Profit’. Towards the end of the post, he talks about the situation in textile industry in India.
https://marginalrevolution.com/marginalrevolution/2018/04/lessons-from-the-profit.html
“…in episode after episode, Lemonis cleans up shop. Literally. He cleans the shop floor and gets rid of inventory that isn’t selling. He then arranges the floor to improve process flow (made easier by concentrating production on fewer products). He then creates an inventory system, tracks orders and the inputs needed to create those orders, and takes advantage of costs savings through economies of scale in input purchases.
Can it be so simple? To be sure, Lemonis is a smart guy but very little of what he does takes genius. We know this because we now have robust evidence from India and Mexico that better management increases profits and productivity and that such increases can be sustained over the long run. In the studies from India and Mexico, randomly selected firms were given access to a “management intervention” and their productivity and profits improved and stayed higher for years after the intervention ended.
Moreover, what were these management interventions? Did some bright Harvard grad recommend a complicated swap-options deal? A new chemical process? A new management form? No. By and large, the interventions were simple. Just like the Lemonis interventions.”
I think they same can be said for many industries in India including agriculture. Just like Madan said govt should focus on infrastructure (irrigation facilities) and solving other systemic problem, or just spending the budget properly to make agriculture industry competitive in the world market.
The blog post gives links to the research work and other data.
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sanjana
December 10, 2018
Maharashtra farmer makes profit of Rs 6 on 2,657 kg onions, sends it to CM Fadnavis
The farmer Shreyas Abhale told PTI Sunday that after selling 2657 kg onions at the rate of Rs 1 per kg at the Sangamner wholesale market in the district and adjusting market expenses, he was left with only Rs 6.
https://www.hindustantimes.com/india-news/maharashtra-farmer-makes-profit-of-rs-6-on-2-657-kg-onions-sends-it-to-cm-fadnavis/story-HRRNUu4hi5L3CUepdZBVyM.html
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hari
December 10, 2018
How many of us who bleed for the farmers are ready to eat farm fresh “naturally grown” veggies and fruits even if it costs 20rs more per kilo delivered directly to you, when delivered twice a week? If you say yes, kudos to you. If no, then no point discussing. If you are interested check out “nallakeerai” in Chennai and similar ones across India. Do your bit to get the farmer out of the debt he is in.
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sanjana
December 10, 2018
“How many of us who bleed for the farmers are ready to eat farm fresh “naturally grown” veggies and fruits even if it costs 20rs more per kilo delivered directly to you, when delivered twice a week? If you say yes, kudos to you. If no, then no point discussing. If you are interested check out “nallakeerai” in Chennai and similar ones across India. Do your bit to get the farmer out of the debt he is in.”
Well, it costs 400 rupees more. 2000 rupees extra budget per month. More or less according to the size of the family.
Depends upon the economic situation and family consensus.
Does this solve all the problems faced by farmers?
But empathy is a separate issue. Our hearts bleed for so many issues. For cancer patients who ask for money through newspaper portals. For the old and the homeless. For the shelter home victims. We cannot help all of them because we have our own problems and constraints. That does not mean that we should not express our empathy. Same with farmers’ and their troubles. We are with them and ready to buy from them directly. But I can assure you that there will be very few who will do this because I have seen very well off people bargain even with raddiwalas for a few rupees more and feel triumphant about it.
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Madan
December 10, 2018
sanjana : We already get farm fresh produce on the weekends and generally go for it. Drop in the ocean though. Had guys like Walmart been allowed in, they would have procurd directly from farmers, bypassing the middle man. But of course govt cares more about 150mn people in retail sector (in the words of Nirmala Seetharaman) than 400-500mn people involved in agriculture.
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sanjana
December 10, 2018
Madan: On the contrary the farmers who sell directly are selling at very cheap prices near my place. On certain days of a week. I am really surprised at this. Especially leafy vegetables.Home deliveries are not happening here for now. We are surrounded by small villages and so I think this is happening regularly.
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sanjana
December 10, 2018
The farmer is also under constant tension and pressure because of the government trying to acquire their fertile lands for some project or the other or at the behest of the industrialists.
The self sufficient farmer is reduced to become a city dweller where he is clueless.
I am reminded of the poem ‘The Deserted Village’ by Oliver Goldsmith.
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vinjk
December 10, 2018
“Had guys like Walmart been allowed in, they would have procurd directly from farmers, bypassing the middle man.”
I have my doubts about corporates paying a good price for farmer’s produce.
My uncle and his wife work in Sittilingi (a tribal village in Dharmapuri district). One of the work they do is to promote the communities traditional handicrafts mainly embroidery work. I remember few years ago they got an order from Fab India. Those a**holes didn’t even pay them the making cost and of course, they sold the goods for an inflated cost to high flyers in Indian metros. They also advertise how they promote indigenous culture and art!
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krishikari
December 10, 2018
@Sanjana “Well, it costs 400 rupees more. 2000 rupees extra budget per month. More or less according to the size of the family.
Depends upon the economic situation and family consensus.”
Even people who can more than afford it want to pay the cheapest prices. The cost is paid by degraded environments and their own long term health. Organic produce needs to become the norm and we really need to start supporting the farmers who are making the switch. It should not have to be an eliteist thing. Practically speaking growing organic is cheaper in terms of inputs but certainly more labour intensive.
“Does this solve all the problems faced by farmers?”
Does every proposed solution need to solve ALL problems? I personally know of farms that have become profitbable when they swtiched from selling produce wholesale to only selling directly to the consumer at the farmers market. But changing the business model is not the only thing, they have to re-educate themselves on how to farm sustainably.
(My absolute favourite malayalam film in which the hero is a wannabe krishikaran is Om Shanti Ohsana)
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krishikari
December 10, 2018
“Had guys like Walmart been allowed in, they would have procurd directly from farmers, bypassing the middle man.”
Walmart is the middle man.
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hari
December 10, 2018
Thanks for the response Sanjana ji.
“Well, it costs 400 rupees more. 2000 rupees extra budget per month. More or less according to the size of the family.” – Exactly. I’m talking only about people who can spend 2000 more for their veggies to support farmers who take up “logistics” to provide farm fresh produce. If one can spend 2000 on movies/eating out and bleed for the farmers but cannot spend that to buy directly from farmers are hypocrites in my dictionary.
My point is only about us, individual, who can do our bit. Thanks.
Getting “walmart” kind of companies will only worsen the situation. All the “tomatoes”, “potatoes”, “onions” will look the same like how you see in an American supermarket but will be absoeffinglutely tasteless. Americans go to “Sunday Market” to get their produce.
Go “local” buy “local”.
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Anu Warrier
December 10, 2018
Madan, Walmart is a filthy corporate. (As opposed to a corporate with a smidgen of conscience.) They don’t even pay their workers a living wage, do you really think they will care about the farmer?
@Hari – I can safely say that I buy local, buy farm-fresh, as seasonal as I can manage, and buy organic. One of our budget priorities was getting good food, grown locally. And if paying extra for organic produce meant it cut into our entertainment budget, for instance, that was fine.
But I’ve been doing this for 20 years now in the US and I did it in India too. Partly because I lived for 8 years with my grandfather who grew everything we consumed. Or let’s put it this way – we ate what he grew. For instance, potatoes were rarely in our diet because he didn’t grow them. But we knew where our food came from, and of course, we ate seasonal produce. On rare occasions, we bought potatoes because my sister and I wanted to make chappati-sabzi.
I also buy from independent booksellers, support local artisans and try as hard as I can to walk the talk. I succeed, let’s say, about 85% of the time.
What is Nallakeerai, by the way? Something that brings produce directly from the farmers? I will ask my aunt if she knows about it. It’s wonderful that that sort of change is beginning and I hope more people support it. It will definitely make a difference.
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sanjana
December 10, 2018
“Getting “walmart” kind of companies will only worsen the situation. All the “tomatoes”, “potatoes”, “onions” will look the same like how you see in an American supermarket but will be absoeffinglutely tasteless. Americans go to “Sunday Market” to get their produce.”
This is true. They have to add more masala to cover up and make the dish more palatable. Why they are so bland is beyond my comprehension.
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Madan
December 10, 2018
Re Walmart, I wasn’t thinking so much about the quality of the offerings but about the price of procurement. If APMCs are buying at Re 1 a kilo from farmers, Walmart can’t be much worse. And on the flipside, the same vegetable that the wholesaler bought at Re1 gets jacked up to at least Rs.10 per kg by the time every middleman has extracted his pound of flesh and it gets to the customer. If not Walmart, somebody else, but it’s imperative we have to give the farmer an alternative to this middleman trap. It puts pressure on govt to keep food prices low (because the middleman has jacked it up) and the pressure ultimately bears down on the farmer and not on the wholesalers/retailers.
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TambiDude
December 10, 2018
https://www.bloomberg.com/opinion/articles/2018-06-28/walmart-shoppers-are-supporting-poor-americans
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hari
December 11, 2018
@anu ji thanks for the response. Please read about nallakeerai here – http://www.nallakeerai.com/index.html.
They do deliver in certain pockets in chennai, do call them up.
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Anu Warrier
December 11, 2018
@hari, thank you. I Googled them yesterday after my comment and have passed their information on to my cousins and friends in Chennai.
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Thupparivaalan
December 11, 2018
Madan: I’m from a farming family. Three of my uncles are farmers, and it’s baffling how the middlemen are allowed to leech without almost any effort. Something should be done right away.
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Eswar
December 12, 2018
I have always felt there is a romanticism towards Agriculture and Farming. As long as this romanticism exists there is likely to be an undue stress on the farmers.
I can understand farmers being attached to what they do. People who are not associated with farming, may be should view it from a step away. Not being too attached.
The problem with making something sacred and putting on the pedestal is it will destroy the very thing being protected. An analogy would be the sacredness attached to woman and making them the honour bearers of the family, culture, society and the nation. It made them restrictive. Took away their freedom. Importantly it is used as a tool to control. A tool to punish them every time when they do something that would break this honour code. Over generations some women probably started believing in this idea of them being the honour bearers. Resulting in enforcing this idea on themselves as well as on other women.
Treating agricultural and farming has a sacred and raising it to a pedestal has similar consequences. Government restricts who can purchase an agricultural land. It prevents farmers to sell their lands to whom ever they wish to. These limitations does not provide incentives for famers to exit farming and move to something that would secure their livelihood. And some of them probably started buying this sacredness and doesn’t want to move away.
People who revere farming can by all means do it. At the same time it shouldn’t be so difficult for someone to move out of farming or dispose away farm lands.
This high altar position of agriculture is also resulting in the huge subsidies to farming sector. Remove the sanctity associated to it, then would the subsidies and waivers still be appreciated? What other sectors enjoy similar handouts? What makes agriculture special?
The love for agriculture probably comes from the love for land. The land is tamed for cultivation and anything that is tamed becomes a pet. Something special by creating a bond This is understandable from a farmer’s point of view. But for the rest, the romanticism seems to me an exaggeration. Adding more woes to the problem than doing anything to solve it.
If we can treat farmers like any other venturers. Allowing them to trade as they wish. Enter and exit at their convenience. Accountable for the risks they get into. Enjoy their profits but also their losses. Then may be farming and farmers will thrive without depending on government and society.
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sanjana
December 12, 2018
Eswar: I agree to the first para of your comment about romanticiizing the issue. But withdrawing help like subsidies and loan waivers will only worsen the situation. Until the situation improves drastically, the help should continue while measures to tackle the situation are also taken simultaneously. They can elect their own middleman from their own fraternity on a yearly basis so that their own man should not become the exploiter. If they want to continue as farmers, they need all the support like some monthly income as an incentive. Dont government employees get a salary even when they do minimum work? Farmers will be happy even if they get a fraction of that kind of salary, say 5k per month to stave off starvation. How ironical that I talk about starvation of the farmers!
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sanjana
December 14, 2018
https://www.ndtv.com/opinion/feroze-varun-gandhi-on-the-untold-stories-of-farmer-distress-across-india-1961974?pfrom=home-topstories
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Srinivas R
December 23, 2018
https://www.livemint.com/Opinion/FgqmiVxc9H9ynEubWevbZM/Opinion–The-political-economy-of-the-persistent-agrarian-c.html
An interesting read on the topic discussed here.
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Thupparivaalan
May 3, 2019
https://www.livemint.com/Opinion/3VeR0nZ9U8ijwhNsXmw8QL/Opinion–A-reinstated-right-to-property-will-protect-the-po.html
A lot of farmer’s problems can be traced to the right to property. In India, Right to property is not a fundamental right. It was, but it was scrapped later. There are a lot of restrictions on who the farmers can sell their land to or what they can do with. Classic case of government regulations harming the poor it intended to help initially. What a farmer does in his private property should not be a concern for any of us ideally.
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Jeeva Pitchaimani
April 12, 2023
https://en.wikipedia.org/wiki/Farmers%27_suicides_in_India#GM_crops
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