Pragati Manifesto

Agriculture: A Manifesto for Freedom

This section of the Pragati Manifesto is about how we can empower our farmers. Read the other pieces here.

As the 17th Lok Sabha elections approach, one of the major issues that can make or break the fortunes of political parties in the government or in the opposition is the agriculture distress facing Indian farmers.

Various political parties have helmed the government in New Delhi since the economic reforms began in 1991, but agriculture has never been on the reform agenda of any of them. Indeed, the farm sector is one of the most controlled and regulated sectors in India today. Even though the share of agriculture in the Indian economy has continuously been falling, more than half the workforce are still engaged in the sector, thus underscoring the importance of the well-being of the farm sector in the overall growth of the economy.

Agriculture in India is endowed with some of the most desirable conditions conducive to farming – low cost of labour, abundant supply of raw materials like water, a huge and growing domestic market, temperate climate with abundant sunlight, and huge tracts of fertile land. But agriculture has never been a sought-after profession in India. In fact, it is debatable if it can even be considered a profession, because it is not treated as one.

Trying his hand at farming and losing money year after year, the late farm leader from Maharashtra, Sharad Joshi, once asked the basic question: “Why is it that the farmers are not able to meet even the cost of their produce and forced to live a life of poverty and indebtedness?”

What prevents agriculture in India from becoming a worthwhile endeavour, rather than a vocation that spells doom? Upon studying the sector closely, the answer to Sharad Joshi was clear: “The reason of farmers poverty is not of their own doing or that of bad karma or fate, but that of bad government policies.”

This freedom manifesto for agriculture seeks to identify these bad policies and address them at their root.

One: Abolish Restrictions on the Trade of Agricultural Produce

Farmers today face restrictions on all facets of trade in agricultural produce, whether it be sale, storage, transport, processing, or export. All such restrictions on trade needs to go.

Also, restrictions on futures trading need to be abolished. Farmers in India are caught in the vicious circle of shortages and high prices, followed by abundance and crashing of the prices. Indian farmers are unique in that they sow crops based on the previous season’s crop prices, rather than future expectations. This increases uncertainty in income for the farmers, and prices for consumers. Enabling futures trading in agricultural commodities will facilitate stabilisation of prices and reduce risks.  

Two: Free Entry and Exit From Agriculture

The land market, especially the agricultural land market in India, is notorious for the lack of clear titles, restrictions on their sale and purchase, and the certification requirements for their end use. Farmers are prohibited from selling their land to non-farmers. They are not permitted to own more than a certain amount of farm land. This artificially depresses the value of farm land, thus tying the farmers to their farm land with little chance of escaping their fate.

An open and transparent land market in agriculture with clear titles is a must for free entry into and exit from practicing farming.

Three: Give Farmers Freedom to Expand Their Business

Unlike any other business, farmers today are the only group that are prohibited from doing better for themselves by expanding their business. They are limited by law in terms of how much land they can hold. The 1960s era land ceiling laws puts a cap on how much land a family can own. A farmer who is successful in his farm business is prohibited by law from buying more land and increasing his or her income. In fact, as the family land is distributed among siblings through inheritance, it only leads to further fragmentation of the farm land.  And farmers are forced not just to be farmers, but to also be entrepreneurs. This is an unfair demand.

Four: Remove Dependency on Loan Waivers and Price Support

It has become normal for politicians and political parties to waive loans and declare higher MSPs as solutions to relieve farm distress. Both these instruments can at best only deliver momentary relief to a lucky few. They are not the solution to the long-term problem facing agriculture. But policymakers have unwittingly led to a dependence that seems hard to get out of.

The opening of the market, removal of the restrictions on trade, higher productivity through adoption of the latest technology and remunerative prices in the international agricultural market are but a few ways through which this dependency can be broken. Once policy reforms start to do its job, the need for such short-term relief measure will automatically be lesser. An effective communication of the plan must also be undertaken to get the buy-in from the farmers on the idea.

Five: Remove Controls on Technology

Indian farmers are unfortunate in many ways, but never more so than in prohibition of access to the latest technology that can help improve productivity. Such controls need to be lifted and the agency of the farmers must be respected in their choice for what is best for their farm, just as it is respected in who best suited to represent them in the Parliament.

To this end, the breadth and the scope of the Environment Protection Act must also be limited to the environment and public health impact. 

Six: Remove All Price Controls

The government sets the minimum support price for over 20 crops. But it procures from the farmers only about six of these crops, and that too for a limited quantity. When it comes to the prices of agricultural produce, they certainly do not perform the function of conveying information to market participants. This avoidable distortion causes all sorts of losses and misallocation.

The Essential Commodities Act of 1955 awards huge powers to the government to control prices and volumes of trade. All these controls must be removed so that farmers can better plan what to sow, and be free to sell to whosoever they want and at whatever price is mutually agreed upon.

Also, the marketing boards were designed to stabilise prices. What they did was to give a guaranteed price that was often less than the market price, thus depriving farmers of their rightful income. Such archaic practices also need to be abandoned.

Over the years, many scholars and commentators have diagnosed what is ailing Indian farm sector. There is no dearth of prescriptions. But they have hardly ever gone beyond the realm of ‘just another academic exercise’. What has remained always in short supply is the courage to administer these prescriptions.

It appears that agriculture has been a victim of too much attention from the policymakers.    Farmers do not need subsidy or sympathy. All they need is to be left alone and the freedom that allows them to live a life of dignity and respect. This sentiment is best captured in this extract from the June 1994 piece in the Economic Times by Sharad Joshi: “There is no problem with agriculture. As I have always said, the government solves no problem. It is the problem. Get it off our backs and farmers will be fine.”

Indeed, it is high time the government stops ‘helping’ the agriculture sector.

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Read the rest of the Pragati Manifesto here.

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About the author

Kumar Anand

Kumar Anand leads the research team at Nayi Disha in Mumbai. His research interests are in Indian economic history, history of economic thought and public choice economics.