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Govt’s dismissal of farmers’ concerns reduces quality of policies, makes them harder to implement

Market reformers must clean up their ideological lenses and see the reality of where power lies in markets. As Barbara Harriss-White, a scholar of India’s agricultural markets once observed, “deregulated imperfect markets may become more, not less, imperfect than regulated imperfect markets.”

Written by Arun Maira |
Updated: December 11, 2020 9:38:14 am
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Indian farmers want better prices for their produce. The NDA government has promised to double farmers’ incomes. Recently, it pushed ahead with “pro-market” reforms. Farmers in northern states — the richest farmers in India — are against these reforms. They say the reforms will harm, not help, farmers. The government says they are being misled. What is the truth?

The problem of India’s agricultural sector, according to economists, is that there are too many people employed in agriculture. Whereas the agriculture sector contributes 17 per cent of India’s GDP, it employs 57 per cent of the workforce. The solution, according to economists, is to improve the productivity of Indian agriculture and reduce the numbers employed. For the agriculture sector to become as productive as other sectors of the economy, it should employ only 17 per cent of the workforce — the overall size of which is estimated to be around 500 million. Therefore, approximately 200 million workers must migrate from agriculture to other sectors. However, other sectors, especially manufacturing, are not generating enough employment. Moreover, there too, wages and incomes are fragile. In manufacturing also, the problem is low productivity economists say. They recommend more “Industry 4.0”, that is, more technology and automation, to improve productivity. To which sectors then must India’s masses migrate to earn decent incomes?

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The problems of low prices for farm produce and low wages for workers are political economy problems. The terms of trade are stacked, as they always are in unregulated markets, in favour of the large against the small. The large have more power in “open markets” to obtain prices in their favour. The small have no capital and savings to fall back on. They have to “take it or leave it” and thus their wages and prices are kept low, which are “good deals” for buyers and employers.

Protests against the agricultural reforms whose ostensible objective is to make markets free have come from farmers in the north who have been the greatest beneficiaries of the system that is proposed to be dismantled. They are richer than farmers in other parts of the country who have not had the benefits of government support. These rich farmers are portrayed as selfish people preventing reforms that will help poorer farmers.

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The vilification of protestors diverts attention from the core issue, which is that farmers have not been able to improve their incomes in those parts of the country where government intervention has been minimal, and markets have been supposedly free. The guaranteed minimum price applies to only a few crops and covers less than 10 per cent of the overall farm produce. The APMC mandi infrastructure covers less than 17 per cent of the market — there are less than 7,000 mandis, whereas 42,000 are required overall. So, how will further deregulation help them?

Labour unions are also caught in a political trap. The terms of employment are most secure, and wages have risen, in large establishments where unions have been strong. When these unions raise concerns about the security of employment and wages for the 95 per cent plus of India’s workers who are not employed in these large establishments, they are painted as representing India’s “spoiled” workers and are accused of preventing other workers from benefiting from labour reforms. Labour reforms are necessary, the unions say. They agree with employers that procedures must be simplified, and outdated laws changed. However, they say the reforms must enable workers to learn and earn more, and with greater safety and dignity than the vast majority of Indian workers presently have.

For this, it is essential that workers in all establishments have the right to have their grievances and suggestions heard by their employers. As individual workers they are powerless. Therefore, for the sake of their welfare, and to meet the national objectives of improvement of the well-being and incomes of all citizens, all workers must have the right of association in unions. In the labour reforms underway, it is the dilution of this fundamental right of collective representation that bodes badly for India’s workers, and for Indian democracy too.

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NITI Aayog’s CEO says tough reforms are difficult because India is “too much of a democracy” (‘We are too much of a democracy… tough reforms hard: Niti chief’s wisdom’, IE, December 9). The concept of democracy should not be reduced to elections and political parties. Democracy is also a process of listening to all stakeholders. The government’s dismissal of the concerns of farmers and workers to push through “bold” reforms is not only bad for democracy, it reduces the quality of policies and also makes them harder to implement.

Three fundamental reforms are necessary to make India’s growth more just and more inclusive. The first is, policymakers must listen to the less powerful people in markets. Therefore, institutions that represent small people — associations and unions of farmers, informal workers and small enterprises — must be strengthened, not repressed. When reforms are supposedly in their interests, they have a right to be heard.

The second is the formation of cooperatives of producers and workers. By aggregating the small into larger-scale enterprises owned by themselves, not only do the producers have more power in negotiations with their buyers, suppliers, and with government, they are also able to retain a larger part of the value they generate and increase their own incomes and wealth. Government regulations must encourage the formation of strong cooperatives, and improve their ease of doing business.

The third is, market reformers must clean up their ideological lenses and see the reality of where power lies in markets. As Barbara Harriss-White, a scholar of India’s agricultural markets once observed, “deregulated imperfect markets may become more, not less, imperfect than regulated imperfect markets.”

This article first appeared in the print edition on December 11, 2020 under the title “Listen to the less powerful”. The writer is former member Planning Commission, and author of Transforming Systems: Why the World Needs a New Ethical Toolkit.

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