Following its independence in 1947, one of the ways that India sought to ensure the welfare of its population was by establishing a price assurance system for farmers, guaranteeing them that if they cultivated critical crops like rice and wheat, they could rely on a set, minimum price paid for the produce. This national system enabled the country to overcome food deficits while also expanding earning opportunities for rural farmers, both of which have been part of its expanding development over the intervening decades.
Having reached such a threshold, several forces in India are encouraging a more free, open, capitalist, market approach. Whereas foreign investments were once closely restricted, today more companies are entering Indian industrial sectors, even without local partnerships. Furthermore, the current prime minister has proposed eliminating the agricultural price assurance system, with the argument that the free market should set the prices for rice, wheat, and other staple crops. New proposed laws would allow private trading companies to negotiate directly with the approximately 800 million individual farmers in India, rather than requiring the participation of existing government-run boards that currently function to establish price minimums and purchase any surpluses.
The response from staple crop farmers has been rapid, vociferous, and angry. They argue that eliminating the price assurances threatens to undermine their livelihoods and the ability of small farmers to survive and compete. Pointing to the example of a limited prior initiative, which dismantled the price assurance system in just the state of Bihar, protesters note that whereas the federal minimum price for 100 kilograms of rice was $25, farmers in Bihar were forced to sell the same amount for just $16. Whereas the free market experiment in Bihar, begun in the early 2000s, initially claimed that the outcome would be higher prices, those claims have not been borne out.
Instead, according to the farmers protesting the new laws, the unethical goal of these changes is actually to benefit large agricultural firms. They allege that two of the largest farming corporations in India are helmed by two people who are close allies of the prime minister, such that accusations of collusion and exploitation are widespread. Notably, the new laws do not provide any means for individual farmers to bring suit if they believe they are being cheated by the trading companies. The new system thus appears designed to drive small farmers out of business, give all the power and control to corporate interests, and offer no legal recourse to people harmed by the consolidation in the industry.
The protests have been extensive and long-lasting, and some of the government’s restrictive reactions to them, such as suspending the Twitter accounts of protesters, have raised further controversy. But negotiations continue, and observers note that the situation is more complex than the protests would imply. Farmers of non-staple crops, such as tomatoes and beans, have never enjoyed the same price support that staple crop farmers do, such that they allege neither the protesters nor the government is helping them overcome the challenges of modern agriculture, climate change, and technology developments.
- Why is India’s national government pursuing initiatives to transform agriculture into a free market?
- Does economic development require a more capitalistic approach, such that farmers need to compete better or else leave the market, or should governments continue to offer price assurances and support to small farmers?
Source: Hartosh Singh Bal, “Why Are India’s Farmers Angry?” The New York Times, January 14, 2021; Niharika Sharma, “Why Indian Farmers Believe New Laws Are Rigged to Favour India’s Richest Man,” Quartz India, December 8, 2020; Lauren Frayer, “India’s Farmer Protests: Why Are They So Angry?” NPR, March 2, 2021.