In the case of Indian farmers vs. Prime Minister Modi, it seems that the Indian farmers won… or have they?
Narendra Modi’s tenure as Prime Minister (PM) of India has yielded its fair share of controversies, though few hit international headlines to the same scale as the Indian farmer laws and subsequent protests. For some context, prior to 2020, the Indian government has historically provided (and continues to provide) substantial monetary support to the agriculture sector in India, notably through subsidies and guaranteed minimum prices for certain essential crops in government-run markets called “mandis”. This move has led to excess surpluses, especially of rice and wheat, that often go to waste and/or are not appropriately distributed in local or international markets. In September 2020, PM Modi decided to suddenly (and admittedly radically) transform this sector by passing three laws that reduced the government’s role in agriculture and paved the way for corporate buyers to enter the agriculture market, with the hope that the competitive forces and free market movement would stabilise quantities produced, improve farmers’ incomes and boost exports. While the move may be economically sound (indeed, several economists in India and abroad have agreed that the current system is outdated), it sparked year-long riots from farmers across India, most notably from Punjab and Uttar Pradesh, against the government’s sudden and dramatic change in agriculture strategy, the potential loss of income and employment for a critical sector of the Indian economy (60+% of India still depend primarily on agriculture for their living) and the lack of appropriate transition and support measures to enact these laws. All of this culminated in an unprecedented repeal of the laws by PM Modi and a rare admission that there may have been shortcomings in how the laws were announced/enacted that the government would take into consideration for future legislation.
A victory for farmers? Maybe, but there is more to this story. While it is true that PM Modi’s reversal on the farm laws is unusual for a leader who has previously managed to push through legislation regardless of any domestic or international backlash, there are other political factors at play that could be influencing his decision to change his otherwise-steadfast stance:
Political factors: appeasing the Sikhs and maintaining a stronghold on Punjab and UP
The decision to repeal the farm laws is likely a move by the PM Modi government to appease the Sikh population, which comprises a large share of farmers in India and is a key voting bloc in the elections. The timing of the announcement would support this as PM Modi scheduled his speech announcing the repeal of the farmer laws on Guru Nanak Jayanti, an important day/celebration for the Sikh community, suggesting that the move may be partially, if not wholly, directed towards pacifying dissatisfaction from the Sikhs. Furthermore, a majority of the Indian farmers who were protesting the laws are from the Northern states of Punjab and Uttar Pradesh, two politically powerful states with significant sway over the election results as result of the large number of members from these states who are elected to the legislative assembly (Lok Sabha) – given the upcoming Assembly elections in these states in 2022 (especially in Punjab), it is possible that the PM Modi government fears that growing distrust from citizens of these states will lead them to support other political parties (notably the Indian National Congress) and hence, conceded their stance on the farmer laws in a bid to appease these citizens and thus, retain a stronghold over these states for the upcoming elections.
Economic factors: wasted surpluses, inefficient distribution and lack of broader job creation
Regardless of whether this will actually appease these states, PM Modi’s decision to repeal the farm laws comes at the cost of meaningful change to an inefficient system (regardless of the manner of communication or the nature of execution) and masks other inefficiencies in the Indian economy in favour of political appeasement. The biggest inefficiency that the current repeal overlooks is the food distribution network – due to the subsidies and minimum prices guarantees that are in place, the Indian government has had to purchase massive surpluses (notably of wheat and rice) that often go to waste / rot, despite the fact that a large part of the country still grapples with malnutrition and starvation, suggesting that the surpluses are not being redistributed effectively to where there is true demand for the same. This misalignment is exacerbated by export limitations due to agreements with the World Trade Organization, leading to further waste of harvested produce. Another major economic issue that the repeal masks is the lack of job creation in the Indian economy. 60+% of the Indian population directly depends on agriculture for their livelihood even though agriculture only contributes to 11% of the country’s GDP – the absence of jobs and low job creation in alternate sectors of the economy has led to citizens reverting to agriculture as their primary source of income, a clear indication of a broader problem in the economy. While it is true that the farmer laws would not have addressed these issues directly and that there was insufficient infrastructure/systems in place to support the farmers through this transition, the laws would have indirectly corrected the imbalances in the system – instead, by focusing on the repeal and the political brownie points that they stand to make, the PM Modi government may be distracting the country and the world from other fundamental issues within its economic structure.
And so, while it seems that the masses have won this battle against the PM Modi government, it is worth reflecting on the nature and the costs of this victory (both political and economic) and what the next steps are for the Indian economy. While there is no doubt that the proposed laws were radical and sudden with little support for the farmer during the transition period, the repeal of these laws (for seemingly political reasons) and the lack of next steps (especially around other pressing economic inefficiencies) are a cause for concern. PM Modi has stated that he and his government will reconsider their approach and has asked protesters to return to their homes and “start afresh”. On one hand, the protesters have already made clear the fact that they will not leave until there is full clarity on the repeal and a few additional demands are met (given their victory, is it is surprising that they’re asking for more?); on the other, PM Modi’s supporters are likely feeling a sense of loss, having staunchly supported their leader and expected his resolute stance on this topic (especially given that it had been under debate for nearly over a year) – it will be interesting to see how this repeal impacts his existing supporter base and how many will witness this defeat as a dent in PM Modi’s image of invincibility. Finally, for the general citizens of India, there is no clarity on how the existing system will be improved, if/how the agricultural policy will evolve and whether we can expect to see positive change under this government. With the right support systems and the appropriate messaging, PM Modi has a chance to fundamentally change the agricultural model of India and catapult it into economic prosperity – it remains to be seen if the political climate enables this positive change.
Featured image credit: Randeep Maddoke; email@example.com, CC0, via Wikimedia Commons
Nandini Mazumdar (MBA 2022) is a Co-President of the Tech & Media Club at London Business School. Prior to the MBA, she completed her undergraduate studies in Econometrics and Political Science at New York University and worked at Mastercard Advisors, offering consulting and advisory services in the payments, fintech and technology sectors. Nandini is an intern for the Wheeler Institute, contributing to the creation of content that amplifies the role of business in improving lives.