Farm reforms will benefit majority of the Indian agriculture sector, says country’s top economic advisor

Farmers shout slogans during their ‘Delhi Chalo’ protest march against the Centre’s new farm laws, at Singhu border on December 2, 2020 in New Delhi, India.

Sonu Mehta | Hindustan Times via Getty Images

SINGAPORE — India’s chief economic advisor said Tuesday that the country’s new farm reforms are designed to benefit the majority of the agricultural sector.

Thousands of farmers, mostly from the northern states of Punjab and Haryana, have been protesting against three farm reforms that were enacted into law this year. Those measures are expected to chip away some of the rules that have protected Indian farmers for decades and would subject them to unfettered free-market mechanisms where private players are expected to have a greater role.

Several rounds of talks between the government and farmer representatives have proved to be inconclusive. The next round of talks are scheduled for Wednesday. Local media reports say farmers have called for a country-wide strike on Tuesday.

“As the honorable Prime Minister (Narendra Modi) has mentioned in two speeches recently, the fact that reforms are something that is extremely important for India to step into this century and that the old laws cannot actually help us in growing the economy,” Krishnamurthy Subramanian told CNBC’s “Street Signs Asia.”

“He’s also mentioned that these farm laws are actually intended to benefit the small farmers,” Subramanian added.

After the laws were passed in September, Modi tweeted that the bills would “ensure a complete transformation of the agriculture sector as well as empower crores (tens of millions) of farmers.” He also said that the bills would “add impetus to the efforts to double income of farmers,” which had been one of his party’s campaign promises in its successful reelection bid last year.

When asked about the farmers’ protests, Subramanian said reforms in a democracy like India typically “pits a vocal minority of the kind that you’re seeing vis-a-vis a silent majority.”

“The silent majority is the one that benefits from reforms,” he said, adding, “While the vocal minority is the one that usually benefits from status quo continuing.”

“I think we have to recognize the beneficial economics of these reforms and that is what the government is doing,” Subramanian said.

Economists generally agree that India’s agricultural sector needs reforms to reduce the excess production of certain crops, which lowers the sector’s competitiveness. But some point out that the farmers’ concerns still need to be addressed. Specifically, there needs to be adequate checks and balances to ensure that the greater involvement of the private sector does not harm farmers’ interests.

For its part, the government has reiterated that minimum support price (MSP) in the farming sector would remain and that government procurement would continue. MSPs are essentially a safety net provided by the government in case prices drop for certain crops, mainly rice and wheat. The government would guarantee a certain price to farmers regardless of market conditions and government agencies would buy some of those crops at that price.

The reforms also come at a time when the Indian economy entered a technical recession — two consecutive quarters of contraction — for the first time in decades. The coronavirus pandemic prompted a national lockdown between late-March and May that led to a collapse in private consumption and investment demand. It also led to significant job losses, which further curtailed spending.

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