The new legislation comes amid a slight sequential rebound in the agricultural sector. While all other segments of the economy are still largely stuck in Covid-induced disruptions, agriculture has shown some incipient signs of recovery.
However, according to the leading economics commentator, it would be irrational to expect overnight miracles from the Indian agricultural sector, reform or no reform.
Some sections of the industry have lately come to pin their recovery hopes on a rural / agricultural revival, based mainly on factors such as the increase in tractor sales in recent months. But agriculture is only 14%, or about a seventh, of GDP and therefore cannot compensate for the suffering of the rest of the economy, Aiyar said.
There is another important reason why agriculture is making a comeback in some way, he noted. A government can shut down industry and services in a crisis, but no government can do the same with agriculture: you cannot suddenly stop the growth of crops or stop the cow giving milk, which is why agriculture it is working relatively well. , He explained.
He also listed some other positive developments behind the resurgence of the agricultural sector: a) rabi acquisitions were not affected by the closures; b) the monsoons have been good and despite some rain damage to vegetables, the prospects for a good harvest for the second year in a row are high.
But these developments do not remove the fact that the tail cannot wag the dog; at the end of the day, agriculture is still only one-seventh of the economy, Aiyar warned.
The more things change …
What will be the most likely outcomes of the new laws? Will hiring come to an end?
According to Aiyar, that will hardly be the case. For all practical purposes, farmers will continue to bring some of their produce to the mandis, he said.
While there is some theoretical probability of procurement-related problems at some point, any serious supply threats are ruled out because the government is free to invoke the commodities law whenever such a thing occurs, Aiyar added.
However, the new system can be very inconvenient for some states like Punjab, he said. This is because Punjab was, in effect, taxing the rest of India by charging a large mandi tax, so Punjab and some of the other states may lose it now.
In the interview, Aiyar also recalled how the mandi-MSP regime, which began in the 1960s when farmers were forced to sell only in mandis so that the ration system could stay well supplied, eventually became a system of support for the country. farmers.
The farmer should definitely have the freedom to sell his produce anywhere he wants, and in this sense, the new farm laws are a good thing, Aiyar said, adding that being able to sell grain anywhere is an absolute and fundamental freedom.
… the more they stay the same
While the government believes that its new farm laws will play a tangible and significant role in changing the lot of farmers, ITC e-Choupal’s experience seems to suggest otherwise, Aiyar said.
Under the e-choupal scheme, ITC was allowed to establish separate direct procurement systems for wheat, soybeans, etc. Up to a point, it worked: farmers flocked to these centers and got better prices and immediate payment. But it hardly revolutionized agriculture as it was supposed to. The system only cared for a small number of farmers; the rest still went to mandis.
In Indian agriculture, there are usually not many large farmers who are open to supplying large areas. That is why they can achieve it using these small intermediaries and other similar people, because the need to reach large geographies does not exist, Aiyar explained.
Farmers may scale by establishing their own marketing groups and doing their own marketing, but that attempt will definitely take time despite the huge business advantages involved, he said.
The Amul manual could be a great example for the Indian farmer who wants to scale this way, but replicating the success of the milk business with other crops will take time; Those who expect miracles overnight should learn the lessons of the e-choupal episode, Aiyar said.
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