World Grain - July 2021 - 6

FROM THE EDITOR
EDITORIAL STAFF
Editor
India's agriculture
conundrum
A
fter 60 years of operating in a
planned economy, India's agricultural
sector is changing course.
Last fall, after contentious debate, India's
parliament passed three laws designed to
liberalize sales of agricultural products
and pave the way for the country to become
a powerhouse exporter.
Advocates of the new free market
system say allowing the private sector
to play a bigger role will spur land consolidation
and investment in mechanization,
as well as generate economies of
scale that will greatly enhance productivity.
Instead of selling their crops to
the government at a minimum support
price (MSP) in local, state-regulated
markets, farmers can sell their harvest
via contracts nationally to a much wider
range of private actors. The government
contends
this
will
increase
farmers'
incomes and lower food prices. While
free markets generally function better
than government-controlled economies,
there are legitimate concerns that the
situation for India's smallholder farmers
will go from bad to worse. More
than 80% of ag producers in India are
categorized as smallholder farmers and
the livelihoods of nearly 60% of the
country's 1.36 billion people are tied
to agriculture. Those are jaw-dropping
numbers in this increasingly high-tech,
urbanized world. In most developed
countries agriculture
comprises less
than 5% of the labor force. In China and
Indonesia, two developing countries
often compared with India, the percentages
are 27% and 32%, respectively.
Under the planned economic system
that has been in place since the Green
Revolution of the 1960s, the government
purchases crops - mostly wheat
and rice - at an MSP, stores them in
government-operated warehouses, and
distributes them at a subsidized price.
Initially, the strategy helped India free
6
itself of dependence on foreign food aid
and become self-sufficient in grain. But
it has increasingly encouraged overproduction
and poor agronomic practices.
Perennially ranked No. 2 in wheat and
rice production, India is anticipating record
output in both crops this year. Unfortunately,
a significant amount ends
up rotting in government warehouses.
It is also worth noting that rice and
wheat combine for 70% of the world's
total water usage on crops. With 20% of
the world's population, India has only
4% of the world's water, but the country
is the largest extractor of groundwater,
with 90% used for agriculture. A 2017
study predicted that Punjab, the nation's
largest grain-producing region, would
exhaust its groundwater supply by 2039.
It's not that India's farmers have been
happy with the MSP system, which only
impacts a limited number of farmers
since wheat and rice are the only crops
the government buys in sufficiently large
quantities. But they fear a free-market
approach will allow large corporations
to gain more control over production and
make it impossible for them to compete.
So the choice is to proceed with the
free-market reforms, which can create a
more vibrant sector and increase India's
potential as an exporter but also may
strip millions of farmers of their livelihoods,
or capitulate to the protesting
farmers and keep some
form of the planned
system, which has left
most farmers at or below
the poverty line
and encourages overproduction
of
crops
that are taxing the country's soil quality
and water supply. Either way, there will
be painful consequences.
Arvin Donley
Editor
Managing Editor
Associate Editor
China Consultant
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World Grain - July 2021

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