The Economic Times
English EditionEnglish Editionहिन्दी
| E-Paper

    Reform or no reform, the farmer is hardly the saviour India is waiting for. Aiyar explains why


    Some sections of industry have lately come to pin recovery hopes on a rural/farm revival, based mainly on factors such as rising tractor sales over the past couple of months. But agriculture is just 14% — or roughly one-seventh — of GDP and hence can't make up for the suffering of the rest of the economy. There are other reasons too.

    Don't expect overnight miracles in farm sector with new agriculture bills: Swaminathan Aiyar
    At a time when Modi govt's new farm laws have sharply divided opinions in India, the optimist faction's high expectations from these reforms do not appear to be rooted in reality, Swaminathan Aiyar told ET Now in an interview.

    The new legislations come amid a slight sequential uptick in the agri sector. While all other segments of the economy are still majorly stuck in Covid-induced disruptions, agri has shown some nascent signs of a recovery.

    However, according to the noted economy commentator, it would irrational to expect overnight miracles from the Indian agriculture sector, reform or no reform.

    Some sections of industry have lately come to pin recovery hopes on a rural/farm revival, based mainly on factors such as rising tractor sales over the past couple of months. But agriculture is just 14% — or roughly one-seventh — of GDP and hence can't make up for the suffering of the rest of the economy, Aiyar said.

    There is another significant reason why agriculture is making some sort of a comeback, he pointed out. A govt can close down industry and services in a crisis, but no govt can do the same with farming — you can't just suddenly stop crops from growing or make the cow hold back on giving milk — which is why agriculture is doing relatively well, he explained.

    He also listed a few other positive developments behind the farm sector's resurgence — a) rabi procurements were not hurt by lockdowns; b) the monsoons have been good and despite some rain damage to vegetables, prospects of a good crop for the second year on run are high.

    But these developments do not take away from the fact that the tail can't wag the dog — at the end of the day, agri is still only one-seventh of the economy, Aiyar cautioned.

    The more things change...
    What will be the most likely outcomes of the new laws? Will procurement come to an end?

    According to Aiyar, that will hardly be the case. For all practical purposes, farmers will still continue to take some of their produce to the mandis, he said.

    While there is some theoretical likelihood of procurement-related problems at some point, any serious supply threat is ruled out because the government is free to invoke the essential commodities act whenever such a thing happens, Aiyar added.

    The new system, however, can be very inconvenient for some states like Punjab, he said. This is because Punjab, in effect, was taxing the rest of India by levying a big mandi tax, so Punjab and some of the other states may lose it now.

    In the interview, Aiyar also looked back on how the mandi-MSP regime — which began in the 1960s when farmers were forced to only sell in mandis so that the ration system can be kept well-supplied — eventually became a support system for the country's farmers.

    The farmer should definitely be free to sell his produce anywhere he likes, and in this respect the new farm laws are a good thing, Aiyar said, adding that being able to sell the grain anywhere is an absolute and fundamental freedom.

    ...the more they remain the same
    While the govt is of the view that its new farm bills will have a tangible and meaningful role in changing the farmers' lot, the ITC e-Choupal experience seems to suggest otherwise, Aiyar said.

    Under the e-choupal scheme, ITC was permitted to set up separate direct procurement setups for wheat, soya, etc. Up to a point, it worked — farmers did flock to these centres, and got better prices and immediate payment. But it hardly revolutionised farming as it was supposed to. The system just took care of a small number of farmers; the rest still went to the mandis.

    In Indian agriculture, there usually are not many large farmers who are open to catering to vast areas. That is why they can get by using these small middlemen and other such people, because the need to reach large geographies is not there, Aiyar explained.

    It is possible for farmers to scale up by setting up their own marketing groups and doing their own marketing, but such an attempt will definitely take time despite the huge business advantages involved, he said.

    Amul's handbook could be a great example for the Indian farmer who wants to scale up this way, but replicating the milk business' success with other crops will take time; those who expect overnight miracles should draw their lessons from the e-choupal episode, Aiyar said.
    (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    18 Comments on this Story

    Satwant Gill33 days ago
    true facts .People who oppose it want small formers to remain teiid up with their small form land and don't to wincher in other fields for uplift their living . S FOR PRICE rise in of season by corporation is concerned .any body can stock for one year, the produce sure to com in next year again
    Rahul Bhargava33 days ago
    Baised thought, one seventh of GDP taking care of bottom forty percent. You can always find faults with anything, but taking care of most vulnerable is sign of matured civilization
    Nagarajan Govindon33 days ago
    lot of peoples without knowing where the paddy and wheat comes they will tell lot of things. First they should go and see the plight of the farmers in the hands of the middlemen.Now the big corporate are going to squeeze to derive maximum benefits
    Already farming community bottom most level.No one is doing with interest because of no alternative.
    The Economic Times