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How India's economic policies are hurting its farmers

Murali Krishnan in New Delhi
February 29, 2024

Farmers are taking to the streets again to protest the government's handling of the agricultural sector. With elections coming up, farmers, who account for nearly half of India's workforce, could put a damper on the BJP.

Farmers ride tractors and shout slogans while marching towards New Delhi
Thousands of farmers from northern Punjab are protesting at two inter-state borders with Haryana demanding financial stabilityImage: ANUSHREE FADNAVIS/REUTERS

Thousands of farmers from northern Punjab are protesting at two inter-state borders with Haryana demanding a legal guarantee on the Minimum Support Price (MSP) on all crops, as well as a complete loan waiver for all farmers to ensure better financial stability and control over their income.

The scenes are reminiscent of India's farmer protests in 2020 and 2021, when hundreds of thousands of farmers pushed the government of Prime Minister Narendra Modi to abandon three bills intended to overhaul India's agricultural economy.

Though the government promised a new start, agreeing to meet the farmers' demands, farmers say those promises were broken.

India's rural economy 'in crisis'

Some 260 million people in India work in farming, accounting for over 45% of the country's workforce, according to government figures.

Tens of thousands of India's farmers on march to Delhi

"The number of agricultural workers in India declined by 67 million between 2004-05 and 2017-18 as workers left low-wage agriculture to instead pursue higher-wage occupations in manufacturing and services," Congress General Secretary Jairam Ramesh told DW.

"However, the number of agricultural workers has gone up by 60 million and the reversion back to agriculture predates the COVID-19 pandemic. Rather than take India on the path to prosperity, the prime minister's blundering and mismanagement has set our economic transformation back by 20 years," added Ramesh.

Himanshu, an associate professor of Economics at Delhi's Jawaharlal Nehru University, says India's rural economy is in crisis and that the government has failed to address the issue with sufficient targeted spending.

"This can happen if the prices of output rise slower than the prices of inputs," Himanshu told DW, adding that "With rising diesel prices, electricity charges and fertilizer prices, even if the farmers produce more, they can incur losses."

Lekha Chakraborty, professor and chair at the National Institute of Public Finance and Policy, warns that minimum pricing is not a magic bullet to cure India's agrarian distress.

"Neglecting the agricultural sector will not help India to 'graduate' to next level of GDP because of its close links to other sectors and to ensure food security," she told DW. "A mindless focus on the physical infrastructure without giving adequate attention on food security, climate change concerns, or social security measures for vulnerable populations including farmers can widen inequalities further."

Chakraborty believes that the doubling of income for farmers, which was promised by the government, can happen only if the growth rate of the sector increases significantly, which has not happened. Targeted cash transfers to farmers have also not solved the problem entirely.

'India must adopt a manufacturing strategy akin to China's'

With the upcoming elections this year, dissatisfied farmers could spell trouble for the ruling Bharatiya Janata Party (BJP) which is seeking a third consecutive term.

Will India become an economic superpower?

The government has already conducted four rounds of negotiations with farmer leaders, but the talks have produced no tangible results.

"We are hoping that we find an amicable solution to the farmers crisis. This should not pose a problem for the party," a senior minister involved in the negotiations told DW.

Santosh Mehrotra, a human development economist and a visiting professor at the UK's University of Bath, says India could look at China's manufacturing strategy.

"To restore non-farm employment and high GDP growth, India must adopt a manufacturing strategy akin to China's, focusing on labour-intensive manufacturing," he told DW. "While a slow global economy may limit export demand, boosting domestic demand can create jobs. A primary focus on services is unlikely to suffice, despite calls to this effect."

Arun Kumar, an economist, says a key problem is the inadequate income of around 85% of farmers who have marginal or small holdings and cultivate less than two hectares (just under five acres) of land. But he says it is not only farmers in India who are suffering.

"Piecemeal and ad hoc policies attempted till now have resulted in contradictions and persisting poverty. Of late, farmers in Europe have also been blocking roads and highways to raise their demands. Clearly, post the pandemic, the issue of adequate farm incomes has become more acute globally," Kumar told DW.

Kumar believes any big policy shift would take a few years to fully get implemented.

"Poverty and inadequate demand need to be tackled by policy makers by focusing on the welfare of the vast majority, and not just of businesses and the well-off. The issue is political, and judges whether the lifestyle of the latter should be maintained at the expense of the former."

Indian farmers pause protest for government negotiations

Edited by: Sou-Jie van Brunnersum

Murali Krishnan
Murali Krishnan Journalist based in New Delhi, focusing on Indian politics, society and business@mkrish11