Agri-reforms : The real gains from reforms in farming sector
October 17, 2020 11:53 AM
Apart from the immediate gains of unshackling the farm sector, what needs to be kept in mind is the potential it unlocks for developing agri-entrepreneurship, even agri-unicorns in the long-term—as it happened post the 1991 reforms
The exploitative structure of APMC, out-of-context ECA controls and the non-allowance of contract farming are unfair, the benefits listed by some notwithstanding.
By Samir Kagalkar
As I start to write this article on the long-term impact of the agrarian structural reforms brought by the Modi government, I recollect the 1991 liberalisation days. The apprehension, confusion and subsequent tension that came with the announcement of economic reforms was palpable. The Narasimha Rao government was defensive about its economic reforms, at least initially. Technical justification by then finance minister, Manmohan Singh, hardly convinced the Indian masses. IN my late teens and early 20s, I witnessed the various phases of economic reforms unfold. And, also reaped its benefits, more importantly, the unstated ones that came our way.
My father had applied for a telephone just before I enrolled for my post-graduation course (for which I had to relocate from Bengaluru to Pune), but our family finally got the connection only after I had finished Masters and come back! Two years to get a telephone connection! That was the cusp period—ending of the control raj and opening up of the free enterprise regime. Anyway, I landed a job at HSBC soon after. That gave me real classes in economics. Comparing my working at HSBC with my father’s who then with SBI, two distinct worlds, of socialist control and a free economy, became clear to me. I got a personalised cheque book and an ATM card, with my first salary. And, in a couple of months, I held a credit card in my hands—the first in my entire family! The work culture, professional outlook, job learning, etc, couldn’t have been more different for the two of us. Since then, the distinction had only become more robust between these two worlds, as illustrated by SBI & HSBC—reinforcing my firm and strong belief in the working of the “invisible hand” as propounded by Adam Smith—away from the socialist control of the Congress Party’s ‘visible hand’ that ruled our economy for a good part of the post-Independence years.
While the comparison between SBI and HSBC exemplifies the immediate distinction and benefits that these two worlds offered, what is more important is how the economy has evolved since then. While former PM Narasimha Rao must be given due credit for taking the political risk of opening up the economy, the implementation was done with a clear economic mind by the economist finance minister, Manmohan Singh. Herein lies the takeaway for us, more so now. Even Singh couldn’t have predicted how the economy would evolve after he liberalised it. While the immediate relief and benefits were seen by firms experiencing pain then (Infosys, Wipro, Bharat Forge, for instance), the medium-term benefits were seen by new age firms like HDFC Bank or ICICI Bank that swiftly made a mark, without having to worry about any baggage from the past. In the long-term analysis of two decades since 1991, new-age companies like Ola, Swiggy, MakeMyTrip, Razorpay, Byju’s and other “unicorns”/successful start-ups have emerged from the direct and indirect impact of liberalisation. That is the real beauty of an open, liberalised economy. This is in stark contrast to a planned, controlled economy—which, incidentally, never panned out as planned while, at the same time, it did not let the unplanned things happen. My father today is as conversant with the latest technologies as I am. SBI offers him all the good services that any MNC bank offers to anyone of us. And we both have learned—slowly but surely—to explore and adopt the latest tech/economic development in the system. The unintended benefits of a new liberated economy have put both of us on the same page. And, in parallel, as a good transformation story, SBI has transformed itself to a large extent to become capable of competing with the best in the country across sectors—public, private & MNC.
This is the crux of the agrarian structural reforms brought in by PM Modi in 2020. The exploitative structure of APMC, out-of-context ECA controls and the non-allowance of contract farming are unfair, the benefits listed by some notwithstanding. That 55-60% of our population is dependent on the agrarian sector that has a relatively small contribution to the GDP (at about 17%) needs to change. And there is a need for a new beginning—for APMC, for farmers, and the agriculture sector at large. That is where the crux of today’s debate should lie, not in splitting hair over technical terms and technical processes, as is being done by those opposing the structural reforms for the sake of opposing.
What is unfortunately missed out in the discussion today is the evolution of reform’s future—on how many unicorns would come out of this agrarian sector after it is unshackled, without any need for support or help from the government. And on how multiple unseen situations would unlock new transformation in agriculture, agro-based industries/services and logistics. The needs and pain-points in this sector are numerous today. In parallel, animal spirit is raring among entrepreneurs to solve these. And these are the entrepreneurs who have shown their mettle in the non-agrarian sector in the last two and a half decades. There are more to come—most of them unseen hitherto, waiting to emerge out of this transformation.
To reiterate, this historic reform is not just about removing the pains of today, but to evolve into a future that is more prosperous, majestic and just, for all the hard work and efforts the farmer community puts in. Giving them their due now and in the future is the crux of this matter. The non-agrarian unicorns have arrived in style—thanks to the opening up of the economy in 1991. When will predominantly agrarian Punjab see dozens of such successful and meaningful unicorn starts-ups in the agrarian sector? Why should the farmer alone be kept in isolation, away from prosperity because of some politically-contrived, unfair economic structure? With the opening up of the agrarian sector, in the most unintended manner—as was the case with the other unicorns—we shall see hundreds of innovative engagements taking shape and gaining scale. All that was required was removing the shackles and letting the inner strength match up with the external opportunities. PM Modi has done his bit. And, in the true spirit of Atmanirbhar Bharat, we wish to see our agri-preneurs spread their wings and fly high. This is the crux of the debate that is completely missing in our media.
(The author is State convener of BJP Economic Cell, Karnataka. Author holds a doctorate in Strategy & Policy from IIMB, and MA in Economics from GIPE, Pune. Views expressed are personal.)