Indian Prime Minister Narendra Modi addresses Patna, India, on October 28.
Photo:
Aftab Alam Siddiqui / Associated Press
For weeks, India has been consumed by protests against agricultural reform. This is probably the hardest political challenge for Indian Prime Minister Narendra Modi, but millions of lives could be improved if he keeps the line.
In September, Mr Modi’s government passed three bills reforming the country’s statistical system for agriculture. The legislation puts an end in particular to the monopoly of government-controlled marketplaces, where farmers sell crops through intermediaries, rather than directly to private buyers. It also removes rules that limit the storage of cereals that have blocked investment in agriculture.
However, the reform would always provoke a backlash, given how many farmers survive in the old system. More than half of India’s workforce earns a living from agriculture, compared to about a quarter of Chinese and less than 2% of Americans. Millions of people will inevitably have to leave farms as India develops, but the left-wing rhetoric about powerful and evil corporations still has some appeal.
The government’s difficult response to the protests has not eased tensions, although it has been doing better lately. The legislation has moved quickly and with few consultations, but these changes have been discussed in India for decades. Major economic reforms in 1991 also passed relatively quickly and led to sustained growth and improved livelihoods.
The changes will attract much-needed investment and make India a more competitive food exporter, but more needs to be done. Subsidies for fertilizers and electricity harm the environment and push farmers to produce inefficient crops. The minimum price of government support will continue with government procurement. Eventually, these statistical relics will have to work as well.
There are some legitimate concerns about implementation, given Mr Modi’s past struggles. In 2016, the sudden and poorly executed demonetization plan undermined public confidence in the government. So did the negligent launch of a tax on goods and services the following year. A smooth transition from government market sites would make for more pleasant reforms in the future.
Despite employing about 263 million workers, agriculture accounts for about 17% of the country’s total income. Privatization will lead to efficiency and consolidation, which means that millions of Indians will have to find work elsewhere.
Clearly, the government took this into account when adopting a parallel series of labor reforms. The new laws limit union power and facilitate women’s night work. More companies will have the flexibility to lay off workers when needed. These changes should lead to investment in labor-intensive production, which for many will provide a better life than staying on the farm.
Mr Modi disappointed hopes of economic liberalization in his first term, but the Covid-19 recession appears to have led to a reset. He deserves credit because he went in the right direction.
Main Street: Jimmy Lai from Hong Kong goes to jail – and Pope Francis says nothing. Images: Reuters / Zuma Press Composite: Mark Kelly
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8