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India’s agricultural deregulation questioned by former World Bank chief economist

Rene E. Ofreneo - Laborem Exercens

The world’s longest and biggest farmer strike is taking place in India. It started in November and is continuing up to the present. At one time last year, the warm bodies involved in the strike reached 250 million when the Indian trade unions expressed support to the strike. A rally of close to a hundred thousand tractors was also held early this year.

And yet, the Indian strongman, Narendra Modi, has remained unmoved. India’s court  system is the one sorting out the issues arising from the passage in September of three laws deregulating the agricultural sector. The first law, the Farmers’ Produce Trade and Commerce, allows the free play of private traders in markets that are regulated by the government. The second law, Farmers Agreement on Price Assurance and Farm Services Act, facilitates contract farming, thus placing the Indian farmer in the global corporate food chains. Finally, the Essential Commodities Act removes cereals and other crops from the list of essential commodities.

In brief, these laws dismantle the role of the government-run Food Corporation of India (similar to our defunct National Food Authority) in supporting price stability for cereals and other products. The laws also push farmers to sell outside the so-called mandis, the government-controlled grains buying markets.

The policies reflected in the foregoing laws are not new to Filipinos. Contract growing, phasing out of government’s role in the rural markets and reduction of support to cereals and other food items have been institutionalized as far back as the 1980s and 1990s—under the IMF-WB’s agricultural deregulation program. The dismantling of the NFA in 2019 under the Rice Tariffication Law was the culmination of these agricultural deregulation program.

What is new is the capacity of mainstream Indian economists to adjust their economic lenses and question some of the old neo-liberal beliefs they once held sacred. One of these economists is Kaushik Basu, former Chief Economist of the World Bank (2012-2016). Basu was once an ardent believer in “agricultural reforms,” which the neo-liberal economists equate to agricultural liberalization and market deregulation.

Recently, Basu startled the mainstream economists worldwide when he wrote that the above Indian laws “are a global problem.” He explained that after reading the “fine print of the legislation,” he realized that he “missed” the insights of the protesting Indian farmers on the workings of the agricultural markets in a deregulated environment. He explained that there is no farmer trust on what the Indian government was saying, that is, farmers gain by selling to private markets that are outside the control of the government. He wrote that if the Indian government gives up the “guaranteed minimum support price [MSP]”  for wheat and rice, “millions of farmers will be forced to sell their products to four or five big agribusiness corporations.”

The foregoing observation of Basu reminds us of what happened right after the passage of the Rice Tariffication Law. A dozen or so big corporate importers immediately imported 3 million or so tons of rice and flooded the domestic market with Thai and Vietnamese rice. This resulted in the collapse of palay farm-gate price to as low as P7 a kilo, which is way below the cost of production of P12 a kilo.

The point of Basu is that there is no such thing as “a playing field” if the big corporations are allowed to dominate freely the buying and distribution of major food items. Deregulation, which allows the entry into the market of these corporate giants, “is not desirable” even if it provides the farmers “more choices.” He likens creating choices in an unequal situation such as giving people of color in the US “freedom” to opt for slavery or allowing Chinese workers to have the option to work in export processing zones by giving up basic labor rights.

Basu concluded: “What we need is not market fundamentalism, but a market that functions freely, within the broad parameters set by well-crafted laws.”

Now, will the Filipino mainstream economists who lobbied for the Rice Tariffication Law do a similar mea culpa and ask for the law’s repeal? Will these economists see that the view from below, at the farm level or at the community grassroots, is starkly different from the so-called free interplay of supply and demand forces under a deregulated market? Who wins and who loses in this market?

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