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Modi’s reforms could help turn India into a powerhouse for food exports

Farmers throw sheaves of cut wheat in a field in Uttar Pradesh, India, on April 21.

Photographer: Prashant Viswanathan / Bloomberg

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Of all the controversial market reforms, Indian Prime Minister Narendra Modi has emerged, and recent farm sales liberalization laws may prove to be the largest.

In a distracted and disobedient session last month, parliament passed three laws that some say could pave the way for India to block world food trade, while others fear it would ruin the livelihoods of millions of farmers. A few days later, village groups and opposition leaders began public protests.


Farmers’ rights organizations are organizing an anti-government demonstration in Bengaluru on September 28th.

Photographer: Manjunath Kiran / AFP via Getty Images

The move to a free market for farm sales is at the heart of a system that directly affects more than half of the country’s 1.37 billion people, changing government control that millions of families have relied on but that hampers the country’s efforts to productively of the largest areas of fertile land on earth. If they succeed, India can not only feed itself, but also become a major food exporter.

“We need private sector investment in technology and infrastructure for Indian agriculture to reach our full potential and compete better in the global marketplace,” said Sirad Chaudhry, managing director and CEO of agricultural services company National. Collateral Management Services Ltd., but the government must give a clear intention to defeat the skeptics. “This is a major policy change that affects a large and vulnerable part of the population.”

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India processes less than 10% of food production and loses about 900 billion rupees ($ 12.3 billion) a year due to a loss from inadequate refrigerated storage, said Amitabh Kant, chief executive of the government’s NITI Aayog think tank.

Modi has a long summary of controversial political moves, including a ban on high value banknotes, the largest tax reform after independence in 1947 and the worst coronavirus in the world locking rules. The latter seems slight in comparison: a set of amendments to the laws governing the purchase, sale and storage of agricultural products.

Still, there were eight opposition MPs suspended for disobedient behavior when the new bill was passed, and groups representing farmers and political parties staged demonstrations, sitting races and tractor rallies in grain-producing countries such as Punjab, Haryana and Madhya Pradesh.


Farmers used tractors to block railroad tracks during a protest outside Amritsar, Punjab, on October 13th.

Photographer: Narinder Nanu / AFP via Getty Images

Shiromani Akali Dal, a longtime supporter of the ruling Bharatiya Janata party, which rarely contradicts the decisions of Modi’s coalition, leave the government. It says that farmers are afraid of the measures will eventually kill the government’s crop price support regime and leave them at the mercy of large corporations that will control the market.

Modi and his ministers say the concerns are unfounded and the price guarantee program will continue. His administration has even raised some minimum prices for winter crops to try to reassure farmers that price support is not in jeopardy.

This is a very emotional topic in India. The government sets minimum prices for more than two dozen crops and buys mostly wheat and rice for its welfare programs, along with some legumes and oilseeds, to prevent distress sales from farmers. Massive subsidies help distribute braces to the poor through a chain of more than 500,000 stores at fair prices.

The issue has been exacerbated by the pandemic. The disruption of farms and supply chains has revealed weaknesses in the state’s social assistance system, which is hampered by bureaucracy, underfunding and archaic distribution facilities.

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A woman collects a subsidized ration of grain from a state-owned distribution store in Madhya Pradesh province.

Photographer: Dhiraj Singh / Bloomberg

Farmers point out that while government-guaranteed prices are often considered a benchmark, private buyers should not pay them.

“We are disappointed,” said Charanget Singh, who grows rice, wheat and vegetables on his farm in northern Haryana. “The government must ensure that all farmers, whether they sell grain in certain markets or to private buyers, receive at least the minimum support price.”

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