Addresses of Indian Prime Minister Narendra Modi in Patna, India, October 28.
Photo:
Aftab Alam Siddiqui / Associated Press
India has been consumed for weeks by protests against agrarian reform. This may be Indian Prime Minister Narendra Modi’s most difficult political challenge, but millions of lives could be improved if he stays on the line.
In September, the government of Mr. Modi three bills well to reform the country’s state agricultural system. In particular, the legislation ends the monopoly of government-controlled market yards, where farmers sell crops through middlemen rather than directly to private buyers. It also eliminates rules that limit grain storage and have crippled investment in agriculture.
Still, reform would always cause a backlash, given the number of farmers who would survive under the old system. More than half of India’s workforce makes a living from agriculture, compared to about a quarter of the Chinese and less than 2% of the Americans. Millions of people will inevitably have to leave the farms as India develops, but leftist rhetoric about powerful and evil corporations still has some appeal.
The government’s heavy-handed response to protests has not eased tension, although lately it has been better at reaching out. Legislation moved quickly and with little consultation, but these changes have been debated in India for decades. The major economic reforms of 1991 also passed relatively quickly, resulting in 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. Fertilizer and electricity subsidies are harmful to the environment and encourage farmers to produce inefficient crops. The government minimum support price will continue along with government procurement. Ultimately, these statistical relics will also have to disappear.
There are some legitimate concerns about the implementation given Mr. Modes. In 2016, the abrupt and poorly executed demonetization plan undermined public confidence in the government. This also applied to the sloppy rollout of a goods and services tax the following year. A smooth transition of government market yards would make more reforms palatable in the future.
Despite employing about 263 million workers, agriculture makes up about 17% of the country’s total income. Privatization will lead to efficiency and consolidation, meaning millions of Indians will have to look for work elsewhere.
The government clearly had this in mind when it implemented a parallel series of labor reforms. The new laws limit union power and make it easier for women to work night shifts. More companies will have the flexibility to fire employees when needed. These changes must involve investment in labor-intensive production, which will provide a better life for many than staying on the farm.
Mr Modi disappointed hopes for economic liberalization in his first term in office, but the Covid-19 recession appears to have prompted a reset. He deserves the credit for going in the right direction.
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