Another green revolution?

At the outset, the current government deserves credit for enforcing the lockdown and saving lives. On that front, India has done well.

But the 20-lakh crore package to fix the economy faces some criticism. For starters, the actual stimulus or relief is far less because the package counts liquidity measures of Rs. 8 lakh crores by RBI. Many are asking why the government restricted cash transfer to Rs. 500 and that too only for female Jan Dhan account holders. Rajiv Bajaj, the straight-talking CEO of Bajaj Auto, called it ghooma-phira (meaning roundabout, complicated) economics and compared it with packages that have been more generous.

That said, when the government is losing revenue even as expenses rise, it can't be expected to spend like Germany or Japan, countries with more than 20x per capita income. Printing money could lead to a downgrade of the country's ratings and rise in inflation. It looks like the government has done its best under the circumstances.

***

Amidst all this, the Covid-19 crisis is being used to finally push some reforms in agriculture.

Like flood and drought, we either see stories of farmers dumping onions on highways, or thieves stealing onions and leaving cash untouched. This is followed by editorials explaining how a farmer doesn't have storage options, freedom to sell his produce, and other things we take for granted in a free market.

Thankfully, as part of the relief package, the FM announced changes in three key areas of agriculture.

Essential Commodities Act: Born after the Second World War and Bengal famine, this law is a handcuff around Indian agriculture which is the world's largest producer of foodgrains. This law allows an administration to punish anyone holding food items beyond a certain quantity. The amendment of this act should lead to greater storage facilities, increased food processing, and stabilization of prices.

Agricultural Product Market Committee: Although designed to protect farmers' interests, this law enabled the formation of cartels which killed competition and kept prices low for farmers. In some states, it was illegal for the farmer to sell elsewhere, or for the buyer to approach the farmer directly. With this law on its way out, the efficiency of capitalism and the supply chain will get a chance to work its magic, as we have already seen for the supply of milk.

Contract Farming: The uncertainties for a farmer include not just the rainfall, but also the price of his harvest. Contract farming will allow a private player to enter into a contract at the time of sowing to assure a price for the harvest.

To be fair, many announcements start with noble intentions and bold spirits before the fine print defeats the purpose. Let us hope that we don't see this here.

Blue Dash

May Talking Points

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