A few notes my leftist friends on farmers’ bills. Please be careful with definitions. Often the the definitions are left vague in our narratives and that lets grave and dangerous errors slip through without us noticing them. So here goes:

1/n

1. Who are farmers? By definition, farmers should be those who till the land themselves & live off the produce of the land. Such farmers are very few. The average farm size is 2.5 acres in India; too small 2 even feed a family of 6. Owning agri land doesn’t make U a farmer.

Most farmers we talk about are “gentlemen land owners” who don’t actual till the land but live off it partly. The guys who actually till the land are very small marginal farmers with or without tiny holdings of their own. Or outright agri labour on wages - usual annual wage.

Few gentlemen farmers live off the land alone. Often they are professionals in other fields who happen to own some ancestral land. U cannot make agricultural policies keeping the interest of such gentlemen farmers in mind. They guys 2 care 4 are the small & marginal farmers.

The situation is the same as the in the case of unemployed vs the labour in organised sector of the economy represented by unions. The biggest mistake Marxist made was to confuse us on the interests of unionised labour vs those without jobs.

When through union pressure, industrial action and other techniques you keep wages in the organised sector too high the result is industry shifts 2 more capital intensive means of production. That means fewer jobs are created per unit of investment & the poor go without jobs.

This is the “definitional problem.” Workers in the Marxian sense are not those well off PSU employees & bank workers whom the unions represent but your poor people looking any gainful employment. Policy must focus on the unemployed, not the well off middle class.

The same with “farmers” vs agricultural labour. The farmers in the Marxian sense is agricultural labour and not mere land owners passing off themselves as farmers. These guys are are more akin to small business owners than farmers. The nomenclature we use is very important.

The real issue in agriculture is land fragmentation, 0 private investment & hence abysmal productivity by global standards. It is a vicious circle where small size of farms promotes share cropping which disincentives incremental investment that results in stagnant productivity.

India has to disrupt this vicious circle by any means possible. Land leasing will allow aggregation of small holdings into viable farms, making incremental investment possible 4 higher productivity. Corporate capability to raise capital will be useful. 1 way 2 bust vicious cycle.

So let us focus on what happens to the incomes of small & marginal farmers who till their tiny plots while working as farm labour on the farmers of gentlemen farmers.

So long as the agricultural workers get giver wages through higher investment, all is good.

Yes, gentlemen farmers face a huge disruption. But I think they will be quick to see the advantages over time after the initial fear of change subsides.

Be that is may, remember the guys to care 4 are those who actually till the lend & live of it.

Not kulkas.

The Sage has asked me to explain why the farmers’ bills will be resisted & why I think they are gambles - ie fraught with high risk - that I didn’t elaborate in my earlier thread.

My focus then was 2 explain the difference between land owners & real farmers. So typos apart, ….

The simple but very complex answer is market risk.

Please don’t think Modi has turned market friendly through these bills. His ban on onion exports, price controls on drugs, his earlier chicanery with price of pulses et al show Modi is very distrustful of markets.

So what explains these bills? Answer lies in the mountain of food we have accumulated over the years, especially cereals like wheat & rice, that we do not need, cannot export nor distribute 4 free 2 the hungry 4 fear of a market collapse in prices and/or creating a moral hazard.

About a third of this surplus food rots or is lost 2 rodents. Another third is exported at a loss. The rest simply disappears as only Govt babus can explain how. The mountain needs about 2 to 3 trillion INR to hold it in inventory. In every aspect the mountain is a huge loss.

Modi, over the last 6 years, has made the MSP, where the state promises to pay farmers the difference guaranteed price and market, MOSTLY NOMINAL. The state no longer buys food but only pays the mark up difference, that too with inordinate delays.

MSP insulates the landowner/farmers against market risk at least nominally if not in actual practice. It continues to cause over-production of cereals we don’t need. And financing the mountain so produced has become impossible 4 a bankrupt Govt with fiscal deficit of 15% of GDP.

So out of sheer necessity & lack of money, and not b/c Modi has suddenly discovered virtue in efficacy of markets, the Govt is transferring the burden of price guarantee from Govt. to the corporate sector. Note this transfer of price risk is 2 corporates is only on paper.

In reality, the transfer of price risk will depend on the relative bargaining power of landowner/farmers versus corporates. No prize 4 guessing who wins that contest. However, the state ostensibly promises to weight in on the side of farmers by law.

It does so by insisting that Farmers & corporates pre-agree on a minimum price before the farmer produces the crop. And the state will punish violations by corporates. So in theory the market risk transfers to the corporates. In practice the corporates own Modi. So U know ;-)

Taking away the state guarantee for MSP & telling farmers to rely on Mota Bhais of the world is political dynamite that can wreck Modi, the reform measure, and BJP. Because it brings out the true class character of BJP as a party of Banias. That’s the big risk 4 Modi.

So Modi will not explain the reforms b/c he cannot afford to do so. Instead he will obfuscate, attack opposition, allege they are anti-nationals etc etc. But gloss over the fact that he is taking away the MSP guarantee without explain why.

But India faces a bigger risk.

The MSP has underwritten the entire superstructure on which agriculture, some 20% of our GDP, and source of employment for about 35% of our population, depends. Take away the MSP, and the whole system is disrupted. This could a bigger problem than even demonetisation was.

Even in the best o times, such a change would require detailed consultation & planning for change to ensure a smooth change in preparing corporates, farmers, regulators, warehouses & Govt machinery to coordinate it all. That ket months of detailed planning & execution.

But in keeping with Modi’s policy of leaping headfirst into the abyss & looking for a parachute later, the detailed planning & preparation has been skipped. Instead, the gambler that he is, Modi has gone straight to execution hoping that things will get ironed out over time.

The timing couldn’t be worse. The pandemic has shrunk the GDP by about 15%. Agriculture was the only sector that escaped the rigours of Modi’s disastrous, unplanned, unthought-through lockdown. And here is Modi dynamiting the only part of the economy that escaped demolition.

For sheer perversity & malevolence you can’t beat this bunch. I remember @Aakar__Patel warning us Modi lacks empathy in his psyche. Here is a glaring example. To disrupt agriculture at this point is roil the economy, and disrupt employment in the core of the economy.

Coming on top of the disruption caused by migrant labour, about 40 million lost jobs to the pandemic, this disruption of employment in agriculture will simply devastate the poor. But I guess the empathy for the poor and their plight simply doesn’t exist for this nationalist.

All told, this is the right reform, at the wrong time being carried out without any planning, preparation or building of a consensus, & making sure disruption is minimised.

It is a huge disruptive gamble that Modi hopes 2 ride out with his vast propaganda factories. Again.