India's second free market moment
Though much of the world first saw heavy coverage of protests on India’s Republic Day in January, these protests have swept across India since August 2020. From Odisha and Karnataka to Punjab, Haryana, and Uttar Pradesh, farmers have spent months demonstrating against Modi’s economic reforms. Despite sowing season coming up, many of them are sticking the protests out on the frontlines – at personal cost. But despite multiple farmer suicides, violence by both government-backed thugs and angry protesters, and a fairly sharp government response to the protests, Modi seems determined to push his free-market agenda.
The farmers are protesting Modi’s recent passage of three farm bills, which are meant to make Indian agriculture a freer market. One of the bills allows farmers to sell outside of government marketing boards , another permits farmers to sign contracts with agribusinesses and retailers, and the third removes certain items from the essential commodities list, which will help attract FDI into agriculture. Before these laws were passed, the government argued that the farmers were working in an inefficient system that only benefited a minority of farmers at the expense of the majority. These bills, it reasoned, could be a way for farmers to break out of this system.
But farmers worry that they will be hurt by these new laws -- and the government has been unable to allay their concerns. Since the 1960s, the government has purchased goods from farmers at a Minimum Support Price (MSP). This convention, however, has never been made official, and with these laws now allowing private businesses to enter the market, farmers fear the government will change its practices. Farmers have two main concerns: First, if crop prices fall and Modi (or a future government) doesn’t follow the MSP, they will be left holding the bag without the government to bail them out. Second, they worry that even if prices do not fall, private actors will negotiate prices that are even lower which may result in farmers losing their livelihoods.
In order to secure assurances, farmers have asked for the MSP to be codified into law, which the government has resisted. Beyond financial worries, small farmers also fear losing their land, and their share of industry to bigger corporations with the ability to undercut them in a less regulated environment. Farmers are already suffering – tens of thousands commit suicide each year mainly due to socioeconomic factors and there is a worry this could be exacerbated by this reform. Around 60 percent of India’s population works in agriculture yet it does not have the concentrations of corporate power present in other industries as 82 percent of farmers are classified as small and marginal.
Modi’s farm bills have also received political pushback. As a result of their passage, the Shiromani Akali Dal, the main Sikh political party with a powerful regional base in Punjab, left the NDA. The day the Lok Sabha passed the bills, Harsimrat Kaur Badal of the SAD, resigned from the cabinet. And opposition parties like the Indian National Congress, Nationalist Congress Party, Shiv Sena and the Shiromani Akali Dal have all indicated their opposition to the government’s actions. Thus far, Modi has resisted both his political opponents and the farmers – the latter of which is demanding a full repeal of the three bills.
Due to the protests, the government has held 11 rounds of talks with the farmers’ representatives -- but despite this, the two parties are no closer to a resolution. After the first 8 rounds, the bills went before the Supreme Court of India, which placed them on hold in January and assembled a committee of farmers and government officials to come to a resolution. Although the government has been clear that a full repeal of the bills is off the table, there are signs that the BJP may have bitten off more than they could chew. In addition to offering to suspend implementation for 18 months, some BJP members have apologized for the insinuations of others that the protesting farmers are backed by seperatist elements. However, none of this has phased the protestors and the farmers have stated that they will continue their agitation until the next general elections are held in 2024 if their demands are not met.
The best analog to Modi’s current reforms is the ones undertaken by former Prime Minister P. V. Narasimha Rao and then finance minister Manmohan Singh in the early 1990s. Rao’s reforms – abolishing the License Raj, loosening FDI restrictions, devaluing the rupee, and slashing regulations, among others -- were momentous, leading to decades of economic growth and lifting hundreds of millions out of poverty. But despite these developments, according to Vinay Sitapati’s biography of Rao, The Man Who Remade India, Rao was accused of keeping his ministers in the dark about his reforms, not properly consulting opposition leaders, and passing the reforms in an overly abrupt manner - all charges that havebeenleveled against Modi for his farm reforms. Like Modi, Rao’s 1991 reforms were extremely controversial and received significant domestic blowback. And in both cases, their reforms drew the support of institutions like the International Monetary Fund and the United States Department of State.
As in the early 1990s, calls to slow the pace of reform and to pay heed to the protestors will likely fall on deaf ears.The Modi government has already stared down protests against the Citizenship Amendment Act/National Register of Citizens and its removal of Article 370 from the constitution, which originally gave Jammu and Kashmir special status, without a shift in strategy in either case. If the government folds now, it risks weakening its position in future political debates.
Given this, they have no choice but to stare down these protests without blinking either and this has taken a few different appearances. Modi has done everything from highlight how long this discussion has been happening to India to parry attacks that it is being rushed to pointing to the fact that they have also been a part of the opposition Congress Party’s agenda to respond to suggestions that the reforms were overly partisan. Since the start of the year, he has taken to attacking the protestors as those who live off agitations prompting a sharp response from the farmers unions.
The Supreme Court has since acted in the case and has temporarily paused the implementation but the government and its representatives have been clear they plan on implementing them in some way.
In some ways, Modi’s legacy is already defined. Under his political rule, the BJP established a right wing governing majority and knocked the Indian National Congress and the Nehru Gandhi family from the positions they have held since 1947. His social legacy will be characterized by the ascendance of a more militant Hinduism, as seen in monuments like the Ram Mandir and the mainstreaming of hard line politicians like Yogi Adityanath.
However, his economic legacy is still far from clear. Modi’s previous major economic moves, like demonetization, were controversial. Between the new farm bills, and a 2021 budget that pushes for privatization across the economy, Modi seems to have offered a decisive break with the Nehruvian socialism that has defined India since independence by finishing much of the job started by Rao in the 1990s.