Of all the controversial reforms Prime Minister Narendra Modi has sprung on the market, the recent laws to liberalize farm sales could turn out to be the most far-reaching.
The move toward a free market for farm sales goes to the heart of a system that directly affects more than half of the nation’s 1.37 billion people, altering government controls that millions of families have come to rely on, but that have hobbled the nation’s efforts to productively farm one of the largest areas of fertile land on earth. If they succeed, India could not only feed itself, but become a major food exporter.
“We need private sector investment in technology and infrastructure for Indian agriculture to realize its full potential and compete better in the global marketplace,” said Siraj Chaudhry, managing director and chief executive officer of agriculture services company National Collateral Management Services Ltd.
Analysts and industry experts say the new policy has the potential to change the face of Indian agriculture, which has been hampered by low yields and inefficient smallholdings, by encouraging more contract farming. That’s a system where private companies agree prices for crops with farmers prior to the harvest or even before sowing, and offer loans, provide quality seeds and encourage mechanization.
Some critics of the amendments to the law say the new situation could be worse for farmers. Corporates and multinational companies buy agricultural products at a cheaper rate and sell at higher prices, “squeezing both ends by hoarding and black marketeering,” said the All India Kisan Sangharsh Coordination Committee, a farmers’ pressure group.
India processes less than 10% of its food production and loses about 900 billion rupees ($12.3 billion) a year due to wastage from inadequate cold storage, said Amitabh Kant, chief executive officer at government think tank NITI Aayog.
Farming has lagged behind other sectors of India’s economy. The rural poverty rate is about 25% compared to 14% in urban areas, according to World Bank data. Underinvestment has made the food supply vulnerable, a fact that is being underlined as the coronavirus spreads across the country.
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