On Tuesday (Jan. 26), thousands of Indian farmers flooded into Delhi, clashing with police and storming the capital’s historic Red Fort, even as prime minister Narendra Modi attended the country’s Republic Day parade not far away. At least 67 people have died in the farmers’ protests, which have stretched for nearly three months in opposition to a set of controversial new farm laws.
At the heart of these laws and the roiling protests they have provoked—indeed, at the heart of India’s agricultural economics itself—is the mandi.
Translated from Hindi, mandi simply means “marketplace,” but in agriculture, it refers specifically to the kinds of regulated markets seen all over the country: vast, sprawling facilities run by state governments, where farmers auction their produce and livestock. There are 7,000 of them across India.
Delhi’s Azadpur Mandi, Asia’s largest wholesale market for vegetables and fruit, is overrun every day with tens of thousands of jute sacks of potatoes and onions, hillocks of pumpkins, and more. Only licensed traders are permitted to buy in mandis, and often, the government will commit to purchasing entire stocks of staples like wheat and rice at a fixed rate—a minimum support price. The mandi is the site of the actual transactions of Indian agriculture, but it is also a symbol of the Indian state’s contract with its farmers.
The contract is half a century old. It dates to a time when India worried so much about the security of its food supply, as well as the wellbeing of its farmers, that it felt compelled to regulate the marketplace. In 1966, in the midst of a decade stalked by drought and famine, the government imported 10 million tons of food-aid wheat from the US; India was, the agronomist M. S. Swaminathan wrote, “a nation surviving on a ship-to-mouth basis.”
India tackled this partly with the help of new hybrids, pesticides and fertilizers, but also by actively controlling and subsidizing agriculture, in tune with the statist tenor of the times. Last year, India produced 105 million tons of wheat and exported nearly 1.8 million tons of its output—a far cry from the urgent imports of 1966.
But clearly, something is still broken in Indian agriculture. At least two dozen farmers kill themselves daily, and the cause is often financial distress. Nearly 70% of India’s farmers are smallholders, owning less than 2.5 acres of land, and a fifth of them live below the poverty line.
At the same time, the government’s granaries bulge with all the grain it has committed to buying up—to the extent that it has to rent private warehouses for further storage, and that thousands of tons rot away without being distributed. Indian exports are uncompetitive, and imports have risen. These dysfunctions reflect the state’s own inefficiencies, so when economists call for agricultural reform, they’re urging the state to shrink its role in agriculture.
On the surface, this appears to be a contest of economic ideology: how much the government should do, how much free rein the market ought to have, how capitalist India wants to be. But the Modi government’s farm laws and the subsequent protest over their proposed reforms have also shown that economics is—as ever—contingent on politics.
The three farm laws, passed by parliament last September, occupy just 18 printed pages. Their essence is not difficult to sum up. One law allows the establishment of private mandis—mandis that aren’t regulated by the government. In these marketplaces, traders don’t have to be licensed, and the government cannot claim the taxes it ordinarily levies to run its own mandis. Another law enables contract farming, so that companies can strike deals with farmers to plant and sell specific kinds of produce. The third law permits traders to stock agricultural commodities with fewer restrictions; the government can step in only during emergencies, when prices rise so sharply that hoarding becomes a danger.
The stated purpose behind these deregulations is to make agricultural procurement more efficient, and to let farmers find the best prices for their produce. Outside a mandi, the argument goes, any company can buy directly from farmers, doing dispensing with middlemen like commission agents. Farmers can sell anywhere they choose, and contract farming offers an assured stream of income.
None of these ideas is new. A report prepared by Swaminathan between 2004 and 2006, for instance, pushes for a “Single Indian Market” for produce, and government economists have previously proposed that farmers ought to be able to sell beyond the mandis.
But farmers have protested because of what they think these laws will bring: an erosion of the mandi system, a disappearance of the minimum support price, and with it, the end of the Indian state’s proactive support of agriculture. (The text of the laws does not assure the government’s commitment to either mandis or the minimum support price.)
Some of this is born of a knowledge that markets can misfire. If farmers and traders decide to transact away from the mandis, to avoid paying mandi taxes or applying for licenses, the state has no incentive to keep them open. But without regulatory oversight or minimum support prices, farmers argue they’re liable to be squeezed by big companies that cartelize and force prices down. These results have already been seen in the northern state of Bihar, which deregulated its own agricultural sector along similar lines in 2006.
Here’s where it gets political. Even at the best of times, groups of loosely organized farmers will find it difficult to go up against a corporation that distorts the market. But farmers fear that Modi’s government in particular is liable to side unhesitatingly with companies and to sideline the problems that farmers face.
The government itself is to blame for the way in which it passed these laws, and for what these laws contain. These three laws were first issued as executive orders last summer, during the height of the pandemic; then they were tabled and passed in parliament by the brute-force majority of Modi’s party, without being referred to parliamentary committees for a full discussion.
P. Sainath, an agricultural researcher, has pointed out that the text of one of the laws holds a deeper problem. No one acting “in good faith”—a government official, a trader, or a company—can be taken to court by farmers. A brace of companies in a district may collude to pay off an agricultural loan officer: no loans to be issued to these farmers, the instruction may run, unless they drop their prices extravagantly.
According to the new laws, all these parties fall outside the judiciary’s jurisdiction. The only people who may field complaints about such outcomes of the laws are authorities empowered by the government itself, with their sundry corruptions and biases. These laws turn “the executive into a judiciary,” Sainath wrote. “Into, in fact, judge, jury and executioner. It also magnifies the already most unjust imbalance of power between farmers and the giant corporations they will be dealing with.”
Reforms always involve big transformations, a sudden dismantling of old protections, and a measure of faith in both the principles of economics and the institutions of a country. For people to accept all this, a government has to make them a part of the process, even while showing itself to be solicitous and transparent. Devising reforms may be economics but selling them to citizens is politics. With the farm laws, the Indian government has misjudged both the economics and the politics.