The contentious farm laws passed by the parliament last month have stirred up mass protests, raging disapproval and sharp criticism across the nation. However, it has also been lauded for its substantial potential to propel India to the heights of a Food-Export Powerhouse. We explore how the farm laws may enable India to change the face of global food trade by emerging as a major food exporter.
The response received by the three farm laws passed by the parliament has been variegated- it has drawn criticism, mass protests and disarray by farmers and the opposition leaders alike, with people fearing that It will wreck the livelihoods of millions of farmers. However, it has also brought to the fore the possibility of India emerging as a Major Food Exporter should the laws be successful.
If the laws succeed, India could not only feed itself, but become a major food exporter.
At the outset, the move is India’s leap towards a free Market in food trade.As a major Policy change, it is vested with the power to impact a large and vulnerable section of the country.
It is enabled with the propensity to compete better in the global marketplace and realize its full potential with the help of private sector investment.
Dealing with wastages due to inadequate facilities
Amitabh Kant, Chief executive officer at the government think tank body NITI Aayog says, “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”.
Indeed, wastages due to inefficient cold storage mechanisms have for long attributed to massive losses for the country. This may change with the coming of the Farm bills.
The Centre has tried to address and dismiss the skepticism met by the bills- which echo the fears of the farmers- that the measures will do away with the government’s price support regime for crops and big corporations will instead take over the control of the market.
The government has even raised some minimum prices for winter crops to try to reassure farmers that the price supports are not in jeopardy.
The pandemic has even aggravated this issue. The disruption to farms and supply chains has exposed weaknesses and blind spots in the government welfare system, which is corrupted by bureaucracy, underfunding and primitive distribution facilities.
Farmers have also pointed out that, while the government’s guaranteed prices are often considered benchmarks, private buyers do not have to adhere to these prices and most often, they do not have to pay them.
Encouraging Contract Farming to boost exports
Industry experts believe that the new policy has the capacity to change the face of Indian agriculture, which has been adversely affected by low yields and inefficient smallholdings, by encouraging more contract farming.
This system will allow private companies to agree prices for crops with farmers prior to the harvest or even before sowing, and offer loans, provide quality seeds and encourage mechanisation.
It would also be easier to sell crops in other states or abroad. Farmers would be benefitted with a more stable income and the increased production would boost exports and revenue, they say.
Analysts at Motilal Oswal Financial Services Ltd. said in a report, “Overall, the reforms should benefit farmers and encourage contract farming”.
It believed that as private sector participation increases over the years, the Indian agriculture sector’s supply chain and infrastructure would improve.
Underinvestment has rendered the food supply vulnerable, which has been brought to the fore by the coronavirus crisis. 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.
Food inflation rose 9.7% in September as COVID-19 hit the nation’s already vulnerable supply chains. While supporters of the farm reforms say the changes would make the system more robust in future, others argue that the crisis underlines the need for a safety net for farmers.
If the government can push through the reforms while retaining the support of farming communities, it could be able to build a platform for wide-scale improvements in the nation’s food output.
The country is already the world’s largest producer of milk and the second-biggest grower of wheat, rice and some fruits and vegetables. It’s also one of the biggest exporters of cotton, rice and sugar.
If India can raise productivity to global norms, the country could become “an important link in global food supply chains,” NITI Aayog’s Kant wrote in a newspaper article.
The new reforms, he said, set the stage for India to become “a food-export powerhouse.”
Indeed, only time will unveil the impact of the laws on upending global food trade whilst establishing the nation as a food export powerhouse.