Indian agriculture and Sharad Joshi’s ideas

Joshi, who died last week, was an economic liberal. He thus not only stood apart from his contemporaries such as Mahendra Singh Tikait or M.D. Nanjundaswamy, with their caste plus subsidy politics, but also earlier farmer leaders such as Charan Singh. His views remain relevant at a time when Indian farmers are facing a second round of distress in a decade.

In his massive rallies, Joshi would often speak of farmers as entrepreneurs who were shackled by statism. He campaigned for higher prices because he believed these were being kept artificially low by the government, but he insisted that what was really needed was to liberate Indian farmers from a web of state controls.

He believed the solution was free markets. Joshi was perhaps a soulmate of another liberal leader of the farming community, N.G. Ranga, one of the founders of the Swatantra Party in 1959. It is perhaps not a coincidence that both Ranga and Joshi were economists by training.

The economic demands of the Shetkari Sanghatana founded by Joshi were based on the premise that Indian farmers actually got negative subsidies. In other words, the price they got from the restricted domestic market was far lower than the global price, which itself is distorted by lavish farm subsidies given by the governments of rich countries.

The gap between domestic and global prices was not covered by the subsidies handed out to Indian farmers. What economists call the aggregate measure of support for Indian agriculture was negative. Influential economists such as Ashok Gulati have also reached similar conclusions in their research.

Joshi, who was an active farmer rather than just a leader, argued that the terms of trade were being manipulated to extract economic surplus from Bharat in order to benefit India.

The agitations for higher support prices were practical responses to the immediate policy environment, a second-best response. But Joshi passionately believed that the real solution to the rural problem was to free the markets for farm produce. He anticipated some of the recent demands for a common national market for agriculture. Joshi also argued in favour of commodity derivatives, regulation of moneylenders rather than an outright ban, joint stock companies owned by farmers to handle the supply chain, companies owned by farmers as an alternative to land acquisition by the government, and equal property rights for women in farmland.

These were not popular views at the time, or even now. His support for the World Trade Organization did not go down very well with the traditional leadership of the Indian farming community. Joshi passionately argued that Indian farming could be profitable if farmers had access to a free market. His critics accused him of ignoring the economic and social inequities in Indian villages, be it feudalism or caste oppression. His overarching construction of a Bharat that was being exploited by India failed to take into account the harsh realities of rural India, they said.

Joshi could never quite translate his early successes into lasting political success, but his views are still relevant today. Indian farmers are once again facing immense hardship. Ten years of higher support prices, a massive farm loan waiver, rising rural wages and a huge increase in bank lending to farmers have not prevented the onset of a new farming crisis. Joshi would argue that these policies amounted to papering over the cracks rather than tackling the key issue of negative subsidies.

The most effective solution to rural distress is the creation of job opportunities outside agriculture, B.R. Ambedkar argued way back in 1918. A prosperous rural economy is needed to provide a large internal market for industrial goods. Joshi had some of the clearest ideas of how to get there.

Do Joshi’s views on the reasons behind farmer distress in India hold relevance today? Tell us at views@livemint.com