The change we want is also the change we resist

The year is 1992. I am in my first job and I don’t know it yet, but as a rookie business journalist, I’m watching India’s stock market balloon and then burst in a huge (for that time) ₹3,500 crore scam. As business journalists, we documented the setting up of India’s capital market regulator in 1992 and then its fight for teeth as the first chairman struggled to get powers to make the regulator effective. Setting up a new stock exchange to break the monopoly of the old one, moving to screen-based trading from the opaque open outcry system, getting brokers under some kind of regulation to demolish the closed club in which they operated and a whole universe of changes that really shook the way capital markets worked in India.

I remember having conversations with brokers and sub-brokers and arguing that corporatization was good and that transparency, rules of the game and investor interest would actually help the market grow. The insiders always resist change and the industry deeply believed that the business would end and everybody will lose. Investors will be orphaned in the new corporate system, went the argument. We resist in investor interest, they said.

New systems, better technology, rules of the road and more oversight in those heady years of change of the 1990s put in place the foundations of a market that saw business grow exponentially. Investors actually benefitted and from paying 5% on a trade, now pay a few basis points. From not knowing at what price the broker bought and sold, they now know the exact time and price at which the transaction happened. From mis-matched signatures to lost or stolen share certificates, it is now a smooth, paperless and hugely efficient process—saving cost and time.

Thirty years ago, participants and incumbents in the Indian stock market went kicking and screaming towards a better way of doing things. Nothing much has changed 30 years later as India struggles to implement major structural reform on labour and agriculture. As the debates and arguments build over reform, the core of the arguments and resistance has not changed. It is in the name of the small farmer that politicians and others want to stop the reform in the choices open to farmers on where to sell and to whom to sell.

The answer to the naysayers is even more reform. Even more markets. Even more choices on the ground. Free markets work when the road rules are created keeping in mind the voiceless rather than the rich lobbyists. The three bills are now Acts with the President of India giving his nod, but the noise over what these changes seek to do drowns out the substance of the reform. Very simply, now the Indian farmers will be able to choose to whom they sell and at what price. Some agri produce was shackled by the Agricultural Produce Market Committee (APMC) into selling only in the regulated mandis at declared prices. The new law does not take away the earlier mandis, but simply allows the farmer to choose if he would like to sell to somebody else at some other price. The second Act removes the threat of the dreaded “hoarding” charge being used to rent-seek even when the intent was storage and not hoarding. India can’t have good storage facilities in agri-business if the old hoarding rules could be interpreted on the ground to harass and rent-seek. The third Act allows farmers to sign contracts with firms to do contract farming. Read bit.ly/3i5UnfT to understand the contents of the Acts better.

The core of the argument against agri-reform has been that small farmers will get exploited by the evil large corporations. And embedded in that argument is the elite urban view that looks at the farmer as somebody not that intelligent. I call it the white colonist’s view that persists in the brown inheritors of power, lifestyle and language. This argument somehow puts the intent of the government and its ability to serve the farmers higher than the corporates and free markets. But the same people also argue about not having faith in governments, who they consider is essentially evil. If all you see around is broken and evil, possibly the problem is inside the people making these arguments, than outside.

Reform is always tough but reform built with good first principles will finally help the market grow and lift all boats. In one of my last conversations with R.H. Patil, the founder and managing director of NSE and one of the big names in the reform of the Indian capital markets, told me: “When you hear resistance to reform in the name of the poor, or the small guy, you know the other side is out of arguments and change will come.” I hope this is as true of the agri-market as it has proved to be of the capital market.

Monika Halan is consulting editor at Mint and writes on household finance, policy and regulation