The reversal of farm laws and other cases show why our policies need to be sustainable from the start
Economists have grown increasingly aware that policies succeed or fail not just on their own merits, but on a variety of other factors. In complex systems, how you arrive at policy is as important as what the policy is and how it is implemented.
Here are some recent examples.
Repeal of India’s farm laws: In a dramatic reversal, the government has committed to repeal three farm laws that it promulgated and passed in a short span of time last year. The repeal comes after dogged protests led by the Samyukt Kisan Morcha (SKM), an umbrella organization representing 32 farmer unions primarily from Haryana and Punjab. These farmer unions represent about 30-35 districts of India’s 600 districts and come from states where Agricultural Produce Marketing Committee (APMC) marketplaces (‘mandis’) are strong. The protests began last year, when thousands of farmers marched towards the national capital as part of a “Dilli chalo" campaign. The laws related primarily to the market access of agricultural produce. Protesters feared that the laws would lead to the abolishment of minimum support prices (MSPs) assured by the government on select crops and also that ‘direct access’ would lead to an asymmetric power relationship between agriculture corporates and small farmers.
About half of all Indian states now allow private markets. Less than half of all agricultural produce is now sold at APMC mandis, and if you include poultry, meat and fisheries, the number is lower still. A rigorous study of data from these complex markets should have provided a more logical basis for trying to de-fragment agricultural holdings, allow flexible market access and reduce the friction costs of multiple intermediaries. These reforms should have been phased in because the success of direct access and farmer producer organizations (FPOs) has been demonstrated only in niche areas. Poultry and dairy products, which have mostly operated outside mandis, have better success stories to show, thanks largely to wider market access, than the country’s production of staple crops like wheat, rice and sugarcane.
Agriculture is clearly demarcated as a state subject according to Entry No. 14 in the State List of the Indian Constitution. Some related matters are also mentioned in the Union and Concurrent Lists. There has been a long-standing demand from states for agriculture—including animal husbandry, forestry, and fisheries—to be defined as an exclusively state subject. Against this demand, Union governments of all political hues have been steadily increasing their ‘encroachment’ on state power through centrally-sponsored schemes that often require matching state grants, which tends to complicate state budgetary priorities. In addition, uniform MSPs for some agricultural products do not consider regional and micro-climatic variations among states. Another thorny issue has been the best way of ‘normalizing’ power subsidies given to farmers.
The paradox is this. The farm laws that are about to be repealed were directionally correct. Like any new regulation, they are not perfect, but could easily have been improved. However, they were implemented hastily without proper consultation with states, particularly those where state-mandated APMCs wield economic and political power. So, in this case, a democratic and peaceful protest won while the cause of farm reforms lost. If only one of the two must win, then it’s best that democracy does, because it has a dramatically positive signalling effect. But perhaps there was a way for a win-win outcome to be achieved.
Red and white ball captaincy of the Indian cricket team: In an explosive press conference, cricketer Virat Kohli spoke about his departure as captain of India’s one-day cricket team after having stepped down as captain of the T-20 side. The crosstalk from the Board of Control for Cricket in India and from Kohli himself has added an unnecessary dimension of controversy to what many experts consider a fair decision, that we need a red-ball captain who is different from a white-ball one. Cricket hardly qualifies as a subject of policy, but it’s a national preoccupation and also holds societal importance. It appears that a collaborative decision process could have achieved the same result, with less collateral damage.
Goods and services tax: The idea of a GST has been around for two decades, but was only implemented in 2017. There has been much discussion about its ‘shoddy implementation’ since, but part of the reason why the GST movement is still floundering is that its conception, despite having been the outcome of much consensus-building, was not immaculate. In technical speak, “an effective search for common ground must take place particularly for federated decision structures in such a manner that ongoing conflicts over policy legitimacy and mission are not constantly questioned". Directionally, the GST is a top-notch idea, but much will need to be done to restore collaborative trust and by way of tax simplification for it to deliver benefits commensurate with its potential.
As these recent examples demonstrate, as a society we seem to place too much faith in the ‘quality and content’ of policy. What is equally important, however, is that we navigate the formulation of any new policy through the political economy in such a way that it can prove sustainable. Once this is done, implementation and improvements must take over.
P.S: “All activities and events that a body is to go through are determined at the time of conception," said Ramana Maharishi.
Narayan Ramachandran is chairman, InKlude Labs. Read Narayan’s Mint columns at www.livemint.com/avisiblehand