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In the backdrop of last year’s announcement of agricultural reforms and subsequent farmers’ protests, Sowmya Dhanaraj, Sankalp Sharma and I wrote in an article last March, “Lower reliance on agricultural employment in Punjab and Haryana reflect higher farm productivity and incomes, allowing women to exit paid farm work. However, a change of status quo in terms of assured demand and prices for foodgrains (which are already in excess supply) could alter this equilibrium."

The same article also said, “The high levels of agricultural-growth driven prosperity and equality enjoyed by some states, especially Punjab, may face a problem of stagnation if prime-age adults leaving agricultural work are not successfully absorbed by other productive sectors." (bit.ly/3xc2lNn)

The repeal of three farm laws announced by Prime Minister Narendra Modi last week was a sudden reversal of the government’s stand. As alluded to in our March article, the bottom line, though often neglected in the debate on farm reforms, is this: The success of any attempt to reform the agriculture sector in India would depend to a large extent on the state of its economy’s non-farm sectors as well as societal culture.

A fall in income level is painful for the poor as well as for the rich. The majority of today’s ‘rich’ farmers who have benefited from Indian farm policies, including the current system of offering minimum support prices (MSPs), are rice and wheat farmers, especially in Punjab, Haryana and western Uttar Pradesh. They fear that a reversal of price guarantees for rice and wheat, the production of which is well in excess of demand, resulting in massive surplus, would make a price decline inevitable. If this were to happen, farmers would be unable to sustain their current income levels and lifestyle.

Think about the following analogy, even if it’s not a perfect match: Would it be possible to tell India’s public-sector employees that neither their salary level nor their increments can be assured by the government, and that both would henceforth depend on their work performance? Should we be surprised if an employee backlash emerges? Have we been able to implement a performance-based pay system across the public sector?

To maintain their current lifestyle, India’s ‘rich’ farmers would have to find alternative sources of income, an effort that would have to include women and younger adults in farmer families taking up paid work. There is another catch. Given the societal circumstances on the ground, a resumption of paid work by women who had retreated from the workforce would signal a drop in social status, something that would be considered unacceptable culturally.

In 2018-19, data shows that only 12-13% of adults in the age group of 20-59 years were involved in agricultural work in Punjab and Haryana. Barring Kerala, this is the lowest proportion among all major states. In 2004-05, 32-35% of this age group were involved in agriculture in these states. What appears to be a dramatic decline in agricultural employment in these states had two reasons, both sustainable only if farm incomes remain high.

First, only about 5-7% of women (in the 20-59 age group) reported being employed in agriculture in 2018-19, a drop of nearly 30% within a span of 15 years. There is little corresponding increase in the proportion of women’s employment in non-farm work. High agricultural incomes, in effect, have allowed women to retreat to their homes.

Second, high agricultural income means around 28% and 34% of young men (aged 20-29 years) could afford to remain unemployed or in education in Punjab and Haryana, respectively, in 2018-19. Fifteen years earlier, this proportion was about 12-14%.

There is another concern. Even if more family members wish to work, is the economy generating a sufficient number of jobs? Even with nearly three-fourths of India’s working-age women not even looking for paid jobs, unemployment among men, especially young men in most states is well over double digits, having risen sharply in the last 15 years along with similar proportions still in higher education beyond the age of 20, as we noted in an article earlier this month. (bit.ly/3CzOwJL)

One obvious question that arises is this: Why did poor farmers not protest? While this may appear puzzling to begin with, the fact is that poor farmers have not benefited to the same extent as farmers in Punjab and Haryana from the country’s agriculture policies, including the system of MSPs. In effect, if they had little to gain from the status quo, they have little to lose.

Today’s poor farmers may well be able to perceive the benefits of farm reforms, especially if these are implemented alongside the establishments of farmers’ producer associations. Improved price-negotiation power, lower commissions for middlemen and higher corporate investment in supply chains, etc, with superior storage and marketing facilities, could be key gains.

There is no doubt that farm reforms in India are necessary to unlock the true potential of agriculture and the agro-processing industry, and for the efficient allocation of private and government resources. It is absurd and unthinkable in any other industry for prices and supply excesses to both see a sustained rise, as seen in the case of foodgrains such as wheat and rice.

Any effort to reform agriculture in India, however, would yield positive results only if non-farm sectors generate enough high-paying jobs and/or women resume paid work. There may be other preconditions for successful farm reforms as well, such as improved irrigation and an agriculture insurance market that functions better.

An invisible trade-off is a powerful yet neglected idea. The repeal of farm reforms is a prime example of the failure to recognize and reduce invisible trade-offs in the country.

Vidya Mahambare is professor of economics, Great Lakes Institute of Management, Chennai

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