Modi to Scrap Contentious Farm Laws in Major Policy U-Turn
India’s Modi Says Government Will Scrap New Farm Laws
(Bloomberg) -- Indian Prime Minister Narendra Modi made his biggest policy reversal since assuming power in 2014, scrapping controversial farm laws ahead of crucial state elections following a year of persistent street protests.
In a televised address to the nation on Friday, Modi apologized for failing to convince a section of farmers and said the parliament will repeal the legislation in the session that starts later this month. When lawmakers passed the bills in September 2020 in a bid to boost investment and productivity, Modi had hailed them as “a watershed moment in the history of Indian agriculture.”
“The purpose of the new laws was to strengthen the country’s farmers, especially small farmers,” Modi said on Friday. “We have failed to convince some farmers despite all our efforts.”
The announcement comes ahead of crucial elections including in Uttar Pradesh, India’s most-populous state, which is considered a crucial indicator of national sentiment ahead of the next national election in 2024. While polls show Modi’s Bharatiya Janata Party is set to win with a reduced majority, his move on Friday suggests he’s getting nervous.
Five Indian states will hold elections in the first half of 2022, including Punjab, a state home to many Sikh farmers who have spearheaded the protests by tens of thousands of farmers that began roughly a year ago. Modi’s announcement came on a national holiday celebrating the founder of Sikhism, one of India’s main religions.
“This is a pretty substantial climb down for Modi,” said Akhil Bery, director of South Asia Initiatives at the Asia Society Policy Institute. “This shows that maybe the BJP are more worried” about upcoming state elections “than they’re letting on,” he added.
Even if it helps Modi’s party win the votes, it’s unclear what that means for his reform agenda. While he has backtracked on policy moves by his government earlier, including on land laws, the repeal shows how politically difficult it will be for India to overhaul a sector that helps support about 60% of the nation’s 1.4 billion people.
Prior to last year, India’s system for buying and selling crops had remained largely unchanged since the 1950s. The laws, which had already been suspended by the Supreme Court in January, allowed farmers to sell crops directly to private firms instead of licensed middlemen at state-controlled markets. While Modi has said the laws will help them earn more cash, farmers feared those companies wouldn’t give them minimum prices set by the government.
Also, central to Modi’s reforms was an amendment to the Essential Commodities Act passed in 1955, which sought to cap prices during times of higher demand -- disincentivizing investment to increase production.
“The basic purpose of bringing these reforms was to increase income of farmers through creating an enabling environment in the sector and to have more investment in agriculture infrastructure,” said P. K. Joshi, secretary of the National Academy of Agricultural Sciences and the former director for South Asia at the International Food Policy Research Institute. “Now we are where we were earlier on reforms. It will be a setback for foreign direct investment and agriculture investment.”
And despite Modi’s move, it’s unclear if the protests will wind down. Demonstrators have also been pushing other demands, including asking the government to buy major farm goods at guaranteed prices, something it has said is unfeasible. The government currently purchases about two dozen agricultural commodities, including some food grains, pulses and oilseeds, at pre-determined prices for its welfare programs.
Rakesh Tikait, a senior leader from Uttar Pradesh, said protesters may not go home immediately as hundreds of farmers have already died.
“Just because the prime minister announced a repeal doesn’t mean that we will pick up our tents and walk away from the protests,” Tikait said, adding that they would at least wait until the laws are formally scrapped. The protesting farm unions will meet and decide their next move, he added.
Opposition politicians seized on the decision. Rahul Gandhi, a leader of the Congress party, said that those “who feed the nation have peacefully defeated arrogance.” He also linked to an earlier comment where he had said, “Mark my words, the govt will have to take back the anti-farm laws.”
The latest move by Modi “will require some new calculations by the farmers’ movement and opposition parties,” said Yamini Aiyar, president and chief executive of the New Delhi-based Centre for Policy Research. “Although it’s difficult to say how much this will help the BJP in the upcoming elections, it does send exactly the wrong message to all political parties: That power political lobbies are best left untouched.”
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