Indian policymakers get it wrong because farmers’ lack of market access is not the problem

Farmers are the only producers who don't get to declare the price of their produce in market. And this is highly unfavourable.

Farmers in Karnataka (representational image) | Photo: Namas Bhojani | Bloomberg

When I began doing fieldwork’ in the grain mandis of Madhya Pradesh over a decade ago, farmers, waiting to sell their soybean and wheat, would often start the conversation by asking: “Have you noticed, the farmer is the only producer in the world who can never declare the price of his own produce in the market?” Of course, this was not meant to be a question because even the most unseasoned mandi observer was expected to have figured out this basic fact. But, for farmer after farmer, in villages and markets in Madhya Pradesh and elsewhere in India, it is a statement that always bore repeating because it established what is for them a fundamental condition of market exchange, irrespective of whether the buyer is a private trader or state agency.

In a similar vein, farmers in Madhya Pradesh would often echo quite precisely the words that a big American farmer in Illinois once told Harish Damodaran: that farmers always buy in retail (phutkar) but sell in wholesale (thok). Again, it was assumed that anyone with half a kilogram of sense could figure out how unfavourable this is for a producer.

Sometimes, of course, deciphering the true balance of power required a better grasp of agrarian euphemism. Old farmers recalled that back in the day, when the village grain trader used to give you seed for sowing, he used to call out, “Chhoti laadi (younger daughter-in-law) bring the pai (1 kg measure)” and when taking back grain as payment after the harvest, he would call out, “Badi laadi (elder daughter-in-law) bring the pai.” And everyone knew that he was really calling for the smaller measure to give you seed and the larger one to take your grain. Laughter and resignation then accompanied the reality that all exchanges are weighted, and for farmers, rarely, if ever, in their favour.

Improving the terms of engagement

It is for this reason that policy prescription that keeps framing the problem as farmers’ lack of access to markets gets it so wrong. We know that over a very long time, albeit with great regional diversity and differentiation, agricultural markets have accessed Indian farmers. The problem is not about access, but about farmers’ terms of engagement in markets and in the multiple, interlinked processes of exchange across the agricultural cycle, where both time and timing are critical to virtually every activity and exchange.

These include at the very least, the markets for land, labour, water, seed, inputs like fertiliser and pesticide, output (commodity) markets, rental markets for equipment, transport and storage and, of course, credit. At the household level, it also involves constantly balancing the costs of production and consumption and involves continuously mobilising erratic and unreliable sources of both agricultural and non-agricultural income.

The difficult thing about improving the terms of engagement for farmers is that while expressed uniquely in the life of each farming household, these are fundamentally structural conditions and constraints. Our policies and interventions, however, have increasingly focused on delivering benefits and incentives, such as input subsidies or Minimum Support Prices (MSPs) that are meant, in principle, to impact individual farmers.

In practice, not only are these generally tied to a very small number of crops (predominantly, wheat, paddy, sugarcane and cotton), but because they encounter the very same structural constraints in the process of implementation, they also have limited regional reach and large exclusion effects, especially when it comes to small and marginal landowners, and even more systemically in relation to landless cultivators.

Potential of deep structural reforms

On realising this, the emphasis then shifts to launching larger and better identification exercises and pooling and cross-verifying across existing, often patchy databases. But, in the end, actual disbursements are mired in disastrous fiscal calculus and poor implementation capacity only matched by the rising expectations of farmers, who have come to expect little else from the state. So, distressed farmers mobilise as best they can to demand that governments at least attempt to deliver on their declarations.

In all this, we seem to have completely forgotten or given up on the potential of real, deep structural reforms in agriculture that can actually address — yes, well — real, deep structural constraints and thereby substantially improve farmers’ terms of engagement in agricultural systems. We also seem to have forgotten or given up on the possibility that well-directed public investments in critical areas for production and marketing can then mobilise private investments, both by farmers and other institutional actors, which can spur agricultural growth and dynamism.

In Madhya Pradesh, I learnt that the same farmers who would always remind you about the home truths of agriculture, could also teach you about how they came to experience an improvement in their terms of engagement in the market. For these farmers, interlocked exchange with village-level traders and mandi-based commission agents are, for the most part, a feature of the past and although it took the better part of two decades, the time from the mid-1980s onwards was transformative for the dynamics of agricultural production and incomes. It involved: the spread of irrigation, changing cropping patterns, the rise of oilseed cooperatives, mandi reforms that first eliminated credit-linked commission agents and then opened up mandis to competition from private procurement channels, an expansion in rural credit, a significant improvement in roads, and upgradation of market infrastructure, including the installation of electronic weighbridges and better weighing and payment practices. And all of these were before MSPs, wheat bonuses and large-scale public procurement arrived to dominate central India’s agricultural scene in 2008.

Farmers: the first and foremost investors

Given the nature of structural conditions in primary produce markets and their centrality to local and global food and fibre systems, countries across the world need to continuously support farmers through a range of strategies. But to focus predominantly on incentives to individual farmers and targeted income support is to both simultaneously overdetermine their actions and undermine their potential to genuinely contribute to agricultural growth.

It is here that a renewed focus on regulatory reform and public investment that has wider regional and collective effects can make a real difference in changing the terms of engagement for Indian farmers. This is also what will generate the kind of private investments that agriculture needs. And, if history is any guide, the first and foremost investors will be farmers themselves.

The author is senior fellow at the Centre for Policy Research and Associate Professor at Ashoka University. Views are personal.

This series of articles is a curtain-raiser to the CPR Dialogues, an international conference on public policy, to be hosted by the Centre for Policy Research on 2 and 3 March in New Delhi. ThePrint.in is the digital partner for the conference. Read all the articles in the series here.