Overregulated Lifeline? Agriculture in India

Roughly 300,000 farmers from Haryana and Punjab have descended upon the Indian capital of Delhi to protest changes to the country’s agricultural laws, especially those to do with the loosening of regulations around government-controlled prices at wholesale markets. Farmers clashed with police on the way that was completed on foot by many farmers from their respective states. According to The Guardian, the groups were mostly stopped at Delhi city limits by barricades where they are encamped now.

Our chart with facts about agriculture in India shows some of the challenges the sector is facing. Despite employing 40 percent of Indians, agriculture only generates 16 percent of GDP, showing the low degree of mechanization. Through the new policies, the Indian government is hoping to modernize the sector to some degree but is facing backlash from farmers. While the new laws so far only add and promote new ways for farmers to enter into open-market contracts with buyers directly without going through government-regulated middle men, many fear the government will eventually end its guarantees for the procurement and price of large parts of the agricultural production. In addition to controlling large parts of wholesale, the government currently procures 40-50 percent of the wheat and rice surplus in India. That number is between 80-90 percent in the states of Haryana and Punjab.

The Indian government also pays subsidies to farmers who had to sell their products below certain minimum prices in the free market, adding another insulation from free-market pricing, albeit one that is not uncommon around the world. Due to the price subsidies (and some other procurement and efficiency initiatives), the Ministry of Finance said in its Economic Survey for 2019/20 that the average Indian household had saved upwards of $200 per year in food costs.