4 DECEMBER 2018
In order to address farmers’ distress, the entire agricultural chain needs a reboot
Last week, tens of thousands of farmers reached Delhi for a two-day Kisan Mukti Morcha and held the country’s attention. They sought a special 21-day Parliament session to discuss the crisis in India’s agrarian economy. Their key demands included an unqualified loan waiver to mitigate indebtedness levels in farm households and better remuneration for their produce instead of promises on paper of high minimum support prices. These broad demands sum up the precarious livelihood of a majority of farmers who work on small, fragmented land holdings. This is certainly not the first distress call from the farm sector to Parliament and policymakers; several such stirs have taken place across States over the past year alone. In March, when around 30,000 farmers and tribals from Maharashtra walked for days to Mumbai, they drew appreciation for their restrained conduct compared to the usually unruly protesters. And, they secured assurances from Chief Minister Devendra Fadnavis of tangible action on their demands over the next six months. Finding little movement on those promises, many of those who had marched to Mumbai joined the rally in Delhi, which was by far the biggest such gathering. Galvanised by the All India Kisan Sangharsh Coordination Committee, it reportedly had participation from 200-plus organisations, with farmers from 24 States.
With rural distress palpable, elections for five State Assemblies under way, and the Lok Sabha election just about six months later, farmers’ issues are bound to further dominate politics. Official data released last Friday show that the agriculture sector clocked a growth of just 3.8% (on a gross value added basis) in the second quarter of this fiscal, compared to the 5.3% recorded in the preceding quarter. To put that in perspective, farm sector output was growing strongly in the first three quarters of 2016-17, before imploding in the aftermath of the demonetisation exercise. The latest number suggests that the semblance of recovery seen in the previous two quarters has dimmed too. The government has done an about-turn on its responses to a parliamentary panel that farmers were hit hard by the note ban, and sought to reassure farmers by reiterating its own initiatives for the sector. The Opposition, in turn, is using the farmers’ platform to take jibes at the BJP-led government at the Centre and in many States. Unfortunately, neither has focussed on the big picture strategy needed to reboot India’s hugely state-controlled farm sector. The Centre exhibits an aversion to inconvenient facts. And the Opposition’s attempts to tap into their angst with breezy promises of loan waivers (with both the Congress and the Telangana Rashtra Samithi promising them in State election pitches) that over-simplify the crisis. Farmers are not just vote banks, but also critical economic actors who aspire to live without handouts. Till that is clearly recognised, paying lip service to the humble farmer will continue to distort the discourse.
U.S. and China must use the next 90 days to close the trade war in a way that benefits both
The global trade war has come to a welcome pause. On the sidelines of the G20 meeting in Buenos Aires over the weekend, the U.S. and Chinese Presidents, Donald Trump and Xi Jinping, agreed to a 90-day truce. The two countries will try to find an amicable solution to the various problems plaguing bilateral trade relations, such as disputes over intellectual property rights and Chinese state support for domestic industries, through talks over the next three months. Meanwhile, the U.S. will refrain from raising the tariff on Chinese goods worth $200 billion from the current rate of 10% to 25% on January 1, 2019, as planned. In return, according to the White House, China will purchase agricultural and other goods from the U.S. in order to reduce the trade imbalance between the two countries. If talks fail, however, increased tariff rates are scheduled to come into force immediately. It is worth noting that Canada and Mexico arrived at a compromise trade agreement with the U.S. in October, replacing the decades-old North-American Free Trade Agreement (NAFTA). So these are signs that the global trade war that began earlier this year may be cooling down a little as 2018 draws to an end.
What prompted the U.S. and China to arrive at an unexpected, albeit temporary, compromise is unclear. It will be important to see if any compromise between the two trade giants will include a complete rollback of the tariffs imposed on each other over the year. But the temporary trade truce should still offer some relief, as there have been apprehensions about the U.S.-China trade battle bringing global economic growth to a grinding halt. Signs of a significant slowdown in the Chinese economy and concerns over the negative impact of the trade war on American financial markets may have played a part in Mr. Trump and Mr. Xi agreeing to the truce — probably a sober recognition of the fact that there are no economic winners in any trade war. During the upcoming negotiations, the U.S. is likely to press hard on China’s protectionist policies aimed at favouring its domestic industries. But it is unlikely that China will yield to such pressure as that would require a seismic shift in the country’s growth policy, which till now has emphasised the state’s role in the economy. In fact, the Chinese government’s promise to increase imports from the U.S. is a clear giveaway of the fact that it still dominates the economy. Further, China itself is bound to draw attention to the U.S.’s own protectionist policies. A compromise that will allow both sides to claim final victory in the battle would be the best outcome.