The constitutional conception of factor market reform in India


One size does not fit all

Undermining the constitutional scheme and bypassing states has turned out to be the loss of agricultural laws. In fact, it is the ignorance of the diversity of the very specific and localized character of agriculture, linked to geo-climatic conditions, within which farmers forged their pact with the State and the very specific local political dynamics that ‘she created which resulted in fueling farmers’ anxieties and protests that last all year round. The Prime Minister spoke of his failure to “convince” farmers and build consensus. But the question that must be asked is whether a centralized law is the right instrument to build this consensus in such a diverse reality.

As I explained with agricultural markets expert Mekhala Krishnamurthy in a separate column, the dynamics of the relationship between farmers and government vary widely from deep dependence (leading to perverse results) to complete abandonment. . The objective of building truly competitive markets requires renegotiating these varied relationships.

In the pursuit of the national interest, the Green Revolution led the labor government of the day to strike a deal with farmers in Punjab, Haryana and Western Uttar Pradesh that locked them into a logic of political economy based on increased state subsidies and public procurement. Any attempt to renegotiate these policies will inevitably trigger anguish, as has been seen through the agricultural protest that has lasted all year. Renegotiating these paths, as the Prime Minister has learned the hard way, requires more than strong leadership that seeks to disrupt the status quo, it requires careful design of transition paths that demonstrate credibility and ” a local and context-specific commitment.

At the same time, in other parts of India like Bihar and Odisha, the bottleneck for instilling competition and giving farmers real choice is not excessive state intervention, but rather its absence. The lack of physical market infrastructure, supply chains, construction of farmer cooperatives leaves farmers to the whims of local traders and cartels.

Still others, Maharashtra and Karnataka, for example, have made significant strides in encouraging greater private competition. Here, the challenge is to sustain, expand and better regulate. None of this can be achieved by centralized law.

It is therefore worth considering whether an alternative process focused on building trust and creating a deliberative platform, such as a national agricultural markets council, aimed at persuading states to accelerate reforms and synchronize national legislation, might have been more appropriate.

This challenge of negotiating the federal conundrum in factor market reforms is not unique to agriculture, six years ago the Prime Minister faced a similar challenge with the attempt to reform laws on the acquisition of land.

But any argument in favor of federalism must recognize the powerful political role the center plays in setting the terms of the political agenda and enabling inter-state coordination. It is no coincidence, whatever its political merit, that protesting farmers are now rallying around the demand for central legislation on the minimum support price, a demand that undermines the very logic of federalism for which the farmers fought.

This argues in favor of a greater consensus with states on a comprehensive national policy and investment in institutions to enable even stronger center-state coordination. But above all, our frameworks for economic policymaking must recognize that long-term sustainable reform cannot be achieved by undermining federalism. Rather, it is about strengthening federal institutions and restoring the federal balance. Federalism and growth must coexist.

Yamini Aiyar is President and CEO of the Center for Policy Research.

The opinions expressed here are those of the author and do not necessarily represent those of BloombergQuint or its editorial team.


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