SCISSORS: India clings to a failed status quo

BY DEREK SCISSORS

Earlier this week, India’s Supreme Court indefinitely stayed new, important farm laws, creating a court-appointed committee to . . . do something, maybe. This has been hailed as prudent and needed to protect farmers and attacked as a dishonest, tactical move to pacify them, with the laws implemented as is on only a few months’ delay. India and its farmers would be better off if the latter was true.

It’s understandable why many people inside and even outside India support widespread farmer protests. They are democratic expression against a government that has taken anti-democratic positions, such as formally discriminating against Muslims and stifling human rights advocates. Farmers fear future policy changes and have reason not to trust Prime Minister Narendra Modi.

One reason for distrust is Modi and his government have been dishonest about the economy. Prior to COVID, there were continuous, justified accusations that official statistics overstated economic performance. There were also serious doubts about the policy path, in light of poor results and the government’s unwillingness to persist with either liberalizing or populist steps.

Twist: The new laws are the single best economic action the Modi government has taken in nearly seven years. They include the basis for most successful economic reform: more choices. Farmers for the first time would have the option of selling outside state-controlled markets on a broad scale. Auxiliary changes also remove important crops from government control. This to some extent mimics what China did 40 years ago, which itself set the stage for the industrial take-off many Indians long for.

Yet much of India wants to continue sitting still. Agricultural collectivization is responsible for the deaths of tens of millions globally, and the immiseration of billions. Rural India in particular suffered per capita income below $600 annually in 2019 with an average farm plot that is tiny and shrinking due in part to weak rural land rights. Collectivization means rural poverty for at least another generation, as population pressure rises.

Against that, farmers fear future steps will reduce the level of support the government provides. This parallels urban workers employed in the “formal” sector opposing labor market liberalization that is aimed at helping the much larger group of informal workers. In both cases, an organized minority of the country is trying to block reforms that will definitely help the majority but *might* hurt them.

Defenders of the Supreme Court ruling say implementation of the laws is being rushed. In fact, it’s decades overdue. There’s no serious implementation challenge in changes that simply give people more options and, as protestors correctly realize, more time can’t reassure them about hypothetical future harms. The only thing the Supreme Court has done is raise the chances these farm laws die on the vine and rural India remains impoverished.

Ordinary and elite Indians share dreams of national economic greatness. There are some in the US and elsewhere who anticipate these dreams coming true. But 900 million people nowhere close to middle income and with no realistic path to getting there makes such greatness impossible. Indian farmers tying their future to government handouts would be an anchor the country cannot budge.