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What farm reform in India has to do with China

Updated: Sep 22, 2021

Indian agriculture is desperate for reforms and a rise in productivity. This could also have a domino effect on the country’s ties with China.

An Indian farmer at work.

India’s long-awaited farm reforms are seeing some protests these days, primarily from the state of Punjab, but there is little doubt that without the reforms – which free farmers from having to sell produce only to government-approved bazaars and at government-approved rates – there is little hope of the country’s agricultural productivity rising.

A little more than 40 per cent of Indian labour is employed in agriculture even the sector’s share of gross domestic product (GDP) is just under 16 per cent. Most rural households in India now make most of their income from non-farm sources. In 2015, the average share of income in a rural household in India from farm sources was less than one-third.

Working on the farm simply doesn’t generate the income, these days, that helps a large number of people see it as worthwhile work for a lifetime anymore – especially if they own no land or possess only a small patch. While the number of farms have doubled in the last 50 years in India, their average size has halved to barely 1 hectare. Productivity of these farms are lower than even fellow BRICS (Brazil, Russia, India, China and South Africa) countries – for instance in the two major staple crops, rice and wheat, China’s farms deliver twice the yield than those of India’s.

India’s farm reforms are set to free primarily these crops, rice and wheat, in some of biggest cultivation areas like the northern state of Punjab and allow more market forces to come in and drive up productivity. Most agrarian produce in India already deal with market forces without state intervention, so there is no reason why wheat and rice should not face the same conditions. In fact in many agrarian products, like milk, productivity has steadily increased (India is the world’s largest producer of milk), and all parties, from large multinational corporations, to successful corporations and individual entrepreneurial players operate successfully in the market.

India’s new farm laws are likely to have domino effect in private purchase and participation in agrarian produce, consolidation of land and production to standardise produce, lead to greater production of cash crops, and higher farm productivity. This supply side shock will have a ripple effect across society as excess farm labour moves out and is absorbed in the growing use of food processing (at an average, only 10 per cent of India’s farm produce is processed). It will also lead to a move away from staple food diets and a climb up the food chain for many Indians. All this is undoubtedly disruption, but it is the disruption that India urgently needs to fix its perpetually under-performing agricultural system.

There is also a strategic aspect to reforming Indian agriculture. The question in this is – if India’s farm productivity rises sharply, including in staples, where would that excess production go?

The simple answer is – it could go to China. A combination of flooding in the Yangtze river basin, spread of crop diseases, a growing population, and change in dietary habits is already causing significant food shortage in China. So much so that President Xi Jinping’s Clean Plate programme to reduce food wastage has started reminded many of Mao’s dictates in 1959 during the Great Famine (1958-62). Even as the Yangtze river basin (which produces 70 per cent of China’s rice) has seen its worst floods since 1939, food prices have soared, rising about 10 per cent during 2020. China’s relations with other sources of major food exports like the US and Australia are increasing more bitter than ever, and India, despite current hostilities, could step in.

With increased farm productivity, India could aim to emerge as the food basket of the future for China. Such a relationship would bind the two Asian powers in a relationship of interdependence which would reduce chances of conflict and bring greater stability to Asia and the world. China will need ever rising levels of food in the years to come, and India is one of the best and closest sources to buy that food. India grows almost every kind of food that is a Chinese staple.

Therefore, widespread reform of Indian agriculture is not only beneficial to the Indian economy by making its farms produce more voluminously and free its labour from being trapped in low income farm labour jobs, but it could also bring significant leverage with what is now a source of constant conflict, China.


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