Can the repeal of the farm law bills have a cascading impact across the entire economy?
Yes. Many people are saying that the reforms might have been okay but they were rushed through. There was not enough time for debate and discussion. I think all this is a completely false argument. The Supreme Court intervened and said I am staying away. We will have an expert committee. You could have all the discussions. You could have all the debate that you want with them. The farmers organisations were very clear, we are not even going to talk. It was straight forward “Jat tactics” — have the clout, we are going to use it.
They know that the world over, in democracies the world over, farm lobbies have similarly done similar things, paralysed roads, paralysed administration and governments have surrendered in various countries and that can be done here too. So no matter how much discussion you would have had, this was going to happen. They are not interested in things like discussions and debates. They are now saying that okay even if Mr Modi takes back all three laws, we will continue the agitation until there is a law enshrining it.
So there is going to be no end to this particular bully. It is now being demonstrated that while Mr Modi is called a strong man, he can be brought to heel by a sufficiently large demonstration; a few thousand people can hold this particular government to ransom. If that is the lesson that you will get, it will be followed by every other group too.
For instance, right now the government has a programme of privatisation. But privatisation has always been opposed by opposition parties and trade unions. The trade unions can put up as many thousands of people as these farmers have done. In UP, in Uttar Pradesh there was a proposal to privatise electricity distribution. Losses of the state electricity boards ran into hundreds of thousands of crores. The only way to reform the system is to privatise. But when that was attempted, immediately the state electricity board employees said they would go on indefinite strike and paralyse the state. There will be no electricity. The state government said let us have a negotiation on this. Nobody believes it will work.
But the point is that the BJP has seen that not only in the farm case, but also in the UP electricity case, if a sufficiently large number of determined people say we are going to go on strike unless you roll back your privatisation, it will happen.
According to Mr Modi’s formal position, we are now going to go for privatisation. Apart from a limited list of essential companies, all others will be privatised. Excuse me, but if there is the kind of agitation that the farmers and the UP electricity people did, how will any of that work? There is a national monetisation pipeline to raise Rs 6 lakh crore by selling old assets like ports and using that money for doing infrastructure. Excellent idea and this is supposed to be the linchpin for the financing of a huge number of new expressways, pipelines, road networks, electricity networks all India grid.
Where is that money going to come from if you cannot privatise and if you cannot have monetisation of the other old assets when people raise this? The fact is Mr Modi has now been seen as weak. Mr Modi has now been seen as somebody whose measures can be rolled back. Within the BJP, organisations like the Bharatiya Mazdoor Sangh and the Swadeshi Jagaran Manch have always been anti-reform. They were sidelined after the 2019 election. Mr Modi came back in such a smashing style, that he could say look I am sorry you guys will now have to take a backseat. I must go ahead in these areas. Those two organisations will once again be enthused to say no we will once again actively oppose all these reform measures from within the BJP.
So by surrendering to the farmers Mr Modi has opened the door for similar agitations, similar protests and similar sabotage and humiliations on all kinds of other reform fronts.
From a market messaging point of view as well, do you think the decision is significantly negative for India? As you said every reform is met with small agitations but this gives the markets and more importantly, the FII fraternity, the signal that if protests were to continue for a longer time, they could get repealed by the government? Do you think the messaging for the markets is not going to go down well?
Absolutely. Mr Modi is not tailoring this decision to the market. Mr Modi has tailored this decision to the coming elections in Uttar Pradesh, Punjab and three other states. This is important because Punjab and UP have produced the bulk of farmers taking part in this agitation, the people who have gained most from minimum support prices and want the existing system to continue. There are farmers elsewhere, the Shetkari Sanghatana in Maharashtra has been very much in favour of the reforms and against these Punjab farmers.
Similarly, the Federation of Farm Associations in Andhra Pradesh, P Chengal Reddy, have also said we want the reforms. So, it is not that all farmers want the reforms. It is the farmers in these states and Mr Modi says that rather than take the risk of losing in these elections well before the election, let me get this protest out of the way because while my image will be tarnished, while the stock market will be affected, while other problems will arise on privatisation front, it is right now on balance. He thinks it is wiser to withdraw on this front at this point of time than risk a very humiliating defeat in the UP or the Punjab elections.
But the consequence is very clear, all kinds of other people who are opposing reforms will get great encouragement and will do their best to sabotage reforms. Not only in the various trade unions on the outside but even the trade unions and Swadeshi Jagaran Manch inside the BJP will oppose it. Please remember that these people also had opposed the land acquisition law back in 2014 that Mr Modi introduced and was forced to roll back.
He has done so now. The fact is that Mr Modi was not particularly looking to signalling to the stock market. He is looking to win the UP election. Is it possible that the whole thing will die down? It is possible. But all the opposition parties will finance to try and continue the farmers’ agitations. Right now, they are trying to continue saying you must have a low on MSP. The fact is even if Mr Modi gives away and enacts a law on MSP, they will find some other reason to keep agitating till the election.
Politics is a very major part of it. It is not just the farmers and some reformers. This is very significantly above the UP and Punjab elections and it has to be seen in that context and it is disturbing for anybody looking at the stock market to say if this kind of constant sacrifice to populist agitations takes place what is the future of reforms and what are the consequences for India’s economic growth. I am afraid the message is a negative one. It means that growth and productivity are going to suffer so this is a setback to the economy as well as to Mr Modi.
