Rhetoric of Reforms


I am happy to see that Narendra Modi has not appeared on television much these days. That probably shows that he is busy. It would have been disappointing to see him talking the same rhetorical stuff as he did during his campaign.

He appointed Arun Jaitley was finance minister and it was clear that India’s economic policy is likely to follow the same path as that of UPA with a elusive promise “we will do better than them”.

Arun Jaitley blamed the Onion price rises on hoarding and then talked about raids and then increased the export duty. This is utter rubbish. This is exactly the Marxist and Socialist way of killing farmers.

In this brilliant piece Nidhi Srinivas explains why agricultural prices rise in India. These small traders which we were told should be protected from FDI in retail by making us pay more for everything than otherwise are the lot who are busy destroying India’s agriculture.

Typically, thousands of small farmers bring their produce to a small number of licensed commission agents, traders and exporters at their nearest market. Here, quantity is what counts, not quality. When a large number of farmers are trying to sell to a small number of licensed buyers, they have little bargaining power. They have no access to price information in other markets or about the pipeline of arrivals into the same market, which also has an impact on prices.

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Under the APMC law, every commission agent and trader requires a license from every market yard they wish to do business in. So if you wanted to buy from all the established market yards in the country, you would need 7,200 licenses, one for each of the regulated market yards. The bigger catch, though, is that you can only get a license if you own a shop or a godown in that particular market yard.

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Since most yards are decades old and unbearably stretched, finding space is virtually impossible. Old shops are prized more than heirlooms, passing on from father to son for generations. Existing traders and agents are organized into associations that fiercely protect their turf and oppose reforms. This requirement thus makes it impossible for new traders and commission agents to enter a market and offer better, market-linked prices.

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The result is that traders and commission agents in every onion mandi (market) are an old boys’ club, where membership is hereditary and controlled by an intricate system of marriages and alliances. Collusion and price fixing are rampant but no one will expose his brother.

It will be utterly shameful for BJP and Narendra Modi to protect this lot while making farmers and consumers suffer.

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