Thoughts on economics and liberty

“Anything which is protected gets stifled” – Sharad Joshi’s interview in Economic Times, in 2000

Found this in my records. I’ve scanned it both as PDF and JPG. ORC’d text below. What a fantastic thinker!

====INTERVIEW===

Interview with Sharad Joshi, Economic Times 11 July 2000

He is the farmer leader that broke the mould of previous Indian farmer leaders. He dissociates himself firmly from the common or garden-variety NGO worker (“they all wanted to become either IAS officers or politicians but lacked the ability to be either”). Today, Shetkari Sangathana supremo Sharad Joshi is perhaps India’s best bet to draft a strategy for the next WTO Agriculture Round. Talking to Nidhi Nath Srinivas, Joshi who is now the chairman of the task-force for WTO and agriculture with Cabinet rank, reveals why he favours letting market forces rule, why foreign direct investment should be welcomed and why all restrictions on the movement of agricultural produce within the country must go.

When is your committee due to submit its suggestions for the new Agriculture Round next year?

We are preparing specific proposals which will be ready by February. We have already taken the views of state governments, NGOs and farmer organisations. What is the line they want India to take?

They believe that before we globalise, we should first create one free, integrated domestic market for goods and services. At present, India is more like several different countries and the tax structures are ridiculous. Multilaterally, they would like the creation of a new ‘box’ for food security to be used by developing nations, which would be excluded while calculating the Aggregate Measure of Support (AMS) to producers. There is a trend towards doing away with all those exceptions allowed through ‘blue’ and ‘green’ boxes under WTO and fixing new limits for AMS. We would also like to negotiate lower bound tariff rates in other countries.

What’s the AMS given to Indian farmers?

Overall, our farmers have a negative subsidy. The differences in the situation of farmers with negative subsidy, such as India, and positive subsidy, such as in EU, is so stark that it cannot but indicate · the non-unity of interests between India’s government and farmers. It also means industry and commerce are getting an unfair advantage. This puts negative subsidies at par with using child labour by manufacturing units.

Isn’t this rather a drastic view to take? India is actually quite proud of its negative subsidy and never fails to mention it.

Negative subsidy is a deliberate, vicious denial to farmers, which means they are losing out on the right prices for their produce. But the solution is not higher Minimum Support Prices (MSPs), as the socialists around us would like to believe.

Actually, if the government simply doesn’t intervene, doesn’t hamper exports or charge a levy from millers, farmers will automatically start getting the right price for their produce. Markets always end up giving the just price for a commodity, provided they are not tampered with.

Is your committee going to address itself to only the WTO agenda or to larger agricultural issues?

Indian agriculture is at a special juncture today. Our continuous anti-farmer policies, coupled with globalisation and genetic technology, means they are worse off now than ever before. So our terms of reference, in accordance with the prime minister’s wishes, reflect these concerns.

But instead of coming out with a voluminous report which would gather dust in the archives, we are trying to create a noticeable change in the agricultural environment through specific projects. In fact, our first interim report would be out by November-end.

What would these projects focus on?

To begin with, we are working on a plan for improving the rural marketing system. The mandi boards or APMCs are today completely politicised, expensive, offer no services, and only create a chasm between producers and Consumers. In my view, state governments should allow any group of seven to 10 persons to form an association offering mandi services.

Once there is free competition between mandis in a district, farmers will get better deals. We are trying this now in Maharashtra. In developed nations, there are parallel networks of large retail supermarkets such as Marks & Spencer’s or Sainsbury’s in Britain for example, which not only procure directly from producers, but also supervise grading standards, pesticide usage and so on. There have been instances where they have made suppliers change product designs and specifications in accordance with consumer demand.

In India, we are asking farmers to compete globally with large multinationals when they are constrained by the warped mandi system. This is unfair to them and we can’t compete without first creating an intermediate stage where quality-conscious supermarkets buy directly from them.

So you would like such giant supermarket networks to come up in India? There are none at present to compare with the international retail players.

Certainly. We need such a network of supermarkets and it would be a major revolutionary move. In my view, we should welcome FDI in both grain handling and supermarkets. Consumers too, will gain tremendously because without middlemen, the final costs would far lower.

The latest buzz in agricultural policy circles of developed nations is multifunctionality, a belief that agriculture needs to be protected because it is not just about producing food but cultures, environment and life-styles as well. Most Third World countries have been saying this for years, though perhaps not so coherently and no one paid the slightest attention to them. Now EU and Japan are using it to defend their subsidies. What will be India’s view on the issue?

All nations are free to have their own beliefs about the role of agriculture in their culture. We believe the cow is sacred and have the right to believe what we want For EU, agriculture needs protection to ensure that it remains a desirable lifestyle. As an EU official once told me, “City girls don’t date farmers’ sons.” So there is a social inequality between city and rural people they genuinely want to address.

But that doesn’t mean limitless subsidies to growers. So we’d like to ask them to add up the costs of ensuring multifunctionality and tell us how it translates in terms of subsidy and what plans they have to scale it down annually. As different nations, we have the freedom of attitudes. What we need to examine is not the intention but the effect of their policies on world trade.

Shouldn’t India also seek protection for handicrafts and SSI to ensure their multifunctionality?

What is stopping India from protecting these sectors except a lack of appropriate policy? We expect handloom, for instance, to compete with mills, which is impossible. But if planned properly, they can capture niche markets where mass production can never work. In fact, our industry and agriculture needs anything but protection, because anything which is protected gets stifled.

The Cairns Group has been vehemently opposing EU’s Common Agricultural Policy and export subsidies. Shouldn’t India align itself formally with it?

We certainly have a community of interests with the Cairns Group. But we don’t agree with their views on how to treat negative subsidies. So it can’t be a wholesale alignment, only an issue-based handshake. We are good at that!

What is the biggest barrier for Indian agricultural produce abroad -high tariffs, prices or quality?

The biggest and completely unnoticed, problem for us is that the produce of most developing nations is not acceptable in world trade. We need to admit honestly that we are deficient there rather than blame the world for not buying our goods. Some self-criticism is needed here. We can prepare to join the market as it is, rather than expect markets to change for us. The world does not owe us a living.

What about our domestic prices?

These are certainly a problem. Earlier we were competitive at the farm gate but lost the edge on the way to port. Now, our prices are also higher because gene technology in cotton and soyabean, for example, have given an edge to foreign farmers. For the first time, Indian cotton is ruling higher than world prices.

So, we have difficulty defending our domestic markets from cheap imports. The solution is nothing short of pulling ourselves up by the bootstraps and altering our very style of agriculture.

But this is becoming a highly painful process for our growers and producers alike. The demands for protection through duties are deafening. The edible oils industry is a case in fact.

You can’t learn swimming without being pushed into the pool. It is a part of the whole learning process. So their suffering is almost like drug addicts getting treatment -painful but necessary. The edible oils industry can be protected but only for some time. If it is protected for ever, that would be unfair to consumers. It would also invite retaliatory action from other producing nations.

What role are NGOs playing in this process of re-inventing Indian agriculture?

Nothing. Our NGOs have the old socialist mindset of paternalistic government Most are completely misinformed and their only expertise is the uncanny ability to generate funds. Typically, if farmers export mangoes for better returns, they protest and say what will local consumers eat? If we import fruit for consumers to get better quality at cheaper prices, they say farmers are losing out They simply don’t understand how markets work and where farmer interests lie.

Why can’t India develop trained negotiators for agriculture like the formidable US Department of Agriculture?

The USDA officials have been working there for decades and understand agriculture and its ramifications as no one here can. In India, we are simply not business minded enough. So we are never able to either defend or promote our interests. Even our WTO negotiating team is being thrown up like the Olympic team. It’s seen as a junket for bureaucrats and ministers.

Sanjeev Sabhlok

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One thought on ““Anything which is protected gets stifled” – Sharad Joshi’s interview in Economic Times, in 2000
  1. Kushal

    Life of indian farmers will be happy if govt acts on his task force report and Marshall plan.
    All political parties and NGOs are playing with emotions of indian farmers.@Kushal Maroti Mude.