Prime Minister Narendra Modi likes to keep his government’s decisions close to his chest until they are announced. Be it the decision of demonetisation of high denomination currency notes in 2016, the revoking of article 370 from Kashmir in August 2019, the implementation of a nationwide lockdown in March 2020, and now repealing of the three farm laws that had caused political upheaval ever since they were enacted in 2020.
A strong government at the centre that gets support from more than 50 per cent of BJP-led state governments makes this stealthy strategy of policy implementation possible. But it has its repercussions in the form of uncertainty for the private sector that is never sure of what might hit them next. Enough has been discussed on the loss incurred by the Indian economy due to the sudden shock of demonetisation, but the damage that the repealing of the three farm laws will cause to the private sector will unfold in the coming quarters.
Private Sector Taken For Ride
Take for example the rise of India's agritech startups who had started raising funds from private markets since the enactment of the new laws.
A Bain & Company report released earlier this year had estimated a $30 billion to $35 billion value pool to be created in agri-logistics, offtake, and agri-input delivery by 2025 in India. In 2020 itself, private equity and venture capital firms invested $329 Mn in the agritech sector. A report by Hindustan Times stated that there was a 54 per cent jump in the incorporation of new agribusinesses within the first 6 months of the enactment of the new agri-laws, as the private sector expected to benefit from investing in India’s agriculture sector, especially logistics, lending and cold storage.
Another sector that is in for a sudden shock due to the government's sudden decision to repeal the farm laws is India’s Food Processing sector. The centre had announced a production linked incentive scheme for the sector with an outlay of Rs 10,900 crore. The scheme incentivised manufacturing of Ready to Cook/ Ready to Eat and processed fruits and vegetables by corporates with a commitment on investments and increase in export sales over a period of six years. India’s food processing industry has a 32 per cent share in the food market and a 10.4 per cent share in exports.
Without sounding anti-farmers or anti-private sector, it’s not possible to write a critique of the government’s latest decisions. One can be either with the farmers or against them. But nobody can deny the fact that India’s agriculture sector is broken and is becoming increasingly unsustainable for the government as well as the farmers. Statistically, over 4 lakh farmers have committed suicide between 1995 and 2018, and we can’t blame any particular government for ignoring the interests of the farmers. It’s also important to note that even though Congress, which was dead against the farm laws, had created the original blueprint of the farm laws enacted by the Modi government.
While UPA failed to implement all the reforms in its 10-year long period for lack of numbers in Parliament, the current government, despite having the highest number of seats in Parliament, since the Rajiv Gandhi-government in the post-Indira era has also failed to bring anything on ground other than the GST- which is yet to show results that it was meant for. And everyone knows that GST, despite fierce opposition from non-BJP states was passed with a constitutional amendment in the Parliament due to then finance minister Arun Jaitley, who had the ability to bring even bitter foes on the dinner table.
What takeaways do we have from the 9 am announcement from PM Modi today? First, a majority in the Parliament does not give any government the license to implement any economic policy. Support for the private sector is always secondary in front of vote-bank politics. Before investing in India, industrialists and investors need to look for a party that is connected with the people on the ground, because without their support, numbers in the parliament are just numbers. They don’t translate into power.