Ending Inspector Raj in agriculture
in storage ran the risk of being called a “hoarder” and facing prosecution.
Thus, every year, India sees prices of vegetables such as onions swinging wildly from being too high to too low. Countries that do not even grow food (like Singapore), meanwhile, continue to enjoy stable food prices.
The systematic bias in agriculture policy goes back to measures introduced seven centuries ago by Alauddin Khilji. Having conquered large swaths of India, he introduced harsh policies to artificially hold down prices and control trade. Contemporary records suggest that these measures were aimed at cheaply supporting a large army and enriching the Turkic nobility while deliberately impoverishing the general population. It is quite extraordinary that Indian school textbooks today present Khilji’s systematic exploitation as “reforms” and blame the traders who were subject to draconian punishments.
This same tilted agricultural policy was used by the East India Company in the late 18th and early 19th century to force Indian farmers to grow indigo (for British industry) and opium (for China), and then sell it at depressed prices through agents. It completely impoverished rural India and caused repeated famines. In the second half of the 19th century, the system was adapted to control raw cotton prices to favour the mills of Manchester. The Berar Cotton and Grain Market Act of 1887 is the forerunner of today’s APMC acts. Importantly, the British were very careful to keep their own hands clean so that the blame fell on the traders. Thus, those who provided the supply chain were accused of “hoarding”. This is the source of the 1950s and 60s film plots.
The FM’S announcement, therefore, promises to remove a deep-rooted bias against farmers and the food supply chain (not to mention a source of multilevel rent-seeking). A central law will be introduced to allow farmers to sell their produce as they wish. Barrierfree interstate trade is to be encouraged. Statelevel APMC laws are already being changed one-by-one to complement this change. Of course, the government will retain the power to intervene in extreme situations, say a war, when markets break down.
This ends the license permit raj for the agricultural sector — three decades after this was done for the rest of the economy. It also creates a common national market for agricultural products.