Planet Money - India, Farming, and the Free Market

Episode Date: April 16, 2021

For decades, India has shielded its agricultural sector from the free market. Now, the government wants to let it in. Millions and millions of farmers are not happy about it. | Subscribe to our weekly newsletter here.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. So Mary, can I tell you about this protest I went to? Lauren Freyer, NPR's India correspondent. I am all ears. So it was January 26th, which is Republic Day in India. It's this big national holiday. Now normally there is a massive military parade in the capital Delhi. Everybody watches it on TV. But this year, the holiday gets completely overshadowed when tens of thousands of farmers roll into the city on their tractors.

They're waving flags and they are angry. And the reason they're angry is that the government has passed these new agriculture reforms, laws that basically let the free market into what has been a pretty closed system. So I'm watching this tractor rally on TV from the other side of the country in Mumbai, where I live. And all of a sudden, like, things escalate. Farmers just bust through police lines and then they're getting tear gassed, and you can see them storm the Red Fort. Like, in real time, I'm watching them scramble all over the ramparts of this 17th century palace, and the whole thing is just shocking.

So I book it down to this cricket field in downtown Mumbai where farmers from this part of the country are gathering in solidarity. And some of them had literally walked like hundreds of miles, days, to get here. And while they're overturning buses and it's like mayhem in Delhi, here it's like a music festival. It's this amazing atmosphere. You look around and it's kind of a surprising mixture of people. They're farmers for sure, but then they're also like Mumbai hipsters and housewives in their 50s. And it just shows you that even in India's biggest megacities, a lot of people have a

connection to farming. I mean, a lot of people, even if they aren't farmers themselves, their grandfathers were, their fathers were, maybe their mothers. And I mean, even now, like half of Indians make a living from agriculture. And so in this cricket field in downtown Mumbai, everybody's like shoulder to shoulder chanting, Jai Javan, Jai Kisan. It's a patriotic slogan.

Literally, it means hail the soldier, hail the farmer. But basically, the meaning is something like you can serve your country like in the way a soldier does by being a farmer, by growing food for your countrymen. And the idea behind this chant is kind of like the idea behind all these protests. Farmers are the noble backbone of India, and no one should force them into the free market. Hello and welcome to Planet Money. I'm Lauren Freyer. And I'm Mary Childs. India's government just touched their third rail of politics. Actually, they kind of body slammed it.

India has the biggest agriculture workforce in the world. Around 700 million people get their living from farming. For decades, the government has helped farmers sell what they grow, lined up buyers for them. And now the government is saying, we don't want to do that anymore. The free market should take more of a role. It's one of the biggest economic transitions the world has ever seen. And mainstream economists say it should happen. But when the free market

steps in, someone ends up paying. Today on the show, one farmer's extremely improbable success and why millions of others don't want to follow in his footsteps. Okay, so the farmer protests. The way farming works in India, it goes back to the 1960s. India was pretty newly independent when it was hit by back-to-back droughts and was facing widespread famine. So the government set out to fix that by helping farmers, giving them price guarantees to help them weather booms and busts, building out basic infrastructure like electricity for irrigation, and subsidizing fertilizers and pesticides to help them boost booms and busts, building out basic infrastructure like electricity for irrigation, and subsidizing fertilizers and pesticides to help them boost their crop yields. This series of reforms became known as the Green Revolution.

And by and large, it worked. Wheat production doubled in five years. Pretty soon, the country was swimming in grain. And those farmers were national heroes. It was this system that Vila Shinde was born into in the mid-1970s. Hello? Yeah, can you hear me? Yeah, I miss a few words. Can you repeat the question?

Okay. Okay, yeah. He's from a long line of farmers in Maharashtra in western India. He lived on the same land where his grandfather used to grow grain. My farm is a part of city, but still a remote place. It's surrounded by the hills. It is completely isolated place. So for me, definitely it's a beautiful place. From that beautiful place, his grandfather would haul his harvest

to the local government wholesale market. Now these markets were another part of the Green Revolution. The government promised, you will be able to sell what you grow because we will line up buyers for you, all in this one place. But by the time Villas was a teenager, the Green Revolution had started to wilt. First, all that intensive agriculture created a whole bunch of environmental problems. Depleted groundwater, poisoned the soil. And the subsidies and guaranteed markets that helped the country stave off famine?

They drained state coffers. Plus, not everybody followed the rules, so farmers weren't always getting the prices they were supposed to. So all those things meant to help farmers weren't really helping. They were actually keeping a lot of them at subsistence. Now, in the 70s and 80s, India didn't really trade with the rest of the world. It didn't import cars. It made its own. McDonald's did not exist here. The economy was state-run. Lots of red tape. You needed a license to do basically anything. And by 1991, the economy had started to stagnate. So India is like, hmm, the rest of the world is doing this capitalism thing.

Let's try it. And growth soared. Hundreds of millions of people emerged from poverty. Everything went free market except farming. Farming stayed the same. The government was still running the wholesale markets, securing buyers, giving farmers price guarantees on grain and other crops. So many people depend on the country's farming sector that the government didn't want to mess with it. It continued to shield it. So farmers, they produced a lot of grain, but they didn't get any richer. Actually, many of them fell into debt.

Including Villas' family. So they decided they wanted him to get out. They don't want him to farm. They want him to find a better life. And they were so convinced that they saved up their money to send him to a local college. They told him to study hard and get a nice government job where you can sit behind a desk and push papers all day. But Vilas, he's kind of an earnest guy. And he had a different idea. I saw all the hardship of my mother, my father, my family. And if I'm not trying to change their life,

then what is the purpose of my life? What is the purpose of my life? He wanted to help his family, not run away. So after college, in the mid-90s, he goes back to the family farm. He's determined to figure out how to make a good living from farming, to get his family out of this hand-to-mouth existence. And he starts trying to figure out what his family has been doing wrong. Like, maybe the problem was with what they were growing? I was thinking that my family should focus on more high-value crops. So I tried some exotic vegetables. So the broccoli,

then the baby corn, with the mind that I will get the better price. He decides to go all in on more high-value crops, exotic vegetables. And this is a risk. Remember how the government created price guarantees in the Green Revolution? Those price guarantees were created to end famine. So they applied to critical staples like grains, not to most fruits and vegetables like broccoli and baby corn. So when he's planting those, he can't count on a particular price. He will get whatever the market is willing to pay. When he starts planting, prices are great. 100 rupees per kilo.

That is so many times more than what he would get for wheat. So he plants, he waits, and finally, come harvest. Instead of getting 100 rupees, actually, I got just 4 rupees, 5 rupees for my broccoli, for baby corn. 4 to 5 rupees. He loses money, which is what can happen without price guarantees. But Vilas is determined to find a way to make farming work. So he borrows more money to try out new, different crops. He plants sweet corn and strawberries. But the same thing happens. The market moves and they are all a bust.

Did your family have doubts at that point? Yeah. The first two, three years, it was a clear understanding of family that I am wasting my time, that I spent four years in college, but I have not learned the real fact about agriculture. Very cool new joke for the family. He learned not one fact in four years of college. Fantastic. So he's like, OK, OK, fine. Maybe the problem isn't what he's selling. It's where he's selling.

He decides to get into grapes, which is a crop he knows well because a lot of people grow it in his area. And he also knows the price of grapes is higher in Europe. So Villas borrows even more money. He rents a shipping container, actually four of them. He figures that's what he needs to make this gambit profitable. But he doesn't grow enough grapes to fill all the containers. And so he goes to his farmer friends and is like, give me your grapes, dear neighbors. The shipping containers set sail from the port of Mumbai. By the time they dock in the Netherlands, the market for grapes has totally crashed.

That was a miserable experience. I got huge losses, almost 70 percent losses. Almost 70 percent of his investment down the drain. You can just hear his family, like, all in chorus. It's not too late. Get a government job. By now, 2004, Vilas is really in debt. He told us it was the equivalent of $100,000. That's staggering for, like, the average person in the U.S., but stacked against the income of a small-time farmer in India, it feels like it shouldn't even be possible. Yeah, so India has a very different relationship with credit. Lending in India isn't just by banks. It's by shopkeepers,

neighbors, the fertilizer guys lending. So is your local temple. And rates are all over the place. In rural India, you meet so many people who are so deep in debt, especially farmers. And we're talking about regular grain growers working in the government system. In fact, for decades now, there's been an epidemic of suicides as more and more farmers just get overwhelmed by all this debt. And you can imagine, if you're already in debt, it can be terrifying to take on more risk, to do what Vilas did. In many ways, Vilas was ahead of his time. And this story of him trying and failing

to save his family farm, saying no to subsidies, explains the protests in India right now. At this point, Vilas's story is a cautionary tale. Exactly what all these farmers in the streets don't want to do. Life without that government support can be pretty rough. The Indian government's new laws, they don't dismantle the existing system, but they do undercut it in a bunch of different ways. For example, remember those government wholesale markets? So they'll still exist, but the government will not line up buyers there anymore.

Trading can happen anywhere, even online. Farmers, they suddenly have to find buyers and they have to market their crops. So for them, this all means less security. It makes sense that they're out protesting and doing everything they can to stop these changes from happening. This is what it sounded like in northern India for the past five months. And with all this upheaval, local politicians started saying they won't implement the new laws. The Supreme Court intervened and called a timeout, forced the government to slow down and negotiate with the farmers. After the break, our farmer friend Villas, his fortunes finally changed.

So it's 2004. Villas has been trying to make farming work for years now. He's just lost a ton of money on those shipping containers, and he's super in debt. And somehow, due to some villas-specific quirk, he is undeterred. So he goes to eight of his grape farming friends and he's like, okay, so yes, I just took these massive losses on the shipping container thing. But if there are nine of us to share the risk, and if we time it better, I think this could work. So they pool their resources, borrow yet more money, to build a packing plant. And they start marketing their grapes directly to supermarkets in India and in Europe. Vilas names this new cooperative Sayadri Farms after the mountain range behind his vineyards. And with even just nine growers, now they have some scale.

They have enough grapes to supply big buyers. Sharing risk means one bad harvest or one market fluctuation. It doesn't necessarily mean ruin. So Vilas' plan finally works. Today, Syadri Farms has more than 10,000 farmers and this huge campus like a university. It's the biggest exporter of grapes in India. So what is this factory floor here? Where are we?

So actually this is the packaging unit for the grapes. So almost there are 900 to 1,000 people who are working here right from early in the morning. And this is all getting exported to the European countries. 900 to 1,000 people on just that one packing floor. And Sayagri's expanded from just grapes. At one point, we walked past these giant, like, yellow garage doors. These are the banana ripening chambers. Banana ripening chambers?

Each ripening chamber is having a capacity of almost 25 metric tons. That's behind this yellow or in these boxes? Yellow for banana. Yeah. Sayadri Farms also sells online. They can reach a lot more buyers than they could at their local government wholesale market just eight miles down the road. They make promotional videos of their farmers. So this idyllic vision of a happy entrepreneur with his many banana-ripening chambers in the beautiful hills near his hometown, it is possible in India.

The government doesn't stop you from selling to whomever you want. Some farmers, many farmers do sell outside the government-run system. But it's really hard to make it on your own. Look at what Villas went through. And of course, not everyone is Villas. Villas almost wasn't Villas. Most farmers can't take on the risk he took. The government has included some protections for farmers in their new laws to blunt some of the downside and help farmers go down that path that Vilas took. Like the new laws say farmers have to get paid within three days of selling a crop

and that their land can never be taken from them as collateral. But even with those protections, there is still a big problem. Because remember how many farmers there are in India? Hundreds of millions. The heart of the matter is that India has too many farmers. Sadanand Dume is a researcher at the American Enterprise Institute in Washington, D.C. So what you have on the one hand is a government that is trying, I think in good faith,

to improve the lives of those farmers who are gripped by a very understandable anxiety about what these changes may end up meaning for their lives. And there's a particular reason for this anxiety. Usually when people move out of agriculture, they often get jobs in manufacturing. That's how it happened in the West, in China, in Vietnam. But when India was doubling down on agriculture in the Green Revolution, it more or less skipped manufacturing, never really had an industrial revolution. Making a transition from agriculture to industry, that can have a big impact,

and not just in terms of gross domestic product. Ultimately, people get healthier, life expectancy goes up, infant mortality drops. Like, by now, only about 1% of the U.S. workforce is still in farming. In China, that figure is 25%. In India, it's about 50%. India, in many ways, is a medieval economy, and parts of it are a modern economy. medieval economy and parts of it are a modern economy. And the challenge is to get more people from that medieval economy into the modern economy. And we should not underestimate the pain of that. We shouldn't underestimate the fact that this is going to be wrenching. But is that the only way to do it? Improve your country's situation by getting into manufacturing? Medha Patkar is a famous Indian social activist who fights for the rural poor and lower castes.

She's been in the streets protesting the laws. And she's like, why not have lots of farmers, masses of farmers? We want production by masses, not mass production, as Gandhi has said it. Mass production, as Gandhi has said it. Gandhi really showed the real path to development, which would be based on fulfillment of basic needs. No one's greed. No one's greed.

India's economy was set up this way on purpose, she says. It goes back to the vision of Mahatma Gandhi, small-scale farmers powering a nation. Like, in the U.S., we're all bootstraps and individualism. Well, here in India, it's like that chant you keep hearing at these protests, Jai Jivan, Jai Kisan, to help your country grow food for your countrymen. Mehta says it's that vision that is under attack. Now, that is under assault because of the present paradigm of development, which is based on globalization, liberalization, privatization, but also equating industrialization with progress.

Industrialization, manufacturing, isn't always progress for the environment, for natural resources that are really owned by the people. Mehta says that over the environment, for natural resources that are really owned by the people. Mehta says that over the years, the government has allowed corporations to siphon those for profit. Wealth has accumulated in just a few hands. Maybe progress doesn't have to be measured in profits and GDP, and industry could exist to serve the people. That's what agriculture did in the Green Revolution. Farmers worked their socks off, and in return, the government agreed to blunt the worst parts of economic cycles through drought or through monsoon.

The way the protesters see it, the government now doesn't want to keep up its side of the bargain. It wants a free market to deal with it. And the farmers know what this can look like because we've seen it happen the world over. When economies that used to be protected open themselves up to the free market, yes, there's more trade, people benefit, but someone will end up paying. Like in the U.S. when we started trading more with China 20 years ago, consumers got more cheap stuff, but workers in the U.S. who used to make stuff like that, many of them were out of a job. Entire towns that had been bustling with activity,

manufacturing furniture and TVs, were left without industry. That's why these protests have resonated and grown, even outside of India. Solidarity rallies have popped up in New York, Paris, Hong Kong. There was a 2,000-car rally on the San Francisco Bay Bridge. All for the Indian farmers. Mainstream economics has historically kind of ducked wrestling with the bad parts of liberalization. It's basically said short-term pain for some groups is offset by long-term gains for an entire country. But that short term can last the bulk of a person's working life. So in India's next economic chapter,

its farmers don't want to be left with the bill. If you want more reflections on capitalism, try our newsletter. The most recent one was called Reflecting on Capitalism. You can subscribe at planetmoney.org backslash planetmoneynewsletter. You can also send us an email, planetmoney at npr.org. We're also on Instagram, Twitter, Facebook, TikTok. We are at Planet Money. Today's show is produced by Alexi Horowitz-Ghazi and Dan Gurma and mastered by Gilly Moon. Planet Money's supervising producer is Alex

Goldmark. Our show editor is Brian Erstadt. This episode was edited by Molly Messick. I'm Lauren Fryer. And I'm Mary Childs. This is NPR. Thanks for listening. Do you have a business idea that you're trying to bring to life? Then join us for the first ever virtual How I Built This Summit. We'll have four days of interviews with some of the best-known entrepreneurs out there and opportunities to connect with other entrepreneurs in our global community. Thank you to Dell Technologies, a supporting sponsor of the How I Built This Summit. For tickets and more information, head to summit.npr.org.

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