This article first appeared in CNBC TV-18 on December 21, 2020 and can be accessed here.
The world’s largest protests are taking place right now in North India. Farmers from Punjab and Haryana are demanding a repeal of the government’s new agriculture laws. Everybody in the country, including the farmers, agree that agricultural reforms are necessary for the country to move forward. However, the recent protests raise the unconstitutional manner in which the Indian government passed the laws and entrenched fears over the effects of the market economy on farming.
While at one point, agriculture was the largest source for both India and China, now it employs only 25 percent of Chinese people and 41 percent of Indians. China’s experience with agricultural reforms has been divisive and difficult. The focus on collectivisation under Mao Zedong for the first three decades of the PRC led to disastrous results—first with the Great Leap Forward's failure and then sluggish output. However, with its Reform and Opening Up in 1978, de-collectivisation happened gradually across the country as communes were slowly disbanded.
At the same time, China implemented a dual-track approach so that liberalisation would not create big-bang shocks. Lau, Qian, and Rowland explain how the government did this, “The commune (and later the households) is assigned the responsibility to sell a fixed quantity of output to the state procurement agency as previously mandated under the plan at predetermined plan prices and to pay a fixed tax (often in-kind) to the government. It also has the right (and obligation) to receive a fixed quantity of inputs, principally chemical fertilisers, from state-owned suppliers at predetermined plan prices. Subject to fulfilling these conditions, the commune is free to produce and sell whatever it considers profitable and retain any profit.”
This dual-track approach was efficient in improving total agricultural productivity and making Chinese agricultural products globally competitive. It is important to remember that China’s agriculture reforms did not take place in isolation. A recent paper points out that, “Beyond fostering markets, the Chinese state has played key roles in rural employment growth; rural poverty reduction; increased food security; education and health access—particularly, of women—and the management of environmental commons with technology, rules, and regulations, etc.”
This was important because China also provided alternative employment: in its massive manufacturing sector. What started as small-scale factories set up by local governments (called township and village enterprises or TVEs) went through a privatization wave in the 1990s. This shift also led to a re-hauling of incentives for government institutions and the bureaucracy, all of which were able to push the economy to a furious pace of economic growth.
This is not to say that the Chinese government’s experience with agricultural policies has been perfect. China’s land reforms, a source of much contention, continue to be incomplete. The Chinese government also continues with subsidies for farmers. Over the last year, it has shown increasing concern over food security. The glaring rate of inequality between rural and urban areas is also an issue that repeatedly comes up in Chinese debate.
China’s agricultural policies are complex but have taken a very different route from the Indian State, which has always pandered to farmers as they form a significant vote bank. The ‘mai-baap’ attitude of the government helps no one and adversely affects the farmers. What it has done is to create a culture of dependence and an implicit distrust of market forces. Incremental change has worked in China, but the Indian government will have to assess how to assuage its farmers and actively solve their concerns.