New type of farmer, new type of problems. Same result.

"In the winter of 1988, the feisty farmer leader from Uttar Pradesh, Mahendra Singh Tikait, laid siege to Delhi, with thousands of his followers and their cattle gathering on the boat club lawns near Parliament," wrote S Bera. But the farmers of today "are not our dhoti-clad, topi-wearing, hookah-smoking farmers". They are educated and tech-savvy. In 1988, agriculture contributed 30% of GDP and employed 60% of workers in India, whereas today, it contributes just 15%, while employing 55% of workers. Farmers are protesting again. Why? "The fundamental root of the agrarian crisis is the intense pressure of population on land. Demographic pressure has pushed down the land:man ratio to less than 0.2 hectares of cultivable land per head of rural population," wrote Prof S Mundle. "Around 83% of rural households are entirely landless or own less than 1 hectare of land." They are forced to sell their produce to licensed traders who pay them 25% of what consumers pay wrote R Kaundinya. With rising input costs, despite subsidies given by the government, about 52% of agricultural households are in debt, the average size of debt being Rs 47,000. Crops are planted according to previous year's demand and when there is excess production prices crash causing acute distress. After a shortage of pulses last year the government pushed farmers to shift from cotton to pulses with the result that the price of pigeon peas crashed this year, while the price of cotton has gone up. The government is committed to buying a certain proportion of crops at a fixed price, known as the Minimum Support Price. This provides a floor for market prices and so prevents prices from falling too far in the event of bumper crops. The present government has been raising MSP at less than the rate of inflation. If prices of food items go up in India the government immediately bans export of those products to increase supply in local markets, while importing those products at lower prices from abroad. In 2015-16 the government spent Rs 1.4 trillion on imports of agricultural products. Why spend such a huge amount in paying foreign farmers, instead of paying Indian ones? Because food and beverages constitute about 46% of our consumer price index, so forcing food prices down keeps retail inflation in check. Retail inflation rate was at 1.54% in June 2017. This allows the government to apply pressure on the Reserve Bank to reduce policy rate. So, the government is forcing poverty on farmers to force interest rate lower. Why? Because politicians and civil servants believe that a low interest rate will stimulate the economy. But, are prices likely to stay down or is this temporary? We shall see. Meanwhile, farmers will keep protesting.