Vipal Bhagat
Adam smith considered as the ‘father of economics’ and he was the one who introduced the concept of free trade in the field of economics, thereby, dispelling the earlier theories of the mercantilist theories. By this theory, he fragmented the conceptual economics that was really easy to comprehend, as this was based on the notion on hedonistic principle i.e. just take care of your personal economic needs, the societal economic needs will be taken care of eventually. This concept of ‘invisible free hand’ had revolutionised the coming centuries in a great deal and helped in raising the standard of living of the millions of people.
This notion of free trade, therefore, rests upon the concept of discovering a price that is beneficial and economical both from the consumer and the seller/producer point of view. This reason suits well to the most of the products under capitalism. But, not to the agricultural products and more specifically to the agricultural products of the developing nations like India. Agricultural products in the developing world are affected by the price plummeting phenomenon i.e. cob-web phenomenon whereby the price of the agricultural products experiences a sharp decline in the year,following the bumper agricultural production. This phenomenon is the direct off shoot of the policy of free trade and it has led to significant reduction in the incomes of the farmers in the past. Therefore, there is the prerequisite of the prevalence of some structural framework that is in operation that brace the policy of free trade subsequently.
The three agricultural bills, which the Govt. has recently enacted,coherently lack such supporting framework for the farmers. Indian agriculture is traditional in nature and moreover it’s the livelihood of the major chunk of the population. Establishment of such a system will be detrimental in its consequences that will go beyond the periphery of the agricultural sector.
Indian agriculture at the time, needs Keynesian philosophy the most. MSP and Procurement systems are the foundations of the structural framework on which the whole agriculture system rests upon. Though these policies focussed more upon the demand side rather than the supply side. But if we apply the Keynes policy of Government intervention, it can rightly be seen in terms of MSP, procurement systems, etc. The provisions like MSP, APMC and procurement systems are not optional, rather, these interventions are prerequisite for the Indian agriculture. No doubt, at present, MSP serves the need of only about six percent of the population. But still it acts more as a symbolic than as a substance.
There are some arguments that the replacement of the state- supported MSP mechanism with that of the market- driven approach will be beneficial for the farmers. But this has to be seen in some context. Market-driven approach suited well for the economies which are not inflicted with economic ills like high inequality, and not for the inequality loaded economy of India. Moreover, the prevalence of the characteristics of the price inelasticity and that of the perfect competition makes the applicability of the market- driven approach redundant, as the Adam Smith’s free market approach was mainly meant for the manufactured and industrial goods, where, supply of the goods can be controlled and manipulated in response to demand.
At the same time, MSP cannot be regarded as the panacea of all agricultural ills, as the condition of the farmers have not been ameliorated since its inception and in addition, the products like dairy products, which are not assisted by any MSP like programmes,fetch relatively more remunerative income to the farmers. Therefore, continuing MSP for eternity will also be not a solution at all, but its discontinuance is, but in a healthy and feasible manner rather than in an abrupt manner.
Historical evidences have substantiated the fact that almost all major economies of the world have attained higher echelons of growth by reducing their dependency upon the agriculture for the GDP composition by shifting people away from the agriculture. India is required to move on this explored path of growth trajectory in an unprecedented manner.
As Keynes came to rescue the world economy in the 2008 Great Depression, he seems to be the saviour again, but at the present time, it is only for India and only for the agricultural sector.
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