Indian farmers’ debt wipe demands show why free trade deal with Australia is unlikely

ABC | 16 June 2017

Indian farmers’ debt wipe demands show why free trade deal with Australia is unlikely

by James Bennett

When Prime Minister Malcolm Turnbull visited India two months ago, he made much of reviving stalled free trade talks — but developments in India this week show the prospects of eventual success are remote at best.

Despite a bumper harvest, this week has seen increasing demands from India’s farmers that billions ($64.5 billion) in outstanding loans be written off.

The reason? Even though India still sets floor prices for the crops its farmers grow, most of them are not enough to meet the cost of production.

This is an incredibly sensitive issue in India. Indebtedness is the cause of the vast majority of the thousands of farmer suicides.

The current waiver push started with an election promise in India’s largest province, Uttar Pradesh.

Then Maharashtra, a state in western India, followed suit and farmers in other major agricultural hubs Punjab, Haryana, Tamil Nadu, Gujarat, Madhya Pradesh, and Karnataka have piled on the pressure.

So volatile was the protest push that last week, amid violent clashes, five demonstrating farmers in Madhya Pradesh were shot dead by police.

Too many farmers, too little land

The reason indebted farmers commit suicide, how they pressure Governments to periodically wipe their slates clean, and ultimately why this makes a trade deal impossible all comes down to two interlinked factors: many farmers and little land.

An analysis of India’s farm holdings by economists at think tank IndiaSpend found that roughly 85 per cent of all operational farm holdings in India were less than two hectares.

That is tiny. Compare it to Australia, where the Australian Bureau of Statistics said only a third (36 per cent) of Australia’s farms were 50 hectares or less.

With small crop returns, Indian farmers are unable to justify the cost of equipment like tractors that boost productivity.

"Fragmented land needs to be consolidated. More investment, knowledge and innovation need to flow into agriculture," economist Ajit Ranade wrote in the Mumbai Mirror.

The farmers (118 million of them, according to India’s 2011 census) turn instead to labourers (144 million in the same census) which in turn means more jobs in India are dependent on farm income and, as Mr Ranade concludes, makes politicians more captive to their demands.

With so much at stake domestically, its easy to see why India’s Government sees little gain from opening its agricultural markets to an exporter like Australia.

Australian and Indian officials are now going through the process of working out where they each stand, but the current situation does help to explain why before leaving India, Mr Turnbull conceded it was possible the two nations would remain "too far apart" to strike a deal.

"It has got to be a deal worth doing," Mr Turnbull said.

source : ABC

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