Editorial 1 : A variable geometry
Introduction: Participating in a panel discussion at the annual Munich Security Conference over the weekend, the External Affairs Minister, Subrahmanyam Jaishankar has offered a new template to think through India’s relationship with the West and how it is different from other members of the BRICS forum that India founded with China and Russia.
S Jaishankar’s formulation of India’s relation with West
- He was responding to a question about India’s apparent freedom to choose between multiple partners, including the US, Europe and Russia and the implicit assumption that the BRICS forum dominated by Beijing and Moscow was “anti-Western”.
- Affirming the distinction “between being non-West and anti-West”, Jaishankar said he would “characterise India as a country which is non-West but which has an extremely strong relation with the Western countries, getting better by the days”.
- He added that that definition might not apply to other members of the BRICS.
BRICS and India
- While Russia and China might want to mobilise the BRICS against the West, Jaishankar said India had no interest in such an agenda.
- At the same time, he insisted that Delhi sees value in the BRICS as a non-Western forum that has had considerable value in reshaping global governance in the 21st century.
- Although many in the West are dismayed by Delhi’s close ties to Russia and BRICS, Secretary Blinken (who was sharing the stage with S Jaishankar) had no reason to quarrel with Jaishankar’s formulation.
- He endorsed Jaishankar’s case for “flexibility” in international relations and underlined the importance of “variable geometry” in the current global context.
- Rejecting the division of the world into “rigid blocs”, Blinken said the US “may have different collections and coalitions of countries that bring certain experiences and capacities” in dealing with different challenges.
- Blinken added that the relationship between the US and India is now “the strongest it’s ever been”, and it “makes no difference that India happens to be a leading member of BRICS”.
- He also highlighted the wide-ranging international collaboration between Delhi and Washington, including in the Quadrilateral Security Forum, along with Canberra and Tokyo.
The history of India-USA relations
- This new comfort level at the highest political level in Delhi and Washington with the apparent geopolitical contradictions does not always filter down to Delhi’s foreign policy discourse that has long defined India’s international relations in anti-Western terms.
- The anti-imperial left and the nativist right in India, as well as the centrist Congress party and the national security establishment, have long operated on the assumption that the contradictions between India and the US are irreconcilable.
How the paradigm of India-USA relations has changed?
- The Narendra Modi government has transcended this paradigm by engaging the US with greater self-assurance and building a strategic partnership with Washington that is deeper and broader than ever before.
- The decline of the left in India and the weakening of the Congress removed much of the traditional resistance to India’s productive engagement with the US and Europe.
- However, there is residual anti-western sentiment among the rising conservative nationalists.
Conclusion: In framing India as “non-West” but not “anti-West”, the Modi government consolidates the support of the Hindu right for its foreign policy while leaving much room open for closer ties with the US and Europe.
Editorial 2 : Income, not MSP
Introduction: Farmers, largely from Punjab, are protesting on Delhi’s borders. The government must deal with them rationally — study their demands and sit down with them to resolve the problem at the earliest.
What are the farmers’ demands?
1. Legalise MSP as per the Swaminathan Commission recommendations
- The farmers’ demands include making minimum support prices (MSPs) legally binding and fixing MSPs according to the so-called Swaminathan formula — it suggested 50 per cent profit over comprehensive cost, often referred to as Cost C2.
- This cost concept includes not only all the paid-out costs of farmers and imputed value of family labour (Cost A2+FL), but also imputed rent on owned land and imputed interest on owned capital.
- The difference between Cost A2+FL and Cost C2 is roughly 25 to 30 per cent for most crops.
- The current MSP formula that the Modi government has accepted is minimum 50 per cent margin over Cost A2+FL.
- So, if this is replaced by Cost C2 plus 50 per cent margin, in most crops covered under MSP regime, the MSPs will go up by 25 to 30 per cent.
2. Loan waivers, pensions
- The farmers have some other demands including loan waivers, pension for farmers and agricultural labourers, a minimum wage rate of Rs 700/day and allowing MGNREGA workers to work on farmers’ fields.
- Accepting them could have significant economic implications, including putting severe pressure on the fisc and raising food inflation.
- So, any decision on the farmers’ demands needs cool-headed thinking, keeping emotions and politics out of the negotiations.
- It is election time and everyone tries to put pressure to get the best possible deal for their economic well being.
The real issue behind farmers’ demands is raising farm incomes
- One thing that must be understood by policy makers negotiating with farmers is that the real issue behind these economic demands is that farmers basically want significantly higher incomes.
- There is nothing wrong in that — almost everyone wants a higher income with least uncertainty.
- The question is whether the government has the wherewithal to pay without wrecking the economy.
- It is difficult to put a figure on the fiscal cost of this package.
- It will depend upon how many of the 23 commodities the government will have to buy at enhanced MSP, the level of market prices and the amount of loan waiver and pensions.
- It is, however, clear that the budget for this package will be large, and it could throw a big spanner in the Centre’s fisc calculations.
Best ways to raise farmers’ income
1. Diversification of agriculture
- The 23 crops under the current MSP regime constitute only 28 per cent of the value of agriculture and allied produce.
- It would be interesting to note that the biggest agricultural produce of India is milk, and its value exceeds the value of paddy, wheat, all pulses, and sugarcane combined.
- The demand for higher MSP will not be confined to 23 crops.
- Livestock and horticulture together constitute more than 50 per cent of agri-produce, and they have been growing without any MSP.
- In fact, their growth is much higher (5 to 8 per cent) than the growth in cereals (1.8 per cent) over the last two decades.
2. More focussed approach on livestock, fishery and horticulture
- The future of Indian agriculture’s potential and farmers’ incomes lies more in livestock, fisheries, and horticulture.
- And, these commodities need a well-integrated value chain approach like the Amul model in milk or the vertically integrated poultry sector, which is actually growing at the fastest pace.
- The market risk is taken by the integrators.
- In the 23 crops under the MSP regime, the best way to augment farmers’ incomes is to raise their productivity in a sustainable manner and enable them to access the best markets not only in India but across the world.
- While augmenting productivity requires a lot of investments in agri-R&D and irrigation — this takes time — the issue of access to best markets can be achieved in a relatively shorter time.
Way forward: Shift from a pro-consumer mindset to a pro-producer mindset is required
- The first and foremost policy action that is needed is to remove all bans on agri-exports, stocking limits on private trade, and stop unloading wheat and rice in the open market at below the economic cost of the Food Corporation of India (FCI).
- These are all anti-farmer policies designed to favour consumers.
- The fundamental problem of today’s agri-food policies is that they are highly tilted towards consumers at the cost of farmers.
- This mindset needs to change, especially when the government claims that just 11 per cent of the population live under poverty.
- Out of roughly Rs 47 trillion, subsidies in the agri-food space account for about Rs 5 trillion, of which 80 per cent is geared towards consumers to keep food prices low.
- The food subsidy of Rs 2.12 trillion and even the fertiliser subsidy of Rs 1.88 trillion (RE of FY24) is a pass on to consumers as it keeps the costs and thus MSP prices low.
- This entire gamut of subsidy policies needs a re-visit and reorientation where 75 per cent could be geared towards producers in the form of a price stabilisation fund or policies like PM-Kisan, and only 25 per cent goes to well-targeted vulnerable consumers.
Conclusion: It is time to stop freebies, and get on with real rational policy-making. Policymakers have a big job at hand, but it can be achieved if they have the will to do so.