Farmers’ agitation spells more trouble for India's Covid-hit economy

·3-min read

The impact of India's weeks-long farmers' protest against new agricultural laws is spreading to other sectors, threatening to aggravate an economy already reeling from the coronavirus.

For over a fortnight, hundreds of thousand farmers have been protesting at the Delhi border to put pressure on Prime Minister Narendra Modi’s government to repeal three farm laws which they maintain will hurt their incomes.

They say the laws could leave them at the mercy of rich corporations who deal outside state-controlled wholesale markets leaving them with no written guarantees of an assured floor price for their produce.

To put further pressure on the government, the agitating farmers called for a ‘Bharat Bandh’ (Shutdown India) last week that led to shops and commercial establishments being closed, transport affected and traffic disrupted as protesters squatted on roads and train tracks in several parts of the country.

Though emergency services were exempted and banks, too, continued operations in the pan-India shutdown, the maximum impact was felt in states such as Punjab, Haryana and Delhi, the epicentre of the snowballing protests.

With the coronavirus recession already inflicting severe economic scarring, policy analysts and business chambers believe the ongoing agitation will impact the economy further.

"Given the challenge to get the economy back on the growth trajectory, Confederation of Indian Industry (CII) urges all the stakeholders to urgently seek ways to end the ongoing protests and reach an amicable solution, in the interest of industry and economy," the CII said in a statement.

The CII said the farmer's protest may push logistics cost by up to 8 to 10 percent.

“Industries such as textiles, auto components, bicycles, sports goods which cater significantly to the export markets would not be able to fulfll their orders, ahead of Christmas, harming our goodwill amongst the global buyers," said the Associated Chambers of Commerce of India President, Niranjan Hiranandani.

Many companies in the industrial belt surrounding Delhi are facing labour shortages as people struggle to reach production facilities from neighbouring towns, the industry chamber said.

Agriculture accounts for nearly 15 percent of India’s 2.4 trillion-euro economy and agriculturalists are a powerful political constituency.

Economists are reluctant to hazard a ballpark figure on the monetary losses incurred by the ongoing agitation but pointed out that it would impact both agriculture and the overall economy.

“At a time when the economy is upended and lives and livelihoods affected, this current impasse will add further distress. It is difficult to estimate the production loss but all this will have a ripple effect,” said Mahesh Vyas, CEO of the Centre for Monitoring Indian Economy.

The Indian economy contracted by nearly a quarter in the April-June quarter of this fiscal year, the worst decline ever recorded since the country started compiling GDP statistics on a quarterly basis in 1996.

The country’s central bank, the Reserve Bank of India has in its October policy review predicted growth to contract by 9.5 percent in the current fiscal year.

Given the unprecedented economic decline in the country which was facing headwinds much before the arrival of the pandemic, a prolonged agitation could only spell more trouble for a beleaguered economy.