Thread: Making Markets Work for Smallholder Farmers in India

Dear Readers,

I hope you are enjoying your Sunday. Last Monday, I wrote an article to unpack the complexity of the question: What does it take to make markets work for smallholder farmers in India? 

For any market to work, if you go by Economics 101, you need three Ps to function effectively. Here is a quick summary of the arguments (If you want the real meat with data, I would encourage you to read the article first.)

1) Private Property:

The central dharmasankata is this:

We are damned, if we do land reforms, for it would make land prices unaffordable for smallholder farmers.

We are damned if we don’t do land reforms, for it would rob farmers of the safety and reliable access to capital.

2) Prices: Market Prices as Information Systems (Thank you, Friedrich Hayek)

How do we make markets work when governments intervene to set MSP? Keeping aside the fact that increasing MSP to raise incomes is not sustainable, how do we reconcile the fact that Governments set MSP based on CACP estimates which vary significantly from state estimates and are based on depressed costs?

3) Profits: The Lure of Profits and the Discipline of Losses

In an ideal world, the checks and balances provided by profits and losses drive Schumpeterian Creative destruction. However, in an imperfect world, things don’t play out that way. What do we do when farm loan waivers are considered to undermine honest credit culture while bailing out big borrowers is considered as a part of the logic of capitalism?

If it weren’t obvious so far, there are no straight answers to the riddle of making markets work for smallholder farmers in India.

After I published the article, I got to read the fascinating story “The Ken” did on the sordid state of affairs when it comes to agricultural land titles. Clearly, digitisation cannot alone help, if there is no sufficient ground-truthing to determine whom all the land belongs to.

Am I the only one to smell a fantastic Agtech opportunity for a smart nut to organize digital land titles in agriculture and provide data access to agricultural credit stack? How many light bulbs does it take to create an algorithm to integrate farming data with land title data and determine a  unique credit score for a smallholder farmer?  

How do we deal with this riddle of making markets work for smallholder farmers? What do you think? Feel free to challenge my arguments. Would love to hear your comments.