The debt trap of Indian farmers
by K P Prabhakaran Nair on 17 Feb 2015 5 Comments
The lot of the embattled poor Indian farmer keeps deteriorating with the passage of time. According to the National Sample Survey Office (NSSO) data released on December 19, 2014, during the last decade the bloated debt of Indian agricultural households has increased almost 400 per cent while their undersized monthly income plummeted by 300 per cent. Even the number of heavily indebted households steeply increased during this period.


The report, titled “Situation Assessment Survey of Agricultural Households in India”, is based on a national survey covering 35,000 households during 2012-13. Though the definition of an agricultural household has changed during the last decade, the basic features remain the same. The survey states that, on an all India basis, more than 60 per cent of the total rural households covered in eleven states are in deep debt, with wide variations - 92.9 per cent in Andhra Pradesh and 17.5 per cent in Assam. Loan pattern show 60 per cent institutional loans, and 40 per cent non-institutional loans; government contributes just 2.1 per cent. Unscrupulous money lenders make up most of the non-institutional lenders.    


Average debt per household is Rs 47,000, while average income is Rs 36,973 per annum. In 2002-03 India had 148 million rural households, which increased to 156 million by 2012-13, a 5.4 per cent increase in a decade, approximating to 0.5 per cent per annum, an alarming state of affairs. 


The above data point to disturbing observations in the state of indebtedness among Indian agricultural households. While average income from 2002-03 to 2012-03 increased by 318 per cent, most worryingly, total debt per household had a steep increase of 273.5 per cent during the same period, proving that while income from sale of agricultural products increased per se due to a price advantage during the last one decade, it has not translated into a reduction in rural indebtedness. Therein lays the real rub of Indian agriculture, leading to a very disturbing question: Has the so-called Green Revolution really helped the poor and marginal farmer of India, struggling with cost escalation of inputs, like chemical fertilisers, pesticides and water, where most of these households are located in the marginalised rainfed areas of the country?


In other words, benefits by way of better seed variety or fertiliser input have been cornered by rich and affluent farmers having huge parcels of land in states like Punjab, Haryana, western Uttar Pradesh, Andhra Pradesh, Tamil Nadu and Karnataka. The poor and marginal farmers of Bihar, Odisha and eastern Uttar Pradesh have been left in a miserable state.


My extensive travels within the country, trying to know the state of affairs of poor and marginal farmers, make me think that  indebtedness of rural agricultural households cannot be just  60 per cent as shown by the NSSO survey, but is likely much higher, perhaps as much as 70-80 per cent. This becomes obvious when we take into consideration the inflation rate in the country. If one adjusts these figures to the rate of inflation, at 6-7 per cent, as has been the case during the past years, sometimes even shooting up to double digits as seen during the UPA regime, it can be safely concluded that the farmer’s income has remained static with no change for the better.


What is the lesson to be learnt from the above data? The answer must be a guide for New Delhi to give enough thought prior to NDA’s second budget. It simply shows that while the enthusiasts of the highly extractive agriculture, euphemistically called the “green revolution”, patterned along the American farming model, the trade mark of which is a “high input technology” – very liberal, often unbridled, quantities of chemical fertilisers, very expensive hybrid or Bt seeds, copious use of irrigation water -  kept flagellating about the “success” of this green revolution, the poor and marginal farmers of India, primarily in the vast rainfed areas of the country, were simply left to eke out a miserable life. Their farms parched while their debts soared.


The most classic example of this is the Vidarbha district of Maharashtra, where the Bt cotton failed miserably in parched rainfed fields and the farmers in thousands took their own lives, unable to pay back the loan sharks. This became a global shame for India. Only where the rich farmers could provide assured irrigation water coupled with unbridled use of chemical fertilisers could the Bt cotton perform well, not in the parched fields of Vidarbha farmers.


I have also observed that many rural farmers are unaware of the minimum support price. And, often, these farmers resort to distress sale of their produce to clear loans from unscrupulous money lenders, obtained at exorbitant interest rates. In collusion with unscrupulous local traders and commission agents, government agencies delay procurement of grains by, in some cases, as many as 50-60 days. 


When poor people do not have easy access to cheap grain, they end up spending more than 50 per cent of their meagre income to buy food grain from the open market for mere subsistence, while government procured grain in FCI godowns find its way into the hands of corrupt officials, middlemen and grain traders.      


Though the contribution of India’s agriculture to the country’s GDP is 18 per cent and it provides employment to more than 60 per cent of the total workforce of the country, if one goes by the NSSO survey, the country is heading towards a crisis in agriculture. The Prime Minister would do well to rethink his “Make in India” strategy. These poor and highly indebted farmers, most of them with no formal education, cannot be allowed to migrate to congested urban areas to eke out a miserable “daily wage” earner’s life. If this country needs to really go forward, one has to deeply think about its agriculture.          

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