February 22, 2015
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Agriculture
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By: 
Prerna Singh
Rural India has 90.2 million agricultural families with an average monthly income of just Rs 6,426.
Over half of country’s farmers are indebted underscoring the lack of profit from agriculture, failure of debt waiver scheme and success of informal lenders 
 
IT'S AN open secret that agriculture in India is stagnating. The latest situation assessment survey done by the National Sample Survey Organisation (NSSO) paints a bleaker picture. Rural India has 90.2 million agricultural families with an average monthly income of just Rs 6,426. Of this earning, only 60 per cent came from cultivation and rearing of livestock; rest being from daily wages and salary. In fact, agriculture is not the principal source of income for 56 per cent of the marginal families (with less than 0.01 hectare farm). 
 
Indebted farms
 

The survey reported that 52 per cent of households in the country were indebted, with levels of indebtedness varying from 93 per cent in Andhra Pradesh and 82.5 per cent in Tamil Nadu to 37 per cent in Chhattisgarh and 17.5 per cent in Assam. The average amount of outstanding loan was highest for Kerala (Rs.2,13,600) followed by Andhra Pradesh (Rs.1,23,400) and Punjab (Rs.1,19,500).

Now let us look at the other side of the coin. While reading out the Rs 52,000-crore debt waiver scheme in his Union Budget 2008 speech, the then Finance Minister P Chidambaram showed special concern for the indebted farmers, especially the small and marginal farmers. But the scheme had some serious flaws, because the outreach of any government measure is limited, and some section of the society would be benefited more than the other.  A CAG report found that 8.5 per cent of the beneficiaries to be ineligible for loan waiver. Overall, in 22.32 per cent of the 90,576 cases checked had lapses or errors.

 
Looking at these two reports what comes in the light is irony associated with it.  Are farmers of India cursed to be indebted? What are the loopholes that are to be considered?
 
A CAG report found that 8.5 per cent of the beneficiaries to be ineligible for loan waiver. Overall, in 22.32 per cent of the 90,576 cases checked had lapses or errors.
 
Informals take the cake
 
On sources of credit, the NSSO survey revealed high levels of dependence on non-institutional channels. Nearly 40 per cent of all loans came from informal sources with 26 per cent advanced by moneylenders. Marginal land holding households suffer the most with only 15 per cent of their credit from institutional sources such as the government, cooperatives and banks. For households in the highest land class (with land more than 10 hectares) the share is 79 per cent.  According to report of the task force on ‘Credit Related Issues of Farmers’ (2008), around 36 per cent of the debt of farmers from informal sources had interest ranging from 20 to 25 per cent. 
 
Another 38 per cent of loans had been borrowed at an even higher rate of 30 per cent and above, indicating the excessive interest burden of such debt on small and marginal farmers. Continued dependence of small and marginal farmers on informal sources is due to constraint in the rural banking network and services arising out of financial sector reforms. Informal sources do not insist on formalities like bank accounts or punctual repayment as banks or cooperative societies do.
 
The similarity between these two reports indicates that the loan waiver scheme might be good for ‘farmers’ as individuals, but not for ‘agriculture’.  What are the possible reasons for such high amount of indebtedness in spite of the government actions to curb the indebtedness?
 
Continued dependence of small and marginal farmers on informal sources is due to constraint in the rural banking network and services arising out of financial sector reforms. Informal sources do not insist on formalities like bank accounts or punctual repayment as banks or cooperative societies do.

 

  • MSP not reaching all- The NSSO survey revealed among households reporting sale of paddy crop only 32 per cent were aware of MSP operations and only 13.5 per cent actually sold to procurement agencies during July to December 2012. 
  • Crop not insured- Over 95 per cent paddy and wheat growers and nearly 99 per cent of sugarcane farmers did not insure their crops during two consecutive agricultural seasons- Kharif 2012 and Rabi 2013. 
  • Lags on government services- Over 59 per cent of the farm households received no assistance from either government or private extension services. Of the 40.6 per cent households which received extension assistance, only 11 per cent of the services came from physical government machinery- extension agents, Krishi Vigyan Kendras and agricultural universities. 
What has changed
 
NSSO conducted a similar survey on ‘Situation Assessment Survey of Farmers’ during January - December, 2003 in the rural areas of the country as part of its 59th round. The latest survey is a stark reminder that little has changed for farmers in the last decade. While formal credit flow has multiplied by four times in this period, small and marginal farmers have certainly not benefited. The question is who has benefited from this increased outflow to the agriculture sector? More worrying is the absence of MSP operations and extension services for most farm families- what it means is that the agriculture sector which feeds the nation is not receiving the kind of concerted attention it deserves. 
 

Prerna Singh is a student of Agribusiness at Gokhale Institute of Politics and Economics, Delhi

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