Farmers indebtedness: Into the abyss?

http://www.downtoearth.org.in/content/abyss

Author(s): Jitendra @jitendrachoube1 

Jan 31, 2015 | From the print edition

The situation of India’s farmers has only become grimmer in the past decade, according to the latest National Sample Survey Office report

imageIllustration: Sorit

The lot of the embattled Indian farmer only keeps on getting worse with the passage of time. In the last 10 years, the voluminous debt of Indian agricultural households has increased almost four-fold whereas their undersized monthly income from cultivation has increased three-fold. Even the number of indebted agricultural households has increased in the last 10 years. At the same time, there has been a micro-increment in the number of agricultural households in India.

All this is according to the recent report of the National Sample Survey Office (NSSO), released on December 19, 2014. The report, titled ‘Situation Assessment Survey of Agricultural Households in India’, is based on a countrywide survey of 35,000 households by NSSO during 2012-2013.

It states that 52 per cent of the total agricultural households in the country are in debt. The average debt is Rs 47,000 per agricultural household in this country, where the yearly income from cultivation per household is Rs 36,972.

The report comes after a gap of 10 years. The last Situation Assessment Survey by the NSSO was for 2002-03. In that year, 48.6 per cent of agricultural households were in debt. The average debt was Rs 12,585. And the yearly income from cultivation per household was Rs 11,628. At the time, India had a little less than 89.35 million agricultural households.

In fact, some think that the report may not even be reflecting the entire truth. “The NSSO survey gives us an idea of the existing situation but not the clear picture. In my opinion, it is not just 52 per cent agricultural households that are in debt but 80 per cent,” says Devinder Sharma, a food analyst. “If you adjust for inflation, on an average 7 per cent every year, farmers’ incomes have remained frozen in the past 10 years,” says Sharma.

The other main takeaway from the NSSO report is that the debt is being incurred by the the richer, more prosperous farmers. NSSO data shows that richer agricultural states like Kerala, Andhra Pradesh and Punjab have the highest average outstanding loans per agricultural household, whereas poorer states like Assam, Jharkhand and Chhattisgarh have the lowest amount of average outstanding loans.

This is substantiated by the data which shows that among agricultural households which possess less than 0.01 ha the share was only 15 per cent of the total outstanding institutional loan, whereas for households which possess more than 10 ha the share was about 79 per cent.

Reasons behind the rise

The question then is: why have farmers’ debts increased? Ashok Gulati, former chairperson of Commission for Agricultural Costs and Prices (CACP), thinks outstanding loans to farmers are natural because of increasing intensification in agriculture. “As the intensification of agriculture increases, so does the loan.

The loan would be in the form of working capital, else the fixed capital will increase,” says Gulati.

image

Others believe that this report is like the one in 2002-2003 and brings out the same systemic problems. They add that India has not learnt anything in the past one decade. One such issue is investment in the sector. Even as agriculture has intensified, investment in it is very less. Even the yearly agriculture budget is not more than that of the flagship employment guarantee programme, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

“The current year’s budget of agriculture was nearly Rs 31,000 crore while the MGNREGA budget was nearly Rs 34,000 crore. If we see the seven-year budget, the ministry budget was never more than MGNREGA,” says Sharma.

According to A note on Trends in Public Investment in India by S Mahendra Dev, Director, Indira Gandhi Institute of Development Research, Mumbai, the share of private investment in total investment in agriculture increased significantly over time from about 50 per cent in the early 1980s to 80 per cent in the decade of the 2000s. In other words, the share of public investment declined from 50 per cent to 20 per cent during the same period.

The public sector investment showed a negative growth in the 1980s and 1990s and a growth of 15 per cent in the 2000s. On the other hand, growth rate of private investment increased gradually from 2.5 per cent in the 1980s to 4.1 per cent in the 1990s and 52 per cent in the 2000s.

Another reason debt has increased is that market price of agricultural produce is not commensurate with rising input cost. Dev says that two-thirds of farmers do not get minimum support price (MSP) for their crops and are compelled to sell their crops at lower rates in the open market.

“Seventy-five per cent of farmers in India sell in the open market at lower than fixed MSP. Only the farmers of Punjab and Haryana get MSP. The situation of other states is deplorable,” says Dev. “For instance, in 2009, when I was the chairperson of CACP, in states like Bihar, farmers used to get Rs 700- Rs 800 for paddy when the MSP was fixed at Rs 1,000.”

The reason for farmers not being able to get MSP, according to the NSSO data, is that large numbers of them are not even aware of it. As per the data, only 32 per cent of paddy farmers are aware of MSP. But even then, less than half are able to sell their produce in government procurement centres.

“In collusion with local traders and commission agents, government agencies delay in starting procurement centres by 30 to 50 days. In between, farmers sell their produce to traders at lower than minimum price,” says Yudhveer Singh, a farmers’ leader.

image

Gopal Naik, who teaches agro-economy at IIM Bangalore, feels that total collapse of agriculture extension centres could also be the reason behind the outstanding loans and poor conditions of farmers. “The agriculture extension centres have collapsed. At one time, they were helping and guiding farmers in a number of situations like making the best use of pesticide, fertiliser consumption and modern tech, and making them aware of MSP and the nearest procurement centres,” he says. “Now farmers depend on dealers and sellers of pesticide for all that, which results in losses and non-profitability,” he adds.

Skewed debt

Naik believes the loan-waiving culture of the government also fuels continuation of outstanding loans. “Government policies are uncertain and increase the tendency of not repaying loans. It can also be a reason of increasing outstanding loans.encourage non-repayment of loans. The big land holders have high outstanding loans because they can easily access credit from institutions. They can access loan for other activities like setting poultry and other farms and wait till the government waives their loans,” says Naik.

The data shows that about 60 per cent of the outstanding loans were taken from institutional sources which included government (2.1 per cent), cooperative societies (14.8 per cent) and banks (42.9 per cent). But while the big farmers can afford to take loans, the small farmers still have no access to them.

“Credit from institutional sources is still a dream for small and marginal farmers,” says Jasveer Singh, a Bengaluru-based senior researcher who works on agricultural labourers’ issues. Anshuman Das, an activist who works with small farmers in Jharkhand, thinks that while they do not get institutional loans, they help in maintaining food security of the country.

“The small farmers practise farming which is different from that of big land holders. They try to keep investment low and innovate. For this, they do not access institutions for loans but are still dependent on non-institutional money lenders,” says Das.

The increasing debt and its skewed nature are surely driving many farmers away from agriculture. Agricultural house-holds are moving away to livestock, other agricultural activities, non-agricultural enterprises and wage employment. Data shows that 37 per cent of agricultural households no longer have agriculture as their principal source of income.

The contribution of agriculture in India’s GDP is nearly 18 per cent and it provides employment to nearly 56 per cent of the total workforce of the country. Despite this, as the NSSO report shows, the sector is no longer the first preference of rural households in India. It is heading towards a huge debt crisis and will need serious policy intervention instead of an ad-hoc approach.

Farmers find farming unprofitable

http://timesofindia.indiatimes.com/city/hyderabad/Farmers-find-farming-unprofitable/articleshow/15442483.cms

HYDERABAD: A report released by National Sample Survey Organization ( NSSO) reveals that farmers in rural India spend less than Rs 35 a day. The situation in the rural hinterland of Andhra Pradesh is no better with monthly expenditure hovering at Rs 1,234 per person (or Rs 41 per day).

This when the monthly income of farmers in rural areas is being pegged at Rs 1,054 and at Rs 1,984 for their counterparts in urban areas. Expressing concern over the widening income-expenditure gap, professor Aldus Janayya of Acharya NG Ranga Agricultural University told TOI that the incomes of 84% of the members of the farming community is less than what they spend.

How do the peasants then overcome this gap? Ryots opt for loans at high rates of interest, work as farm labourers/coolies and labour at construction sites. Analysts say that lack of support price for various crops, income security and increased input costs has led to dipping incomes, higher expenses and distress migration among farmers.

“In states like Maharashtra, there is a major shift from agricultural to the horticultural sector. Their farmers have better incomes than our ryots,” said KR Choudary, former advisor to the central government on agriculture.

Thanks to the diminishing incomes from farming, peasant migration has assumed significant proportions in districts like Mahbubnagar, Karimnagar, Anantapur, Adilabad, Prakasam, Vizianagaram and Srikakulam where cultivators are altogether shunning agriculture. “Most of the construction workers in Hyderabad hail from the north coastal districts of Andhra Pradesh while farmers from Mahbubnagar and Anantapur head towards Maharashtra and Gujarat to look for work as labourers at construction sites,” an expert pointed out.

The worst hit are the marginal and small farmers. In 2010-11, the farmers got Rs 6,500 (per quintal) for cotton, Rs 14,000 for turmeric and Rs 12,000 for chilli. But their rates fell to Rs 3,500, Rs 4,000 and Rs 5,500, respectively, in 2011-12.

“The steep fall in remunerative prices has forced us to abandon cultivation. I am working as a construction labourer but neither is that fetching me much,” said Sidda Naidu, who migrated to Hyderabad from Vizianagram.

Agricultural activists blame the government for the present mess. “Paddy is procured by the government, which fixes a low remunerative price. How do the farmers recoup their losses?” pointed out GV Ramanjaneyulu of the Centre for Sustainable Agriculture.

NSSO’S 66TH ROUND SURVEY REVEALS SHOCKING DATA ON RURAL EMPLOYMENT

http://www.transparentchennai.com/2011/08/24/nsso%E2%80%99s-66th-round-survey-reveals-shocking-data/

New employment data released by the National Sample Survey Organization (NSSO) shows that the UPA government generated only 2 million jobs between 2004 and 2009, even as the economy grew at the rate of 8.43 percent annually. The employment numbers present a stark contrast to the Planning Commission’s target of 58 million jobs in the five years between 2007 and 2012. The new NSSO survey numbers have added on to the pile of problems and corruption charges that the UPA has been embroiled in during its second tenure. Many are now referring to this tenure as the phase of jobless growth. The figure, 2 million new jobs, looks worse when one looks at the number of new jobs the NDA government generated between 1999 and 2004 – 62 million.

NSSO’s survey, presently the most credible and widely respected sample survey in India, is now drawing flak from some very influential officials, including the chief statistician of India and the Deputy Chairman of Planning Commission. Right from the methodology to the survey process and analysis, everything is being questioned, maybe to sidetrack the nation from real issues in hand.

Let’s look more closely at what the 66th Round says. According to NSSO data, the employment rate has actually declined in the five year period ended 2009-10 to 39.2 per cent from 42 per cent in 2004-05. This means, if the growth in population is factored out, there has been a decline in employment in absolute terms. When one looks at these statistics along with Census of India projections, it seems that during this 5 year period, only 2 million jobs were added compared with 55 million who joined the workforce aged between 15-59 years.

The report by NSSO also shows an increase in the number of casual workers[1] by 21.9 million, while growth in the number of regular workers nearly halved between 2004-05 and 2009-10, compared with the previous 5 year period. This means that there has been a substantial shift in the structure of labour force in the Indian economy during the period in question. Planning Commission’s Prinicipal Adviser, Pronab Sen, quickly came to the rescue of the UPA government by saying something on these lines– 2009-10 was a severe drought year, possibly forcing some among the self employed (includes farmers) into casual labour.

NSSO’s director general himself spoke of these numbers. He said: “Discussion on these topics in India often loosely uses language of employment and labour market from the more developed world, with misleading and confused conclusions.” He went on to say that these bunched numbers (2 million jobs vs 62 million) hide many distinct structural problems. His explanation suggests that fewer jobs were created because of an improvement in other socio economic indicators; 1. Many young individuals, previously employed in menial jobs have quit, and joined back school. This is evident from increased school attendance and decline in child labour. 2. Fewer people have multiple jobs now because their primary job is enough to help them make ends meet.  3. Participation of women in the labour force has declined sharply, also because of an improvement in other socio-economic indicators (eg: spending more time in school).

However, neither does this explain the increase in the number of casual workers, nor does it tell us about the second jobs that people abandoned. It is still unclear from reports as to what people are finally drawing from the NSSO data. The 64thRound also hinted that we be cautious, but went largely ignored. Should the government be alarmed? Are there some serious corrections required in the economy, to include rapid growth in labour intensive manufacturing as one of our primary objectives? Should we be reminded of the reforms in the 1990s and promises of new jobs in the factory that were made? Whatever the final verdict is, we know the debate that is being generated in academic circles was much needed. Job creation has again gained the importance it always deserved. It also acts a reminder to the government to check how far we have drifted from our vision of inclusive growth.

NSSO Survey 66th Round Reports brings deep urban-rural divide into focus

  1. NSSO survey brings India’s deep urban-rural divide into focus, Per capita expenditure of urban India was 88% higher than rural India: The survey estimated average MPCE in 2009-10 to be INR1054/USD23.71 and INR1984/USD44.63 in rural India  and urban India  respectively implying per capita expenditure level of the urban population was on an average 88% higher than the rural  counterpart. The consumption inequality within the rural population was also considerable with the top 10% of India’s rural population having an average MPCE  (INR2517/USD56.63) 5.6 times that of the poorest 10% (INR453/USD10.19). A similar trend was noticeable within the urban population with the top 10% having a 9.8 times higher average MPCE (INR5863/USD127.85) compared that of the bottom 10% (INR599/USD13.48). Considering the  average rural MPCE  value of INR1054/USD23.71 in isolation would be partially misleading. The rural MPCE median of  INR895/USD20.13 (about  INR30/USD0.67 per day) implies that half the rural population had MPCE below this level. Furthermore, 40% of the rural population had MPCE below INR800/USD18.00 while 60% had MPCE below INR1000/USD22.50. Compared to the rural median MPCE (INR895/USD20.13), the urban median MPCE level was 1.68 times higher at INR1502/USD33.79 with 30% of the urban population having MPCE above INR2100/USD47.24 and 20% having MPCE above INR2600/USD58.49.
  2. Plight of agriculture and inefficacy of safety net programs widening the divide: The plight of the agricultural sector and inefficacy of the rural social safety net programs are the chief factors responsible for widening of the urban-rural divide. Decline in per capita food production, poor state of rural infrastructure such as power, roads etc. and underperformance of social safety net programs like rural job schemes and public distribution systems have restricted rural income growth. The positive impact of India’s thrust on economic growth has so far been largely limited to the urban population and is yet to widely percolate to the rural population. Such a premise implies the need for the government to adopt effective strategies tailor-made for the rural population. Encouraging private sector participation, unilaterally and via public-private partnerships (PPP), to create inclusive and innovative business models to cater to the needs of the rural population is one such strategy being experimented and implemented successfully in other developing countries.