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Agrarian Crisis: Looking beyond the Debt Trap

Agrarian Crisis: Looking beyond the Debt Trap

The agrarian crisis is pushing farmers into distress and ultimately to suicides. It is argued that the cumulative effect of a number of factors is responsible for the present agrarian crisis. These factors, categorised as technological, ecological, socio-cultural and policy-related, are discussed here.

AGRARIAN CRISIS

Looking beyondthe Debt Trap

The agrarian crisis is pushing farmers into distress and ultimately to suicides. It is argued that the cumulative effect of a number of factors is responsible for the present agrarian crisis. These factors, categorised as technological, ecological, socio-cultural and policy-related, are discussed here.

V RATNA REDDY, S GALAB

F
armers’ suicides have become a regular phenomenon and cannot be brushed aside as an event associated with drought or other natural disasters. Despite a good monsoon this year, farmers’ suicides continue to occur in one state or the other. In some states like Andhra Pradesh, they are occurring regularly for the past 10 years irrespective of the rainfall situation, though drought has aggravated the numbers. Number of studies have tried to examine and understand the problem. Most of these studies have, rightly, identified household indebtedness as the main reason for the suicides. While indebtedness is the factor driving farmers towards suicide, the factors that are responsible for indebtedness are less understood. As a result, approaches towards mitigating the end (indebtedness) are proving to be ineffective. Unless the means (factors leading to indebtedness) are understood and corrected, the distress is likely to continue. Suicides are the result of the deep-rooted agrarian and rural distress rather than a temporary phenomenon associated with institutional credit or rainfall. The increasingly regular incidence of suicides across the states points toward a brewing agrarian crisis in the country over the past decade. Agriculture is becoming increasingly an unviable proposition irrespective of rainfall pattern. This is very well reflected in the data from the National Sample Survey Organisation’s 59th round, which reveals that a third of the farmers indicated that farming is not profitable and another 40 per cent of the farmers are ready to give up farming in favour of a job. On the whole, 70 per cent of the farmers are frustrated with their profession [Deshpande and Prabhu 2005].

The contribution of agriculture is declining at a faster pace than the population depending on it. While agriculture’s share in GDP is 25 per cent, 58 per cent of the population still depends on agriculture. Agriculture recorded the lowest growth rate of 1.86 per cent per annum during the last decade (1995-96 to 2003-04) as against 3.33 per cent during the earlier period. The value addition from agriculture has also recorded the lowest during the last decade. The decline is much sharper in per capita terms. Growth in per worker income in agriculture has declined from 1.16 per cent (1988-89 to 1993-94) to 0.28 per cent (1998-99 to 2003-04) during the last decade. On the contrary, per worker income from non-agriculture sector has gone up from 3.31 per cent to 4.30 per cent during the same period [Chand 2006].

Here an attempt is made to identify the main drivers of the agrarian crisis that are pushing the farmers into distress and ultimately leading to suicides. It is argued that aggregate and cumulative effect of a number of factors is responsible for the present agrarian crisis. For the sake of simplicity these factors are categorised under four groups, namely, technological, ecological, socio-cultural and policyrelated. However, these categories are not watertight compartments, as some of the factors are inter-connected. In what follows, we discuss these factors in detail, without attaching any order of importance.

Technological Factors

Technology is critical for improving land productivity. The green revolution technology in the late 1960s has helped improving land productivity in the irrigated regions. Land productivities in these regions have saturated during the 1990s after recording continuous growth for more than two decades. This is mainly due to the limits of the technology itself and the environmental problems associated with high input-intensive agriculture. This has also resulted in the shift towards marginal lands in these regions. Though the need for improving the productivity in dry land regions was recognised

Economic and Political Weekly May 13, 2006

way back in the 1980s, there is no breakthrough in finding an appropriate technology for these regions. In fact, the returns to investment in agriculture are substantially higher from rain-fed regions than from irrigated regions. Incidentally, it is in the rain-fed regions that the majority of the poor live. In the absence of appropriate technologies to boost land productivity of rain-fed agriculture, provision of irrigation and moisture conservation have become critical for improvement or stabilisation of crop production in these regions. While provision of irrigation has been slow due to locational problems, the impact of moisture conserving technologies like watershed development has been limited.

The main fallout of this technological deadlock is the increase in input intensity in order to maintain the productivity levels in the degraded and marginal lands. Even the marginal growth in productivity is achieved at an increasingly higher input costs, adversely affecting the profit margins of the producers. In fact, input costs are growing at a faster rate than value of output during the last decade [GoI 2005]. On the other hand, some of the recent innovations in biotechnology are proved to be neither land saving nor cost saving. On the contrary, some of them are found to be cost escalating. As a result, farmers are experimenting with crops and inputs in order to maintain or improve their disposable incomes that are falling short of ever increasing costs of living. The pressure to take risk is driving them to invest, even at high cost of borrowing. In the absence of a proven technology, agriculture now has become a high risk and high stake gambling, which is causing the distress. Though farmers are familiar with naturerelated risks, they are not able to cope with the technology-related risks due to high stakes. Even the new gene technologies are limited to few crops and are biased against fragile (drought-prone) regions and the poor [Pingali and Raney 2005]. Moreover, presently the spread of these technologies is limited to a few countries and would take a long time to become accessible to more farmers. Drought-prone regions are still waiting for the advent of appropriate technologies, despite the best efforts of more than two decades.

Ecological Factors

Ecological exigencies leading to farm distress are mostly human induced rather than natural. Rainfall analysis during the last 100 years, especially in drought-prone areas, shows little variation in quantity or pattern. Ecological factors include mainly the declining quality of land and water resources. The use of imbalanced and high input composition, i e, organic and inorganic has led to decline in soil quality. The decline in soil quality is often compensated through further use of chemical fertilisers. In some regions like Punjab, degradation is rendering lands unfit for paddy and wheat cultivation. Similarly, the excessive use of pesticides over the years has not only affected the biodiversity but also led to increase in resistance among pests. This has resulted in higher costs or/and crop failures. The advent of bore well technologies has facilitated the over exploitation of groundwater resources in many regions. The capital intensive and lumpy nature of these investments coupled with well failure (depletion of water table), is one of the main reasons for indebtedness in the farm community. The problem of groundwater depletion is due to the neglect of the linkages between replenishing mechanisms like tanks. Most of these water bodies are in disuse in the absence of investment, public or private.

Here also the result is high costs with little or no impact on productivity. While the intensive chemical fertiliser use in 1970s and 1980s was instrumental in increasing land productivity significantly, the spread of their use to degraded soils is only pushing the costs up. The farmers have realised the importance of maintaining the balance but the process is slow in the absence of policy support. The spread of cost effective pest management practices like IPM is also slow. On the other hand, overexploitation of groundwater is unabated in the absence of regulation/management and proper information on the ecological constraints.

Socio-Cultural Factors

While the above-discussed factors are integral to the agriculture, socio-cultural factors are catalytic in the process of agrarian crisis. The socio-cultural canvas of India has been going through rapid changes during the last two decades, especially during the 1990s. Society has become more open and outward. The media explosion in the 1990s has spread this to rural areas as well. As a result, lifestyles have changed. Expenditure or investment portfolio of rural households has changed. Education has become important. People have become health conscious. Lifestyle induced expenditures like consumption of milk products, soft drinks, cosmetics, entertainment, etc, have increased. Over the years quality education and health have become costly. The gap between publicprivate and rural-urban services has widened significantly. This is more so and alarming in the case of health and education. Rural government schools are only serving the children from economically and socially backward households, while rich send their children to urban/private schools. The quality of education is so low in the rural government schools that no parent thinks his/her child would be fit for competition outside. Those who send their children to these schools do so because they cannot afford private schools. In fact, this is one of the reasons for high dropout rates in rural Andhra Pradesh. Poor quality public education is not as dangerous as poor quality public health. Households are found spending increasing amounts on private health services as the quality of public health services is deteriorating by the day. Public dispensaries remain sans facilities and medicines. The pathetic conditions of government hospitals are striking even in urban areas including capital cities like Hyderabad. One need not venture into rural areas to understand the conditions of the primary health centres. Households tend to resort to all possible means in order to save their dear ones. Given the high health cost, coupled with the unscrupulous means adopted by the private practitioners, one serious health problem can cripple a household in the long run.

On the whole, the cost of survival has gone up substantially. These costs are over and above the standard expenses on lifecycle events like marriage, death, etc. But, returns to agriculture have stagnated due to technological and ecological constraints. The mismatch between the earnings and expenditure is reflected in the decline in the celebration of lifecycle events and food consumption as well. While unable to control these expenses, farmers are trying to experiment with new seeds, inputs and in new areas in order to enhance their incomes. In the process they are getting entrapped in debt. They borrow and invest with a hope to reap high returns without knowing the constraints they are working against.

Policy Factors

The aggregated and cumulative effects of technological and ecological problems have snowballed into agrarian crisis due to distorted or unjudicious agrarian policies. And the socio-cultural elements have

Economic and Political Weekly May 13, 2006 further aggravated the crisis. There has been an apparent policy bias against agriculture in general and rain-fed agriculture in particular. The overall public capital formation in agriculture is declining over time. Public investment in agriculture has declined from 4 per cent of agriculture GDP (Rs 70 billion in 1993-94 prices) in early 1980s to 1.5 per cent (Rs 46 billion in 1993-94 prices) in early 2000 [GoI 2005]. Dry land agriculture has been long neglected. The public investments in these regions are relatively low when compared to endowed (canal irrigated) regions. A lion’s share in public subsidies goes to endowed regions in the form of fertiliser and irrigation subsidies. In fact, farm subsidies have gone up from 3 per cent of agriculture GDP in the early 1980s to 10 per cent in the early 2000. While huge investments were made on creating irrigation potential in the endowed regions, irrigation is left to private initiatives (groundwater exploitation) in the rainfed regions. Very little is done to revive the traditional water bodies like irrigation tanks that help in replenishing groundwater. On the contrary, tanks and wells are treated as substitutes rather than complements.

There was no policy emphasis on dry land agriculture technologies or promotion of practices. The price policy is biased in favour of wheat and paddy to the neglect of other cereals and dry land crops like groundnut. Input policies like power and water have encouraged inefficient and excess use of these resources, resulting in ecological problems. Even the water efficient methods of cultivation like system of rice intensification (SRI) are not finding support from the agriculture department. SRI is observed to have twin advantages of labour intensity and water saving [Reddy et al 2005]. Government should actively involve itself in promoting SRI, especially in the water scarce regions. Policies should look beyond the traditional way of promoting land saving technologies. It is high time that the priorities are shifted towards water saving and water use efficiency as well, which would hold the key to future growth, especially in the rain-fed regions. Unless government starts caring about water use efficiency in agriculture, it is unlikely that the attitude of farmers would change.

Rural credit policies have encouraged private moneylenders. There are no consistent seed or other input policies and often the quality is neglected. Extension services in agriculture are neglected resulting in poor coverage and ill qualified services. The role of extension has declined over time, leaving farmers in the dark regarding, quality of inputs, soil quality, availability of groundwater, etc. According to the 59th round of NSSO farmers do not get sufficient information from the extension worker, instead they get from progressive farmers and input dealers [Deshpande and Prabhu 2005]. Input dealers have often lured farmers to adopt high input intensive cropping patterns. This has led to the spread of high input intensive and remunerative crops like cotton into the marginal lands and fragile resource regions causing further degradation of resources, especially groundwater, and cost escalation.

In the light of increased stress on the resources, farmers in some regions have

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    Economic and Political Weekly May 13, 2006

    tried to shift towards less water intensive and better remunerative crops like horticulture. But, in the absence of policy support in providing conducive environment like markets, stable prices, storage and processing facilities, these efforts are fizzling out. While the value addition to the agriculture produce has gone up substantially, the share of the farmer in the additional value is zero. Farmers are not encouraged or supported to get involved in the process of value addition. In the light of declining profit margins, share in the value addition is the only way that a farmer can increase his disposable income. At the same time, education and health policies have not only encouraged private sector but have also resulted in a wide quality gap between private and public. This, coupled with the neglect of rural areas, has escalated the household costs on education and health. On the other hand, policy support to new activities like shrimp farming is not only causing ecological problems but also adding to rural distress. It is estimated that shrimp farming in Andhra Pradesh alone is cutting about one million person days of employment per year, as farmers convert paddy lands into shrimp ponds. Therefore, policies are either not conducive or against the rural population.

    The present agrarian crisis cannot be simply addressed through dealing with indebtedness or strengthening the rural institutional credit systems. There is no rationale in pumping money into an unviable enterprise. The crisis is more to do with the viability of agriculture sector itself, consequence of prolonged neglect and the absence of a breakthrough in production technology. Such crisis was avoided during 1960s with the advent of green revolution technology. The green revolution technology could be still effective, if only we could provide irrigation to the rain-fed regions. No such technology, especially for dry lands, is visible on the horizon presently. Though the crisis is less intensive in irrigated tracts, it is only time before they come under the grip of technology and ecological constraints. The signs are evident in regions like Punjab and Haryana – green revolution hot spots. One pertinent question could be why the incidence of suicides is higher in states like AP? The decline in the share of agriculture has been sharper in AP, consequent to undue importance given to non-agriculture sectors. The share of commercial crops (high risk and stakes) is higher and the rural urban divide is much sharper.

    One way of dealing with the crisis is switching over to cost effective and ecologically sustainable input compositions. These practices are currently adopted on a small scale and can be expanded only through policy support. Second, appropriate policy support is needed to reduce the gap between producer and consumer prices. Presently, the gap is anywhere between 5-10 times in the case of fruits and vegetables. Providing infrastructure facilities that would ease the information and marketing bottlenecks can narrow this gap down. The gap between producer and consumer prices is much wider in the case of processed foods, including cereals where processing costs are marginal. Therefore, farmers and rural communities ought to be made partners in the value addition of agricultural produce, processed or unprocessed. This could be possible with the cooperative marketing models such as NDDB (Amul), where the role of middlemen is marginal.

    EPW

    Email: vratnareddy@cess.ac.in

    References

    Chand, Ramesh (2006): ‘India’s Agricultural Challenges and Their Implication for Growth and Equity’, paper presented in the CESS Silver Jubilee Seminar on Perspectives on Equitable Development: International Experience and What Can India Learn? Centre for Economic and Social Studies, Hyderabad, January 7-9.

    Deshpande, R S and Nagesh Prabhu (2005): ‘Farmers’ Distress: Proof beyond Question’, Economic and Political Weekly, Vol XL, Nos 44 and 45, October 29-November 4.

    GoI (2005): National Accounts Statistics, Central Statistical Organisation, Government of India.

    Pingali, Prabhu and Terri Raney (2005): ‘From Green Revolution to the Gene Revolution: How Will the Poor Fare?’ ESA Working Paper Nos 05-09, Agriculture and Development Economics Division, the Food and Agriculture Organisation of the United Nations.

    Reddy, V Ratna, P Prudhvikar Reddy, M Srinivasa Reddy and D Sree Rama Raju (2005): ‘Water Use Efficiency: A Study of System of Rice Intensification (SRI) Adoption in Andhra Pradesh’, Indian Journal of Agricultural Economics, Vol 60, No 3, July-September.

    Economic and Political Weekly May 13, 2006

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