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To What Extent Are India's Farmers Indebted?

https://thewire.in/agriculture/dimensions-of-farmers-indebtedness-the-extent-of-indebtedness

A farming household in 2013 had more than 630% higher debt to asset ratio than one in 1992.

To What Extent Are India's Farmers Indebted?

Representational photo. credit: Flickr/Michael Foley (CC BY-NC-ND 2.0)

Sandeep Kandikuppa
Sandeep Kandikuppa
30/NOV/2018

This is the final part of a two-part series exploring the phenomenon of farmers’ indebtedness in India. Read the first here. 

In this section, I look at the mean debt to asset ratio, who is likely to have a higher DAR, and who is likely to have a DAR in excess of 60%, i.e., be over-indebted. Before I proceed, I would like to point that this the above criterion for being over-indebted seems to have been drawn with urban populations in mind; nevertheless, I felt that this might be a good starting point to gain some perspective into farmers’ indebtedness.
Debt to asset ratio among farmers
Debt to asset ratio among farmer households is less than that of the non-farmer households. However, households that have casual labour as their primary occupation (based on net income earned from the occupation) are likely to have a significantly higher DAR than the other rural households.
Also read: Dimensions of Farmers’ Indebtedness: Who is Indebted?
SC households were likely to have 8.5% higher DAR than households belonging to the general category; and OBC households were likely to have 7.7% higher DAR than general category households. Among farmer households, SC households were likely to have 15.2% higher DAR and OBC households 7.8% higher DAR than those belonging to the general category.
In short, from the data, indebtedness is likely to be higher among farmer households belonging to  SC and OBC categories than among those belonging to the general category. Farmer households for whom casual labor is the principal occupation, i.e., households which have farming operations but derive their primary income from casual labor, are likely to have a significantly higher number of standing loans than the other households among the rural population.

Mean Debt to Asset Ratio Among Rural Households (%) All figures are percentages. Source: NSSO 1992, 2003, and 2013

Perhaps the clearest sign for the rising indebtedness among farmers is when we look at DAR over time. A farming household in 2003 was likely to have 17% higher DAR than a farmer household in 1992; and one in 2013 more than 630% higher (this is not a typo) than one in 1992. This is an astounding figure that begs an explanation.
What accounts for this giant leap?
One possible explanation could be that borrowing among farmers has grown exponentially while the value of their assets remained stagnant or at least not growing as fast as the liabilities are piling up. If the value of assets is way below that of the liabilities, what prompts lenders to extend credit to the farmers? During my conversations in Anantapur, Andhra Pradesh and Sangareddy, Telangana, I was told that lenders often assessed the value of the land before extending credit to the farmers. Now in rural areas, land has the highest proportion in the total asset value. Seemingly, rising prices of land assure the lender of its value as security against loan.
That being the case, it might point to the possibility of debt being the current day tool for primitive accumulation. But then the question is, if the value of land has been increasing is it not adequately captured in NSSO? Could it be possible that the method of valuing land by NSSO underreports the actual value of land?
NSSO values land as per its “normative/guideline values,” when in reality the value of the land might be significantly higher, in no small measure owing to speculation over it. So, would the debt to asset ratio be lower, at least in places like Sangareddy and Anantapur, which are closer to major urban centres (Hyderabad and Anantapur town respectively) if the real value of land were taken into account by NSSO?
It may. But it still does not explain the skyrocketing debt to asset ratio over the two decades between 1992 and 2013. Nor does it take anything away from the fact that over a period of time, farmers find themselves with one loan too many, and are forced to juggle them by borrowing from one source to pay off another. They find themselves in an inexorable debt trap, and when they reach a tipping point, drastic measures like suicides ensue. These are mere possibilities and it is beyond my modest knowledge to fully explain the startling growth in the debt to asset ratio among farmers.

Among the states, farmers in Andhra Pradesh, Rajasthan, and Tamil Nadu are likely to have a significantly higher DAR than those in other states. It seems almost uncanny that farmers from these states have been protesting and demanding relief from the growing debt burden.

Negative correlates to over-indebtedness
Being dependent on debt to a high extent can prove to be physically, mentally, economically, and environmentally detrimental to the households themselves and to rural communities at large. There is scholarly work which shows that those who are in debt tend to show poorer psychological health indicators than those who are not. In rural India, being unable to clear one’s debt is negatively correlated with social status.
During my conversations with a farmers’ family in Sangareddy district, Telangana, I was told of an instance where a farmer was looking to borrow some money so that he could repay another loan that he had taken from a public sector bank. However, the moneylender he regularly depended on refused to lend him any further amount until he had cleared an outstanding loan. Despite pleas, the moneylender did not relent. Fearing a loss of face, this farmer committed suicide.
Instances of informal moneylenders or representatives of micro-finance institutions publicly shaming people who are unable to pay their monthly instalments; or of public sector banks seizing assets like livestock in lieu of unpaid loans are also not unheard of. From my conversations with farmers in both Telangana and Andhra Pradesh, such incidents are seen by farmers as bringing shame to them and can push them to take drastic steps.
Another consequence of high debt is that farmer households are forced to work under increasingly stressful conditions for meagre pay. A recent article in The Wire mentions how farmers migrated from Odisha to Sangareddy, Telangana to work in brick kilns for extremely meagre pay, so they could clear their loans back home. Such stories are heard even in Andhra Pradesh and Telangana. Farmers in Anantapur narrated that if the rains were sub-par even in one season they would have to migrate to either Bangalore, Tirupati or even Kerala, in search of daily labor so that they can keep servicing their loans back in their village.
In many cases, the moneylenders determine what crops are to be grown, how they are grown, what inputs are to be used, and where those inputs have to be procured from (mostly from the moneylender himself). This forces the farmer to cede her agency over farming decisions. What also became apparent to me was that mounting debt exacerbates the unviability of agriculture as an economic activity and pushes farmers into a seemingly endless spiral of debt.
Farmers need credit to access the other means of agricultural production, viz. seeds, fertilisers, draught power and so on. In a place like Anantapur where rainfall has becoming unpredictable and where chances of a cropping season failing are high, farmers tend to depend on debt not only to fund agricultural inputs but also their daily needs like food or monthly groceries. This piles on already high debt burdens. And as the debt burden mounts, farmers are forced to resort to more intensive agricultural practices which in turn forces them to depend on debt to fuel such practices.
As I conclude I am reminded of a phrase in Telugu that often cropped up during my conversations with farmers in Anantapur: “appe teerchaalana, thinde tinaalana” – literally translating to “with the limited money that we have, should we feed ourselves or spend it clearing our loans?” This statement encapsulates the frustration that farmers experience – of having to make hard choices between servicing a loan and saving face, and the future prospects of getting another loan or surviving and meeting family expenses.
In the process of trying to find the balance between these competing demands, farmer households often find that their horizons of planning have shrunk and they are forced to deal with the here and now, disregarding future costs and consequences. Many times, this results in them making decisions like having their children drop out of schools, giving up agriculture altogether, leaving their families behind and migrating to cities to work on a construction site under hazardous conditions, or taking one’s own life. This shrinking of choices is perhaps the most tragic outcome of indebtedness.
The author would like to thank members of All India Kisan Sabha, Anantapur and Sangareddy, and to Rahul M. of PARI. 

Dimensions of Farmers’ Indebtedness: Who is Indebted?

https://thewire.in/agriculture/famers-march-indebtedness

Farmers are often forced to take additional loans to service current loans. Juggling a large number of standing loans can take a toll on their overall well-being.

Dimensions of Farmers’ Indebtedness: Who is Indebted?

Representational photo. Credit: NoDerivs 2.0 Generic (CC BY-ND 2.0)

Sandeep Kandikuppa
Sandeep Kandikuppa
29/NOV/2018

This is part one of a two-part series exploring the phenomenon of farmers’ indebtedness in India

Indeed, indebtedness has been at the heart of every major farmers’ movement that India has witnessed, both in colonial and post-colonial times. Whether it is the Deccan Riots of 1875 or the Telangana Struggle of 1949-51, or the more recent Kisan Long March earlier this year and the upcoming Chalo Dilli, the problem of indebtedness has been at the root of farmers’ angst, and relief from it one of their key demands.
Defining indebtedness 
So, what is farmers’ indebtedness? Who among the farmers is more likely to be indebted? These are the questions that I address in my two-part essay. I use data from the All India Debt and Investment Survey for the years 1992, 2003, and 2013, collected by National Sample Survey Office (NSSO) to look at these dimensions of farmers’ indebtedness.
Indebtedness has been described as impoverishment by debt (Guerin, I et.al, 2013), or as a situation where a household is caught in spiral debts (Taylor M, 2011). Taylor further described it as a situation where there are a large number of standing loans, a high rate of interest, and no real hope of clearing the principal amount.
Scholars have measured indebtedness in a wide variety of ways. Some have used a self-reported sense of being indebted, using indicators like attitudes towards earning, saving, and spending money while others have looked at the frequency of taking loans and participation in debt markets. Yet others have looked at the extent to which households sacrificed basic needs, witnessed a dilution of their economic coping strategies and an erosion in the households’ ability to live with honour.
Also read: For the Third Time in Three Months, Farmers to Protest in Delhi
The NSSO looks at indebtedness along three axes; the number of standing loans, the average amount outstanding at the time of survey, and the ratio of the total amount outstanding to the total value of assets (called debt-to-asset ratio or DAR). In this part of the essay, I focus on the standing loans.
Survey findings
How many farmer households have a standing loan or uncleared loans? According to the data from AIDIS, more than 70% of the rural population has one or more standing loans. Nearly 74% of the farmer households were in debt in 2013, as opposed to 64% of the non-farmer households. Since 1993, the percentage of farmer households in debt has increased by more than 12 percentage points. Prima facie, a higher proportion of large farmers are in debt, than those with marginal and small  landholdings; similarly, a higher proportion of farmer households in the top quintile are in debt when compared to those in the lower quintiles.
Digging deeper into the data reveals a more nuanced story. I find that caste is an important determinant of whether a household has standing loans or not. For instance, a household from the Scheduled Caste (SC) community is more likely to have a standing loan than those in the general category, as is a household belonging to the other backward caste (OBC).

Percentage of Farmers Indebted. Source: NSSO 1992, 2003 & 2013. All figures are percentages. Source: NSSO 1992, 2003, and 2013

A farmer household in 2013 is 22 percentage points more likely to have a standing loan than a farmer in 1992. Thus, the likelihood of a farmer being in debt has been increasing over the past two decades. Among the states, farmers from Andhra Pradesh, Telangana, Punjab, Kerala, Maharashtra, Karnataka, Tamil Nadu, and West Bengal are more likely to have a standing loan than those in other parts of the country.
Having a standing loan is only a small sliver of the story. In order to better gauge indebtedness, we need to look at the number of standing loans that a farmer household has. On an average, in 2013, a farmer household was likely to have 20 percentage points higher number of standing loans than a non-farming household. Among farmers, SC households had a higher number of standing loans than a household from the general category. More significantly, a  farming household in 2013 would have had 132 percentage points more standing loans than a farming household in 1992; a clear indication that the proclivity to borrow has increased significantly over the past two decades.
Among the states, farmers from Andhra Pradesh, Telangana, Punjab, Tamil Nadu, Kerala, and West Bengal are likely to have a higher number of standing loans than the farmers elsewhere. It seems to be more than a coincidence that farmers from some of these states are participating in large numbers in the various movements and struggles that we are witnessing today.

Also read: Agricultural Loans Worth Rs 59,000 Crore Went to 615 Accounts in One Year

This is a hard question to answer for it can vary from person to person. For instance, a salaried employee may be able to service two to three loans comfortably. But for a small farmer to service even two loans might be very difficult. What these numbers suggest is a higher dependence on loans among farmers.
During June-July 2018, I  visited a few villages in Sangareddy district, Telangana, and Anantapur, Andhra Pradesh to take stock for my dissertation, and had an opportunity to interact with a few farmers. What came across through those conversations was the sheer everydayness of loans in their lives. Whether it be because the bank was taking its time disbursing the loan or because someone at home got ill or because the household had to host a large number of guests and they had run out of ready cash, debt stepped in to address each of these situations, and more.

Mean number of Standing Loans. Source: NSSO 1992, 2003 & 2013

One farmer I spoke to mentioned that although he had a particularly good crop that season, because the middleman who sold his produce at the market took long to return with the proceeds, he lacked access to money for the next cropping season; and so he had to borrow. Another thing that transpired during my interactions with farmers, something that is widely acknowledged today, is how farmers are forced to take additional loans to service current loans. As one farmer in Sangareddy mentioned, if a lender gets too restive, the borrower simply takes money from another lender and repays the former.
Done repeatedly, juggling a large number of standing loans can take a toll on the overall well-being of farmer. The number of standing loans does not, however, fully explain the sense of despair due to indebtedness among farmers. In the second part of my essay, I look at the debt-to-asset ratio to understand the extent of indebtedness.

Sandeep Kandikuppa is a Doctoral student at the University of North Carolina, Chapel Hill.

Despite Increased Average Income, Farmers' Debt Remains an Issue

Part -1

Despite Increased Average Income, Farmers’ Debt Remains an Issue

While the average income for a farming household has increased to Rs 8,931, 50% of all households earned less than Rs 5,500 per month and more than 50% households remain indebted.

https://thewire.in/agriculture/despite-increased-average-income-farmers-debt-remains-an-issue

Despite Increased Average Income, Farmers' Debt Remains an Issue

Representative image. Credit: Reuters

Siraj Hussain
Siraj Hussain
22/AUG/2018
This is part one of a two-part series that critically analyses NABARD’s financial inclusion survey. Read part two here.
On August 16, the vice-chairman of Niti Aayog released NABARD’s All India Rural Financial Inclusion Survey, appropriately named ‘NAFIS’, which in Urdu means decent. NABARD management has truly acted ‘NAFIS’ by commissioning this detailed survey and then publishing its finding rather quickly. The survey was conducted between January 2017 and June 2017, covering 40,327 households in 245 districts spread across 29 states. The reference period for agriculture related data was from July 1, 2015 to June 30, 2016 (agriculture year, AY, 2015-16).
In its survey, NAFIS includes semi-urban places having a population of up to 50,000. At an all India level, NAFIS sample of households includes 84% rural and 16% urban households. But in several states, semi-urban households had a higher ratio (Kerala 57% and Tamil Nadu 40%). NAFIS defines an agricultural household as one that received value of produce exceeding Rs 5,000 during FY 2016 from agricultural activities. Other households were classified as non-agri households.
The National Sample Survey Office (NSSO), Ministry of Statistics and Programme Implementation, conducted a Situation Assessment Survey of Agricultural Households (SAS) in its 70th round (January – December, 2013). Data was collected from 4,529 villages in 35,200 households and it was published in December 2014 as ‘Key Indicators of Situation of Agricultural Households in India’. Semi urban areas were not included in this survey and an agricultural household was defined as one that had received Rs 3,000 as value of annual agricultural produce.

It is clear that the two surveys are not entirely similar and as compared to SAS, NAFIS may have overstated the income of households because its level of threshold income to be categorised as an agricultural household is 67% higher than under the NSSO survey.

NAFIS finds that the monthly income of agricultural households in AY 2016 was Rs 8,931. As per SAS, average monthly income of an agricultural household in January-December 2013 was Rs 6,426. Based on this data, a government committee on doubling of farm income (Dalwai Committee) calculated that an average agri-household earned Rs 8,059 in 2015-16.
Even though SAS and NAFIS data are not comparable, there is an impressive increase of 39% in nominal income of agri-households between 2012-13 and 2015-16. This is even before the government’s implementation of new schemes of crop insurance (Pradhan Mantri Fasal Bima Yojana), e-NAM, soil health cards, Pradhan Mantri Krishi Sinchai Yojana and announcement of substantial hike in MSPs (in Kharif 2018).

The Pradhan Mantri Fasal Bima Yojna is more a profit-making enterprise for private companies than an insurance scheme for farmers. Credit: Well-Bred Kannan (WBK Photography)/Flickr CC BY-NC-ND 2.0

The survey shows that incomes of agriculture households has increased on average. Credit: Well-Bred Kannan (WBK Photography)/Flickr CC BY-NC-ND 2.0

Income data presents a positive outlook
The data of income for states presents an even more positive outlook. In the three-year period, nominal monthly income of agri-households in Bihar increased from Rs 3,558 to Rs 7,175 (an increase of 101.6%) and in West Bengal from Rs 3,980 to Rs 7,756 in WB (increase of 94.9%). However, the income in J&K decreased from Rs 12,683 to Rs 9,355 per month, perhaps due to floods in September-October 2014. It is possible that agri-households in WB, a top performing state under MNREGS, may have earned relatively higher income from wages under the scheme. But Bihar continues to perform poorly under MNREGS and agri-households may have found employment in other states, which may have contributed to such a high increase in three years. In any case, wages under MNREGS in Bihar and WB in 2018-19 are Rs 168 and Rs 191 respectively, while the minimum wage fixed by these states are Rs 237 and Rs 234 respectively.
NAFIS has not provided segregated data of source of income of households for each state. Therefore, the real drivers of high growth in income of farmers in Bihar and WB remain unexplored. To get a fair sense of what is driving the income of agri-households in various states, we may have to wait for the next SAS and NAFIS, which will capture the data for AY 2018-19. One hopes that both the organisations will not change the methodology for collection of data so that actual progress in agriculture and in rural economy can be analysed.
NAFIS also provides information on distribution of households by monthly income. 50% of all households (in rural and semi-urban areas surveyed) earned less than Rs 5,500 per month in 2015-16. This low level of income confirms the impoverishment of rural areas and the urgency of increasing their income from sources other than cultivation of crops. The survey also shows that smaller the size of landholding in the household, larger is the share of income from livestock rearing. With rising incidents of violence against traders of animals, there is every possibility that future surveys of NSSO and NAFIS may show a decline in income from rearing of animals. It is likely to affect small and marginal farmers and landless households more adversely than other households.
This survey, like SAS earlier, confirms that wage labour provided 34% of income of agri-households. In case of marginal farmers, the share of wage labour was more than 40%. In case of non-agri households, 54% of income came from wage labour. It is clear that generating employment in labour intensive sectors like agro industries, construction and textiles is crucial for increasing the income of rural and semi-urban households. The downturn in construction industry would have hit the income of both agri and non-agri households and is likely to reflect in subsequent surveys.

The Swaminathan Commission mentioned that they were referring to C2 cost when making their recommendation. Credit: Navaneeth Kishor/Flickr CC BY 2.0

Due to rising incidents of violence against traders of animals, there is a possibility that future surveys may show a decline in income from rearing of animals. Credit: Navaneeth Kishor/Flickr CC BY 2.0

Savings and indebtedness
The NAFIS data on household savings is not only surprising but also reassuring. About 55% of agri-households informed that they had saved money in the previous year. The north-eastern states showed higher level of savings with more than 90% households confirming that they had saved. Surprisingly only 21% households in Punjab and 23% households in Haryana mentioned any savings. It is surprising that the states having highest income are saving the least. It is however heartening that 94% savings are in institutional agencies. Out of annual income of Rs 1.07 lakh, the agri-households saved Rs 9,657 which is a handsome 9% of annual income. Poor households in rural India are thus setting an example for showing a mirror to much better off urban India!
Another important finding of the survey is high level of indebtedness (defined as presence of any outstanding loan). Similar to level of indebtedness in SAS, about half (52.5%) of agri-households confirmed in NAFIS also that they were indebted. The level of indebtedness rose with the size of landholding in the household. Bihar (48%) and WB (37%) show much lower level of indebtedness than AP (76%) and Telangana (79%). Thus the correlation between indebtedness and suicides is rather clearly established. It is, however, a matter of further research why agri-households in these two states are so highly indebted.

Part 2:

Despite Penetration of Institutional Credit, Farmers Continue to Rely on Moneylenders

NABARD’s survey shows that lengthy procedure for sanction of loans by institutions, demand for collateral security and short term of crop loan were the reasons for farmers seeking loans from non-institutional sources.

Despite Penetration of Institutional Credit, Farmers Continue to Rely on Moneylenders

Representational image. Credit: CIAT/Flickr CC BY-SA 2.0

As an institution providing refinance to cooperative and regional rural banks for agricultural credit, NABARD’s interest in understanding the extent and width of coverage of farmers for obtaining crop loans is only natural. NABARD therefore devotes several chapters in its All India Rural Financial Inclusion Survey (NAFIS), to financial issues (household savings, investments, indebtedness, insurance and pension, microfinance and financial knowledge) of agricultural and non-agricultural households. Since indebtedness of farmers is considered a major factor leading to farmer suicides, a detailed examination of the survey findings would be in order.
The All India Debt and Investment Survey conducted by NSSO in its 70th round had found that as on June 30, 2012, 35% of cultivator households were indebted. NAFIS finds that in AY 2015-16, 47% of agri-households were in debt. Though the sample in two surveys is different we get a sense of increasing penetration of credit to farmers.
Launched by the A.B. Vajpayee government in 1998, the kisan credit card (KCC) scheme enables farmers to get credit limit to purchase crop seeds, fertilisers, diesel and other inputs at 4% interest (if loans are repaid in time). The farmer can draw money to the extent of limit sanctioned, as per requirement and as many times as she wants. For every crop cycle, the farmer does not have to go to a cooperative or bank for sanction of loan. NAFIS found that only 10.5% agricultural households held a valid KCC.

The Situation Assessment Survey of Agricultural Households during the NSSO’s 70th round (January – December, 2013) had found that out of 15.6 rural households in the country, nine crore were agricultural households. According to a reply given in Lok Sabha on March 9, 2018, there were 2.77 crore active KCCs as on March 31, 2017. Even though NAFIS left out agricultural households earning less than Rs 5,000 per month from agri and allied operations, the penetration of KCCs at 10.5% appears rather low. In states having poor coverage of KCC, a massive drive of inclusion is required to disseminate benefits of borrowing through KCCs rather than going to money lenders for loans.

Indebtedness is one of the primary reasons for farmers’ suicide. Representational image. Credit: Katrin Park/Inernational Food Policy Research Institute

Borrowing from non-institutional sources
In a worrying finding from the survey, it is observed that 30.3% of agri-households still borrowed money from non-institutional sources like money lenders, relatives and input suppliers etc. About 9% agri-households borrowed from both institutional and non-institutional sources. In another encouraging sign of reducing dependence on money lenders, the NAFIS survey finds that out of average borrowing of Rs 1.07 lakh in AY 2015-16, agri-households borrowed about Rs 30,000 (28%) from non-institutional sources. Lengthy process for sanction of loans by institutions, demand for collateral security, and short term of (crop) loan were cited as reasons for seeking loans from non-institutional sources. NABARD has its task cut out for increasing the penetration to small and marginal farmers.
In another worrisome sign of dependence on money lenders, the NAFIS survey finds that out of average borrowing of Rs 1.07 lakh in AY 2015-16, agri-households borrowed about Rs 29,000 from non-institutional sources (27%). Lengthy procedure for sanction of loans by institutions, demand for collateral security and short term of (crop) loan were cited as reasons for seeking loans from non-institutional sources. NABARD has its task cut out for increasing the penetration to small and marginal farmers.
NAFIS also covers the penetration of crop insurance, finding that out of households which had taken any loan for agricultural operations, only 6.9% reported they had any crop insurance. It is thus a myth that banks deduct the insurance premium from all farmers who have taken loan on KCC. Premium is payable only on crops notified by the state government.
It is no surprise that only 1.7% of agri-households owning milch animals reported insurance for their livestock. The plight of uninsured agri-households who lost their animals and other agri-assets in the Kerala floods of August 2018 can only be imagined. In fact, while launching the Pradhan Mantri Fasal Bima Yojana (PMFBY), in April 2016, the government came up with a package insurance scheme under which in addition to crop insurance, the farmers had the option to buy insurance cover for fire, animals, pump set, tractor and personal accident. However insurance companies have not been successful in selling it due to high cost of marketing of diverse risks in a single insurance policy. The government has done well to keep premiums under PMFBY very low. Certain policy reforms in PMFBY and concerted effort by state governments (to conduct crop cutting experiments in a timely transparent manner) and insurance companies (to ensure timely settlement of claims) will surely result in increase in coverage of crop insurance and possibly other insurance products also.

Few farmers have insurance for their livestock. Credit: Reuters/Rajendra Jadhav

Reach of microfinance institutions
NABARD did well to seek information about reach of microfinance institutions (MFI) in meeting credit needs of households. At the national level, 23% of households had at least one member associated with an MFI, but the data is skewed. The all India average in high only because a few states like AP (61%), Telangana (65%), Odisha (44%) and Karnataka (40%) reported higher reach. UP, Rajasthan, Punjab and Haryana have less than 10% coverage of MFI. Odisha and Jharkhand (27%) have demonstrated that deep engagement with reputed NGOs (like Pradan) can help in increasing the reach of MFIs to even the most backward districts. The survey found that MFIs meet needs for personal loans for which institutional finance is not easily accessible.
Expansion of financial inclusion through Pradhan Mantri Jan Dhan Yojana has been one of the major achievements of Modi governments. About 32.17 crore accounts have been opened as on July 25, 2018. Out of these, 18.97 crore are in rural and semi-urban areas. But, in states like UP, where household earning is as low as Rs 6,668 per month, it is worthwhile to consider how many would deposit their cash income and then withdraw the same.
It is rather heartening that about 73% of survey respondents said they can use an ATM without anyone’s help and 52% can use internet banking. If it correctly reflects ground reality, it should be possible to switch to direct benefit of transfer (DBT) of food subsidy in states having high literacy, good road network and deep penetration of banks and telecom infrastructure. Rather than forcing beneficiaries to authenticate their identity through Aadhaar every month in states not having surplus food grains and poor internet infrastructure (like Jharkhand), the government should be switching to DBT in food surplus and developed states like Punjab, Haryana, AP and Karnataka.
A commendable attempt
NAFIS 2016-17 is a commendable attempt to collect and analyse data of rural and semi-urban India. There are several surprises in the survey and a more detailed analysis of data will require state level tables for every chapter covered in the report. In a vast country with acute disparities in literacy, income, availability of ground water, cropping pattern and marketing network, it is only natural that a uniform national strategy for agriculture sector will not work.
In March 2015, the government had set up a task force on agricultural development under Arvind Panagariya, then vice-chairman of Niti Aayog. Based on the work of the task force, a solitary paper titled ‘Raising Agricultural Productivity and Making Farming Remunerative for Farmers’ was published by Ramesh Chand in December 2015. The Niti Aayog had also asked states to set up state-level task forces to prepare reports suited to the specific state. Some states did prepare their reports, but the exercise was not pursued and a good opportunity to document the specific action points for each state was lost. This survey itself indicates that there are success stories in several states which need to be replicated in other states.

Siraj Hussain is former secretary of Agriculture and Farmers’ Welfare (GoI) and currently visiting senior fellow at ICRIER.

The debt story less told

The Hindu, February 12, 2015, by K P Prabhakaran Nair
http://www.thehindubusinessline.com/opinion/the-debt-story-less-told/article6887610.ece
Small and marginal farmers in rainfed regions are trapped in a losing battle with agriculture — and with life
The lot of the 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 increased almost 400 per cent Even the number of heavily indebted households has steeply increased during this period.
The report is titled Situation Assessment Survey of Agricultural Households in India, and 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 11 States are in deep debt, though wide variations exist, ranging from 92.9 per cent households indebted in Andhra to 17.5 per cent in Assam. Loan patterns show it is 60 per cent institutional loans and 40 per cent non institutional loans. Moneylenders make up most of the non-institutional lenders.
Green revolution myth
Average debt per household is ₹47,000, while average income is ₹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.
The data point to another disturbing trend. While average income from 2002-03 to 2012-03 increased by 318 per cent, most worryingly, total debt per household increased by 273.5 per cent during the same period, proving that while income from sale of agricultural products increased due to a price advantage during the last one decade, it has not translated into a reduction in rural indebtedness. Has the so-called green revolution really helped the poor and marginal farmer of India?
Benefits by way of better seeds or fertiliser input have been cornered by rich and affluent farmers in Punjab, Haryana, western Uttar Pradesh, Andhra, Tamil Nadu and Karnataka. The poor and marginal farmers of Bihar, Odisha and eastern Uttar Pradesh are in a miserable state. There are reasons to believe that indebtedness of rural agricultural households cannot be just 60 per cent, as shown by the NSSO survey, but perhaps as much as 70-80 per cent.
The enthusiasts of highly extractive agriculture, euphemistically called the green revolution, based on “high input technology” — very liberal, often unbridled, quantities of chemical fertilisers, very expensive hybrid or Bt seeds, copious use of irrigation water — kept proclaiming the “success” of this revolution. But the poor and marginal farmers , primarily in the vast rainfed areas of the country, were simply left out.
Their farms remained parched, while their debts soared. The Vidarbha region of Maharashtra, where Bt cotton failed miserably in parched rainfed fields and farmers in thousands took their own lives, unable to repay the loan sharks, became a global shame. Only where rich farmers had access to assured irrigation water coupled with unbridled use of chemical fertilisers could Bt cotton perform well.
 
PDS leakages
Many farmers are unaware of the minimum support price. And, often, these farmers resort to distress sale of their produce to clear the loans from moneylenders, 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.
The poor end up spending more than 50 per cent of their meagre farm income buying food for mere subsistence, while the government procured grain in the FCI godowns finds 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 with no formal education, cannot be allowed to migrate to congested urban areas to eke out a miserable, daily wage-earner’s life.

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.
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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.
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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.

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