NSSO - Kisan Mitra

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)

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.

One of the key indicators NSSO uses in order to measure indebtedness is the debt-to-asset ratio, or the ratio of total outstanding loans to total assets as on the date of survey. Essentially it tells us how much money a household owes to others, for every Rs 100 worth of assets that it owns. According to the website Investopedia, a DAR of under 40% is considered to be ideal, and if it is over 60%, it is considered to be alarming.

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.

A related aspect that I look at is the kind of households that are likely to be in the ‘over-indebted’ category, i.e., have a DAR in excess of 60%. A farmer household is about two percentage points less likely to be in this category. To rephrase, a farmer household is almost as likely to be in the over-indebted category as a non-farming one. A farmer household in 2003 was 3.52 percentage points more likely to be over-indebted, in relation to 1992; while a farmer in 2013 was nearly 9 percentage points more likely to be in this category. A farmer from Andhra Pradesh was more likely to be in over-indebted than any other state in the country.

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.

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

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

29/NOV/2018

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

The Indian farmer is marching again. In March of this year, she walked to Mumbai; now she, along with more than 100,000 of her fellow-farmers, is on her way to Delhi; all in the hope that she can place her concerns in front of political leaders and the wider citizenry. One of the key demands in the charter drafted by the Nation for Farmers on the occasion of the Kisan Mukthi march, is that the “credit crisis and exploding rural indebtedness” be discussed as part of a special session of parliament, on ‘agrarian crisis’.

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

How many loans is too many?

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.

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

Illustration: 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.

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.

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.

A decade that failed the farmer

https://www.livemint.com/Politics/tfr5ONrNMoNvDctjI1AhdL/The-decade-that-failed-the-Indian-farmer.html

Sayantan Bera

60% of farmers continued to be outside the radar of govt extension services and without any access to modern technology

Topics

In the 10 years to 2013, the life of the average Indian farmer showed no improvement — it either stagnated or deteriorated.
That’s the conclusion that can be drawn by a comparison of the Key Indicators of Situation of Agricultural Households in India (2012-13), a survey recently released by the National Sample Survey Organisation (NSSO), with the first such report issued in 2003.
In that decade, land holdings became more fragmented—nearly 87% of families owned less than 2 hectares, while the proportion of rural households for which agriculture was the principal source of income increased from 34% to 37%. This could be due to a change in definition of the farmer household—the latest survey counts in families that did not possess or operate any land, provided they received more than ₹ 3000 from agricultural activities and had at least one member self-employed in agriculture either in the principal status or subsidiary status during the last year.

While more farmer families are indebted (nearly 52%), the average outstanding loan per family shot up from ₹ 12,585 to ₹47,000. The share of non-institutional loans as a percentage of total advances decreased marginally; the moneylender is holding the fort. States infamous for farmer suicides are also where levels of indebtedness are the highest. In Andhra Pradesh, 93% of farming households were indebted; the average debt in the state was ₹ 1.23 lakh. In Telengana, carved out of Andhra Pradesh as a separate state in June, 89% of the households were indebted; their average debt was ₹ 93,500.

The income and expenditure data shows that many farming households continue to live a hand-to-mouth existence. In real terms, there has been hardly any increase in expenditure on productive assets. A big surprise here: the contribution of wages to incomes came down from 39% in 2003 to 32% in 2012-13, despite the introduction of the Mahatma Gandhi National Rural Employment Guarantee Scheme, now in its ninth year.

Access to irrigation and government procurement at support prices remained stagnant over the decade. Sixty percent of Indian farmers continued to be outside the radar of government extension services and without any access to modern technology. Over 95% of paddy and wheat growers still do not insure their crops; only 10% of cotton growers insured theirs.

It’s a wonder then that agriculture (or perhaps the farmer) delivered a growth rate of 4.1% (in agriculture GDP) in the 11th Five-Year Plan (2007-2012).