Looking For A Sign – Explaining the poor plight of Indian farmers

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Farmers committing suicide is not a new thing. Although it can happen for personal reasons, however, the economic ones gain prominence. Crop failures, inability to get the right price, and insurmountable debt are the factors that may drive the farmers to take extreme step. This is bad. From the perspective of livelihood agriculture sector is important. Agricultural and agriculture related informal sector support livelihood of around 58 per cent of the population. Interestingly, every time, in wake of a number of suicides the political class debate out the reasons. The ruling party argue that enough has been done in terms of farm loan waiver schemes, higher minimum support price (MSP), fertilizer subsidies, and a tax free agricultural income, the opposition parties slam the government as not much is happening on the ground. The fact of the matter is much of the factors leading to a farmer’s death are outside control of anyone.

During the fiscal year 2013-2014, contribution of the agricultural and agriculture related allied activities was 14 per cent of the Gross Domestic Product (GDP). Therefore, per-capita agricultural income is low, and importantly at times it is not possible to sustain this low income. Also, fluctuation in agricultural output is much higher in comparison to the industrial, and the services sector. Considering the agricultural, industry, and services output data, we find that during the period between 1991-1992 and 2013-2014, the coefficient of variation for agricultural output is 191.34, in comparison to 50.48 for industry, and 22.03 for services sector. This also explains lower investment in the agricultural sector – investor shy away investing in sectors with a volatile return.

Rainfall and Farmers’ Suicide

Rainfall and Farmers’ Suicide

(Source: Rainfall Data (https://data.gov.in/keywords/annual-rainfall) and Farmers Suicide Data (http://agrariancrisis.in/2012/02/29/farmers-suicides-data-from-1995-2010-state-wise-gender-deseggregated/)

Low and uncertain income may have driven the farmers to commit suicides. While crop failures during bad rainfall years can be attributed to less than normal rainfall, the reason for farmers realizing low price for their produce has to do with inefficient agriculture supply chain management.

World Bank data shows only 35 per cent of India’s agricultural land is irrigated (artificial application of water to land or soil). This means a greater proportion, 65 per cent of farming, depends on rain. In fact, as Figure 1 shows, probability of a farmer committing suicide is more during bad-rain years. To have a meaningful comparison, we standardized rainfall and suicide data with respect to mean and variance, to make them unit free (read, std. rainfall and std. suicide).

Similarly, reasons for farmers not getting the correct prices emanate from lack of reforms in the Agricultural Produce Market Committee (APMC) Act, low bargaining power emanating from small farm size, and lack of warehousing facilities. Another important factor is aspiration. While India’s national income has grown at 6 per cent plus rate over the last five years, agricultural income has grown at a modest 1.1 per cent during 2014-15. In order to keep with the Joneses (read, well off neighbors) farmers borrows heavily. And, when crop output fails, they have no other options but to commit suicide.

Main takeaways. In order to improve plight of Indian farmers there is a need for imparting skill. This will facilitate employment opportunities for people dependent on agriculture. Instead of spending on subsidies, investment on rural infrastructures, such as electrification and building canals, will help to mitigate losses due to crop failures. Electrification will help setting up rural based small-scale industry, and canals will reduce dependence on weather god. Also,needed is reform in the APMC Act. This will ensure price discovery and better price realization for the farmers.

(Nilanjan Banik is with Mahindra Ecole Centrale, Hyderabad. He is also a ARTNeT-UNESCAP Researcher, and author of the book The Indian Economy: A Macroeconomic Perspective. All comments to nilbanik@gmail.com).

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