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Farmers’ Distress In India

Srijit Mishrasrijit@igidr.ac.in

Lecture to YSP participants, IGIDR 23 June 2009

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Presentation Format

Suicide Mortality Rate Risk Factors Matrix of Issues Twin Dimensions of Crisis in Agriculture Risk Mitigation Concluding Remarks

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Suicide Mortality RatesMale Suicides: Farmers vs Non-farmers, 1995-2007

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11

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14

15

16

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18

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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Farmers Non-Farmers

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The Risk Factors

The larger study on farmers' suicides focuseson examining socio-economic aspects that can be identified as important risk factors andin providing some policy suggestions.

SOCIO-ECONOMIC(Precipitating)

NEUROBIOLOGICAL(Predisposing)

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Matrix of IssuesIssues Demand SupplyOutput, Price, Income

Yield risk: weather, power, pests, spurious inputs; Not profitable; Poor returns

Increased price volatility; subsidies in US/EU; low tariff; MSP not always functional; Futures-virtual

Input Supplier-induce-demand; Deskilling; Increasing costs – tragedy of commons

Poor link - research and extension; unregulated private suppliers; Inadequate pub investment

Credit Formal – not timely; repayment difficult yield/price shocks; System draws farmers into credit; Consumerism

Decline in branches; decline in agricultural/net bank credit (direct); Increasing reliance on informal sources at higher interest burden

Other Dominance of lender/input dealer; higher family size; lack of social support

Interlinked markets; Non-farm option is limited; Pub health response (farmers); Pesticide avalability

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Two Dimensions of Crisis in Agriculture

Agrarian Crisis

Threatening Livelihood of Farmers

(particularly, the small and marginal)

Farmer, people

Agricultural (Developmental) Crisis

Lies in the neglect of agriculture

(designing of development programmes and allocation of resources)

Farming, goods

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Features of the Current Crisis Deceleration in production and productivity. Waning profitability and poor returns. High dependence on agriculture (64% rural persons in

2004-05) – limited non-farm opportunities. Low size-class of holdings (63% marginal, 2000-01). Decline of public investment in irrigation and other

infrastructure. Inadequate supply of credit from formal sources. Failure of research and extension (rainfed/dryland). Changing technology and market conditions has increased

uncertainties in product & factor markets.

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Deceleration in Production and Yield

Crops Production Yield 

 

TE 81-82 to

TE 92-93

TE 93-94 to

TE 04-05

TE 81-82 to

TE 92-93

TE 93-94 to

TE 04-05

Total Foodgrains 3.0 1.0 3.3 1.3 Cereals 3.2 1.2 3.5 1.4 Pulses 1.5 -0.5 1.6 0.1Total Oilseeds 6.6 0.0 3.0 0.9Sugarcane 3.9 1.4 1.8 -0.2Cotton (Lint) 4.2 0.3 4.0 -1.0

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Sectoral Share and Employment Status of Rural Workforce

Rural Employment 1983 1999-2000

2004-05

Agriculture 81.49 76.16 70.08

Non-Agriculture 18.51 23.84 29.92Status of Rural Workforce

Self-employed 61.37 55.76 60.2

Hired-Regular 7.15 6.83 7.1

Hired-Casual 31.49 37.41 32.8

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Share of Agriculture in GDP and Employment

Year Share of Agriculture in GDP at 1999-2000 Prices

Share of Agriculture in Employment (UPSS)

1972-73 41.0 73.9

1993-94 30.0 63.9

1999-00 25.0 60.2

2004-05 20.2 56.5

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Monthly Per Capita Income/Consumption by Size-Class of Holdings, 2003

1000

3000

5000

7000

9000

< 0.01 0.01 -0.40 0.41–1.00

1.01–2.00

2.01–4.00

4.01–10.00

>10.00

Size-class (hectares)

Inco

me/

Con

sum

ptio

n (R

s)

Income Consumption

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Per capita per day returns, 2003 (Rs)

0.0

4.0

8.0

12.0

SC ST OBC Oth All

Cultivation, 2002-03 Farm Animals, 2003 Non-Farm Business, 2003

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Farm Business Real Income Deflated by CPIAL (1993-94=100)

90

95

100

105

1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000

FBI Trend

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Number of Poor and undernourished farmers in million

Poor Undernourished

1983-84 220 153

1987 170 121

1993-94 174 151

1999-00 123 180

2004-05 63 200

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Per worker productivity in Agriculture across states

0

10

20

30

40

BI OR HP MP AP GU RA UP JK MA TN AS IND KA WB KE HA PU

Per w

orke

r Pro

dctiv

ity (R

s.'00

0)

1999-00 2004-05

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Operational Holding and Area (%)

Operational Holding Operated Area1960-

61(17th)

1981-82

(37th)

2003(59th)

1960-61

(17th)

1981-82

(37th)

2003(59th)

Marginal 39.1 56.0 71.0 6.9 11.5 22.6Small 22.6 19.3 16.6 12.3 16.6 20.9Semi-Medium 19.8 14.2 9.2 20.7 23.6 22.5Medium 14.0 8.6 4.3 31.2 30.1 22.2Large 4.5 1.9 0.8 29.0 18.2 11.8All Sizes 100.0 100.0 100.0 100.0 100.0 100.0

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Irrigation Growth Rate

Period Canals Tanks Wells & Tube Wells

Others Total

1970s 1.76 -2.53 4.25 1.19 2.211980s 1.33 -0.77 3.00 1.40 2.181990-91 to 2003-

04

-1.09 -3.15 2.80 -0.49 1.06

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Captital Formation in Agriculture

1980-81Pub GCF Agr/Agr

GDP

PVt GCF Agr/Agr

GDP

GCF Agr/GDP

GCF Agr/GCF

1980-81 4.0 5.2 3.0 16.1

1990-91 2.4 8.1 2.8 11.5

1999-00 1.9 9.3 2.6 9.8

2005-06 2.5 10.7 2.4 7.3

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Share of credit disbursed to share of area

Upto 2.5 acres

2.5-5.0 acres

>5 acres

1981-82 1.02 0.82 1.08

1991-92 0.54 0.75 1.42

2002-03 0.41 0.80 1.40

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Important Measures of Trade Liberalization

External Trade WTO: 1997, General System of Preference1998, IPR for Agr products – seeds and GI1998, QR dismantled for 470 products.1999, OGL and QR extended to 1400 more.1990 to 1997, tariff reduced from 100 to 30Against min common access, but importing 2% of food requirements

Internal Market Liberalisation

Seed: 100% foreign equityFertiliser: Gradual reduction of subsidyPower: charges increased but resistance by some statesIrrigation: Water rates increase, Participatory managementCredit: Undermining of importance of Priority Sector, Branches declined, RRB priority lending diluted –restructured on commercial considerationsAgr Marketing: Model Act, Forward Market

Fiscal Reform

Tax reduction and public expenditure: grave implication for public investment in agriculture.

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Evaluating Risk Mitigation through the prism of Choice of Techniques

Ti: Xi →Yi; i=0,1.T1>T0 if X1<X0 or Y1>Y0(improvement if input-saving or output-enhancing

Now, if Y1>Y0 and X1>X0(output-enhancing and uses more resources; further there

could be a change in composition of X)

and (Y1-X1)>(Y0-X0)(net returns are higher)

But, (Y1/Y0)<(X1/X0) (increase in output is lower than input – risk mitigation is more

difficult)

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Risk Mitigation: Alternative Scenario

Yr Input Output

Net Return

s

Consumption

CumSav

Traditional 1 1.0 3.0 2.0 1.3 0.72 1.0 3.0 2.0 1.3 1.43 1.0 3.0 2.0 1.3 2.14 1.0 0.0 -1.0 1.1 0.0

Intensive 1 3.0 6.0 3.0 1.8 1.22 3.0 6.0 3.0 1.8 2.43 3.0 6.0 3.0 1.8 3.64 3.0 0.0 -3.0 0.6 0.0

Sustainable 1 0.5 2.7 2.2 1.4 0.8

2 0.5 2.7 2.2 1.4 1.6

3 0.5 2.7 2.2 1.4 2.4

4 0.5 0.0 -0.5 1.2 1.2

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Evaluating Risk Mitigation: An example

Characteristics T0 T1 T1/T0, %

Net Returns 3930.0 5720.0 45.5Costs 13410.0 27600.0 105.8Cost/Returns 3.4 4.8  Insurance, 5% gross (for crop loss <80%)

867.0 

1666.0 

  

Yield, 85% 14739.0 28322.0  Revised Costs 14277.0 29266.0  Revised Net Returns 462.0 -944.0   -304.3

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The Lesson Interventions that are thought to

address a part of the risk will also have a cost dimension and it is in this that instead of reducing ends up adding to the risk.

With poor returns, the call of the hour is to bring about an intervention or a mix of products where costs should reduce and returns should increase.

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Concluding Remarks

Debt waiver ... Challenge for technological and financial gurus is to innovate

products that reduce costs while increasing returns. Address larger crisis of low returns and declining profitability (not

piecemeal). Risk management should address yield, price, credit, income,

weather and other uncertainties. Water availability with diversification in farm and also increasing

non-farm opportunities. Improve research and extension, regulate private providers of

input and credit. Organizing farmers through a federation of Self Help Groups

would help address an institutional vacuum.

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Selected Readings Bhaduri, Amit (2008a), Predatory Growth, Economic and Political Weekly, 43 (16), 10-

14. Bhaduri, Amit (2008b), Inaugural Comments, National Seminar on Health Equity in India,

Sarvodaya, St Pius College Campus, Mumbai (Organizd by SATHI, Pune), October 2-3, 2008.

Government of India (2007), Report of the Expert Group on Agricultural Indebtedness, Ministry of Finance, New Delhi, (Chairman: R Radhakrishna).

Mishra, Srijit (2006), Suicide of Farmers in Maharashtra, Indira Gandhi Institute of Development Research (IGIDR), Mumbai.

Mishra, Srijit (2007), Agrarian Scenario in Post-reform India: A Story of Distress, Despair and Death, Orissa Economic Journal, 39, (1 & 2), 53-84. IGIDR Working paper version is WP-2007-001.

Mishra, Srijit (2008) Risks, Farmers’ Suicides and Agrarian Crisis in India: Is There a Way Out? Indian Journal of Agricultural Economics, 63 (1), 38-54. IGIDR Working paper version is WP-2007-014.

Reddy, D. Narasimha and Srijit Mishra (eds.) (2009), Agrarian Crisis in India, Oxford University Press, New Delhi.

Reserve Bank of India (2006), Report of the Working Group to Suggest Measures to Assist Distressed Farmers, Rural Planning and Credit Department, Mumbai, (Chairman: S. S. Johl).