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AGRICULTURE
TELEGRAPH, AUG 1, 2017
Getting to know villagers- Farmers' woes may not originate in the expected sources
Ashok V. DesaiThough extremely unstable, agricultural growth has far outpaced population growth in recent years; the supply of agricultural goods per head has risen. The proportion of population dependent on agriculture has been falling; so goods produced per agricultural family have been rising even faster. Yet there is news every so often of farmers killing themselves or burning buses. Are they too demanding? Are their expectations outrunning their fortunes?
According to the National Sample Survey, there were 156 million families in villages in 2013; 90 million were doing farming. In other words, less than three rural families out of five were actually farming. The proportion was just 27 per cent in Kerala, 35 per cent in Tamil Nadu, and 41 per cent in Andhra Pradesh; over a half of the villagers in these southern states were doing something else. In Rajasthan, Uttar Pradesh and Madhya Pradesh, on the other hand, over 70 per cent of villagers were farmers.
Almost 32 per cent had less than an acre of land; another 35 per cent had one to 2.5 acres. Only a third had a landholding exceeding 2.5 acres. Not surprisingly, only 48 per cent of rural income came from farming. Another 12 per cent came from business, and 12 per cent came from farm animals - mainly selling milk, meat or animals. Almost a third - 32 per cent - was wages. Only those families with more than 2.5 acres got more than a half of their income from farming. Those who had virtually no land earned 60 per cent of their income from wages, and got a quarter of their income from their animals. It is not common for farmers to engage in non-agricultural business; only about 10 per cent do it. But their proportion goes up to 15 per cent in Odisha, 18 per cent in West Bengal and 25 per cent in Kerala. Farmers in Kerala and Tamil Nadu who indulge in business earn over Rs 10,000 a month - almost twice what the average farmer earns. Bigger farms earn more from business, but smaller farmers' profit margins are higher.
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The richer states have fewer cardholders under the Mahatma Gandhi National Rural Employment Guarantee Act: the proportion was three per cent in Haryana, 13 per cent in Punjab and 29 per cent in Gujarat. But it was 22 per cent in Bihar and 25 per cent in UP, which are hardly rich, and over 70 per cent in Tamil Nadu and Telangana, which are hardly poor. It was 38 per cent for the landless, 29 per cent for those with more than 10 acres, and over 40 per cent for the classes in the middle. The two bottom consumption deciles had more than a half of the farmers with MGNREGA cards, the highest decile had 31 per cent; all the classes in the middle had 40-50 per cent cardholders. The cards are poorly correlated with poverty.
The size of the family was seven in the poorest decile, and went down to 3.8 in the richest decile; the poor lived in joint families, no doubt to save on accommodation costs. The sex ratio went down from 1,044 to 936 per thousand: the correlation was not perfect, but female infanticide was clearly positively related to income, maybe because the rich could afford it or knew how to get it.
All farmers who could, invested to increase their earnings, but what they invested in varied. Landless farmers spent two-thirds of their investment on livestock and poultry; those with an acre or less spent 48 per cent. Those with five acres or more spent roughly a half on machinery and implements. Investment in non-farm business was close to 20 per cent amongst those with an acre or less, and less than 10 per cent amongst those with more than an acre. Farmers leave business to traders and other non-farmers; few combine farming and business.
Seeds cost 10-15 per cent of output - more in Gujarat, Rajasthan and Maharashtra because land yields are lower. Almost a half of farm expenses in Kerala are wages; landowners find it profitable to work in towns or in Dubai and hire workers to look after plantations or farms. In West Bengal, wages are 35 per cent of costs; there too, it is common for landowners to work in Calcutta and hire workers to do the farming. Leasing land is common in Punjab, where it accounts for 26 per cent of the costs. In neighbouring Haryana it is 12 per cent. Surprisingly, it is 20 per cent in Andhra; it apparently has many absentee farmers. Elsewhere it is negligible.
Milk is the major commercial product, accounting for 68 per cent of animalwallahs' income, going up to 92 per cent in Punjab and 95 per cent in Haryana and Gujarat. But in Assam, Jharkhand, Chhattisgarh and Odisha, breeding animals for sale is their main use; it is also important in Kerala and Maharashtra.
The notion that indebtedness is a curse of small farmers is mistaken; the larger the farm, the more likely is the farmer to be indebted. Less than a half of farmers with under 2.5 acres are indebted, against over three-quarters of farmers with over five acres. Borrowing is more common in the south. The proportion of indebted farmers is 93 per cent in Andhra, 89 per cent in Telangana, 83 per cent in Tamil Nadu and 77 per cent in Karnataka and Kerala; it is low in 'backward' states like Assam (17 per cent), Jharkhand (29 per cent) and Chhattisgarh (37 per cent).
Where agriculture is commercialized, farmers borrow for their businesses. The average debt was high in Kerala (Rs 2,136), Andhra (Rs 1,234), Punjab (Rs 1,195) and Tamil Nadu (Rs 1,159). Surprisingly, three-fifths of the money came from banks, cooperative societies and governments; only a quarter came from moneylenders, and another 3 per cent from traders or shopkeepers. A tenth came from friends and relatives. Big farmers are more likely to borrow from banks and cooperatives; small and landless farmers are more likely to borrow from moneylenders and 'informal' lenders such as friends and relatives. Successive governments have made banks go into villages and lend to farmers. But banks are least willing to lend to bad risks such as poor farmers, who still have to go to moneylenders. Interestingly, banks give loans more easily against agricultural or non-agricultural business or a pension; a moneylender is more likely to lend against a prospective remittance, or a job or livestock.
Farmers spend a lot - 15-20 per cent of their costs - on manure and fertilizer, and close to 10 per cent on pesticides, weedicides and so on. Irrigation costs very little - usually 2-4 per cent. The landless pay out more than 10 per cent of their income on leasing land. Renting animals is uncommon. The biggest cost is of human labour: it can come to 20 per cent of income or more. Even the landless employ workers to get the most out of the land they lease.
So my impression is that farmers are managing. But farming is a risky business with wildly fluctuating sale and purchase prices. The right finance for risk-taking is equity; but farmers cannot - or do not - incorporate themselves. So they often get into trouble. Some burn buses; others burn themselves.
STATESMAN, AUG 2, 2017
Moneylenders still rule India's rural economy
Moin Qazi
While the government is set to forgive billions of dollars of loans of Indian farmers, the truly distressed among them will have no respite from misery. They owe money to moneylenders whereas the government waiver applies only to formal credit.
Almost every farmer in India’s massive rural swathes is tethered, in one way or another, to thesahukar, the Indian variety of the moneylender, the ubiquitous, ravenous loan shark.
For centuries, moneylenders have monopolised rural Indian credit markets. Families have lost land and assets, farmers have been asked to forfeit jewellery of their wives or to prostitute them to pay off debts, and, when all else has failed, they have tied the noose to end their misery.
An inescapable cycle of debt continues to grip rural India, particularly its farming class. Yet the public image of menacing debt collectors does not reflect the actual plight of India’s three million farmers. The rapacious moneylender, who plugs the huge gaps in credit supply in a hassle-free process, is an inalienable part of a rural family.
He is the first port of call in a distress situation, and is also the man they can turn to in times of need. For most villagers there is no life without him. Moneylenders have been around for generations, but their business has boomed ever since India’s economic priorities shifted, with globalisation, from agriculture to industry. An ancient Indian proverb has it: a village can be formed wherever there come together “a river, a priest, and a moneylender”.
According to the All-India Debt and Investment Survey 2012, nearly 48 per cent farmers across the country took loans from informal sources such as moneylenders and landlords. The number had risen from 36 per cent in 1991 and 43 per cent in 2001. Moneylenders provided 69.7 per cent of total rural credit in 1951. This fell to 16.9 per cent in 1981 before climbing up again.
The latest survey shows that among farmers who owned land parcels smaller than 0.1 hectares, 85 per cent had pending loans from such informal finance sources. While these small farmers pay exorbitant interest, affluent farmers get subsidised credit. The government’s interest subvention (subsidy) scheme for farmers provides credit at subsidised interest rate of seven per cent and for prompt repayers at four per cent.
With institutional credit drying up for farmers, local sharks have taken the place of banks. They charge an arm and a leg and are creating a debt-trap for farmers who rely on crop success — and prayers — for loan repayments. But a suicide does not absolve the rest of the family from paying back a loan. Unlike a bank loan, which is squared by the government’s waiver package, the moneylender’s loan has to be atoned by the distraught family. Farmers borrow from moneylenders at insane rates of interest.
The peasants hope for a better yield in times to come but this never happens, and they find themselves in a debt trap. Unable to pay the interest, let alone the principal, they borrow more to get onto a treadmill recklessly driven by the cruel moneylenders who are no better than sharks.
Shylock demanded only a pound of flesh. But the moneylenders bay for blood. Crushing debts are pushing farmers into the darkest of pits. A current of dread runs through the country’s suicide-ravaged farmlands as their debts pass from husband to widow, from father to children. Most villages are locked into a bond with village moneylenders — an intimate bond, and sometimes a menacing one.
Popular cinema and classic literature tell many pathos-filled narratives of India’s poor caught in that karmic cycle of poverty. Those stories inevitably end in tragedy. Farmers who fall into the moneylending trap find themselves locked in a white-knuckle gamble, juggling everlarger loans at usurious interest rates, in the hope that someday a bumper harvest will allow them to clear their debts — so they can take out new ones.
This pattern has left a trail of human wreckage. The authors of a landmark study of the system of credit and household indebtedness published by the Reserve Bank of India in the early 1950s, the All-India Rural Credit Survey, scrutinised the role and operations of the moneylender, who then enjoyed a dominant position as a source of finance. They did so on the premise that, in India, agricultural credit presented a “two-fold problem of inadequacy and unsuitability”.
They envisaged only a minor place for him in their proposed solution, which took the form of a system of cooperatives covering all villages: “The moneylender can be allotted no part in the scheme (of cooperatives)… It would be a complete reversal of the policies we have been advocating… when the whole object of… that structure is to provide a positive institutional alternative to the moneylender himself, something which will compete with him, remove him from the forefront and put him in his place.”
The authors of the survey did not, of course, lay out a formal model of India’s rural credit system as it then existed, nor did they provide a formal analysis of the effects of introducing a system of cooperatives upon its workings. Despite legions of committees and reports that have outlined ways of replacing moneylenders through stepping up institutional credit, the moneylender still remains the backbone of the rural financial system. It is a bitter truth, which we have to swallow.
The picture, which Nobel laureate Gunnar Myrdal presented in his Asian Drama, almost five decades ago remains unchanged despite gigantic efforts from both the private and public sector in bringing large swathes of people into the folds of formal finance.
“When the moneylender sees that he can benefit from the default of a debtor he becomes an enemy of the village economy,” Myrdal wrote. “By charging exorbitant interest rates or by inducing the peasant to accept larger credits than he can manage the moneylender can hasten the process by which the peasant is dispossessed.”
(The writer is a Nagpur-based scholar. He can be reached at )
AWARDS
TELEGRAPH, AUG 3, 2017
Down with the Nobel Prize- Suppressing free speech is ultimately dangerous for the StateSukanta Chaudhuri