Demon-et-ise: 2K view

Earlier I had shared my one-paise view on demonetisation. Here, I would like to share my 2K view or the demons of 2K. Before you lay any apprehensions, I must take you aside for a moment and say that my concern for these demons does not in any way support other demons - black money, counterfeit money or terror funding money. I reiterate that I am against all these three demons, which I will now refer to as dark matter, an euphemism to avoid being called a racist or anything that is not politically appropriate (not withstanding the fact that dark matter is a cosmological constant attributed to contribute to expansion of universe).

Perceptions matter
Use of image at source.

My concerns for 2K are in some sense related to the Y2K problem. Or, should I say related to the bug problem, which is intertwined with the computational or mathematical logic. For transactional purposes, getting a 2K note is a restriction (given the paucity of 0.5K notes), one would be in need of at least 15 notes of 0.1K from the receiver for transactions below 0.5K. The need of the hour would have been 0.2K notes along with more of 0.5K notes and should have done away with 2K notes. Besides, more of 2K notes will add to the dark matter (all three demons) and lead to an expansion of the universe that will end with a big explosion (unless of course the universe has neither any beginning nor an end).

If you are of the view that the current dispensation is not thought through the dispensing of the 2K and 0.5K notes then you are mistaken. These notes are not going to replace the old notes withdrawn, neither now nor any time in the future. This, as of now, is a given; something akin to a cosmological constant, but without the dark matter. 

To state that the universe is finite with its existence being infinite can be a point of view, subject to verification. However, if one takes a similar position with regard to the economy then my existence (as an economist) will definitely become finite. 

Nevertheless, with trepidation, I assume (not presume, as I want to leave some safety valve for my survival) that the new 2K and 0.5K notes are meant to have a finite existence and are not going to replace the old 1K and 0.5K notes. One strong reason for this assumption being that the 2K notes (along with the new 0.5K notes) will add to the dark matter (the three demons). 

One also feels that one is not going to see the 0.2K notes to come to our rescue any time soon. Given the mammoth task of getting even the limited amount of 2K notes and new 0.5K notes to circulation, this will not be physically possible.

The new normal is that we are moving into a digital world (tending towards cashless). The sooner all of us understand this and plan to adjust to this new normal (whether we agree with it or not) the better for all of us. Now, if the economy (nay, universe) is constant and there are substantive changes in the nature of internal transactions then some will gain and some will lose. 

It is imperative now to know whether those who will gain on account of 'facilitating' the transition into a digital transaction have any checks and balances on their rent-seeking returns. Are our institutions geared towards recognising and addressing these concerns. What would be the cost of internet accessibility and transaction charges? What would be its implication on the poor and the vulnerable? 

We also need to be concerned about dark matter beyond the above-mentioned three demons and have adequate safeguards for card cloning, data theft, phishing, pharming, smising and vishing among others. Do we have human resources to train the entire population and enable them to guard against such incidents? Will there be space for sovereign guarantee under such circumstances?

Further, as we will be moving towards an automated world, as is being globally talked about then what would be the implications. Is it not appropriate that we also start discussing the need for a universal basic income, as the need for that, at least for certain sections like those dependent on agriculture indicated through incidence of higher farmers' suicides (notwithstanding efforts at their underreporting), is already knocking at our doors.

Farmers’ suicides and crisis in Indian agriculture

Nearly a quarter million farmers’ suicides have been recorded in India in the last 15 years, ie 45 farmer suicides per day or almost one every 33 minutes. The suicide mortality rate (SMR, suicide deaths per 100,000 persons) of male farmers has been greater than that of male non-farmers (see Figure 1). The SMR for male farmers peaked to 19.2 (almost 40 per cent higher than that of non-farmers) in 2004. Subsequently, it has been declining (except for 2009, a drought year) and is to be at 16.1 in 2011.  Despite the continuing high incidences of farmers’ suicides, the declining trend gives a hope that the farm sector is perhaps getting back and other data also show that the farm sector was doing relatively well in recent years.

Calculated using a method described in an earlier work by the author and based on data from the National Crime Records Bureau and Census of India.

While acknowledging, the relatively better performance of agriculture in recent years, the decline in the incidence of farmers’ suicides is also because of the reporting of farmer suicides in some other category that led to recording zero farmers’ suicides in the state of Chhattisgarh, which had been reporting more than 1,000 farmers’ suicides per annum prior to 2011. Then, of course, there is the overall underreporting of suicides because of social stigma and the fact that suicide continues to be criminal offence under the statute books of the Indian Penal Code. Keeping aside our apprehension on data for a different exercise, SMR for male farmers in 2011 are 290 for Kerala, 49 for Maharashtra,  42 for Andhra Pradesh, and 37 for Karnataka and more than three-fifths of the farmers’ suicides in the year were reported from these four states.

Following the classic work of Durkheim on suicides, almost a hundred years ago, it goes without saying that a high incidence of suicides among a particular sub-group of population is indicative of a socio-economic problem. Of course, its absence does not deny the absence of a crisis among farmers in other regions/states. The crisis in Indian agriculture is pervasive and much more spread out than the spread of famers’ suicides.

Besides farmer distress, the social crisis is observed in food and nutrition insecurity, and social conflicts that has also taken the form of extremism in some parts of the country among others. The economic crisis in agriculture is said to be on account of technology fatigue, stagnating productivity, declining fertilizer use efficiency, low growth with high input usage, subsidies surpassing investments, and increasing cost of cultivation. To add to it there is the ecological crisis reflected through soil degradation, falling water tables, destruction of friendly predators and parasites, biomass loss in commons, and increasing risks from climate change.

This crisis is as much because of inadequate and inappropriate planning as much it is because of an emphasis on means rather than ends. To address this crisis, the government has responded with a number of programmes. The major response was to expand the green revolution areas beyond the irrigated areas to other areas that are largely rainfed.  This comes with the assumption that the technology and science meant for irrigated water abundant areas should be transferable to other areas. The current response, unfortunately, is suggesting more of the same which has already brought about the crisis.

Further, such an argument stems from the perspective of making food available at a macro level and it is this that subsumes the issues of accessibility and affordability to the public distribution system and not by strengthening the local production system, but by imposing a production system that is largely mono-cropping in nature. This also compromises the risk taking ability inherent in a system that thrives on diversity and mutual dependence. For instance, a good foliage cover will provide fodder for livestock, who in turn will provide manure to the soil that in turn will help the plant grow. Similarly, cultivation of multiple crops could also mean that all the crops need not be vulnerable to a particular unforeseen climatic fluctuation, but it could have adverse implications in a mono-cropping system.

A very nice initiative of the Government of India is the Rashtriya Krishi Vikash Yojana initiated since the 11^th Five Year Plan. The logic behind this initiative is that the planning from agriculture should start from the village level and then be aggregated to block, district, state and nation, respectively. In short, it should be bottom-up, and, I would say a novel initiative. But, the problem is that this initiative also comes with a message from the Prime Minister that we should be able to achieve 4 per cent growth per annum in agriculture. In real terms, this means that there should be production growth. Independent, of the fact that this is impossible and not even required because our population growth is about 1.6 per cent per annum.  What is more, this imposition from top comes with a plan that moves from state to district to the village.

So, we have a bottom-up thinking being implemented through a top-down structure. This top-down structure is entrenched in many of our institutions. Scientists and technocrats, more often than not working in silos, would come up with ideas that is to be the input the farmer will use. The agricultural administration facilitates the provisioning of these inputs that are largely tied through some subsidy schemes. This top-down structure unfortunately means that generation and dissemination of knowledge is a one-way process. The farmers become passive recipients and are not active participants in the process.

Another much talked about initiative is the farm debt waiver of 70,000 INR in 2008 (17.5 billion USD; the approximate exchange rate then is 1 USD=40 INR). This, of course, is a fiscal decision and government in many parts of the world have been taking such decisions and I would leave it at that. However, it needs to be mentioned that this is book-keeping exercise that helped the banks do away with their non-performing assets. For the farmers who benefitted (there are many who didn’t), it would reduce the mental burden and also make them eligible for fresh loans. It is the fresh loans that would help them get back to the agricultural activities. However, the market-dependent input-intensive production where rate of increase in cost is greater than net returns, debt-servicing would be a casualty, particularly in bad years. This also increases the risks in the agricultural production process.

Many a times proponents of the input-intensive argument would suggest that the criticisms are well taken, but there is no alternative, TINA. This is not correct. Actually, like mother earth, multiple alternatives exist, MAE. The alternatives focus on diverse and integrated production systems that are better adapted to climatic variability and take into consideration the local specificities. It needs to be mentioned that the alternative being proposed is not a blind call to tradition. It does borrow some of the positive aspects from tradition, but it is based on science and is knowledge-centric. This means that to propagate this alternative will require an investment that has a different logic. In particular, investments that enable peoples’ capabilities to make them active participants will be crucial, as they are the real wealth of nations.

(This write-up is based on related recent work that the author has been associated with and meant for spring 2013 edition of the Newsletter of the Association of Indian Economic and Financial Studies, AIEFS, http://www.aiefs.org/. It was first written on 2 April 2013 and has been slightly edited for this blog.)

Satyamev Jayate on Toxic Food: Some Concerns

The eighth episode of Satyamev Jayate on toxic food was one where I saw many familiar faces Ramanjanayelu and Kavitha. In the background, one also saw Mr Raidu who has been looking into Community Managed Sustainable Agriculture of Andhra Pradesh. The two organisations selected for receiving funds donated by people are Ramanjanayelu's Centre for Sustainable Agriculture and Umendra Datt's Kheti Virasat Mission. I had met them, a couple of weeks ago at a Bt review meeting (see press note and a write-up along with a comment from the other perspective in Down to Earth). I use this to write a couple of related things.

Both pesticides production and organic exports have good business propositions. Moral and ethical concerns are outside the realm of these decisions. Hence, those into agri-business can enter into both the domains and there is no contradiction in that.

The Non Pesticidal Management (NPM) movement of Andhra Pradesh is to make the cultivation less costly by largely using locally available resources and by following a list of practices without applying pesticides.  This does lead to the product being organic, but we keep the business of labelling it aside so as to keep the farmer away from the associated costs and risks. It also keeps the onus of contamination from groundwater, air or through any other means outside the purview of the farmer. Of course, they are equally important and need to be appropriately dealt with, but it definitely does not call for reprimanding the farmer.

A related point about the success of Andhra Pradesh is the existence of institutions of women through Self-help Groups (SHGs) of women that have been federated to village, mandal and district level community based organisations. These have been indicated in my co-authored paper Persistence of Crisis in Indian Agriculture: Need for Technological and Institutional Alternatives, in Dilip M. Nachane edited India Development Report 2011, Oxford University Press, New Delhi, pp.48-58, see pre print version. This institution building of farmers is relevant because in its absence their bargaining power against large market players become weak - these players could either be the sellers of external inputs or the buyers of the products.

The issue of farmers' suicides came into the discussion. I have written about it elsewhere (see Suicides of Farmers in Maharashtra with links to the report as also the executive summary). One thing which is relevant for the current purpose is that pesticide consumption continues to be the single largest method of committing suicide by farmers. This assumes importance because many pesticides that are banned elsewhere in the world are still available and that there are no regulatory mechanism about control their sale or even their usage. Globally it has been seen that checks and controls on fatal methods of committing self-harm have led to reduction of incidences. However, such controls will not address the Agrarian Crisis in India, but will reduce the loss of lives. 

An aspect related to farmers suicides among cotton farmers is the use of Bt seeds, which have become popular since its legal introduction about a decade ago. Their large scale usage and increment in production is cited as success by some, but in the absence of appropriate counterfactuals nothing much can be said about their yield increases. Today, most of the cotton farmers who commit suicides would have used Bt seeds, and hence, these seeds become an associated risk factor or one can at least state that their usage has not reduced such risks. Based on a study comparing bad or drought years, one can state that in some situations Bt has added to the risk of the farmer (see To Bt or Not to Bt, a co-authored working paper of mine).

In the Bt review meeting, mentioned earlier, one speaker compared the success of Bt with that of mobile phones. The analogy begins with both being new technological developments that were rarely used even a decade ago and today both are very popular. Fair enough!

We would  like to bring in some other dimensions of comparison. Usage of mobile phones, which were quite costly to begin with have become cheaper, even much cheaper than the landline and the (nominal) prices of the latter has not increased while Bt seeds continue to be costlier than the traditional alternative. The reduction in prices in mobiles was because of an introduction of  competition by bringing in many players whereas in Bt seeds the intellectual property right is owned by a single company who charge a royalty for it at a flat rate for each packet of seed and thereby increasing the cost. Mobile phones have facilitated communication and in that process access to knowledge, but use of Bt seeds brought in a new paradigm leading to deskilling of knowledge among farmers. An aspect of commonality, as indicated by concerns raised by some, is the possibility of health risk arising out of the radiation in mobile technology (more so from towers) as also from the toxicity in Bt plants.

Before I forget, those who want to sign the petition to the Union Agriculture Minister on India for Safe Food may sign and send the petition here.

For some of my other related writings see:

The farmers strain

Pesticide usage in India 

Day 28 of farmers marching across India to save agriculture 

Day 35 of farmers march coincides with Obama's visit to India 

Kisan swaraj yatra travels through Eastern India

Kisan swaraj yatra in North India

Options and priorities for agriculture in Indian on the eve of the 12th five year plan

Size-class and returns to cultivation in India

Hunger ethics and the right to food

Daughters are precious: first episode of Satyamev Jayate
Four episodes of Satyamev Jayate

Meetings at Whole Foods, CNFA and IFPRI at Washington DC

Our day started with a meeting at Whole Food's Market that provides a niche market for natural and organic foods. They make constant endeavours in maintaining high standards of quality, satisfying customers, creating wealth, caring for community and environment, facilitating suppliers, promote healthy eating. One wonders whether such an initiative can be taken up by the Society for Elimination of Rural Poverty (SERP) (to being with, it should be in a small scale but it can expand later) in Andhra Pradesh.

The days second meeting was with CNFA (an acronym for which I did not get the full form). This elusiveness was also evident in my understanding of what they are doing. Their interventions are among poorer regions of Africa, Central Asia and South Asia to increase productivity and give a higher income to farmers. But, it gave me an impression that they are using technologies that have been developed elsewhere and have not been locally grounded. One only hopes that their concerns of global hunger and food security has some good initiatives and it is a laudable. Nevertheless, concerns on immediate benefits and long term ramifications remain. The irony is that the immediate benefit will be shared by many but adverse consequences will only be limited to the local communities.

Outside our itinerary, the participants decided to go to a conference by USDA's 'The Economic Research Service: Celebrating 50 Years' and attended their session 3 'Leading the Study of the Food System'. There were four panelists. David Zorn, 'Understanding the Economics of Food Safety', talked about new technologies and the need for new regulatory systems and research so that consumers can make informed choice. More importantly food safety research has to go beyond presence/absence of germs. Discussions on other aspects of nutrition (sodium, fat, calories among others are equally relevant).

Elise Galon's 'Exploring the Determinants of Food Choice' discussed about What, Where, Why and How of Food and indicated about the affordability of food because of the prices. She touched upon the fact that there is a price variability across regions, but the value of food coupons given to the vulnerable is the same. There is also a need to understand food demand from the perspective of behaviourial economics. In a survey where people were told that the wine is from 'North Dakota' then they sipped and said it is not good. The same wine was given to them and they were told that it is from 'California' then the said that it is very good. These have implication that suggest that the choice the consumer has is 'subjective'.

Steve Carlson's 'Measuring Domestic Food Security' acknowledged the developments in measurement of food security but said that the main picture of hunger is missing in the analysis. What is more, the discussion of numbers misses the richness of information that one can gather from peoples experience and the socio-economic milieu.

Neel Convelin's 'Assessing Global Food Security' raised the global concerns of hunger. When it comes to households the question of distribution cannot be ignored. At the national level policies on trade and development become relevant and at the global level the growth of population should be kept in mind.

One of the questions, which was also in my mind, is that some of the discussions and views expressed here are missing in the policy on global hunger and food security. Are concerns of food safety not relevant there?

The last meeting of the day was at IFPRI (International Food Policy Research Institute). Guillaue Gruere has been working on South Asia with a focus on technology and has recently written a paper on farmer suicides and Bt cotton. This has reference to some of my earlier work. Kamiljon Akramov was working on development strategy and governance with a focus on Central Asia.

Later in the evening we went to Ford's theatre to see 'Liberty Smith'. It was an enthralling performance. 

The farmers' strain

Revised shorter version: 19/20 March 2014 (updated: 9 September 2014)

The farmers' strain,

Across undulating plain,
Without any recourse to feign,
To give us our daily grain.

The Physiocratic brain,
Considered agriculture as main,
Today, farming is in disdain,
How will their lives sustain?

Let their efforts not go in vain,
Break the silence we maintain,
Help farmers form a chain,
To safeguard unfair bargain.

So that their lives remain,
So that our lives remain.

Revised 6 August 2010

The farmers' strain,
Ignoring bodily bruise and pain,
Across undulating plain,
Overlooking muddy stain,
Toiling again and again,
Without any recourse to feign,
To give us our daily grain.

The Physiocratic brain,
Considered agriculture as main,
Today, farming is in disdain,
Scientists avoid the domain,
Bankers do not entertain,
You and I, a silence to maintain,
How will their lives sustain?

Come sunshine or rain,
Let their efforts not go in vain,
Without any loss or gain,
Help farmers form a chain,
To safeguard unfair bargain,
And stop the plunder and drain,
So that their lives remain.

'Help farmers form a chain'refers to something like the federated self-help groups.

30 July 2010

The farmers' strain,
Across undulating plain,
Overlooking muddy stain,
Ignoring bodily pain,
Without any feign,
They toil again and again,
To give us our daily grain.

Let this not go in vain,
Like the Physiocratic brain,
Who considered them the main,
Join us form a chain,
Without any loss or gain,
To stop the plunder and drain,
So that their lives remain.


(This is an ode to farmers and a follow-up of my previous blog/note. I was thinking of putting the same starting line 'In the midst of rain' for both the paragraphs, and also the last two lines at the end but decided against it. Readers may comments on this. Those pondering overy my urge to rhyme are told that this is influenced by my six-year old daughter Nerika. My work on agrarian crisis and farmers' suicides have some bearing here. In India, more than 16000 farmers are committing suicides per year in recent years, that is, more than 45 per day.)

Whirlwind Tour of Odisha

A very happy new year to you all. I have just returned from a whirlwind tour of Odisha. The initial purpose was to attend the Indian Economic Association 92nd annual conference held at Bhubaneswar and perhaps combine it with a meeting of friends from School after 25 years. The latter could not materialize. Thus, I combined my visit with some other work and made a whirlwind tour of rural Odisha.

I visited places in Banki (one flood prone village where I had a two-hour discussion with villagers), Nayagarh (two farmer field school groups (FFSGs) - one in their field one in their village, two civil society groups that facilitate formation of FFSGs and Selh-help Groups (SHGs) and additional livelihood activities, and one farm house), and Puri (a cluster of two-three villages in and around Birapurusottampur, which happens to be my native village) and also had discussions with various stakeholders. It will not be appropriate for me to reveal the contents of my discussion now, but it does reiterate the grim agrarian scenario in Orissa. The macro observations indicated earlier in Poverty and Agrarian Distress in Orissa (nay, Odisha) is more or less substantiated by these field visits.

A disturbing picture that one observed during this visits is reportage of farmers' suicides by the media almost every day. I did disucss this with many and the responses were familiar as these are similar to the ones that one came across when I was starting the study on Suicide of Farmers in Maharashtra. People have to get out of the denial mode (that this is just a media hype) and the least that they can do is to stop blaming the farmers for this. The media can have a look at the World Health Organization (WHO) guidelines on suicide reportage. This is a symptom of the larger Agrarian Crisis in India, elaborately discussed in the book edited by D. Narasimha Reddy and me and published by the Oxford University Press. There is need for technological and institutional innovations that reduce costs and improve returns.

Agrarian Crisis and Farmers’ Suicides in India

The larger agrarian crisis has two dimensions. On the one hand, there is a livelihood crisis that threatens the very basis of survival for the vast majority of small and marginal farmers as also for agricultural labourers. On the other hand, there is an agricultural developmental crisis that lies in the neglect of agriculture arising out of poor design of programmes and allocation of resources and having resulted in declining productivity and profitability. This twin dimensions could also be equated with the developmental discourse where the former is about displacement of people and the latter is about displacement of ideology. The outcome is that planning is not people-centric.

In monsoon India, abundance or paucity of water has always been considered as a major source of agricultural uncertainty. Today, this yield risk could also be because of spurious inputs or inappropriate use of technology. Increasing costs, price volatility, non-availability of credit from formal sources and other risks further compound it. Social responsibility of education, healthcare and marriage instead of being normal activities add to the burden. All these would even put the semi-medium farmer under a state of transient poverty.

An extreme response to this distress is the increasing incidence of farmerss suicides. Between 1995 and 2006, more than 190,000 farmers have committed suicides, 83 per cent of these being males. The suicide mortality rate (SMR, suicide death for 100,000 persons) for male farmers increased from 10.5 to 19.5 whereas that of male non-farmers has more or less remained around 13. The major states with SMR for male farmers greater than the all India average of 18 during 2001-06 are Kerala (233), Maharashtra (53), Chattishgarh (47), Karnataka (39), Andhra Pradesh (35), Tamil Nadu (31) and West Bengal (21). It is to be reiterated that suicide is a symptom of the larger crisis, and its absence does not in any way indicate the absence of a crisis.

It is only in Kharif 2008 that one observes a substantial increase in the minimum support prices of the 16 major crops. In fact, the absolute increase would be almost equal to increments in the entire decade. Though welcome, this vindicates the established fact that returns to agriculture had turned out to be abysmally low. Per-capita per day returns to farmer households from cultivation in 2002-03 was eight rupees. Another recent public policy intervention has been the Rs.70,000 crore debt waiver package. This is just a book keeping exercise and at best will reduce the burden from formal sources. Indebtedness, like suicides, is another symptom.

Risk mitigation has to go beyond suicides and debt. What is more important is to spruce up public investments that will increase returns to cultivation. Skill enhancement and linking of opportunities to local resources are required to increase non-farm income. Success of the credit and input markets require effective regulation. There is a case of encouraging technological and financial products that would reduce costs while increasing returns. Institutions that can organize farmers are required.

My earlier blog on a related theme is Indian Agriculture in Doldrums.


Selected Readings:

Bhaduri, Amit (2008), Predatory Growth, Economic and Political Weekly, 43 (16), 10-14.

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

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.) (2008) Agrarian Crisis in India, Oxford University Press, forthcoming.

This is the abstract of a presentation at a one day international seminar, “Environmental degradation and food crisis – Lessons for India” being organized by Greenpeace India on 24 October 2008 at India International Centre, Lodhi Road, New Delhi, India.

Indian Agriculture in Doldrums

A farmer is one of the biggest entrepreneurs. The farmer takes risks against the vagaries of nature. Agriculture’s association with the ups and downs in monsoon is captured by the Oriya saying “pani bahule shrushti nasha, pani bihule shrushti nasha” (abundance of water destroys life, paucity of water destroys life). The farmer has taken the challenge head-on and it is this risk-taking ability that has been ensuring food and nutritional security for millions. This act of giving, has however, cost the farmer a lot. Returns to cultivation are low at less than eight rupees per person per day in 2002-03 (Situation Assessment Survey of Farmers (SAS), 2003), which is less than half-a-litre of bottled water. The risk-taker is under despair; result, an increase in the incidence of farmers’ suicides.

Between 1995 and 2006, as per the National Crime Records Bureau, 190,732 farmers committed suicide – 84 per cent of these being males. During this period, the suicide mortality rate (suicide deaths for 100,000 persons) for male farmers has increased from 9.7 to 18.2 whereas the suicide mortality rate for male non-farmers increased marginally from 12.5 to 13.7 (Figure 1). Across major states, the high incidences in Andhra Pradesh, Karnataka, Kerala and Maharashtra have been highlighted by the media and there have also been public policy initiatives to address this. It is of concern that the relatively higher incidences in Chattishgarh and Tamil Nadu seem to have gone unnoticed.

Suicide, a complex and multifaceted phenomenon, is a rare event. Nevertheless, relatively higher incidence among a sub-group of population is indicative of a larger socio-economic malaise. It is symptomatic of a larger agrarian crisis. This crisis, as the Report of the Expert Group on Agricultural Indebtedness prepared under the chairmanship of R. Radhakrisha for the Government of India in 2007 indicates, has twin dimensions. First, is the livelihood crisis, which threatens the lives and sustenance of those dependent on it. In particular, the large mass of small and marginal farmers and the agricultural labourers. The second aspect is the agricultural developmental crisis. It is an outcome of a cumulative neglect and failure in the designing of programmes and in the allocation of development and plan resources.

Some of the current features of the crisis are the following. Agricultural production and productivity has decelerated for almost all crops from the mid-nineties and a value of output from agriculture has declined from the late nineties. Large sections of the population continue to be dependent on agriculture (56 per cent of the usual principal and subsidiary status employment in 2004-05). Non-farm employment opportunities are limited. Increasing marginalization of holdings (63 per cent are with less than one hectare as per the agricultural census of 2000-01). Decline of public investments in irrigation and other related infrastructure. Focus of green revolution on irrigated rice-wheat is suggestive of the failure of research and extension for crops and regions under rainfed or dry land conditions, which account for nearly three-fifths of the net sown area. Supply of credit from formal sources to the agricultural sector is inadequate leading to greater reliance on informal sources at higher interest burden. With changing technology and market conditions the farmer is increasingly being exposed to the uncertainties of the product as well as factor markets.
Today, the farmer is faced with yield, price, income, input, technology and credit risk among others. Production or yield loss could be because of weather, pests, disease of plants and spurious quality of inputs. This can adversely affect the consumption requirements of many farmer households. With the integration of global markets the price volatility has increased. The conventional argument that price compensates for good/bad monsoon, and hence, local supply/demand is not much relevant.
The farmers are price-takers in the product as well as in the input markets. Over the years, increasing costs and decreasing profitability has reduced returns. As indicated earlier, returns to farmer households from cultivation in 2002-03 was less than eight rupees per person per day. With such low returns, saving for carrying out next year’s cultivation or for meeting normal social obligations like education, healthcare or life-cycle ceremonies turn out to be taxing.
Adequate and timely availability of credit is a critical matter. As per SAS 2003, from the total outstanding debt at the end of June 2002, nearly three-fifths are for agricultural purposes. Two-fifths are from informal sources with a greater interest burden. Non-payment, which is largely on account of crop failure, would further escalate the interest burden. More so, because the informal credit provider would have dominance in the larger socio-economic sphere with a possibility of interlinked contracts in the input and output markets. Absence of non-farm avenues and poor public facilities on health and education further add to the woes.
To address the various possible risks, alternative techniques of production as well as financial and insurance products are being put forth. Most of these end up adding to, rather than reducing, the risk. An illustration is given as follows (Table 1). In a given technology input cost is one unit whereas output is three units. Thus net returns are two units and with a consumption of 1.3 units the individual can save 0.7 units. With a crop failure in the fourth year the existing risk mitigation strategy draws upon the cumulative savings to pay for the input costs and also helps consumption at a slightly reduced level. Now suppose there is a new technology where input cost is three units and output is six units giving a net return of three units. The farmer now increases consumption to 1.8 units and in the spirit of enterprise increase savings to 1.2 units. In such a scenario, a crop failure in the fourth year would render a much lower level of consumption. In short, though net returns are much higher in the new technology during normal years it increase risk during bad years. This is so because they add to the cost much more than they add to the returns.

Table 1: Comparing Old Versus New Technology: An Illustration
Year	Old Technology, T0					New Technology, T1
	X0	Y0	R0	C0	S0	X1	Y1	R1	C1	S1
1	1	3	2	1.3	0.7	3	6	3	1.8	1.2
2	1	3	2	1.3	1.4	3	6	3	1.8	2.4
3	1	3	2	1.3	2.1	3	6	3	1.8	3.6
4	1	0	-1	1.1	0	3	0	-3	0.6	0
Note: X=Input, Y=Output, R=Net Return, C=Consumption, S=Cumulative Savings. The subscript 0 and 1 denote old and new respectively.

Given the low levels of income that the farmer gets from cultivation, the call of the hour is to bring about an intervention or a mix of products where costs should reduce and returns should increase. From a policy point of view, low returns to agriculture, declining profitability and absence of non-farm opportunities need to be addressed. Appropriate research and extension, water availability to facilitate diversification and providing adequate and timely credit would be of great help. Organising farmers in a federated manner that could be aggregated at village, taluka, district or state would facilitate them in increasing their bargaining powers. Activities of private players should be regulated and civil society should complement the efforts of the public institutions.
For elaborate discussion on some of the above issues the readers may have a look at a working paper on Risks Farmers' Suicides and Agrarian Crisis in India: Is There a Way Out? or its revised version published in the Indian Journal of Agricultural Economics, 63 (1), January-March 2008. Another related working paper is Agrarian Scenario in Post-reform India: A Story of Distress, Despair and Death.
(An earlier version of this write-up has been published in the Industry & Mines Observer, May 01-15, 2008, 3-5.)