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.)

Reservations

On 10th April 2008 the Supreme Court of India upheld the constitutional validity of the 93rd Amendment regarding the Central Educational Institutes allowing an additional 27 per cent reservation to the socially and educationally backward classes (OBCs). This would be over and above the existing reservations of 15 per cent for Scheduled Castes (SCs) and another 7.5 per cent for the Scheduled Tribes (STs). The Ministry of Human Resources and Development has already issued a notification that this be carried out from the current academic year, 2008-09 (see link). There have been a lot of discussions, time and again, either in favour of or against reservations, but one feels that there is some misplaced emphasis.
True, equity principle calls for policies that favour the deprived to ensure distributive justice. In the current context, the moot question that the Government has failed to provide quality education from the primary level to all its citizens is not being answered. More schools, colleges and professional institutes (medical, engineering and management among others) need to be opened. Today, the government can boast of primary schools in almost all nooks and corners of the country, but the quality of education is poor in most. More importantly, all those who pass out of these will not have access to secondary schools. Similarly for higher secondary and college education. Everyone should have access to basic quality education at all levels. Falling back on the equity principle it means that better teachers should be provided adequate incentives to teach the most deprived.
India is perhaps the only country where pre-primary education onwards the better facilities are meant for those who can afford it. It does not happen in the US, UK or other developed countries where the neighbourhood schooling system is followed. Private schools exists in some of these countries but it caters to a very small proportion of the population. School education is by and large through publicly funded institutions. This itself allows for a quality control. If our lawmakers, bureaucrats and those with some public voice send their children to the private schools then this cannot happen. In India, many lawmakers even operate their own schools and educational institutions on a for-profit basis and refer to this as an act of philanthropy.
Higher education can be through public or private enterprise. Most students, however, should be able to avail of loans in case of professional vocations or get scholarships so that their social and economic backwardness is not a constraint. Given the size of the country and its population, we should have colleges in every taluka, and at least one medical college in each district.
The latter is essential from a public health perspective. Here again the best thing would be to have public medical colleges, but may not be financially feasible. One can think of allowing for private medical colleges. These can be tied up with developed countries who seem to be having a 'shortage' of care givers. As getting more and more patients would also helps them in imparting quality education they should not provide treatment on a for-profit basis. In fact, it should be made free if possible. Of course, wherever we introduce private interests we should have effective regulations in place.