Indian farmers need a new indicator of distress. Suicide data will not be enough

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Aaccording to a American University, farming is one of the most stressful occupations in the United States. With high levels of resource deprivation where farmers suffer from weak and unsustainable agriculture, steadily battling volatile commodity prices, rising input costs, the fierce and uncertain impacts of weather and climate change, l Indian agriculture too, if not the most, is among the most stressful professions in the countryside.

Measures of the plight of farmers in India

Despite the centrality of the agricultural sector in India and the widespread recognition of the distress with which most farmers must live, there is no standard measure of the distress of farmers in the country. The most frequently cited measure is the number of farmer suicides. There is also a crop damage measurement which is undertaken under the PM Fasal Bima Yojana (crop insurance scheme), but which particularly concerns the areas and farmers covered by the scheme. In 2020, of the 14.65 crore of Indian farmers (Agricultural Census 2015-16), only 2.68 crore (18.2%) were covered by the PMFBY.

According to the National Crime Records Bureau (NCRB), 10,269 farmers committed suicide in 2019 and the most cited reason was high debt or their inability to repay their loans (NCRB 2015 and 2019). Most of this indebtedness came from loans taken out from financial institutions such as banks.

There are two major problems, among others, with the above explanation. First, by measuring distress by the number of suicides, the government oversimplifies a deeper, multi-layered reality of agrarian distress. And second, by linking suicides to debt owed to financial institutions, the diagnosis paves the way for a simple farm loan exemption solution that is not only an ineffective but also an ineffective solution to the plight of middle and middle farmers long term.

Political parties announce farm loan waivers in an attempt to alleviate the plight of farmers by removing over-indebtedness from farmers. By writing off a farmer’s overdue dues and providing a way for them to access new credit, governments are working to reduce the plight of farmers. But the problem stems from the cyclicality of the debt. A farmer in India is plagued by multiple distortions that make farming activity volatile and unsustainable. Production cycles make it impossible for farmers to stay out of debt, and income instability makes it difficult for them to break out of a debt cycle. Therefore, in such a scenario, a forgiveness of a farm loan turns out to be just a “jury rigged expedient.”‘ – a quick fix that should be applied at regular intervals.

Supporting a farmer in distress in a sustainable way that gives him power in the short and long term therefore requires an overhaul. The first step in this regard is to understand the building blocks of farmers’ distress.

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Debt as a symptom of farmers’ distress

From our ongoing survey of Indian farmers in the three states of Punjab, Uttar Pradesh and Maharashtra, we learned that most farmer borrowers wanted to repay their loans and did not want to default. They defaulted because of financial distress which was usually caused, among other things, by a poor harvest, or the inability to obtain remunerative prices for their crops and / or personal loss. This default resulted in over-indebtedness which amplified their distress, sometimes pushing some to take the extreme step of suicide. According to the farmers, if the financial distress is covered in one way or another and they are able to generate a remunerative income, they still prefer to repay the loans.

By treating debt distress with a farm loan waiver while leaving aside the other factors that cause distress, governments appear to be dealing with only one symptom (debt) of a much more complex problem. It is likely that a farmer receiving an exemption will come to the point of needing another round of exemption soon due to the persistence of his other causes of distress. The key, therefore, is to scientifically profile the factors that cause distress to our farmers.

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What is causing distress to farmers?

Despite increasing subsidies each year, directed and subsidized credit flows, and several tax benefits aimed at the agricultural sector, farmers continue to suffer both economically and socially.

Indian farmers are generally poorer than others in the economy. In 2015-16, India’s annual per capita income was around 94,797 rupees (NAS). In that year, the total annual household income of a farmer was around Rs 1,07,172 (NAFIS). With an average household size of 4.9, this implies an average per capita income of around Rs 21,872, which was less than a quarter of the national per capita income.

In addition, Indian farmers buy high and sell low. In other words, the terms of trade (TOT) for farmers have been unfavorable. TOT is the ratio between the prices received by farmers and the prices paid by them to purchase various inputs, goods and services. When the value of TOT is less than 100, it implies that the relative prices are against the farmers. According to data from the Union Ministry of Agriculture, in 2004-05 the TOT of farmers was around 88, which rose to around 96 in 2018-19. Despite an increase, the ratio remains below 100, which implies an unfavorable situation for farmers. An improvement in farmers’ TOT will require an increase in agricultural prices relative to non-agricultural prices, implying that consumers will have to incur higher prices for agricultural products. This is unlikely to happen and therefore leaves the government with a dilemma.

Farmers also suffer from uncertainties and pressures on the production side.

Agricultural labor is an important input to culture. According to data from the Ministry of Agriculture and Farmer Welfare, GoI, in 2017-18, according to the states, the share of the cost of labor in the total cost of production (A2 + FL, i.e. the costs directly incurred by farmers more imputed value of unpaid family labor) ranged from 34 to 64 percent in the case of paddy, 17 to 50 percent for wheat, 30 to 65 percent for maize, 25 to 67 percent in grams and about 20 to 40 percent soybeans. Since 2000-01, the daily wage rates of farm workers have increased from Rs 56 to Rs 311 in 2019-2020, an increase of 5.5. The increased cost of labor increases the cost of cultivation, which puts additional pressure on the profit margins of the farmer. Profitability itself has been very volatile for the Indian farmer.

Farmers also suffer from uncertain weather and climate conditions. Due to poor irrigation coverage (49 percent of the gross cultivated area is under assured irrigation), farmers have to depend on monsoon rains to irrigate their crops. In the last 21 years since 2000, there have been 5 years of drought (actual rains have fallen below normal levels of 10 percent or more), and in addition there have been 9 years of deficit rains (where average rains across India were below normal but the difference was less than 10 percent). It can be inferred that a farmer in India suffered from a drought every four to five years and poor rains every three years. Analysis of historical data reveals that agricultural GDP fell with monsoon deficits.

In addition to these, there are several other factors that cause distress to farmers. There are other factors such as ineffective coverage under the crop insurance scheme, limited access to credit from financial institutions, etc., the absence of which exacerbates the plight of farmers.

Overall, it appears that the government needs to undertake coordinated and sustained efforts to put in place the elements of a virtuous cycle of upliftment. Can a farmer distress monitoring tool be a catalyst for this?

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A sign of distress for Indian farmers

An index that monitors high-frequency data integrating weather conditions, existing and future climatic conditions, farmers’ debt burden, data on agricultural commodity prices, etc., can serve as a measure of the level of distress of farmers. Technological breakthroughs through space technology, AI, and blockchain enable real-time snacking. The index should ideally be conceptualized at a farmer level where the severity of individual farmer’s distress is tracked in real time.

If the distress is considered high, targeted support to that farmer can be triggered. Depending on the type and severity of the distress, support may be provided in the form of a combination of unconditional grants, loan restructuring and / or full debt forgiveness. This kind of real-time, data-driven intervention will not only help farmers, but also provide governments with the much-needed policy bandwidth to effectively time a targeted goal., and effective political support for the farmer in distress. The government must engage with experienced professionals to develop such an index.

Saini is Principal Investigator (Visiting) at ICRIER and Khatri is Research Associate at GDI. Opinions are personal.

(Edited by Neera Majumdar)

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