Farmers’ Distress In India

Srijit Mishra
srijit@igidr.ac.in

Lecture to YSP participants, IGIDR

23 June 2009
1
 Presentation Format

 Suicide Mortality Rate

 Risk Factors
 Matrix of Issues
 Twin Dimensions of Crisis in Agriculture
 Risk Mitigation
 Concluding Remarks

2
 Suicide Mortality Rates
Male Suicides: Farmers vs Non-farmers, 1995-2007

20
19
18
17
16
15
14
13
12
11
10
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Farmers Non-Farmers

3
 The Risk Factors

NEUROBIOLOGICAL SOCIO-ECONOMIC
(Predisposing) (Precipitating)

The larger study on farmers' suicides focuses

on examining socio-economic aspects that
can be identified as important risk factors and
in providing some policy suggestions.
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 Matrix of Issues
Issues Demand
Output, Yield risk: weather, power,
Price, pests, spurious inputs; Not
Income profitable; Poor returns
Input Supplier-induce-demand;
Deskilling; Increasing costs
– tragedy of commons
Credit Formal – not timely;
repayment difficult
yield/price shocks; System
draws farmers into credit;
Consumerism
Other Dominance of lender/input
dealer; higher family size;
lack of social support
Supply
Increased price volatility; subsidies in
US/EU; low tariff; MSP not always
functional; Futures-virtual
Poor link - research and extension;
unregulated private suppliers;
Inadequate pub investment
Decline in branches; decline in
agricultural/net bank credit (direct);
Increasing reliance on informal
sources at higher interest burden
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  Agricultural
(Developmental)
Crisis
Threatening Livelihood Lies in the neglect of
of Farmers agriculture
(particularly, the small (designing of development
and marginal) programmes and
Farmer, people allocation of resources)
Farming, goods

6
 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 TE 93-94 TE 81-82 TE 93-94
to to to to
TE 92-93 TE 04-05 TE 92-93 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 0.1
Total Oilseeds 6.6 0.0 3.0 0.9
Sugarcane 3.9 1.4 1.8 -0.2
8

Cotton (Lint) 4.2 0.3 4.0 -1.0

Sectoral Share and Employment
Status of Rural Workforce

Rural Employment 1983 1999- 2004-05

2000
Agriculture 81.49 76.16 70.08
Non-Agriculture 18.51 23.84 29.92
Status 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 Share of Agriculture in

GDP at 1999-2000 Prices 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

9000
Income/Consumption (Rs)

7000

5000

3000

1000
< 0.01 0.01 -0.40 0.41 1.01 2.01 4.01 >10.00
–1.00 –2.00 –4.00 –10.00
Size-class (hectares)

Income Consumption

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Per capita per day returns, 2003 (Rs)

12.0

8.0

4.0

0.0
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)

105

100

95

90
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 Undernouris
hed
1983-84 220 153
1987 170 121
1993-94 174 151
1999-00 123 180
2004-05 63 200
14
Per worker productivity in
Agriculture across states
40
Per worker Prodctivity (Rs.'000)

30

20

10

0
BI OR HP MP AP GU RA UP JK MA TN AS IND KA WB KE HA PU

1999-00 2004-05

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Operational Holding and Area
(%)
Operational Holding Operated Area
1960- 1981- 2003 1960- 1981- 2003
61 82 (59th) 61 82 (59th)
(17th) (37th) (17th) (37th)
Marginal 39.1 56.0 71.0 6.9 11.5 22.6
Small 22.6 19.3 16.6 12.3 16.6 20.9
Semi-Medium 19.8 14.2 9.2 20.7 23.6 22.5
Medium 14.0 8.6 4.3 31.2 30.1 22.2
Large 4.5 1.9 0.8 29.0 18.2 11.8
All Sizes 100.0 100.0 100.0 100.0 100.0 100.0
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Irrigation Growth Rate
Period Canals Tanks Wells & Others Total
Tube Wells
1970s 1.76 -2.53 4.25 1.19 2.21
1980s 1.33 -0.77 3.00 1.40 2.18
1990-
91 to
-1.09 -3.15 2.80 -0.49 1.06
2003-
04

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Captital Formation in
Agriculture

Pub GCF PVt GCF

GCF GCF
1980-81 Agr/Agr Agr/Agr
Agr/GDP Agr/GCF
GDP GDP

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 2.5-5.0 >5 acres

acres 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 Preference
1998, IPR for Agr products – seeds and GI
1998, QR dismantled for 470 products.
1999, OGL and QR extended to 1400 more.
1990 to 1997, tariff reduced from 100 to 30
Against min common access, but importing 2% of food requirements
Internal Market Seed: 100% foreign equity
Liberalisation Fertiliser: Gradual reduction of subsidy
Power: charges increased but resistance by some states
Irrigation: Water rates increase, Participatory management
Credit: Undermining of importance of Priority Sector, Branches
declined, RRB priority lending diluted –restructured on commercial
considerations
Agr Marketing: Model Act, Forward Market
Fiscal Tax reduction and public expenditure: grave implication for
Reform public investment in agriculture. 20
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 Returns Consumption CumSav
Traditional 1 1.0 3.0 2.0 1.3 0.7
2 1.0 3.0 2.0 1.3 1.4
3 1.0 3.0 2.0 1.3 2.1
4 1.0 0.0 -1.0 1.1 0.0
Intensive 1 3.0 6.0 3.0 1.8 1.2
2 3.0 6.0 3.0 1.8 2.4
3 3.0 6.0 3.0 1.8 3.6
4 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 45.5

Costs 13410.0 27600.0 105.8
Cost/Returns 3.4 4.8
Insurance, 5% gross 867.0 1666.0
(for crop loss <80%)
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).

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