December 28, 2014

New Data Show Continuing Agrarian Distress For Small And Marginal Farmers

R Ramakumar and Aparajita Bakshi

IT is official now. New data released by the National Sample Survey Organisation (NSSO) for 2013 show that the agrarian distress in rural India is continuing, and even intensifying for small and marginal farmers. In the last decade, there has been much talk on inclusive growth, revival of growth rates in agriculture, higher public investment in agriculture and the doubling of agricultural credit. Yet, the new data show that all these policies have largely bypassed the rural areas, and particularly the small and marginal farmers. The two new reports that were released last week are the Situation Assessment Survey (SAS) and the All India Debt and Investment Survey (AIDIS). SITUATION ASSESSMENT SURVEY (SAS) The SAS in 2013 was conducted by the NSSO as a repeat survey of the first SAS in 2003. However, the two surveys are not comparable. In 2003, the SAS used the concept of a “farmer household”, and defined them as households with at least one member working as a farmer. A farmer was someone who operated some land and engaged in agricultural activities. This category disappears in the new SAS; instead, the concept of an “agricultural household” is used. It is defined as “a household receiving a value of produce more than Rs 3000 from agricultural activities and having at least one member self-employed in agriculture either in the principal status or in subsidiary status during last 365 days”. Hence, as the two surveys are incomparable, we use data only from the second SAS in this article. In 2013, agricultural households constituted 57.8 percent of India's rural households. Cultivation and livestock rearing were the principal income sources for 67 percent of agricultural households. Cultivation and livestock rearing contributed, respectively, 47.9 percent and 11.9 percent to the total household incomes. Thus, while agriculture remained the most important source of income, rural households also received incomes from varied and multiple sources outside agriculture. The average monthly income of an agricultural household in 2012-13 was estimated at Rs 6426. The states with highest levels of income were Punjab, Haryana, Jammu and Kashmir and Kerala. The average monthly consumption expenditure per agricultural household was Rs 6223. If we assume an average family size of 4.9, the per capita monthly consumption expenditure was Rs 1270. Our rough estimates show that given the decile distribution of consumption expenditures, the proportion of agricultural households below the new Rangarajan poverty line would be between 30 and 40 percent. Let us consider the poorest 50 percent of the agricultural households. Their average household incomes were actually less than their average consumption expenditures. Similarly, let us consider all agricultural households that possessed less than 2.5 acres of land, who constituted 69.4 percent of all agricultural households. Their average household incomes were also less than their average consumption expenditures. Thus, about 50 to 70 percent of the agricultural households survived on incomes that were inadequate to meet their requirements of consumption expenditures. What is the record of the procurement schemes? For all crops (except sugarcane), less than 5 percent of households reported sale to a government agency/cooperative that assured minimum support prices (MSP). Farmers largely sold their output to private traders. Only 31 percent of paddy farmers and 39 percent of wheat farmers were even aware of the MSP scheme. Worse, only 13.5 percent of paddy farmers and 16.2 percent of wheat farmers sold their harvest to procurement agencies. The reason: shortage/unavailability of procurement agencies and local purchasers. In fact, independent village surveys conducted by the Foundation for Agrarian Studies, Bengaluru have also demonstrated that the actual prices received by farmers were lower than the MSP. Agricultural extension and crop insurance were also poorly developed. Only less than 5 percent of agricultural households insured their crops. Only 10 percent of the agricultural households reported access to an extension agent, KVK or agricultural university. The most important sources of technical advise were “progressive farmers” and “radio/TV/newspapers”. Only 1 percent of agricultural households had access to NGOs for technical advise. For “farmer households”, the earlier SAS survey of 2003 had also shown similar results. In sum, despite problems of methodology and lack of comparability, the SAS shows that the economics of crop cultivation in India remained precarious for a large section of farmers. Successive governments have failed to provide essential services to enhance their agricultural incomes and reduce production and market risks. There are no indications of improvement due either to public intervention or to new policies in the period between 2003 and 2013. ALL INDIA DEBT AND INVESTMENT SURVEY (AIDIS) The key results of the 2013 round of the AIDIS, released last week, provides information on the conditions of asset ownership, indebtedness and investment for two sets of households: all “rural households”, and “cultivator households”. All rural households operating at least 0.002 ha of land were treated as “cultivator households”. The AIDIS is organised roughly every 10 years. Unlike the SAS, concepts used in the AIDIS are comparable across time. Hence, in this article, we adopt a longer view and compare data on indebtedness for 1992 and 2013. The conditions of indebtedness of rural and cultivator households show massive deterioration between 1992 and 2013. There was an increase in the share of rural and cultivator households who were indebted. The share of rural households indebted rose from 23.4 percent in 1992 to 31.4 percent in 2013; the share of cultivator households indebted rose from 25.9 percent in 1992 to 45.9 percent in 2013. Of course, a rise in the share of indebted households need not be an adverse phenomenon in itself. However, what has been striking is that the rise in the incidence of indebtedness occurred alongside a rise in the debt-asset ratios (which shows the extent to which debt is a drain on the value of owned assets). In 1992, debt-asset ratio for rural households was 1.78, which rose phenomenally to 3.23 in 2013. Thus, the data point not just to a higher share of indebted households, but also to an intensification of their debt burdens. From where did they borrow? Between 1992 and 2013, the share of debt outstanding from informal credit sources increased sharply. For all rural households, the share of debt outstanding from the formal sector fell from 64 percent in 1992 to 56 percent in 2013. Similarly, for the cultivator households, the share of debt outstanding from the formal sector fell from 66.3 percent in 1992 to 64 percent in 2013. The most important reason was the withdrawal of commercial banks from lending to farmers and rural areas. Between 1992 and 2013, the share of debt outstanding from commercial banks fell from 33.7 percent to 25.1 percent for rural households, and from 35.2 percent to 30.7 percent for cultivator households. Informal sources of credit have become increasingly powerful in the 1990s and 2000s. If only 32.7 percent of the debt outstanding of rural households was from the informal sector in 1992, the corresponding share rose to 44 percent in 2013. If we consider cultivator households, the share of debt outstanding from the informal sector rose from 30.6 percent in 1992 to 36 percent in 2013. Within the informal sector, it was the share of debt from moneylenders that rose most sharply. For all rural households, the share of debt outstanding from moneylenders rose from 17.5 percent in 1992 to 33.2 percent in 2013. For cultivator households, the share of debt outstanding from moneylenders rose from 17.5 percent in 1992 to 29.6 percent in 2013. The results from the AIDIS reveal three realities of rural India in the era of financial liberalisation. First, through the 1990s and 2000s, financial liberalisation has continued to undo the improvements in agricultural credit achieved after bank nationalisation in 1969. Secondly, though the UPA government in 2004 announced a scheme to double the supply of agricultural credit, the increase in credit flow from banks has not reached the farmers. In fact, more than half of the increased credit flow to agriculture has been siphoned off by corporate groups and agri-business companies based in urban and metropolitan areas. A recent paper has provided data to show, for instance, that in West Bengal, about 55 percent of the total agricultural credit outstanding in 2011 was advanced by urban or metropolitan branches! Thirdly, ad hoc measures like the debt waiver scheme or relief packages have improved neither the conditions of farmers on the ground nor the overall credit supply to rural areas. The Left criticism of neo-liberal agricultural policies stands vindicated with the arrival of the new data. Neo-liberalism has trapped the peasantry between rising costs of cultivation and inadequate output prices. Increased openness to world markets has intensified price volatility and raised price risks. Alongside, neo-liberal policies have also weakened price support systems so as to open farmgate purchases to multinational corporations and retail giants. The new data reaffirm the Left's demand that a comprehensive reversal of neo-liberal policies has to be, necessarily, the starting point of efforts to address India's agrarian distress.