Agriculture will continue to a vital role in India’s economy as long as we have 1.3 billion people to feed. Over 58 per cent of the rural households depend on agriculture as their principal means of livelihood. Agriculture contributes 15% of Gross Domestic Product (GDP). Despite supporting almost 60 percent of India’s total population, the contribution of agriculture to the GDP has been consistently declining and this tilt is creating a perceptible imbalance. It high time we recognize that an excessive part of the country’s population is dependent on Agriculture sector, resulting in massive disguised unemployment and therefore there is need for finding out new farm sector framework to engage the labor/wage earners outside agriculture and allied agriculture to other sectors. This shall help in reducing under-employment/disguised unemployment on the farm and building alternative opportunities for the rural population.
2. Plight of small & marginal farmers is far bigger and will only aggravate if not addressed sustainably
The harsh reality is farmers especially the small and marginal farmers are struggling to survive. These small and marginal holdings are more than 85% and these farm holders are facing decreasing landholdings, high input costs, falling water table, deteriorating soil quality and insignificant improvement in productivity and yields. Sustainability of small farms is a growing matter of concern and so is to help these farmers get rightful price for the produce they grow.While small and marginal farmers are facing a serious challenge due to lack of economies of scale, the situation is going further aggravate with every coming year. As per Government estimate by 2030, 91% of total farm holding would belong to small and marginal farmers of categories of less than 2 hectares. The real challenges to be addressed therefore is are far more serious and bigger and wide-spread
3. Credit flow has jumped multiple times but farm incomes and farmer’s income security a big concern
While the flow of credit has grown by 10 times in the decade, the outcome and income of farmers has not grown in the same proportion and there has been really no significant improvement in farmers on the ground situation and therefore there needs to focus on unclogging and removing the bottlenecks that are really creating real distress for the farmers especially the small and marginal one. It clearly points to the fact that credit burden cannot be only “single” factor which is responsible for farmers current plight, rather there are other factors which have deprived the farmers of their rightful status in economic pyramid of the country. Loan Waiver as merely poll bait and populist measure shall harm the farming community and agriculture sector at large
It is important to note that 80% of agriculture in India depends on credit and therefore “Agriculture Credit “ is the single most critical input in agriculture.It is a matter of fact that agriculture credit flow which was at Rs. 86,980 crore in 2003-04 will grow to Rs. 900,000 crore in 2016-17. This will go up further to Rs 10,00,000 crore in next financial year. However its important the credit policy framework for banks also be aligned to ensure that every unit of credit should help farmer generate better livelihood and higher income. Credit for Development should be underlying driver.
4. Loan waivers may not be best way to help the distressed farmers as it is not in the interest of any stakeholders – the Farmers, the Banks and later on the Government
Given the election season Political parties try to consolidate the farmers as a “vote bank” by wooing them through promises like loan waiver, interest free loans, so on and so forth, which ultimately creates a big challenge for unsuspecting farmers, as this ultimately results in impairing the agricultural credit channels for them in a longer run. Placing such promises on manifesto should be discouraged by appropriate constitutional mechanism.
The banks are not comfortable with debt waiver schemes as it vitiates the credit culture in the industry, creates ill will among those who are timely payers, because debt waiver goes to only those who default the payment and encourages moral hazard.
The states ultimately may end up taking an imprudent decision for “farmers” in a longer run, create fiscal deficit, saddle the banks with bad debt, create a moral hazard to willfully default on debt repayments and ultimately result in impairing the agricultural credit channels for farmers. The past experience have reportedly shown that the earlier debt relief schemes resulted in fewer farmers getting access to credit, which is the exact opposite of what the government had intended to achieve.
5. What could the (best) possible way forward to provide relief to marginalized farmers and yet create sustainable income security?
1. In case of small and marginal distressed farmers the sops/waivers are to be extended than such announcements should be part a comprehensive package, including public and private investment and should be judiciously blended with other incentives, subsidies and sops which help the farmers create sustainable livelihoods and give a boost to agriculture sector.
2. These incentives can be purveyed through mechanism of Direct Benefit Transfer (DBT) to farmer’s accounts/loan accounts in case of crop failure, natural calamity or distress or unfortunate incidence. The methodology and mechanism with banks can be worked account. It will be quick and transparent. In this case Government will be seen as payee rather than farmers perceiving it as waiver.
3. The incentives should be given for capital formation, boosting agriculture and creating income security. Following could be possible incentives
i. Develop Irrigation & Micro-Irrigation- Reduce dependence on monsoon
ii. Promotion of new technologies for farmers
iii. Incentive on investment Credit ( capital formation)
iv. Water conservation measures
v. Improved seed kits at lower cost
vi. Measures to improve crop yield and soil productivity
vii. Comprehensive Insurance schemes for crops ( besides notified crops)
viii. Improved Cattle scheme
ix. Installation of Milk collection centres in villages
x. Program on fisheries, poultry and bee keeping
xi. Area specific incentive programs on horticulture, floriculture, and aquaculture
4. India still does not have a defined drought policy, although the country has started an ‘anticipatory drought management approach’. The Policy makers should take a serious view of the impact of uncertain rainfall patterns leading to drought or flood. The spending on Climate change and Drought proofing needs to be increased under a master plan with targeted approach rather than providing relief only on as an when basis.
5. There is need for announcing that market driven remunerative farm gate price (doubling the farm income) will be implemented to protect the interest of farmers. The farmers produce should be collected at farm rather than APMCs. The APMCs act may be amended suitably. The objective is to create a framework for farmers “income security”.
6. There is need for announcing & creating positive opportunities in nearby semi-urban centers to encourage positive opportunity led migration rather than distress migration for farmers, agri-wage earners and farmers working on leased lands on seasonal basis.
7. Credit Flow Policies to agriculture sector needs to be more focused on capital investment in agriculture rather than just ensuring continuity of agriculture by crop loans. The multiple studies seem to suggest that the doubling of aggregate credit flows did not had any sizable impact at the agriculture household level income as also in creating productive assets. It is important to recognize that the flow of credit for short term ( crop loan for continuing agriculture) and for long term ( for creating assets and capital formation) will hold key to help farmers especially small and marginal to create productive assets that generate sustainable income.The Government, Regulator and Financial Institutions need to review the Agriculture credit policy framework for banks and financial institutions.
It is critical to recognize that “Food Security of the Nation” can only be ensured by “creating Income Security for Farmers”.
The views expressed in this article are purely personal.
Manoj Rawat | India | firstname.lastname@example.org