Farmers on the brink

The ongoing unrest is a result of policy failures

It is paradoxical that at a time when agricultural productivity is a leading contributor to the country’s economic growth, farmers find themselves on the brink. The single common factor behind the current wave of farmers’ protests in several states is the deep-rooted economic distress due to market failings and flawed government policies. On the face of it, the demands for loan waivers in several states might have been triggered by the Uttar Pradesh government’s Rs 36,000-crore debt write-off, yet the foundations of the current distress were laid by many other policy failures. Of course, local factors, too, have contributed. The farm distress caught national attention in March when farmers from Tamil Nadu gathered in Delhi seeking drought relief. But the agrarian distress in other states was not due to poor rainfall. In fact, in many of the states, such as Madhya Pradesh and Maharashtra, which are witnessing some of the fiercest clashes between farmers and the local administration, farmers are actually suffering because prices have crashed after bumper production. The glut in the market of many crops sustained either because the government continued to allow imports or placed curbs on exports. What has made matters worse is the continuing cash crunch in the rural economy in the wake of demonetisation.

For instance, in Maharashtra, a meltdown of prices, particularly of onions, tomatoes and pulses (chiefly tur or pigeon pea) was the trigger. According to IndiaSpend, tur prices across the country fell by 63 per cent between December 2015 and December 2016; in fact, they fell below the minimum support price (MSP). Such a price crash in the wake of a good kharif harvest has also been the cause of stirs in many other states because it prevented growers from recovering even their production costs. Understandably, farmers’ patience over getting a fair deal has begun to wane. Events in Mandsaur in Madhya Pradesh bear this out. The local administration is finding it tough to handle the protests. Though loan waiver and higher MSPs have become the main demands, these are only temporary relief measures.

 Loan waivers, as a means to alleviate farm distress, have been tried out several times in the past without any tangible positive results. They mar the credit culture, as is being evidenced at present, and make banks wary of lending to the truly needy in the future. In any case, the institutional loans that can be set aside constitute only a part of total rural indebtedness. More troublesome are loans from the informal sector (read money lenders) at usurious interest rates. Moreover, easy access to institutional credit is of little help to farmers unless it is accompanied by measures to boost their earning capacity. Past experience shows that farmers continue to be losers regardless of whether production rises or falls — in the former case because prices tend to nosedive and in the latter case because growers do not have much to sell. The government’s tendency to impose curbs on stock holding, external and domestic trade, and movement of farm goods and persistently ignoring the need to invest in the food economy have not allowed farmers to benefit from the market mechanism. Add to this the fact that over half of Indian farmers are without irrigation and small and marginal land-holdings now constitute 85 per cent of the number of operational farms in the country, and the reasons for the distress in the farm sector are obvious.