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1 Farmers Distress In India Srijit Mishra Lecture to YSP participants, IGIDR 23 June 2009.

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Presentation on theme: "1 Farmers Distress In India Srijit Mishra Lecture to YSP participants, IGIDR 23 June 2009."— Presentation transcript:

1 1 Farmers Distress In India Srijit Mishra Lecture to YSP participants, IGIDR 23 June 2009

2 2 Presentation Format Suicide Mortality Rate Risk Factors Matrix of Issues Twin Dimensions of Crisis in Agriculture Risk Mitigation Concluding Remarks

3 3 Suicide Mortality Rates

4 4 The Risk Factors 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. SOCIO-ECONOMIC (Precipitating) NEUROBIOLOGICAL (Predisposing)

5 5 Matrix of Issues IssuesDemandSupply Output, Price, Income Yield risk: weather, power, pests, spurious inputs; Not profitable; Poor returns Increased price volatility; subsidies in US/EU; low tariff; MSP not always functional; Futures-virtual InputSupplier-induce-demand; Deskilling; Increasing costs – tragedy of commons Poor link - research and extension; unregulated private suppliers; Inadequate pub investment CreditFormal – not timely; repayment difficult yield/price shocks; System draws farmers into credit; Consumerism Decline in branches; decline in agricultural/net bank credit (direct); Increasing reliance on informal sources at higher interest burden OtherDominance of lender/input dealer; higher family size; lack of social support Interlinked markets; Non-farm option is limited; Pub health response (farmers); Pesticide avalability

6 6 Two Dimensions of Crisis in Agriculture Agrarian Crisis Threatening Livelihood of Farmers (particularly, the small and marginal) Farmer, people Agricultural (Developmental) Crisis Lies in the neglect of agriculture (designing of development programmes and allocation of resources) Farming, goods

7 7 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.

8 8 Deceleration in Production and Yield CropsProductionYield TE 81-82 to TE 92-93 TE 93-94 to TE 04-05 TE 81-82 to TE 92-93 TE 93-94 to TE 04-05 Total Foodgrains3. Cereals3. Pulses1.5- Total Oilseeds6. Sugarcane3.91.41.8-0.2 Cotton (Lint)

9 9 Sectoral Share and Employment Status of Rural Workforce Rural Employment19831999- 2000 2004-05 Agriculture81.4976.1670.08 Non-Agriculture18.5123.8429.92 Status of Rural Workforce Self-employed61.3755.7660.2 Hired-Regular7.156.837.1 Hired-Casual31.4937.4132.8

10 10 Share of Agriculture in GDP and Employment YearShare of Agriculture in GDP at 1999-2000 Prices Share of Agriculture in Employment (UPSS) 1972-7341.073.9 1993-9430.063.9 1999-0025.060.2 2004-0520.256.5

11 11 Monthly Per Capita Income/Consumption by Size-Class of Holdings, 2003

12 12 Per capita per day returns, 2003 (Rs)

13 13 Farm Business Real Income Deflated by CPIAL (1993-94=100)

14 14 Number of Poor and undernourished farmers in million PoorUndernouris hed 1983-84220153 1987170121 1993-94174151 1999-00123180 2004-0563200

15 15 Per worker productivity in Agriculture across states

16 16 Operational Holding and Area (%) Operational HoldingOperated Area 1960- 61 (17 th ) 1981- 82 (37 th ) 2003 (59 th ) 1960- 61 (17 th ) 1981- 82 (37 th ) 2003 (59 th ) Marginal39. Small22.619.316.612.316.620.9 Semi-Medium19.814.29.220.723.622.5 Medium14.08.64.331.230.122.2 Large4.51.90.829.018.211.8 All Sizes100.0

17 17 Irrigation Growth Rate PeriodCanalsTanksWells & Tube Wells OthersTotal 1970s 1.76-2.534.251.192.21 1980s 1.33-0.773.001.402.18 1990- 91 to 2003- 04 -1.09-3.152.80-0.491.06

18 18 Captital Formation in Agriculture 1980-81 Pub GCF Agr/Agr GDP PVt GCF Agr/Agr GDP GCF Agr/GDP GCF Agr/GCF 1980-814. 1990-912.48.12.811.5 1999- 2005-062.510.72.47.3

19 19 Share of credit disbursed to share of area Upto 2.5 acres 2.5-5.0 acres >5 acres 1981-821.020.821.08 1991-920.540.751.42 2002-030.410.801.40

20 20 Important Measures of Trade Liberalization External TradeWTO: 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 Liberalisation Seed: 100% foreign equity 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 Reform Tax reduction and public expenditure: grave implication for public investment in agriculture.

21 21 Evaluating Risk Mitigation through the prism of Choice of Techniques T i : X i Y i ; i=0,1. T 1 >T 0 if X 1 Y 0 (improvement if input-saving or output-enhancing Now, if Y 1 >Y 0 and X 1 >X 0 (output-enhancing and uses more resources; further there could be a change in composition of X) and (Y 1 -X 1 )>(Y 0 -X 0 ) (net returns are higher) But, (Y 1 /Y 0 )<(X 1 /X 0 ) (increase in output is lower than input – risk mitigation is more difficult)

22 22 Risk Mitigation: Alternative Scenario YrInputOutputNet ReturnsConsumptionCumSav Traditional11. Intensive13. 43.00.0- Sustainable10. 40.50.0-0.51.2

23 23 Evaluating Risk Mitigation: An example CharacteristicsT0T1T1/T0, % Net Returns3930.05720.045.5 Costs13410.027600.0105.8 Cost/Returns3.44.8 Insurance, 5% gross (for crop loss <80%) 867.0 1666.0 Yield, 85%14739.028322.0 Revised Costs14277.029266.0 Revised Net Returns462.0-944.0 -304.3

24 24 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.

25 25 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.

26 26 Selected Readings Bhaduri, Amit (2008a), Predatory Growth, Economic and Political Weekly, 43 (16), 10-14.Predatory Growth 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.National Seminar on Health Equity in India Government of India (2007), Report of the Expert Group on Agricultural Indebtedness, Ministry of Finance, New Delhi, (Chairman: R Radhakrishna).Report of the Expert Group on Agricultural Indebtedness Mishra, Srijit (2006), Suicide of Farmers in Maharashtra, Indira Gandhi Institute of Development Research (IGIDR), Mumbai.Suicide of Farmers in Maharashtra 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. 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.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).Report of the Working Group to Suggest Measures to Assist Distressed Farmers

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