Into the abyss?

The situation of India's farmers has only become grimmer in the past decade, according to the latest National Sample Survey Office report

By Jitendra
Last Updated: Monday 17 August 2015

Into the abyss?


The lot of the embattled Indian farmer only keeps on getting worse with the passage of time. In the last 10 years, the voluminous debt of Indian agricultural households has increased almost four-fold whereas their undersized monthly income from cultivation has increased three-fold. Even the number of indebted agricultural households has increased in the last 10 years. At the same time, there has been a micro-increment in the number of agricultural households in India.

All this is according to the recent report of the National Sample Survey Office (NSSO), released on December 19, 2014. The report, titled ‘Situation Assessment Survey of Agricultural Households in India’, is based on a countrywide survey of 35,000 households by NSSO during 2012-2013.

It states that 52 per cent of the total agricultural households in the country are in debt. The average debt is Rs 47,000 per agricultural household in this country, where the yearly income from cultivation per household is Rs 36,972.

The report comes after a gap of 10 years. The last Situation Assessment Survey by the NSSO was for 2002-03. In that year, 48.6 per cent of agricultural households were in debt. The average debt was Rs 12,585. And the yearly income from cultivation per household was Rs 11,628. At the time, India had a little less than 89.35 million agricultural households.

In fact, some think that the report may not even be reflecting the entire truth. “The NSSO survey gives us an idea of the existing situation but not the clear picture. In my opinion, it is not just 52 per cent agricultural households that are in debt but 80 per cent,” says Devinder Sharma, a food analyst. “If you adjust for inflation, on an average 7 per cent every year, farmers’ incomes have remained frozen in the past 10 years,” says Sharma.

The other main takeaway from the NSSO report is that the debt is being incurred by the the richer, more prosperous farmers. NSSO data shows that richer agricultural states like Kerala, Andhra Pradesh and Punjab have the highest average outstanding loans per agricultural household, whereas poorer states like Assam, Jharkhand and Chhattisgarh have the lowest amount of average outstanding loans.

This is substantiated by the data which shows that among agricultural households which possess less than 0.01 ha the share was only 15 per cent of the total outstanding institutional loan, whereas for households which possess more than 10 ha the share was about 79 per cent.

Reasons behind the rise

The question then is: why have farmers’ debts increased? Ashok Gulati, former chairperson of Commission for Agricultural Costs and Prices (CACP), thinks outstanding loans to farmers are natural because of increasing intensification in agriculture. “As the intensification of agriculture increases, so does the loan.

The loan would be in the form of working capital, else the fixed capital will increase,” says Gulati.


Others believe that this report is like the one in 2002-2003 and brings out the same systemic problems. They add that India has not learnt anything in the past one decade. One such issue is investment in the sector. Even as agriculture has intensified, investment in it is very less. Even the yearly agriculture budget is not more than that of the flagship employment guarantee programme, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

“The current year’s budget of agriculture was nearly Rs 31,000 crore while the MGNREGA budget was nearly Rs 34,000 crore. If we see the seven-year budget, the ministry budget was never more than MGNREGA,” says Sharma.

According to A note on Trends in Public Investment in India by S Mahendra Dev, Director, Indira Gandhi Institute of Development Research, Mumbai, the share of private investment in total investment in agriculture increased significantly over time from about 50 per cent in the early 1980s to 80 per cent in the decade of the 2000s. In other words, the share of public investment declined from 50 per cent to 20 per cent during the same period.

The public sector investment showed a negative growth in the 1980s and 1990s and a growth of 15 per cent in the 2000s. On the other hand, growth rate of private investment increased gradually from 2.5 per cent in the 1980s to 4.1 per cent in the 1990s and 52 per cent in the 2000s.

Another reason debt has increased is that market price of agricultural produce is not commensurate with rising input cost. Dev says that two-thirds of farmers do not get minimum support price (MSP) for their crops and are compelled to sell their crops at lower rates in the open market.

“Seventy-five per cent of farmers in India sell in the open market at lower than fixed MSP. Only the farmers of Punjab and Haryana get MSP. The situation of other states is deplorable,” says Dev. “For instance, in 2009, when I was the chairperson of CACP, in states like Bihar, farmers used to get Rs 700- Rs 800 for paddy when the MSP was fixed at Rs 1,000.”

The reason for farmers not being able to get MSP, according to the NSSO data, is that large numbers of them are not even aware of it. As per the data, only 32 per cent of paddy farmers are aware of MSP. But even then, less than half are able to sell their produce in government procurement centres.

“In collusion with local traders and commission agents, government agencies delay in starting procurement centres by 30 to 50 days. In between, farmers sell their produce to traders at lower than minimum price,” says Yudhveer Singh, a farmers’ leader.


Gopal Naik, who teaches agro-economy at IIM Bangalore, feels that total collapse of agriculture extension centres could also be the reason behind the outstanding loans and poor conditions of farmers. “The agriculture extension centres have collapsed. At one time, they were helping and guiding farmers in a number of situations like making the best use of pesticide, fertiliser consumption and modern tech, and making them aware of MSP and the nearest procurement centres,” he says. “Now farmers depend on dealers and sellers of pesticide for all that, which results in losses and non-profitability,” he adds.

Skewed debt

Naik believes the loan-waiving culture of the government also fuels continuation of outstanding loans. “Government policies are uncertain and increase the tendency of not repaying loans. It can also be a reason of increasing outstanding loans.encourage non-repayment of loans. The big land holders have high outstanding loans because they can easily access credit from institutions. They can access loan for other activities like setting poultry and other farms and wait till the government waives their loans,” says Naik.

The data shows that about 60 per cent of the outstanding loans were taken from institutional sources which included government (2.1 per cent), cooperative societies (14.8 per cent) and banks (42.9 per cent). But while the big farmers can afford to take loans, the small farmers still have no access to them.

“Credit from institutional sources is still a dream for small and marginal farmers,” says Jasveer Singh, a Bengaluru-based senior researcher who works on agricultural labourers’ issues. Anshuman Das, an activist who works with small farmers in Jharkhand, thinks that while they do not get institutional loans, they help in maintaining food security of the country.

“The small farmers practise farming which is different from that of big land holders. They try to keep investment low and innovate. For this, they do not access institutions for loans but are still dependent on non-institutional money lenders,” says Das.

The increasing debt and its skewed nature are surely driving many farmers away from agriculture. Agricultural house-holds are moving away to livestock, other agricultural activities, non-agricultural enterprises and wage employment. Data shows that 37 per cent of agricultural households no longer have agriculture as their principal source of income.

The contribution of agriculture in India’s GDP is nearly 18 per cent and it provides employment to nearly 56 per cent of the total workforce of the country. Despite this, as the NSSO report shows, the sector is no longer the first preference of rural households in India. It is heading towards a huge debt crisis and will need serious policy intervention instead of an ad-hoc approach.

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  • covered multidimensional

    covered multidimensional sides of issue

    Posted by: Anonymous | 5 years ago | Reply
  • Sorit Gupto must be recalled

    Sorit Gupto must be recalled here to draw out the Indian Statistical Tamper. Be careful only central sample with a truncated definition of agriculture household is being used thus making its comparison with earlier rounds redundant and meaningless.
    Even within the central sample report no clue is available as to how various national flagship programmes initiated since 2007 worked. However one sharp point emerging from this truncated report on Key Indicators of agricultural households. RKVY indeed is a Rashtriya Kosh se Vyarth Vyaya Yojana and C-DAP-the famous anchor to all National flagship programmes-district agricultural development plan is correctly perceived as dead plan both phonetically and functionally.
    Will NITI AAYOG or PM-Modi make use of this truncated SAS KIs is not a million rupee question since agriculture is not in their radar due to high and lethal doses of #MakeinIndia.

    Posted by: Anonymous | 5 years ago | Reply
  • The oft repeated flawed

    The oft repeated flawed analysis of the situation of the agrihouseholds and blatantly demonstrated in the piece is the production landscape and the unit area that it is striving to provide a livelihood security. As is often said averages conceal a lot of starker and sharper pointers, SASagrihhds-2013 is anchored to the Land-Livestock holdings survey. Look at this making innovative classifications to hide the true situation existing in the ground.
    DTE has already covered the yawning gap between the estimates of Livestock in this NSS-report and the quinquennial livestock census.
    While commenting on the burgeoning debt burden of the rural agrihhds, the same NSS round-70 has come out with another set of KI report. What surprises me as a lay reader is the alacrity with smirkness of some of the spin doctors to rationalise many fundamental flaws. For instance, ADWDR-2008 related reports have been in the public domain for sometime before the design for NSS70th Round was in discussion mode. Could not the high-powered designers reflect on these reports and come out with more meaningful situation analysis survey? Or was it protecting the statistical Tamper turf?

    Posted by: Anonymous | 5 years ago | Reply
  • FarmersÔÇÖ plight The article

    FarmersÔÇÖ plight

    The article ÔÇ£In to the abyssÔÇØ (DTE Jan 16-31) should be revealing to our policy makers. The farm sector is suffering a serious jolt all over the country according to the National Sample survey. The situation cannot be remedied by more loans or moratoriums on loans. The small and medium farmers are the worst hit. The rich ones can escape the strangle-hold by mechanization wherever it is feasible. However the fate of the majority of farmers who have to depend essentially on manual labor on farm is deplorable. It is a losing struggle for them.

    The article in passing makes a comparison between the budget allocation for MGNREGA and the farm sector. The former outweighs the latter. It requires not much imagination to realize that the large labor force usually associated with the farm sector has today chosen the easy path of MGNREGA in our rural landscapes. It is only natural. Anyone would choose the easier option in any given circumstance. MGNREGA has opened up a way to be less accountable. No goals and no stiff targets. No enforcement. No personal accountability. Strictly speaking, there is no beneficiary other than the work force themselves. If some great feat under MGNREGA can be pointed out it is only where local leadership showed exceptional statesmanlike qualities against heavy odds.

    The philosophical underpinning of MGNREGAÔÇÖs idea springs from the ÔÇÿsocialistÔÇÖ view that land owners are intrinsically exploiters of the working class. I do not intend to go into a discussion on this contentious issue. All that I would like to say here is that most of the middle class farmers (perhaps many socially responsible large farmers too) bear no such ill -will towards their next door people. These middle class people are the majority of farmers who suffer from the dichotomy between the farm sector and MGNREGA.

    The famers are supposed to feed the country against an array of imposing natural calamities and institutional hazards. When the work force are forced to turn a blind eye towards their ill- fated land-holding neighbors owing to the great labor divide created by MGNREGA, the country will be on the way to begging for food.

    Food production was never a profitable activity. Farmers in the olden days engaged in this task with the help of abundant labor force made available by the then prevailing socio- economic system. The emerging political forces broke down traditional social relations. It goes without saying that the responsibility for helping the farmers in food production should squarely rest with the political system. It was so in the past and it must be so today. Leaving farmers, who have to shoulder the responsibility of producing food, to always running in circles in search of workers, is ruinous. When a ruling political system views farmersÔÇÖ interest as diametrically opposed to the interests of local workforce, farmers will soon perish and they will discard farming altogether, inviting the real estate business to play their cards. Food production will suffer as a matter of course.

    MGNREGA which today employs a large active workforce, if correctly aligned with agricultural production (and perhaps other spheres of traditional livelihood production areas) can set right many wrongs and pave way for the betterment of quite a few vital areas of socio- economic and national needs. The funds available for farming and such other rural sectors will effectively multiply leading to food and social security. Farmers and other rural producer sectors on the verge of bankruptcy, and thinking of suicide as a viable option, can turn around and come back joyously to winning ways. The funds made available through the MGNREGA can be used purposefully for productive employment and rural reconstruction. The national priorities like food production, biodiversity conservation, and soil and water conservation could be integral to the MGNREGA activities along with local priorities such as giving a helping hand to ailing traditional village industries.

    Posted by: Anonymous | 5 years ago | Reply