Understanding the backdrop

12/01/2021

For years, governments have neglected the agricultural sector, failing to recognise the abysmal conditions under which a majority of our farmers work. The ongoing protests must be understood in the backdrop of the levels of poverty they face. Approximately 55% of the total workforce in India was employed in agriculture and allied sectors (2011 Census). This has declined to 42.5%, according to the Periodic Labour Force Survey 2018-19. The Economic Survey 2019-20 states that the share of agriculture and allied sectors in national income has also declined to 16.5%. Though the average size of an agricultural holding was around one hectare in 2015-16, small and marginal farmers who hold less than two hectares of land constitute 86% of the total holdings. Only 1% of farmers hold more than 10 hectares of land.Since farming has become unremunerative, farmers have little surplus to deal with contingencies, even in a relatively good year. In most other years, they are forced to borrow from local moneylenders to meet major expenses such as a family marriage, a medical emergency or education. This is above the regular loans they take to buy fertilisers, seeds and other inputs.
Let us look at another data point. The average outstanding loan of a farming household is just over Rs1,00,000. Most loans, which account for this debt, are from non-institutional sources at exorbitant interest rates ranging from 24% to 36%. Since the sanctioning of loans by institutions is a lengthy process, involving demand for collateral security, farmers are driven to non-institutional sources resulting in extreme indebtedness. This also explains the number of suicides by farmers - in 2019 alone, the number was 10,281. Unlike the corporate sector, the farming community doesn't have the clout to influence government. Industry and other sectors of the economy seek exemptions, waivers and incentives while farmers are only seeking Minimum Support Prices (MSP). Even that price doesn't cater to their sustenance as 94% of the farmers are deprived of the benefits of MSPs. Of over 140 million farmers, only 8.7 million benefit from it. In states such as Uttar Pradesh (UP) and Karnataka, none of the farmers knew about MSPs before the sowing season, according to a NITI Aayog report. Punjab and Haryana, however, are the biggest beneficiaries. In fact, 85% of the wheat procured in India in 2019-20 came from the three states - Madhya Pradesh, Punjab and Haryana, which is why Punjab's farmers are so concerned about their livelihood. The protesting farmers are seeking an assurance on MSPs for all crops until markets become sufficiently competitive. The government must continue with the policy of declaring MSPs of various crops well before the sowing season. Further, MSPs should be linked to inflation so that farmers know much revision will take place going forward.

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