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Indian Agrarian Crisis

by Saumit Patki on Thursday 10 August 2017, 1:23 PM | Category: Rural Economy| View: 325 views

 Indian Agrarian Crisis


Rural India is facing a deep agrarian crisis and the same is witnessed by farmer's suicides and agitations in different states of India. Despite the crisis India's growth rate (GDP) is expected to be pegged at 7- 7.2 % (IMF forecast for 2017-18). As far the growth keeps chugging along at 7% plus and food prices remain stable Indian farm crisis can be overlooked. India is an agrarian country where in more than 60 % of the population still engaged in agriculture and allied activities for earning. For 1.3 billion population, imports will not solve the problem if there is a severe drought and food shortage. Agriculture however accounts for less than 15% of gross domestic product (GDP), it is still the main source of livelihood for nearly half our population. To understand the crisis, one needs to decode the roots of it. Therefore, we need to understand the roots of the agricultural crisis.

Understanding the Roots of Crisis

The intense pressure of population on land is the fundamental root of the problem. The land: human ratio is less than 0.2 hectares of cultivable land per head of rural population due to demographic pressures. The size structure of landholdings is also low because of the same. Around 80% of rural households are either entirely landless or own less than 1 hectare of land. Another 17% own less than 3 hectares. At the opposite end, less than 0.25 of rural households own more than 10 hectares of land and a minuscule 0.01% own over 20 hectares.

Hence, the real agrarian crisis is of the marginal farmers and landless farmers and not of the wealthy ones. The small landholdings cannot feed the whole family of farmer resulting into distress in rural areas.

Another root cause is the shortage of monetary resources. Landless or marginal farmers lack the resources to buy or lease more land or invest in farm infrastructure—irrigation, power, farm machinery, etc.—to compensate for the scarcity of land. As land scarcity intensifies with population growth, farming progressively becomes a less viable source of livelihood.

The third constraint is the weather. A large part of farming in India is dependent on rains. A weak monsoon or a delayed monsoon means a significant loss of output. Risk of weak soil fertility, pests and plant diseases is also high.

The fourth constraint is price. The traders on many occasions exploit the farmers even when there is a good harvest. The better the crop the lower would be the price.

The government declares minimum support price for food-grains and other crops to support the farmers, but large traders are mostly benefited by this. Small farmers typically do not have enough marketable surplus to justify the cost of transporting the crop to government corporations in the towns. Their crop is usually sold to traders at rock bottom post-harvest prices in the village itself or the nearest mandi. In the case of other crops, Agricultural Produce Market Committees (APMCs), which were supposed to protect the farmer, have had the opposite effect. Farmers have to sell their produce through auctions in regulated markets controlled by cartels of licensed traders, whose licences give them oligopolistic market power. These cartels fix low purchase prices, extract large commissions, delay payments, etc. Despite subsidies on power, fertilizers, etc., input costs have been rising faster than sale prices, further squeezing the meagre income of the small farmers and driving them into debt. About 52% of agricultural households are estimated to be in debt, and the average size of household debt is Rs47,000. If small farmers are subjected to any of the production or marketing shocks described above, it knocks the bottom out of their precarious existence. The household slides into a downward spiral of extreme distress, debt default and more distress. Source: (Economic & Political Weekly, 27 May).

The Solution

The India Agrarian crisis has a solution of co-operative farming. In a recent article, citing the Amul Dairy Cooperative in Gujarat, which was later replicated throughout the country, former chief economic adviser Ashok Lahiri discussed whether the same model could be applied for other agricultural products (‘Lessons from milk for agriculture' Business Standard, 5 July. Co-operative farming is spread in several other countries like France, Germany, Romania, Kyrgyzstan, Nicaragua, Kenya, and Bangladesh. Co-operation in activities related to accessing credit, acquiring inputs and marketing to production cooperatives which includes land pooling; labour pooling; joint investment, joint water management and joint production. The advantages of cooperative farming are it aggregates small farmers into larger voluntary cooperatives institutions to undertake huge investment in irrigation and farm machinery, more efficient farming practices, greater bargaining power and better terms in the purchase or leasing of land, access to credit, purchase of inputs and the sale of produce. The best example of co-operative farming is the Amul milk cooperative in Gujarat.


As India is projected to grow at a healthy 7-7.2 % in year to come, the same cannot be achieved without agriculture. The investment in agriculture should be doubled in years to come. However, politics and economics never really go together, the time is not right to indulge farmers in loan wavier politics. As loan, wavier is not the solution but a future death trap. Financial discipline should be maintained at any cost.

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