Agriculture sector has been under stress in India for a several decades now. Agricultural growth has been, on average, lower than that in non-agriculture, including industry; but the rate of decline of the population dependent on agriculture has been discouragingly low since employment outside of agriculture has not been growing fast enough. Incomes from farming depend on both revenues and costs of cultivation, with revenues being in turn determined by output produced and sold and market prices received. Low growth, poor earnings and distress behavior such as large-scale internal migration and disproportionately high suicides have signaled that something is wrong with the rural sector in India.
After independence, the government emphasized on land reforms and improvement of infrastructure followed by introduction of new methods of cultivation, use of high yield variety seeds, fertilizers and pesticides. The new strategy increased agricultural productivity but also changed the agriculture practices in India. Cultivation of single crops under market pressures made agriculture cash based individual enterprise which required huge investments in modern input and wage labour. This led farmers to draw more and more credit to plough their lands. Lack of remunerative prices, uncertainty in crop yield and fluctuations in the prices of agriculture produce caused immense trouble for farmers, especially the small farmers.
Root Causes Agrarian Distress in India
Some of the root causes of Agrarian distress in India have been identified as:
- Fragmentation of land holding: Demographic pressure has pushed down the land: man ratio to less than 0.2 hectares of cultivable land per head of rural population.
- Shortage of money: Landless or marginal farmers lack the resources to either buy or lease more land or invest in farm infrastructure—irrigation, power, farm machinery, etc.—to compensate for the scarcity of land.
- Dependence on Weather: The large majority of small farmers are dependent on the rains. A weak monsoon or even a delayed monsoon—timing matters—means a significant loss of output. Soil fertility, pests and plant diseases is another risk.
- Price Variations: Farmers are usually at the mercy of traders. The better the crop the lower would be the price. Net income sometimes collapses if there is a very good crop of perishables. The highly distorted and exploitative product market is the second most important factor responsible for the misery of the small farmer.
- MSP: small farmers usually do not benefit from the government assured MSPs. It mainly benefits the large traders who sell grain to the government. Small farmers typically do not have enough marketable surpluses 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.
- APMCS: 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. These cartels fix low purchase prices, extract large commissions, delay payments, etc. According to a study, the farmers may typically get as little as 25% of the price that consumers finally pay. A consolidated mark-up of 300%.
- Migration: The rural youth, especially young males, are migrating to the towns and cities for a better future. But their dreams are quickly shattered. There is not much employment growth anyway and they lack the skills required for a decent job. What remains is a burgeoning army of unemployed, miserable and frustrated young men.
The agrarian crisis is morphing into a social nightmare. Its time for a complete overhaul. An idea that has gained much traction in recent days is cooperative farming. This is already popular in France, Germany, Romania, Kyrgyzstan, Nicaragua, Kenya, and Bangladesh among others. There are several variants of cooperation ranging from collective action in accessing credit, acquiring inputs and marketing to production cooperatives that also include land pooling; labour pooling; joint investment, joint water management and joint production.
There are many lessons of successful cooperative farming in India and abroad that will have to be learned for the institutional transformation of our small farmer economy into cooperative farming systems on a national scale to address the agrarian crisis.