UPSC Express

The main reasons for farm crises are:

1. Slow agriculture growth:

• Agriculture shrank to just 18 percent of the GDP in 2013-14; and further shrinking is projected given agriculture’s lower growth rate compared to other sectors.
• The agriculture growth rates have been unsteady in the recent past.
• • 2012-13: 1.5%
  • 2013-14: 5.6%
  • 2014-15: (-) 0.2%
  • 2015-16: 0.7%.
  • The provisional estimate puts it at 4.9% in 2016-17.
• The trend reflects the distress in the agriculture sector.

1. Land assets:

• As per Agriculture census 2010-11, the average farm size in India is small, at 1.15 hectare, and since 1970-71, there has been a steady declining trend in land holdings.
• The small, marginal and semi-medium land holdings (less than 4 hectares) account for around 70% of land holdings in term of area and around 95% of total numbers.
• As per the Socio-Economic and Caste Census (SECC) 2011 around 30 percent of rural households are landless.
• This predominance of small operational holdings is a major limitation to reaping the benefits of economies of scale.
• Since small and marginal farmers have little marketable surplus, they are left with low bargaining power and no say over prices.

1. Population on farming

• While share of agriculture in GDP is declining, the percentage of population dependent on agriculture observe very slow decline.
• Still around 70 percent of its rural households still depend primarily on agriculture for their livelihood.
• This huge population dependency is one the main reason for farm crisis.

1. Risk involved

• The agriculture sector is characterised by instability in incomes because of various types of risks involved in production, market and prices.
• Crop production is always at risk because of pests, diseases, shortage of inputs like seeds and irrigation, which could result in low productivity and declining yield.
• Agriculture still remains largely rain fed (around 52%) and vulnerable to the vagaries of the monsoon. And so are the fates of millions of Indian farmers.
• Because of the perishable nature of produce and inability to hold it due to poor storage infrastructure, produced have very low resilience.
• Hence, these issues lead to absence of mechanism in which farmers can protect themselves against adverse circumstances like surplus-shortage scenarios or insure against losses.

1. Increase in input cost

• Along with the slowdown in agricultural growth, the costs of farm inputs such as fertilisers, seeds, mechnisation, electricity etc., have increased faster than farm produce prices.
• The cost of capital too has increased manifold over the years.

1. Remunerative Price

• The government’s economic survey for 2016-17 points out that the price risks emanating from an inefficient APMC market are severe for farmers in India.
• Farmers face price uncertainties due to fluctuations in demand and supply owing to bumper or poor crop production and speculation and hoarding by traders.
• The lower than remunerative price in the absence of marketing infrastructure and profiteering by middlemen adds to the financial distress of farmers.

1. Credit system

• The predominance of informal sources of credit, mainly through moneylenders, and lack of capital for short term and long term loans have resulted in the absence of stable incomes and profits.
• Further, it leads to defaults and indebtedness which turned agriculture into an unprofitable occupation and deepened the crises.

1. Uncertain policies and regulations

• Uncertain policies and regulations such as those of the Agricultural Produce Market Committee (APMC Act), besides low irrigation coverage, drought, flooding and unseasonal rains, are some other factors that hit farmers hard.

Way forwards

• While the farming sector has its own set of risks, like any other economic activity, to increase and ensure stable flow of income to farmers it is vital to manage and reduce the risks by analysing, categorising and addressing them.