Rya Jetha (PO ’23)
Five years ago, at a political rally in Delhi, Gajender Singh climbed a neem tree near the stage. He fashioned a noose out of a white scarf, fastened it around his neck, and jumped off the branch to his death in front of the crowd. Later, a note found in his pocket said “Friends, I am a farmer’s son. I’m thrown out by my father because my crop is destroyed. I have three children. Please tell me, how do I go back to my home?”
Singh’s suicide is a symbol, a political statement that has fallen on deaf ears for decades in India. Since 1995, more than 300,000 farmers have committed suicide due to an agrarian debt crisis, surging input costs, lack of direct integration with the market, heavy reliance on fertilizers, and climate change.
Government response to the agrarian crisis causing farmer suicides, for decades, has been in the form of loan waivers, which is the voluntary waiving of the real or potential liability of a person or party by the body who gave the loan. The first national loan waivers to farmers were doled out in 1990, costing the government $5.6 billion. During the 2008-2009 global financial crisis, the Indian government enacted the Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS), which fully or partially canceled $16 billion worth of debts from up to 60 million rural households in India. As of February 15th 2020, the state government of Maharashtra plans to roll out a loan waiver worth $41 billion for 34,00,000 farmers.
The merit of loan waiver programs as a tool to alleviate stress on farmers and increase agricultural productivity has been controversial. Analysis from the World Bank indicates that ADWDRS has prompted farmers to delay loan repayments and increase in defaults, while showing a rise in moral hazard and no increase in agricultural productivity. In fact, the Indian Comptroller and Auditor General’s report following ADWDRS revealed corruption and administrative errors in identifying which farmers would benefit from the program. Veteran agricultural journalist P Sainath has commented that “the loan waiver is a tool, not a transformation. They are a mechanism but not a solution, they are a relief but not an answer.” Indeed, another criticism of loan waiver programs is that medium and large land-owning farmers benefit disproportionately from loan waivers. The ADWDRS, for example, only covered formal sources of credit and did not recognize informal loans. Therefore, wealthier farmers with more land and better access to institutional credit (approximately 23% of Indian farmers) benefitted from the scheme, while the small-scale majority of farmers who borrowed their funds from private money lenders were ineligible to benefit from the scheme.
This helps to explain the disproportionate number of small-scale farmers who commit suicide every year compared to large-scale farmers. Data from the year 2015-16 indicates that more than two-thirds of farmers who committed suicide owned less than 5 acres of land. Kishor Tiwari, an activist who heads a task force to prevent farmer suicides in Maharashtra, commented that “these [small] land holdings are simply not sustainable, and it is these poorest of poor farmers who suffer the most.” The problem only seems to be getting worse: the average size of land holdings in rural India has halved over the last two decades. Currently, more than 85% of farmers fall into the ‘small and marginal’ category indicating ownership of less than 2.5 acres of land.
Apart from the disproportionate benefits accorded to institutional borrowers, loan waivers adversely impact the economy. They are a heavy drain on both state and central government financial resources, and decrease government investment in more efficient infrastructure such as irrigation and storage facilities, water conservation, and better farm-to-market connectivity.
Apart from government investment to improve the structural flaws of the agricultural system, improving the wellbeing of farmers requires government investment in rural education. A recent government study found that 32 percent of India’s rural population is illiterate, compared to 15 percent in urban areas. For farmers specifically, the percentage is estimated to be even higher than the general rural population. Despite agriculture accounting for nearly 18 percent of India’s GDP and more than half of the country’s workforce being employed by the agricultural sector, farmers continue to be deprived of knowledge and skills to improve farm productivity, especially in the face of climate change. Topsoil erosion, soil health, groundwater depletion, and insufficient irrigation are problems endemic to India, and farmers currently do not have the awareness, let alone tools, to solve these problems.
Fortunately, recent developments in the field of behavioral economics may provide a feasible solution to India’s farmer education crisis. The 2019 Nobel Prize in Economic Sciences was awarded to Abhijit Banerjee, Esther Duflo and Michael Kremer “for their experimental approach to alleviating global poverty.” Banerjee, Duflo and Kremer’s work was important in developing the limited knowledge we have about how to apply behavioral economics to developing countries. The results from their study called Improving Immunization Rates Through Regular Camps and Incentives in India indicated that offering families in resource-poor settings small, non-financial incentives (1 kilogram of lentils and a set of metal meal plates) along with reliable services and education reaped better immunization rates than services and education alone. This economic model, which recognizes that poverty changes cognition and preferences, has the potential to improve the welfare, education and farm productivity of Indian farmers. Along with educational courses, small, non-financial incentives may provide a way for farmers to develop deeper farmer-to-farmer connections and better practical knowledge for farming and financial matters. In addition to government investment in agricultural infrastructure, these policies are certain to give farmers a fulfilling reason to live.
Thank you to Izzy Davis for editing the piece.
Thank you Sushma Seksaria, Professor Heather Williams and Professor Manisha Goel for their time and insights.