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India's Bitter Seeds: The Plight of Small Farmers

 
 

His speech is of mortgaged bedding,
On his kine he borrows yet,
At his heart is his daughter’s wedding,
In his eye foreknowledged of debt.
He eats and hath indigestion,
He toils and he may not stop;
His life is a long-drawn question
Between a crop and a crop.

-Rudyard Kipling, The Masque of Plenty

More than a billion people in the world are employed in agriculture, and in India, one out of four people are farmers or agricultural workers. Farm output contributes $325 billion ( about 15 percent) to India’s $2 trillion economy. Yet despite their contributions, small farmers — who constitute 85 percent of farmers globally — make up one of the largest constituencies among the world’s poor. Small and marginal farmers constitute 80 percent of total farm households, 50 percent of rural households, and 36 percent of total households in India.

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These smallholder farmers are plagued by low productivity and low quality. They are locked out of higher paying markets because they lack access to farm inputs such as good seeds and fertilizers, training and capital; barely six percent of rural adults in developing countries have bank accounts.

Economic reforms and the opening of Indian agriculture to the global market over the past two decades have made small farmers vulnerable to unusual changes and fluctuations. Small farmers have now to compete with larger ones, who are well endowed with capital, irrigation, and supplementary businesses to buffer them against any adverse shocks. As fallout, the farmers are facing what has been called a “scissors crisis,” which is driven by the rising cost of inputs without a commensurate increase in output price. A crop failure, an unexpected health expense, or the marriage of a daughter are perilous to the livelihood of these farmers. An adverse weather change, for example, can lead to a drastic decline in output, and the farmer may not be able to recoup input costs, leave alone repay loans. Sometimes farmers have to plant several batches of seeds because they may go to waste by delayed rains or even excess rains. The problem has dragged down yields and rural consumption nationwide — a heavy economic drag on a nation where two-thirds of people live in the countryside.

Adding to their problems, small and marginal farmers also do not have access to institutional credit. Most of them depend on village traders, who are also moneylenders, giving them crop loans and pre-harvest consumption loans. Credit histories and collateral may serve to qualify middle-class customers for loans, but most rural smallholder farmers have neither.

Some innovative new approaches are trying to change that. The international Grameen Foundation has designed the Agricultural Risk Evaluation Tool (ARET) to evaluate the ability of a smallholder to repay loans based on who they are and how they farm: concrete information that can be gathered by field agents using a digital app. ARET uses farm-level data to answer key questions that provide crucial insights into a farmer’s likelihood of defaulting on a loan. The tool segments farmers into eight risk groups that help make decisions on who to serve and how to best serve them with credit and ongoing support. Data collected by field agents and credit officers are used to assess risk, and develop individualized farm management plans that help farmers raise their productivity and their credit-scores.

Still, most small farmers remained dependent on local financing sources. The superior bargaining power of village traders and the middlemen means that the prices received by farmers are low. On account of the small size of the farms, they can rarely apply technological solutions that work best on a large scale. And with government extension workers not properly trained, small farmers do not have access to knowledge about best practices (for example, crop rotation techniques to help reduce pests). Higher farm labor and input prices and depleting ground water resources add to their woes.

There is  greater value for farmers in forming groups for mutual self-help, where those growing the same crops come together in organized groups to receive joint training, buy inputs in bulk, and start to sell as a single body. Smallholder farmer producer groups are a key component of creating true scale because of the confidence, support, and buyer/seller power they provide.  This also enables a greater scale of transformation in terms of individuals and communities

According to the National Sample Survey Office (NSSO), during the last decade the bloated debt of Indian agricultural households has increased almost 400 percent while their undersized monthly income plummeted by 300 percent. The total number of heavily indebted households steeply increased during this period. Most farmers have become victims of the endemic phenomenon known to economists as the cycle of poverty — that inexorable process of descending along the social ladder by which the farmer became a sharecropper, then a peasant without land, then an agricultural laborer, then is eventually forced into exile. It is no use dreaming of climbing the rungs in the reverse direction.

A survey commissioned by NABARD and undertaken by Punjab Agriculture University has confirmed that 94 percent of the government subsidies are being used by big and medium farmers, leaving the smaller farmers — for whom subsidies are actually meant — sidelined. The survey has also indicated that the subsidies are not being given based on needs, but on political considerations. The survey has brought out the startling facts that nearly 88 percent of farmers in the state are in debt. The marginalized and smaller farmers have six times more debt than big farmers in Punjab.

While farmers, particularly those with small parcels of land, continue to work out strategies to keep their age-old bond with their land alive the new generation finds farming unsustainable for their new living style. This is the key reason behind their influx to cities despite the hard truth that the new utopian world the migrants hope to discover is just a vain chimera.

India needs to arrest this influx and inject the rural economy with new skill development programs to generate local employment. That is the right way of saving both the cities and villages – and, in a way, the civilization itself.

Moin Qazi is an author, researcher and development professional who has spent more than three decades in the development sector. He holds doctorates in Economics and English. He is author of the bestselling book, Village Diary of a Heretic Banker.

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