Farm labourers face double-edged squeeze

Sukhgeet Kaur
Director, NITI Aayog

COMPARED to the non-farming sector, suicides in the farming sector are lower. They account for about 10 per cent of the total suicides. Nevertheless, farmers' suicides push rural families to extreme deprivation levels, forcing governments to take costly relief and rehabilitation measures. However this brings short-lived relief as main causes for triggering suicides remain unattended. 

Punjab, with the highest cropping intensity, irrigation coverage and use of fertilisers is battling with increasing rural indebtedness. On an average, the Punjab farmer has the third highest outstanding loan in the country after the southern states. The proportion of indebted agricultural households in Punjab is higher than Bihar, Jharkhand, Assam and Haryana. While increasing use of new technology on the one hand helped in achieving the country's food security, on the other hand it made traditional agriculture unsustainable both in terms of stagnant growth and stressed water and soil resources. Moreover, agricultural development could not make a dent on the growing inequalities. 

Farm labourers’ indebtedness

Worse, farmers' suicides in Punjab seem to be on the rise. However, what misses the headlines is that over one-third of the suicides are by agricultural labourers. Reduced demand for farm labour, increased expenditure on medical and education needs and expensive non-institutional credit have pushed them into debt traps. They face a double-edged squeeze with greater use of labour-displacing agricultural technology and lack of education/skilling limiting other occupations. The negative annual growth of wages during the last four years (2014-17) is indicative of the economic squeeze.

The inverse relationship between debt and asset position of borrower —  almost 70 per cent of Punjab's indebted farmer households possess two hectares or less of land — explains the high incidence of indebtedness. A study found that while about 19 per cent of the marginal and small farmers were bankrupt, only six per cent of the medium and large farmers were bankrupt.

Another factor is the growing dependence on high interest-bearing non-institutional credit sources. On an average, the share of non-institutional sources was half of the loan given to Punjab farmers. Institutional credit is almost absent in the lowest asset holding class. A study of Mansa, Ludhiana and Hoshiarpur districts concludes that the average debt per agricultural labour household from non-institutional agencies was Rs 50,218 and from institutional agencies it was only Rs 4,492 with the moneylender as the primary source, leading to a disproportionately higher interest burden. It was estimated that agriculture labour owed the maximum debt at a rate of interest ranging between 22 and 28 per cent.

Worse, the most vulnerable households borrow heavily to pay for non-productive purposes. Farmers with less than 0.4 hectare of land spent over three-fourths of the loan on conspicuous consumption, marriages, ceremonies, education and healthcare costs. Interestingly, institutional credit is diverted to pay for these needs.

Failure to develop alternative sources of livelihood by diversified agriculture or skill development has accentuated the crisis. The high incidence of suicides in the age group of 20-40 years calls for urgent interventions to harness this demographic dividend. Otherwise indebtedness will continue to grow. These vary from short-term income support to long-term support for better livelihoods.

How farm incomes can be raised

• Raising farm incomes needs a concerted push towards diversification in less water-intensive crops. Simultaneous investments in research and extension can help improve profitability through better seeds and efficient technologies. For example, the average yield of wheat is higher than the realised yield which points to yield stagnation. To ease out stressed water resources, funds should be diverted towards micro-irrigation and water efficiency.
• Income support to the most vulnerable households would help in reducing debts. Extreme impoverishment not only increases out-of-pocket medical expenses but its ill effects also limit agricultural productivity. Upscaling of the social security net through medical insurance and nutritional supplements will effectively address the needs of the poor households.
• There is need to combine investments in social protection with investments in farm diversification and rural development.
• Enabling village-level cooperatives to acquire and lease agricultural machinery can bring down the magnitude of loans taken for capital investments. Interlocked input-output-credit markets can be effectively displaced by e-mandis and electronic payments.  Besides incentivising growth of institutional sources and micro-credit, borrowing needs to be limited by counseling borrowers to not over-rely on credit and educating lenders to sanction loans only after due diligence of the re-paying capacity; else face punitive action. 
• Complementary interventions such as expanding free healthcare and education, mental health counseling and strengthening cooperative movement can equip the most vulnerable for better livelihoods.
• Artificial intelligence can empower even the small and marginal farmers through weather advisories, prediction of yields and arrivals and reduction of crop failure due to improper farming techniques. Thinking smart solutions is worthwhile than pressing for loan waivers which do good to no one in the long run. More so as climate change is set to worsen the stresses in agriculture. 

Views are personal