vidarbha farmers suicides
Left behind: Debt relief brings little respite for India’s farmers
By Joe Leahy and Arush Chopra in Mumbai
Published: August 24 2008 18:44 | Last updated: August 24 2008 18:44
Afew years ago, Kalawati Bandurkar (pictured above) was just another Indian farmer eking out a back-breaking existence from a few acres of land. Life was hard – but this was true for everyone in the village of Jalka in Vidarbha region, a remote corner of India’s western Maharashtra state.
Then events took a tragic turn. Kalawati’s husband, Parashuram, who had long been preoccupied by the family’s crippling debt burden, began acting strangely. Often he would just sit by the road, running over the numbers in his head, wondering how he was going to repay his loans as well as marry off his seven daughters and buy seeds for the next cotton crop.
Rising cultivation costs and crippling debts have forced more than 90,000 people in India to commit suicide since 2001
When he took his own life, he joined an estimated 5,000 farmers to have done so in Maharashtra since 2004, many of them in Vidarbha, which today is known as India’s farmer suicide region. “He used to always walk around tense with his head in his hands, saying what am I to do – and then he did what he did,” says Kalawati, sitting flanked by her family of nine at her mud-and-thatch home.
That was three years ago. Last month, Kalawati’s fortunes underwent another dramatic shift when Rahul Gandhi, scion of the country’s Nehru-Gandhi political dynasty and a member of parliament with the ruling Congress party, turned up on her doorstep as part of a field trip to investigate rural poverty. Mr Gandhi mentioned Kalawati’s case as an example of rural hardship during a crucial vote in parliament on India’s civilian nuclear deal with the US. The shy and illiterate widow is now known across the country by her first name.
Mr Gandhi’s visit was carefully timed. India’s Congress-led ruling coalition must hold an election before May next year. It knows its fate rests not with the prosperous middle classes of India’s booming cities but in the hands of the more than 70 per cent of India’s 1.1bn population who live in rural areas. Of these, most are heavily indebted “small and marginal” farmers, like Kalawati.
To win them over, Congress announced this year possibly the biggest direct handout in India’s history – a Rs710bn ($16.2bn, €11bn, £8.7bn) bank loan waiver for bankrupt farmers. The scheme, which is being implemented now, is costing around 1.7 per cent of gross domestic product.
In his Independence Day speech on August 15, Manmohan Singh, prime minister, went so far as to describe Congress’s rural initiatives, particularly the loan waiver, as a “New Deal” for farmers – evoking the social spending programme of the President Franklin D. Roosevelt during America’s Great Depression. “Our effort at increasing investment in rural areas and reducing the debt burden of farmers has turned our agricultural economy around,” Mr Singh said. “Our farms are once again green. Our godowns are once again filling up. Our farmers are once again hopeful about their future and their welfare.”
The speech left many analysts in India wondering whether Mr Singh was talking about the same country. Not only is the loan waiver scheme dangerously flawed, they argue, but the government needs to do more to address the fundamental cause of India’s rural poverty – too many people tilling plots of land that are too small to sustain them.
The mathematics behind the crisis in India’s agricultural sector are simple. Agriculture’s contribution to GDP fell from 42 per cent in 1970 to half that by 2001. Yet the percentage of India’s workforce engaged directly in agriculture declined by much less during roughly the same period – from 73.9 per cent in 1973 to 56.5 per cent in 2005. This means more than half the national workforce is producing only a fifth of GDP.
“The most important structural feature of the agricultural sector in India is the continuous decline in the share of agriculture in total gross domestic product, [together with the] very slow diversification of [the] workforce away from agriculture,” said a report on farmer indebtedness prepared for the government by R. Radhakrishna, a former director of the Indira Gandhi Institute of Development Research in Mumbai.
This has been accompanied by the fragmentation of family land as the population has grown. According to the Radhakrishna report, the number of land holdings in India has almost doubled to 101m in the 22 years to 2003, while the cultivated area declined 19 per cent during the same period to 108m hectares. About three-quarters of these holdings are owned by small and marginal farmers yet, despite being by far the most numerous, they own less than a quarter of India’s total agricultural land.
Another problem is stagnating productivity due to poor fertiliser use and a lack of investment in irrigation. After 61 years of independence, only 40 per cent of Indian farmland is irrigated. Yields for crops such as rice have been virtually flat in the past five years while for wheat they have declined. Reforms to encourage farmers to diversify into cash crops, such as cotton, have also exposed them to world markets without adequate insurance to protect them from crop failure and global price fluctuations.
Srijit Mishra, an associate professor at the Indira Gandhi Institute who worked on the Radhakrishna report and is writing a book on India’s rural crisis, calculates that, on average, farmers make a return of only Rs8 (about 18 US cents) per person per household a day. “We are in a very critical situation. It has reached what you might call epidemic proportions,” Mr Mishra warns.
One symptom of the urgency of the problem is that many farmers, like Kalawati’s husband, are committing suicide. By 2005, according to the Radhakrishna report, Indian farmers were over a third more likely to take their own lives than the average city dweller. In total, between 2001 and 2005, nearly 90,000 farmers committed suicide in India.
It was to counter this trend that the government launched the loan waiver. Announced in February and implemented in June, the scheme applies only to bankrupt farmers with five acres or less – those with more land are entitled to relief for up to a quarter of their loans. It covers loans from institutions taken out before March 31, 2007 but not loans from local moneylenders – a crucial omission according to critics.
H.N. Sinor, the outgoing chairman of the Indian Banks’ Association, worries that the scheme, which the government claims has benefited 40m landowners, could damage the “credit culture” among farmers. A similar programme in the 1980s led to many farmers neglecting repayments on loans taken out after the cut-off date, forcing banks to take harsh recovery action. “When we see the results for this financial year, only then will we get a real feel of the problem,” Mr Sinor says.
Equally concerning, say analysts, is whether the waiver reached those who needed it most: small and marginal farmers, most of whom borrow large sums at exorbitant rates from local moneylenders. The tight grip of the moneylender is an enduring feature of Indian village life, immortalised in Hindi films such as the 1957 epic Mother India.
Jayati Ghosh, an academic at New Delhi’s Jawaharlal Nehru university, sees the waiver scheme as a missed opportunity. “What the government should have done was to set up a debt commission that could identify the distressed farmers and make the exercise more targeted.”
Economists say the key policy problem for India’s rural sector is an emphasis on blanket subsidies, such as the loan waiver and another one for fertilisers, at the expense of long-term investment. “On paper, over Rs1,500bn is spent [by the government] on agriculture but, out of that, up to Rs1,200bn is subsidy. There is no capital investment,” says Mohan Guruswamy, chairman of the Centre for Policy Alternatives in New Delhi.
Mr Mishra argues that investment in alternative occupations to help farmers to earn more income from non-farming sources is the only long-term solution to India’s agricultural crisis. Initially, this could be from industries directly related to the farmers’ production, such as processing centres for cotton or oilseed. But ultimately, modern industries must be developed in regional cities to provide more jobs for surplus labour from the surrounding rural areas.
The case of Kalawati’s husband illustrates the danger of putting in place perverse incentives for farmers. Villagers claim he committed suicide in the hope that his family would qualify for a Rs100,000 grant given by the state government to the bereaved in such cases.
It seems his sacrifice was in vain. Kalawati says she never saw the money. She is now bearing a debt burden of Rs90,000 – which has grown 50 per cent since her husband’s death. Nor does she qualify for the loan waiver as she is essentially landless and her debts are to moneylenders.
Kishore Tiwari, a rural activist in Vidarbha, argues that the government needs to ensure the region’s cotton farmers receive a decent price for their produce. The commodity used to be known as “white gold” in the area until the US started subsidising its cotton production, leading to a crash in global prices, he claims. “The loan waiver is not practically workable, so what is the use of it?” he says. He has seized on Rahul Gandhi’s visit to Kalawati to turn her into a cause célèbre for the farmers and she seems to have grown into the role.
At a farmers’ rally in Vidarbha, she gives an impassioned speech before dissolving into tears. Back at her hut, where a giant poster of Rahul Gandhi flaps in the wind, she lists her demands – a minimum price from the government for cotton, better irrigation and the Rs100,000 state compensation for her husband’s death.
Thanks to Mr Gandhi, for Kalawati at least there is some relief. At her home, one of her daughters is busily working on a sewing machine donated by the local branch of Congress after Mr Gandhi’s visit, while a son tinkers with a new bicycle. A charity has also agreed to give her family Rs25,000 a month, a princely sum in Jalka.
Yet most of India’s rural millions will continue to suffer until government policy becomes more far-sighted, analysts say. The birth of the next generation of villagers will further fragment farmland, forcing more hungry farmers to migrate to cities where infrastructure is already collapsing under the population pressure.
In Vidarbha, some are already contemplating a career change. One of Kalawati’s neighbours, Nitin Khadse, wryly jokes that selling water is more profitable than farming in India. “A bottle of water costs Rs15 a litre, while a litre of milk from my cows for which I work so hard fetches only Rs10, so I’ve been telling people get out of milk and into the water trade,” he says.
With additional reporting by James Fontanella-Khan
Copyright The Financial Times Limited 2008