Agriculture distress

Agriculture distress refers to  low crop yields, fluctuating agricultural produce prices, high input costs, indebtedness, and a lack of access to credit experienced by the farmers.

Agriculture distress: Causes

Declining Average Size of Farm Holdings:

• The main reason for farm crises is the rising pressure of population on farming and land assets.
• Government data show 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 and marginal land holdings (less than 2 hectares) account for 72% of land holdings, and 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.

Natural calamities resulting in crop losses or serious reduction in yields:

• Rising temperatures, floods, and excessive rains in a short period of time cause substantial agricultural damage.
• For example, in 2020-21, several states in India experienced floods, which damaged crops such as paddy, maize, and soybean. (Source: Ministry of Agriculture and Farmers Welfare)

Declining agricultural productivity:

• The average yield of main crops in India, such as wheat and rice, has been stagnant or declining, resulting in a decrease in farmer income.
• For example, the average rice yield in India in 2010-11 was 2,748 kg/ha, but it fell to 2,436 kg/ha in 2019-20.
• Similarly, the average wheat yield in India in 2010-11 was 2,948 kg/ha, but it fell to 2,692 kg/ha in 2019-20. (Source: Agriculture, Cooperation, and Farmers Welfare Department)

Increasing cultivation costs:

• The cost of cultivation, including the cost of inputs such as seeds, fertilisers, and labour, has been continuously rising in recent years, putting further financial strain on farmers.
• In India, for example, the average cost of cultivation per hectare for paddy was Rs 1,866 in 2010-11, rising to Rs 2,796 in 2019-20. (Source: Agriculture, Cooperation, and Farmers Welfare Department)

Inadequate market infrastructure and poor implementation:

• According to the Organisation for Economic Cooperation and Development (OECD), the agricultural sector is in distress due to a mix of market rules and infrastructure shortcomings.
• To this, there has been a lack of technological advancement, which has hampered production, as well as a lack of food processing centres, which has hampered farmers’ incentives to diversify.
• According to a Niti Aayog study, farm sector growth has overlooked the selling potential. Farmers’ access to well-developed markets remains a problem, despite various initiatives to build an electronic market place.
• Experts recommend establishing a body similar as the GST Council to bring states and the Centre together to make decisions on reforming the sector and improving farmers’ access to markets.

Lack of credit:

• Many farmers in India lack access to formal credit and have to rely on informal sources of credit, which frequently carry high interest rates.
• According to the National Bank for Agriculture and Rural Development (NABARD), the average agricultural loan in India in 2019-20 was Rs 56,740, which is significantly less than the average cost of cultivation per hectare for several crops.

Undermining of the MSP system:

• When the government fails to boost inventories at MSP, it undermines the MSP system’s core objective, which is to ensure farmers receive a fair price for their produce.
• Farmers’ trust in the MSP system may suffer as a result, as will their willingness to invest in agriculture.

Modern technology is lacking:

•  Access to contemporary technologies may increase productivity by improving the variety of seeds, farm implements, and farming technology.
• According to a Niti Aayog study, there has been no significant technological advancement in recent years.

Fragmented supply chain:

• Farmers’ troubles have been exacerbated by large gaps in storage, cold chains, and insufficient communication.
• It has also contributed to the large post-harvest losses of fruits and vegetables, which are estimated to be 4% to 16% of total output. ( as per OECD report)

Agriculture Distress: Impact

Agricultural distress in India can have a huge economic impact because agriculture contributes significantly to the country’s GDP and employment.

• Agricultural growth fall:
  • Agricultural distress can lead to a decline in agricultural growth, which can have a knock-on effect on the entire economy.
  • For instance, as per Statistics and Programme Implementation Ministry, the growth rate of agriculture and allied sectors in India was expected to be 3.4% in 2020-21, down from 4.3% the previous year.
• Slowing of rural demand:
  • When farmers faces distress, their earnings and purchasing power may fall, resulting in a slowing of rural demand for products and services.
  • As per data of NSO, the growth rate of rural consumption spending in India in 2020-21 was anticipated to be 1.4%, lower than the 2.4% growth rate of urban consumption expenditure. (Data from the National Statistical Office)
• Rise in bank non-performing assets (NPAs):
  • Agricultural distress can lead to an increase in bank non-performing assets (NPAs), as farmers may be unable to repay their loans.
  • As of 2022, Farm sector NPAs constitute 17.4 per cent of the total banking sector NPAs, against 15.07 per cent in the previous year, according to Reserve Bank of India (RBI) data.
• Job losses in agriculture:
  • When agriculture is in distress, producers may be compelled to downsize their workforce or may be unable to hire personnel, resulting in job losses in agriculture.
  • As per data from the National Sample Survey Office (NSSO)the expected number of agricultural employees in India in 2019-20 was 14.5 crore, down from 15.3 crore in 2011-12.
• Increased migration:
  • Migration to cities is a major trend that will impact food security and nutrition in the next years.
  • The annual percent change in urban population is higher than the global average, indicating that internal migration is accelerating.
  • It is estimated that by 2050, more than half of the Indian population would be living in cities.

Agriculture Distress: Steps taken

• Minimum Support Price (MSP):
  • Each year, the government announces MSPs for various crops to guarantee that farmers receive a fair price for their produce.
  • This gives the market a price floor and protects farmers from market swings.
• Crop and livestock Insurance:
  • The government has implemented several crop insurance policies such as Pradhan Mantri Fasal Bima Yojana (PMFBY),Livestock insurance Scheme,Weather based Crop Insurance Scheme (WBCIS).
  • They protect farmers from crop losses caused by natural disasters, pest attacks, and other reasons.
  • These programmes provide financial assistance to farmers in the event of crop loss, lowering their risk and susceptibility.
• Agricultural Credit:
  • The government lends money to farmers through various programmes, such as the Kisan Credit Card, to guarantee that they have access to credit at fair rates.
  • Crop production, farm mechanisation, and other connected activities are eligible for credit.
• Irrigation Facilities:
  • To increase irrigation facilities in the country, the government has developed many initiatives, such as the Pradhan Mantri Krishi Sinchai Yojana, which aims to ensure water availability in every farm field.
  • This enables farmers to boost crop output while decreasing their reliance on rain-fed agriculture.

• Market Reforms:
  • The government has implemented a number of reforms to improve the functioning of agricultural markets and offer farmers with better price discovery.
  • The e-NAM platform is an online trading platform for agricultural produce, and the Agricultural Produce and Livestock Marketing (APLM) Act intends to build a competitive and transparent agricultural produce market system.
• Direct Income assistance:
  • The government has developed numerous schemes, including PM-KISAN, DBT transfer, Krushak Assistance for Livelihood and Income Augmentation (KALIA) scheme (Odisha) and Rythu Bandhu (Telangana).
  • They offer farmers with direct income assistance, which helps to supplement their income and alleviate their misery.
• Research and Development:
  • The government has developed a number of research and development institutions in order to develop new technology, crop types, and farming practices that are more suited to farmerneeds.

Agriculture Distress: A way ahead

• Agricultural distress requires a new distress index:
  • The government oversimplifies a deeper and multi-layered reality of rural suffering by quantifying it through the number of suicides.
  • Second, by linking debt-related suicides to financial institutions, the diagnosis clears the way for a simplistic remedy of farm loan waivers, which is not only inefficient but also ineffective in the medium to long run and hence there is need of new distress index.
• Agripreneuship:
  • Farmers should diversify their crops and shift to horticulture and animal production, which are less volatile in the market.
  • This will lessen their reliance on a single crop and enhance their revenue.
• There should be a advisory board at the district and state levels to address farmer stress concerns and advise on how to prevent terrible and unfortunate farmer suicides.
• Technology can assist in closing ‘yield gaps’ and thereby increasing production. Government policies have favoured cereals, particularly rice and wheat. There is a need to shift policies away from rice and wheat and towards millets, pulses, fruits, vegetables, livestock, and fish.
• In order to address the issue of small average holding sizes, strategies for land consolidation as well as land development activities are required.
• Farmers can join forces willingly to pool land and get the benefits of scale. Farmers can benefit from economies of scale in both input procurement and output marketing by consolidating.
• Raising the MSP, price deficiency payments, or income support programmes are just partial solutions to the challenge of providing farmers with remunerative returns.
• A long-term solution would be market reforms paired with export-friendly trade policies along with a competitive, stable, and united national market is required for income stability of farmers.