Think it through

The deliberations at the Nainital conclave of Congress chief ministers centred on widespread distress on the farms, and understandably so in the wake of continuing reports of farmer suicides in the Vidarbha region and elsewhere. The reported outcome is renewed focus on the cost of credit and farmers' indebtedness""but that is to confuse the symptom with what has caused farmer distress. The harsh fact is that farming is no longer remunerative in many parts of the country, the fluctuations in fortunes from one year to the next (especially in the rain-fed areas) are great, and farmers cannot make a living if they have no other sources of income (like dairy). The underlying reasons are the shrinking size of land holdings, deterioration in soil fertility because of nutrient depletion, low efficiency of input-use (like pesticides), poor post-harvest management and value addition and, most importantly, inefficient marketing. The result is that farm productivity, low to begin with, has been stagnant or declining and farmers are incapable of investing to reverse this trend. Measures that the Congress party and sundry governments favour, such as providing credit at low interest rates, waiver of past interest, raising protectionist walls and undertaking state procurement of produce at guaranteed prices, will not produce the intended results if the fundamentals are ignored. As much should have been obvious from the fact that suicides by Vidarbha farmers have continued even after the announcement of a liberal financial package when the Prime Minister visited the region a few months ago.

It is important to note that the suicides are not by the poorest farmers; they are more often by farmers who have small holdings and can provide the collateral for loans from banks and private money-lenders. Their situation gets desperate when a crop fails, or when a well that has been dug with the money borrowed turns out to be dry, and the repayment obligation becomes too much to bear. Vidarbha also has some specific issues, like the wisdom of growing cotton (which requires a lot of inputs bought with cash) in a rainfed area that is drought-prone. In addition, cotton growers here are denied the returns their counterparts elsewhere in the country get, because of Maharashtra's monopoly cotton procurement scheme. Pumping in more credit at lower rates of interest provides no solution to any of these problems.

The suicides are mostly in agriculturally advanced states, among farmers who have taken to single-crop farming, and not where they still follow an integrated farming system comprising a mix of crops, horticulture, livestock, poultry and the like. This was the conventional, time-tested system for hedging risk. This aside, the avenues for non-farm employment in near-by areas, which farmers normally tapped during periods of distress, have failed to keep pace with the growing rural population. The proportion of people dependent solely on agriculture (read farm land) has, therefore, increased while land availability per head has shrunk. At the macro level, public investment in agriculture has been declining for many years. Budgetary allocations for agriculture go largely to cover subsidies and not for spending on productivity-related measures like irrigation and post-harvest infrastructure. As a result, gross capital formation in agriculture, as a share of the total capital formation, has dropped from 9.85 per cent in 1999-2000 to 7.8 per cent (at current prices) in 2005-06.

In short, while the government may order short-term relief measures, there is no magic wand that can end farmers' woes overnight. The long-term strategy has to focus on productivity, and that means getting more people off the land and into non-agricultural occupations. That, in turn, is linked to changing today's rigid labour laws so that labour-intensive manufacturing can flourish, as in China. But the Congress party will have none of this; perhaps it does not see the connection between labour laws and farmer suicides.