The Hindu Business Line : Needed, macro-remedies for agriculture

Without the much-needed investment in agriculture, and given the growing indebtedness of farmers, farmer suicides could become an epidemic across the country.

FARMERS FEEL the pressures of rising prices much more than the urban Indian.

The terms of trade between agriculture and industry are beginning to worsen.

People appear to be becoming inured to suicides by, and indebtedness among, farmers. The Rajya Sabha Chairman, Mr Bhairon Singh Shekhawat, expressed deep anguish at the low attendance in the House when the Union Minister for Agriculture, Mr Sharad Pawar, was replying to a short-duration discussion on the farmer suicides in the country. The farmers are feeling the pressures of rising prices much more than the urban Indian. Their purchasing power is caught in a vice: On the one hand, the cost of cultivation is rising and, on the other, prices of their produce are falling.

Farmers' predicament

Mr Pawar pointed out that the crisis in the farm sector was due to low investment, which manifested itself in low productivity, shrinking land holdings, drought, crop failure and inadequate irrigation, crop failure, and burden of loans which in turn lead to defaults and dependence on money-lenders. These constitute the investment side — the rising cost of cultivation.

He also highlighted the un-remunerative prices for farm products, inadequate market access and lack of supplementary income for farmers — constituting the returns side. The Indian farmer is beginning to feel the pressure from both ends: His inability to make the capital expenditure required to increase productivity of the land and the dwindling returns for his products. His condition is aggravated by the inflationary spiral. After a brief respite, prices of a whole gamut of products and services have begun to rise.

Inflationary spiral

During the third week of August, the Wholesale Price Index inched closer to the 5 per cent mark at 4.82 per cent, substantially higher than the 3.78 per cent recorded for the corresponding week last year.

With international crude prices remaining firm, domestic fuel prices have strengthened, and the prices of power, light, lubricants and furnace oil have all moved up by three per cent. They not only have a direct bearing on agriculture, but also have an indirect impact, via the cost of other inputs such as fertilisers and pesticides. Clearly, agriculture is one sector that has borne the brunt of the recent price rise.

On the other hand, prices of most agricultural products have been ruling steady if not fallen. The food articles basket, as a whole, fell, with steep drops recorded for jowar, fruits and vegetables. The Index for Non-Food Agricultural Products also registered a decline with cottonseed, groundnut and jute leading the fall. This, even as prices of manufactured commodities headed north; textiles, chemicals and metals have all become costlier.

Adding to the woes

Farmers' woes do not end there. The rising inflationary expectations have resulted in hardening interest rates. Given the uncertainties in the agricultural sector, floods, drought, and other natural disasters, bankers have never been keen on lending to this sector.

With the falling returns for his products and the rising cost of capital, the ability of the farmer to make the much-required investment is diminishing. The increasing costs and falling returns from agriculture will also affect the repayment capacity of the farmer. This is likely to result in more instances of default and more suicides.

The money crunch extends right across the Indian agricultural spectrum to commercial crops and plantations. So much so, some industrial houses have exited from the plantation sector to focus exclusively on processing of, and adding value to, food products. Instances of large industrial houses exiting from tea plantations have been reported from the east and south of the country.

The trend is not confined to tea, but extends also to rubber, cardamom and other commercial crops. These agonies will be compounded by the spurt in the inflationary spiral.

If the trend continues, the farmer suicide crisis will not be confined to six districts in Maharashtra, six in Karnataka, three in Kerala and 16 in Andhra Pradesh, but spread to all of India .

Setting up expert groups and offering special packages for places with endemic agricultural deprivation is all very well; micro-managing the agriculture crisis in specific pockets is not doubt essential.

However, the malaise needs to be addressed with a macro perspective and remedies should be adopted at the national level.

This alone will ensure that the adverse terms-of-trade between agriculture and industry ease. Else, greater indebtedness, default on repayment and growing instances of farmer suicides could become a country-wide epidemic.