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September 14, 2017

Are loan waivers a sustainable solution for farmers' distress? Analyse  the challenges for small and marginal farmers in Indian agriculture and suggest measures to make farming profitable for them as well.
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Manav 7 years

Considering the dire situation of farming in India, loan waivers come as a stress reliever for the farmers. But considering Indian economy at large, frequent loan waivers are a huge burden to the economy. The drawbacks of loan waiver are as follows:

a. The frequent loan waiver erodes the credit culture. 
b. The loan waiver excludes agricultural labourers that to agricultural cultivators. Hence social relief is largely unequal. 
c. As evident from the CAG findings in Agriculture Debt Waiver and Debt Relief Scheme in 2008, loan waiver is prone to serious exclusion and inclusion errors.
d. The studies have suggested that loan waiver provides only partial relief as half of the loans are for a non-agricultural purpose. 
e. It also reduces the capacity of government to spend on other developmental activities. 

Apart from this unsustainable nature of loan waiver, there are multiple challenges faced by small and marginal farmers in Indian agriculture. 

a. Discrimination of caste basis: Largely, the small and marginal farmers belonging to the lower caste. It is seen that even though they have the capacity to own a land, they still continue to be a labourer because of the caste-based prejudice in most of the Indian villages. 
b. Land fragmentation: Since the British Raj, land fragmentation has been the biggest reason for low-scale production in Indian agriculture. 
c. Lack of institutional support: More than half of area under cultivation does not have access to irrigation. There is lack of a full-fledged institutionalized support to small-scale farmers for selling goods. The crop insurance is still a problem. 
d. Gender inequality is at large for marginal farmers like women who are not recognized as landowners owing to Indian tradition.    

The government can help these farmers in the following way:

a. The state can diversify the farm income by promoting dairy and livestock farming. Land fragmentation can be controlled by educating farmers on family planning. 
b. Greater subsidies can be provided for the purchase of agricultural equipment, fertilizers, and pesticides. Schemes like Saur Sujala Yojana is in this direction to provide highly subsidized solar pumps. 
c. Focus on technology to increase the area under irrigation. Drip irrigation must be promoted. 
d. States must implement suitable reforms to remove gender inequality in farming. 

India is characterized by low-scale and low productive farming despite the surplus food production. There is sunshine at one end and darkness at the other. This may be addressed only when the state moves away from frequent loan waiver politics and focus on the real issues.   

IAS Parliament 7 years

Good Points and equal coverage of all three parts of the question. Keep practicing.

IAS Parliament 7 years

Key points

·        The introduction of a nationwide agriculture loan waiver in 1990 had a deleterious impact on the provision of rural credit.

·        Loan waiver act as a short-term pain reliever, while breeding credit indiscipline among farmers and leading to a short fall in rural credit growth.

·        Loan waiver is a magical term which shifts the agrarian distress into an administration distress.

·        It undermines an honest credit culture.

·        It will affect state government finances by increasing the deficit and worsening the quality of expenditure.

·        The possibility of implementation of loan waivers in other states will have a bearing on the national balance sheet.

·        Yields on government bonds also are impacted.

·        It can also lead to the crowding out of private borrowers as higher government borrowing can lead to an increase in cost of borrowing for others.

Challenges for small and marginal farmers:

·        Credit facilities for small & marginal farmers compared to large & medium farmers are not properly channelled. Over 50% of small and marginal farmer loans are from Non-Banking sources.

·        Increasing Fertilizer and pesticide prices causing them to adopt organic means of farming which does not yield as much as from inorganic way of farming.

·        Limited availability and high cost of High yield variety seeds also hampers agriculture productivity.

·        Large farmers having access to mechanised products like water pumps, consuming huge amounts of water and leaving hardly anything for small and marginal farmers.

·        Gradual increase in input cost for farming.

Solutions to make farming more profitable

·        Greater subsidies could be extended for the purchase of farming equipments, fertilizers, and pesticides.

·        Medical insurance coverage to farmers

·        Allowing marginal farmers to be paid for tilling their own fields.

·        Educate farmers about the suitable crops for their land and crop diversification process.

·        Ensure every subsidy reach the targeted beneficiary without leakage through the direct Benefit transfer method.

·        Increasing the scope of Mahatma Gandhi National Rural Employment Guarantee Act.

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