The recent protests in rural Madhya Pradesh, Maharashtra and other parts have drawn responses that vary from surprise, conspiracy, and politics and policy failures. Price collapse on the back of increased production is no doubt a trigger but the causes run deeper and are best contextualised as part of the larger process of change transforming the rural economy and society.
At the outset, the nature of the present unrest is fundamentally different from that India witnessed in the 1970s and 1980s. While those drew their support from the landless agricultural labourers, the present draws its support largely from the land owners.
It is difficult to miss the gradual but phenomenal transformation that is underway in rural economy and society. Among the more clearly visible changes include better roads, transportation, greater penetration, adoption, consumption, and use of media and communication technologies.
The past two decades have witnessed a major shift in the lifestyle and nature of economic activities of households. The lifestyles are more sedentary and involve a noticeable increase in consumption. Incomes have increased due to a combination of measures, including higher minimum support prices (MSP) and a greater willingness to seek greener pastures outside the villages.
This outmigration in search of better economic opportunities also means that successful migrants often plough back savings into the village by purchasing agricultural land and housing plots. Some eventually return and those who do not return prefer to lease out the land to tenants.
An important investment across the social and economic pyramid is in education. This is borne by the increase in a number of recognised schools (primary to secondary) in the country: from about 2,30,000 all over India in 1950-51 to about 15.16 lakh – rural areas accounted for 12.78 lakh in 2015. The total number of students enrolled in the schools and colleges from 2000-01 to 2014-15 was 44.29 crore, of which higher education accounted for 24.82 crore.
It is likely that a majority of those who enrolled in higher education are unlikely to have returned to agriculture. These investments in education have often been triggered by the success of previous generations in the 1980s and 1990s. The investment in education paid off for those who preferred to try their luck in the new Information Technology and high-growth sectors that grew in the aftermath of the opening up of the economy, post-1991 reforms.
This has only reinforced the dream that the best way to improve socio-economic status is by investing in education – even if it means a large amount of debt. Borrowing itself became possible due to the expansion of the number of loan providers in the formal sector, ranging from banks to gold loan companies. Little wonder that despite the expansion of the formal banking sector, a continuous increase in credit to agriculture and an annual increase in the scale of finance for crop loans, there is always a shortage of low-cost formal sector credit.
Loans from the informal sector are used to bridge the gap between working capital needs for agriculture and increased consumption needs. Invariably, credit sanctioned for agriculture always finds its way to meet other consumption needs. Servicing these loans was not an issue as long as the prices of produce were rising, especially for those cultivating pulses and vegetables.
The problem of indebtedness hurt as prices went into reverse gear largely due to overproduction. It does not help matters that the education system equips them with low skills with the attendant possibility of finding work only as a lower-level employee in the job market. The cycle is completed with an increased preference for service sector jobs due to a combination of socio-economic reasons.
Problematically, education of any shade makes it a social taboo for people to go back to work in agriculture or allied activities which require hard manual labour. As increased numbers seek education and migration, the rural labour market has witnessed drastic changes that have triggered a spiral of more shortages and rising cost of labour, thereby pressurising the margins of those involved in farming.
A concurrent increase in the cost of living, thanks to health and lifestyle needs, makes matters worse. Unfortunately, incomes have not risen at the same pace. Further, generational shift and a shortage of cheap labour in the village has reduced income from petty commodity production which served as a valuable source of incomes till about two decades ago.
The total livestock population increased from 47.08 crore in 1992 to 51.20 crore in 2012 – an increase of about 9% in two decades. Rising input prices, roller coaster prices and declining margins mean that there is insufficient cash flow to service their loans and pay for their new lifestyle, especially for the small and marginal farmers.
Cumulatively and when pieced together, the past decade has led to problems on multiple fronts in rural society and economy. The recent unrest has shown that Indian agriculture is badly prepared to meet cycles of over and under production. Essentially, what the sector needs is a multipronged approach that will make agriculture more remunerative.
There is a need for solutions that drastically overhaul agricultural and consumption credit, market access, market information, logistics expanding post-harvest facilities like warehousing and expanding agricultural extension services among others. Any attempt at piecemeal interventions in fits and starts will not help matters. Debt write-off is practical only when it comes to debts from the formal banking sector. It may offer some immediate but limited succour. The larger problem will still remain.
(The writer is an independent researcher based in Andhra Pradesh and is associated with the Institute for Development and Research in Banking Technology, Hyderabad)
At the outset, the nature of the present unrest is fundamentally different from that India witnessed in the 1970s and 1980s. While those drew their support from the landless agricultural labourers, the present draws its support largely from the land owners.
It is difficult to miss the gradual but phenomenal transformation that is underway in rural economy and society. Among the more clearly visible changes include better roads, transportation, greater penetration, adoption, consumption, and use of media and communication technologies.
The past two decades have witnessed a major shift in the lifestyle and nature of economic activities of households. The lifestyles are more sedentary and involve a noticeable increase in consumption. Incomes have increased due to a combination of measures, including higher minimum support prices (MSP) and a greater willingness to seek greener pastures outside the villages.
This outmigration in search of better economic opportunities also means that successful migrants often plough back savings into the village by purchasing agricultural land and housing plots. Some eventually return and those who do not return prefer to lease out the land to tenants.
An important investment across the social and economic pyramid is in education. This is borne by the increase in a number of recognised schools (primary to secondary) in the country: from about 2,30,000 all over India in 1950-51 to about 15.16 lakh – rural areas accounted for 12.78 lakh in 2015. The total number of students enrolled in the schools and colleges from 2000-01 to 2014-15 was 44.29 crore, of which higher education accounted for 24.82 crore.
It is likely that a majority of those who enrolled in higher education are unlikely to have returned to agriculture. These investments in education have often been triggered by the success of previous generations in the 1980s and 1990s. The investment in education paid off for those who preferred to try their luck in the new Information Technology and high-growth sectors that grew in the aftermath of the opening up of the economy, post-1991 reforms.
This has only reinforced the dream that the best way to improve socio-economic status is by investing in education – even if it means a large amount of debt. Borrowing itself became possible due to the expansion of the number of loan providers in the formal sector, ranging from banks to gold loan companies. Little wonder that despite the expansion of the formal banking sector, a continuous increase in credit to agriculture and an annual increase in the scale of finance for crop loans, there is always a shortage of low-cost formal sector credit.
Loans from the informal sector are used to bridge the gap between working capital needs for agriculture and increased consumption needs. Invariably, credit sanctioned for agriculture always finds its way to meet other consumption needs. Servicing these loans was not an issue as long as the prices of produce were rising, especially for those cultivating pulses and vegetables.
The problem of indebtedness hurt as prices went into reverse gear largely due to overproduction. It does not help matters that the education system equips them with low skills with the attendant possibility of finding work only as a lower-level employee in the job market. The cycle is completed with an increased preference for service sector jobs due to a combination of socio-economic reasons.
Problematically, education of any shade makes it a social taboo for people to go back to work in agriculture or allied activities which require hard manual labour. As increased numbers seek education and migration, the rural labour market has witnessed drastic changes that have triggered a spiral of more shortages and rising cost of labour, thereby pressurising the margins of those involved in farming.
A concurrent increase in the cost of living, thanks to health and lifestyle needs, makes matters worse. Unfortunately, incomes have not risen at the same pace. Further, generational shift and a shortage of cheap labour in the village has reduced income from petty commodity production which served as a valuable source of incomes till about two decades ago.
The total livestock population increased from 47.08 crore in 1992 to 51.20 crore in 2012 – an increase of about 9% in two decades. Rising input prices, roller coaster prices and declining margins mean that there is insufficient cash flow to service their loans and pay for their new lifestyle, especially for the small and marginal farmers.
Cumulatively and when pieced together, the past decade has led to problems on multiple fronts in rural society and economy. The recent unrest has shown that Indian agriculture is badly prepared to meet cycles of over and under production. Essentially, what the sector needs is a multipronged approach that will make agriculture more remunerative.
There is a need for solutions that drastically overhaul agricultural and consumption credit, market access, market information, logistics expanding post-harvest facilities like warehousing and expanding agricultural extension services among others. Any attempt at piecemeal interventions in fits and starts will not help matters. Debt write-off is practical only when it comes to debts from the formal banking sector. It may offer some immediate but limited succour. The larger problem will still remain.
(The writer is an independent researcher based in Andhra Pradesh and is associated with the Institute for Development and Research in Banking Technology, Hyderabad)
