April 10, 2018 | By Marshall M. Bouton

India’s Emerging Agrarian Crisis

Dear Reader: We are pleased to announce a new occasional blog series, Cultivating Tomorrow: Indian Agriculture Challenged, by Marshall M. Bouton, president emeritus of the Chicago Council on Global Affairs. The series will examine the state of Indian agriculture today, its areas of progress and challenge, the roles of productivity, markets, infrastructure, policy distortions and opportunities, the challenge of climate change, and the implications for poverty, nutrition, food security, economic growth, and agrarian relations. In this initial blog Dr. Bouton discusses the emerging crisis in the agricultural sector.

A farmer walks through a paddy field at Tannaurah village in the northern Indian state of Punjab . REUTERS/Ajay Verma 

Today a sense of crisis not seen in decades is enveloping Indian agriculture. Not since the 1960s when harvest failures and near famine conditions gave rise to the Green Revolution has India experienced such widespread disruption and distress in the agrarian sector that still provides livelihoods to over 50 percent of Indians.
 
The crisis today differs from that of the 1960s. Then the central challenge was increasing food production, when the low productivity of wheat and rice meant India could not feed its people. Today it is increasing and stabilizing farming incomes, when drought, market failures, and policy distortions are threatening farm viability.
 
Prime Minister Modi recognized this shift in priorities when he announced in March 2016 a goal of doubling farm incomes by 2022. Apart from the near impossibility of achieving that welcome but ambitious goal, India’s central and state governments are struggling just to keep farm incomes growing at all. Agricultural GDP growth in 2017-18 is estimated at only 2.1 percent.
 
The signs of agrarian distress are everywhere. In the five years to 2015-2016 real farm income per cultivator increased by an average of only 0.44 percent per year while labor and input costs rose. For years thousands of desperate indebted farmers have committed suicide. In June 2017 farmers in Madhya Pradesh and other states dumped vegetables, fruit, and milk on roads rather than sell below their cost. In July 2017 farmers in the southern state of Tamil Nadu protested over the impact of drought on their crops. Last month in Maharashtra 35,000 poor cultivators walked across the state to demand better prices, more secure land tenure and loan concessions.
 
The impact of farm distress is already evident in national politics and policy. In recent elections in Gujarat, Prime Minister Modi’s home state, his BJP party lost support among farmers. Farmers in eight states have petitioned their governments to waive farm loans and six states have agreed. In February Prime Minister Modi’s government put forward a budget with increased allocations to the agricultural sector even though food and fertilizer subsidies already account for about 9 percent of total central expenditure and 1.5 percent of GDP.
 
But India’s emerging agrarian crisis will not be susceptible to simple solutions. The causes and consequences are varied and complex.
 
First, the legacy Green Revolution technologies now produce diminishing economic returns and increasing environmental stress. While they have led to huge increases in wheat and rice production, so much so that in recent years India became an exporter of both commodities, today in many areas those crops yield near their potential and rely on heavy usage of fertilizer and groundwater irrigation. Soil quality has been damaged and water tables have dropped dramatically. Ironically the procurement and support price policies put in place to incentivize and capture the gains of the Green Revolution now inhibit those farmers from moving to higher value-added crops.
 
Second, many millions of farmers were left behind by the Green Revolution. They are the small and marginal cultivators in the mostly unirrigated regions of east and central India farming plots of two to four acres. They suffer from very limited access to infrastructure, technology, credit, and markets. Their costs of cultivation exceed their income and they subsist through off-farm labor. These famers are the most vulnerable to weather fluctuations. The 2018 Economic Survey of India found that unirrigated farms, which account for 50 percent of total cropped area, are at nearly twice the risk of crop and revenue loss from extreme rainfall shocks than are irrigated areas.
 
Third, the recent success story of many Indian farmers, especially in peri-urban areas, improving their incomes by diversifying into higher-value production of vegetables, fruit, dairy and pulses, is now imperiled by price volatility. In recent years the prices of three essential vegetables, onions, potatoes and tomatoes, have swung wildly with cycles of over- and under-production. Lacking adequate facilities for storage and transportation and not able readily to export, these farmers find their incomes newly at risk. In February Prime Minister Modi announced an initiative to lessen these price swings but little can be done without major new incentives and investments.
 
Behind the three faces of India’s agrarian crisis are several obstacles to ready improvement: limited irrigation, the prevalence of small holdings (average holding size is less than five acres), low investment in research and extension, market failures, policy distortions, and impending climate change. IFPRI’s 2018 Global Food Policy Report concludes that by 2030 India’s agricultural growth will be lower than its potential due to weather shifts.
 
The good news of Indian agriculture over the last decades is national food security. India reliably produces enough to feed its people. In fact, cereal production reached record levels in 2016-17. Among the recent and promising signs of change is crop diversification. In Bihar small farmers are growing maize for animal feed and selling directly to processors such as Cargill and even raising strawberries for urban markets. Some states such as West Bengal and Madhya Pradesh are making investments in storage facilities for vegetables and fruit. A policy shift in Delhi is beginning to address the environmentally dangerous use of nitrogen fertilizers.
 
The bad news is the slow and unsteady growth of farm incomes. Eighty percent of India’s poor are rural and most of those are engaged in cultivation so the consequences for overall poverty reduction are great. Farm income growth is also critical to the structural transformation of India’s economy away from agriculture.
 
Today India needs once again to put agriculture at the top of its national agenda and to frame new approaches and policies as bold as those of the Green Revolution fifty years ago.

 

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The Global Food and Agriculture Program aims to inform the development of US policy on global agricultural development and food security by raising awareness and providing resources, information, and policy analysis to the US Administration, Congress, and interested experts and organizations.

The Global Food and Agriculture Program is housed within the Chicago Council on Global Affairs, an independent, nonpartisan organization that provides insight – and influences the public discourse – on critical global issues. The Council on Global Affairs convenes leading global voices and conducts independent research to bring clarity and offer solutions to challenges and opportunities across the globe. The Council is committed to engaging the public and raising global awareness of issues that transcend borders and transform how people, business, and governments engage the world.

Support for the Global Food and Agriculture Program is generously provided by the Bill & Melinda Gates Foundation.

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