Agricultural indebtedness has been a long-standing challenge in India, deepened after COVID-19. Despite being a food grain surplus nation, farmers remain trapped in a cycle of debt and distress.

Current Scenario of Agricultural Indebtedness

• NSSO Data on Indebtedness: The National Sample Survey Office (NSSO) reported that 48.6% of farmer families were indebted in 2003, which increased to 50.2% by 2019.
• NABARD NaFIS Report: The NABARD National Farm Information System (NaFIS) 2021-22 indicates an even higher figure, with 55% of farmer households carrying debt.
• RBI Agricultural Loans Data: RBI data shows a substantial increase in agricultural loans, growing by 137% between 2019 and 2024, effectively more than doubling in five years.
• Impact on Farmer Suicides: This indebtedness often leads to farmer suicides, with the National Crime Record Bureau (NCRB) reporting 10,281 suicides in 2019 and 11,290 in 2022.

Primary Reasons for Agricultural Indebtedness

• Farm Holdings and Land Fragmentation: India faces a severe issue of land fragmentation, where the average landholding per farmer is a mere 0.74 hectares, in stark contrast to 189 hectares in the USA. 
  • This fragmentation makes it difficult to utilise large machinery, leading to higher cultivation costs and reduced profits. 
  • The percentage of small and marginal farmers in India has grown significantly, from 80.6% in 1991 to 92% by 2021.
• Rising Cost of Production: The prices of essential agricultural inputs such as fertilisers, seeds, and pesticides have escalated considerably. 
  • The “input cost treadmill” means that more fertilizer is now required to achieve the same yield as in the 1960s. 
    • This situation implies that farmers “run but don’t move forward,” as increased production costs erode potential gains.
• Stagnant Productivity: While input costs are rising, the productivity of many crops, particularly pulses and oilseeds, has not seen significant improvement in India, unlike wheat and rice. 
  • This lack of productivity growth, partly due to insufficient Minimum Support Price (MSP) for these crops, further strains farmers’ finances.
• Lack of Institutional Support: Farmers face inadequate institutional support, especially concerning access to bank loans. 
  • A substantial 24.5% of farmers still resort to borrowing from local moneylenders (sahukars), who charge exorbitant interest rates. 
    • This forces farmers into a vicious cycle of borrowing to repay previous loans, often leading to dire consequences, including suicide.
• Market Access Issues: Farmers often struggle to sell their produce directly, allowing middlemen to capture a large share of the profit. 
  • Small farmers typically lack facilities like cold storage to store their produce and sell it when prices are favourable. 
  • They also face challenges in value addition, such as processing raw produce (e.g., wheat into flour, tomatoes into sauce) which would fetch higher prices.

Measures for Tackling Agricultural Indebtedness

• Cooperative Farming: By pooling their land, small farmers can achieve economies of scale, allowing them to use larger machinery and adopt new technologies, thereby reducing cultivation costs. 
  • Cooperative farming also enhances their bargaining power when purchasing inputs and selling produce. 
    • Banks are also more inclined to provide loans to a group of farmers rather than individuals. 
    • The Amul dairy cooperative is cited as a successful model that could be replicated in crop farming. 
    • The government’s initiative to form Farmer Producer Organisations (FPOs) is a step in this direction.
• Income Diversification: Farmers should not solely rely on farming but also explore other income avenues to mitigate risks. 
  • This includes engaging in animal husbandry, poultry farming, apiculture (beekeeping), and sericulture (silk worm rearing). 
    • This Integrated Farming System helps ensure alternative income sources, particularly when crops fail due to adverse weather conditions.
• Reducing Production Cost and Increasing Profit: Farmers should effectively utilise the Soil Health Card Scheme to determine the precise type and quantity of fertiliser needed, preventing overuse and wastage.
  • A balanced approach combining organic and inorganic farming can help maintain soil health while reducing expenses.
  • Integrated Pest Management (IPM) promotes the use of natural methods for pest control, reducing reliance on expensive chemical pesticides.
• Better Market Linkages: FPOs and cooperatives can facilitate direct sales of produce to companies, bypassing exploitative middlemen.
  • Farmers should be encouraged and supported in value addition activities, such as processing tomatoes into sauce, which significantly increases profit.
  • The government must invest in developing essential infrastructure, including storage facilities, cold chains, and food processing units near villages. 
    • The e-NAM (National Agriculture Market Place) scheme is an effort to improve market access for farmers.

Conclusion

• Agricultural indebtedness poses economic, social, and structural challenges. Ensuring farmers’ welfare is key for India’s vision of a ‘Developed India’ by 2047. As M.S. Swaminathan warned, “If agriculture goes wrong, nothing else will have a chance to go right.”

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