High debt isn’t driving India’s farmers to suicide
What is abundantly clear is that farm loan waivers are not the panacea they’re made out to be politically
debt — far above the national average of 57%.
Overall, too, India’s farmers are doing far better than many realise. One way to gauge the well-being of rural households is to look at how much they’re buying: They now account for 45% of the fast-moving consumer goods sector in India. This is remarkable given the vast disparity in disposable incomes between urban and rural households. Over the last three years, rural sales grew significantly faster than urban sales in both volume and value; consumption growth currently stands at a robust 9.7%.
What policymakers need to realise, first, is that India has no single rural economy. It’s always possible to find distressed households somewhere. But they may fall in the bottom quintiles, or perhaps in specific states of the country or perhaps even among the rich farmers of Mehrauli, near Delhi. More targeted programmes would address the problem more effectively and far more cheaply than blanket loan waivers.
Second, loans are clearly not the only source of farmer distress. While “indebtedness” has been rising as a cause of farmer suicides since the government began measuring them separately in 2014, the most commonly cited causes of suicide in India historically have been “family problems” or “illness.” Access to healthcare, as well as to rural infrastructure, obviously plays a role in determining how optimistic and secure farmers feel.
Each of these issues requires a different prescription. As agricultural productivity and output improve, for instance, and India grows more food-secure, farmers are inevitably going to face lower prices. The most effective and least distortionary way to support them would be through direct benefit transfers. The new National Health Protection Mission (“Ayushman Bharat”) should improve rural healthcare. Free LPG connections for poor households should lower their energy burdens while improving the respiratory health of women. What is abundantly clear is that loan waivers aren’t the panacea they’re made out to be politically. Those who want to help India’s farmers should be working much harder to figure out what they really need.