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FM plans huge loans for farmers

New Delhi, Thu, 24 Jan 2008 Vikash Ranjan

The government has started working on a mega package worth over Rs 65,000 crore for the agricultural sector, which would hopefully support 600 million out of the massive 1.1 billion populations. The package would be analysed by the Union Cabinet and afterwards would come into operation. The package would be a loan waiver of Rs 65,000 crore and borne by nationalised and cooperative banks, as per the official sources.

Whether the funds needed should be raised by levying a “farmers’ rehabilitation cess or surcharge” or through a budgetary provision by diverting resources, will be discussed at the prime ministerial level. The total outgo over four years is expected to be about Rs. 70,000 crore.

The Agriculture Ministry has proposed imposition of a one per cent cess on direct taxes and two per cent on indirect taxes. This is expected to yield about Rs. 8,500 crore per annum.

Whatever is the intention behind issuing this ‘would be’ hefty package whether the concerning fund is election-motivated or for the purpose of welfare of farmers and saving them from committing suicide? But no doubt that the states with rampant farmers suicide could benefit from this historic loan waiver proposal.

India is said to be a country of villages. India's recent economic growth has been attributed to the service industry, but 60 percent of the workforce still indulged in agriculture in villages.

Economy of India

If we look at the economy of India, on one side the GDP shows India is heading speedily towards progress, but on the other side is dark one, which states the poverty stricken people residing particularly in villages still living below poverty line.

The Indian economy accounts for the GDP of US $1.25 trillion (2008) is the 12th largest in the world and third largest in terms of purchasing capacity. However owing to the India’s huge population the per capita income is $4,542 at purchasing power parity (PPP) and $ 1,089 at nominal, according to the IMF- World Economic Outlook Database (2007) and CIA-the World Fact Book, 2007. The World Bank grade India as a country of low-income economy.

Our country’s economy is diverse, taking its resources from agriculture, handicrafts, textile, manufacturing, and a multitude of services. Services are a growing sector indulging 12% of population, but still two-thirds of the Indian workforce earns their livelihood directly or indirectly through agriculture.

India's economy has grown at an average annual rate of 6.8 percent since 1994, reducing poverty by 10 percent. However, 40 percent of the world's poor live in India, and 28 percent of the country's population lives below the poverty line. More than one third live on less than a dollar a day, and 80 percent live on less than two dollars a day.

Reasons for the lower income of farmer

Lower incomes of farmers is caused by the low productivity of agriculture, which results into taking incremental debts from local moneylenders, because their illiteracy and many other reasons prevent them from availability of loans from banks and ultimately their starvation forced them to commit suicide.

There are many reasons, which can be cited for the low productivity of agriculture such as illiteracy, socio-economic backwardness, slow progress in implementing land reforms and inadequate or inefficient finance and marketing services for farm produce.

Also, the average size of the land holding is very small and fragmented owing to many reasons from land ceiling to family disputes in some cases. Besides these small land holdings these are often over-manned, which thereby results in unemployment and low productivity of labour.

Moreover modern agricultural techniques and technology are inadequate and farmer’s illiteracy also put off them from its practical uses. In many cases villages especially which is at a significant distance from rivers or canals and unavailability of irrigation facilities also make them dependent completely on rainfall. A good monsoon results in a vigorous growth for the economy as a whole, while a poor monsoon leads to a sluggish growth.

Suicide case of farmers

The suicides of thousands of farmers around the country tell distressing and revealing tales of their plight, and the anxiety that marks the lives of so many millions. Among many factors such as disastrous policies, woeful access to affordable credit, greedy and corrupt middlemen, and indifferent administrations are some of them that have pushed farmers to their breaking point.

The data on suicides are complex and often misleading and does not depict the complete picture of the number of such cases.

About 150,000 farmers committed suicide in India in nine years from 1997 to 2005, as per official data. Although the farmers have committed suicides in many States, but nearly two-third of these deaths are occurred in five States, which as a whole accounts just a third of the country's total population. It means that farmers' suicides occurred in those (mainly cash crop) regions with terrible intensity.

These five worst hit States are Maharashtra, Andhra Pradesh, Karnataka, Madhya Pradesh (including Chattisgarh) and Kerala. Of these States, only Kerala showed no sustained increase in the number of yearly farm suicides over this period. The data for Maharashtra is available since 1995, which reveals it the worst state in the country. Farmers’ suicides in Maharashtra are enhanced triple from 1083 in 1995 to 3926 in 2005.

Between 1997 and 2005, nearly 29,000 farmers committed suicide in Maharashtra as according to official data. This states that roughly 1.5 lakh farmers who killed themselves across the country in that period, almost every fifth one was from Maharashtra, which accounts 105 per cent increase in farm suicides in those nine years.

In the state of Andhra Pradesh alone, 4,500 farmers have committed suicide in the past seven years. This does not include the number of family members of farmers who have also killed themselves.

Funding by government

In these perspectives the mega package expected to be release in 2008 worth nearly Rs 65,000 crore for the agricultural sector would hopefully benefit the farmers. The package would be a loan waiver of Rs 65,000 crore and borne by nationalised and cooperative banks, as per the official sources. The package would be analysed by the Union Cabinet and then would come into operation.


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