Debt Trap

Debt Trap

 

The graph below shows that the number of indebted households was highest in Andhra Pradesh to be followed by Maharastra, during NSS 59th Round (January–December 2003). 

Number of Indebted farmer households in the States with prevalence of indebtedness 50% or more

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According to the Situation Assessment Survey of Farmers Indebtedness of Farmer Households NSS 59th Round (January–December 2003)

 

 Out of 89.35 million farmer households, 43.42 million (48.6%) were reported to be indebted. A similar survey by the NSS relating to 1991 found indebtedness among only 26 per cent of farmers. On an average, the amount of debt per farmer household was Rs. 12,585.

 At all-India level, estimated number of rural households was 147.90 million, of whom 60.4% were farmer households.

 At all-India level, an estimated 60.4% of rural households were farmer households and of them 48.6% were reported to be indebted.

 The incidence of indebtedness was highest in Andhra Pradesh (82.0%), to be followed by Tamil Nadu (74.5%), Punjab (65.4%), Kerala (64.4%), Karnataka (61.6%) and Maharashtra (54.8%).

 Haryana, Rajasthan, Gujarat, Madhya Pradesh and West Bengal each had about 50% to 53% farmer households indebted. States with very low proportion of indebted farmer households were Meghalaya, Arunachal Pradesh and Uttaranchal. In each of these States less than 10% farmer households were indebted.

 Estimated number of indebted farmer households was highest in Uttar Pradesh (6.9 million), to be followed by Andhra Pradesh (4.9 million) and Maharashtra (3.6 million). More than half of the indebted farmer households belonged to the states of Uttar Pradesh, Andhra Pradesh, Maharastra, West Bengal and Madhya Pradesh.

 Going by principal source of income, 57% farmer households were cultivators. Among them 48% were indebted.

 The percentage share of estimated all farmer households in different social groups was 13.3% in ST, 17.5% in SC, 41.5% in OBC and 27.7% in Others.

 The prevalence rate of indebtedness of farmer households in different social groups was 36.3% in ST, 50.2% in SC, 51.4% in OBC and 49.4% in others. The average loan per farmer household in different social groups were 5,500 rupees for ST, 7,200 rupees for SC, 13,500 rupees for OBC and 18,100 rupees for others.

 The size classes of land possessed considered were: <0.01 ha, 0.01-0.40 ha, 0.41-1.00 ha, 1.01-2.00 ha, 2.01-4.00 ha, 4.01-10.00 ha and more than 10.00 ha. The proportions of total farmer households in these seven classes were estimated as 1.4%, 32.8%, 31.7%, 18.0%, 10.5%, 4.8% and 0.9% respectively. The prevalence rates of indebtedness in these seven classes were 45.3%, 44.4%, 45.6%, 51.0%, 58.2%, 65.1% and 66.4%, i.e. in the different size classes of land possessed, 44% to 66% farmer households were indebted.

 At the national level, on an average, 29 out of 100 indebted households borrowed from ‘agricultural/professional money lender’. Among the states the incidence of borrowing from this source was highest in Andhra Pradesh (57 out of 100 indebted households), to be followed by Tamil Nadu (52 out of 100 indebted households).

 Marriages and ceremonies accounted for 111 rupees per 1000 rupees of outstanding loans of farmer households. Among the states the proportion was highest in Bihar (229 rupees per 1000 rupees), to be followed by Rajasthan (176 rupees per 1000 rupees).

 The most important source of loan in terms of percentage of outstanding loan amount was banks (36%), to be followed by moneylenders (26%).

 Average outstanding loan per farmer household was highest in the state of Punjab, to be followed by Kerala, Haryana, Andhra Pradesh and Tamil Nadu.
 

According to P. Gruère, Guillaume, Mehta-Bhatt, Purvi and Sengupta, Debdatta (2008): Bt Cotton and Farmer Suicides in India, IFPRI Discussion Paper 00808, October, http://www.ifpri.org/pubs/dp/IFPRIDP00808.pdf:


• General Change in Cropping Patterns toward Risky Nonfood Crops: Many of the states like Andhra Pradesh and Maharashtra, which used to be dominated by rain-fed, low-cost food crops, has gradually moved toward cultivation of cash crops, which led to the decline in the area under food crops. A rising trend towards cash crops such as groundnuts and oilseeds without adequate water irrigation systems has pushed farmers toward financial distress.

• Increased Dependence on Monsoons: Dependence on monsoons and rain-fed irrigation in areas where growing of cash crops has increased led to more troubles being faced by the farmers. Increased area under cash crops was not accompanied by increased irrigation, despite the importance of adequate water for most of these crops. There is evidence that Bt cotton has performed better under irrigated conditions. Yet, Bt and non-Bt cotton are reported to have similar irrigation.

• Access to Rural Credit: Indebtedness also occurs due to lack of access to institutional credit. Most of the farmers who committed suicide in Maharastra and Andhra Pradesh had high, unpaid loans. In Maharashtra, the share of total credit utilization going toward agriculture declined from 20.2 to 11.2 percent from 1991 to 2004. In Andhra Pradesh, the share of moneylenders and other sources of credit going to agriculture is much higher, reaching about 68 percent. A survey conducted by the government of Andhra Pradesh showed that 80 percent of all agricultural loans come from non-institutional sources. The interest rate from these sources is high at 24–36 percent

• Rising Cost of Cultivation without Increased Minimum Support Prices (MSP): Most small and medium farmers sell to the local government procurement center, where prices have been very low. However, the MSP did not increase as fast as cultivation costs. The Dandekar Report of 2005 claims that crops cultivated in the region were sold at a loss to farmers. According to this report, between 1996 and 2004, farmers’ net losses were about 38 percent for paddy, 38 percent for cotton, 32 percent for groundnuts, 37 percent for soybeans, and 12 percent for sugarcane. 

• Loss of Social Status: While dealing with crop loss, farmers did not have any respite from repayment of the heavy debts they had accumulated. Farmers who committed suicide have consistently been harassed for immediate repayment of loans even after a crop failure


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