Resource centre on India's rural distress
 
 

Debt Trap

KEY TRENDS 


• The NSS 59th Round (January-December 2003) had found that 48.6% farmer households were indebted while the NSS 70th Round (January-December 2013) has observed that 52% of India's agricultural households were indebted in July, 2012-June, 2013 $

 

• A similar survey on rural indebtedness by the NSSO in 1991 found indebtedness among only 26% of farmers $

 

• On an average, the amount of debt per farmer household was Rs. 12,585 during NSS 59th Round, which increased by nearly 4 times to reach Rs. 47000 per agricultural household during the NSS 70th Round $

• Based on a survey of 4529 villages, the NSS 70th Round report tells us that among the major Indian states, Andhra Pradesh has the highest share of indebted agricultural households in the country (92.9%), followed by Telangana (89.1%) and Tamil Nadu (82.5%). Assam (17.5%), Jharkhand (28.9%), and Chhattisgarh (37.2%) are some of the major Indian states with lowest share of indebted agricultural households $

 
• Out of 9334 accounts test checked in CAG audit across nine states, 1257 accounts (13.46 percent) were those which were found in audit to be eligible for benefit under the Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS), 2008, but were not considered by the lending institutions while preparing the list of eligible farmers €

• Out of 80299 accounts granted debt waiver or debt relief, in 8.5 percent of cases, the beneficiaries were not eligible for either the debt waiver or the relief €

• Out of 89.35 million farmer households, 43.42 million (48.6%) were reported to be indebted*

• On an average, the amount of debt per farmer household was Rs. 12,585*

• 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%)*

• At the national level, on an average, 29 out of 100 indebted households borrowed from ‘agricultural/professional money lender’*

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

• 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)*

 

$ Key Indicators of Situation Assessment Survey of Agricultural Households in India, NSS 70th Round (January, 2013- December, 2013) are as follows (Please click here to access)


€ Report no. 3 of 2013-Union Government (Ministry of Finance)-Report of the Comptroller and Auditor General of India on Implementation of Agricultural Debt Waiver and Debt Relief Scheme. 2008,
http://saiindia.gov.in/english/home/Our_Products/Audit_Report/Government_Wise/union_audit/recent_reports/union_performance/2013/Comm/Report_3/Report_3.html

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

 

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The key findings of the report titled [inside]Key Indicators of Situation Assessment Survey of Agricultural Households in India, NSS 70th Round (published in December 2014)[/inside] (January, 2013- December, 2013) are as follows (Please click here to access):

• The NSS 59th Round (January-December 2003) had found that 48.6% farmer households were indebted while the NSS 70th Round (January-December 2013) has observed that 52% of India's agricultural households were indebted in July, 2012-June, 2013.

• A similar survey on rural indebtedness by the NSSO in 1991 found indebtedness among only 26% of farmers.

• On an average, the amount of debt per farmer household was Rs. 12,585 during NSS 59th Round, which increased by nearly 4 times to reach Rs. 47000 per agricultural household during the NSS 70th Round.

• Based on a survey of 4529 villages, the NSS 70th Round report tells us that among the major Indian states, Andhra Pradesh has the highest share of indebted agricultural households in the country (92.9%), followed by Telangana (89.1%) and Tamil Nadu (82.5%). Assam (17.5%), Jharkhand (28.9%), and Chhattisgarh (37.2%) are some of the major Indian states with lowest share of indebted agricultural households.

• The average amount of outstanding loan has been highest for Kerala (Rs. 2,13,600/-), followed by Andhra Pradesh (Rs. 1,23,400/-) and Punjab (Rs. 1,19,500/-). Some of the states with lowest amount of average outstanding loan are Assam (Rs. 3,400/-), Jharkhand (Rs. 5,700/-) and Chhattisgarh (Rs. 10,200/-).

• At the national level, about 60% of the outstanding loans have been taken from institutional sources, which includes Government (2.1%), Co-operative society (14.8%) and banks (42.9%). Among the non-institutional sources, agricultural/ professional money lenders (25.8%) have the major share in terms of outstanding loans.

• The report mentions that the share of institutional loans increases with rise in land possessed. For the agricultural households covered in the lowest size class of land possessed (less than 0.01 hectare), only about 15% of the outstanding loans were from institutional sources (government, co-operative society, bank), whereas the share was about 79% for the households belonging to the highest size class of land possessed (more than 10 hectares). This means that the land-poor households are more dependent on informal sources for borrowing money, which may be due to lack of proper collateral available among them.

• The average monthly income per agricultural household in India during the agricultural year July 2012- June 2013 was estimated at Rs. 6426/- whereas the average monthly consumption expenditure per agricultural household was Rs. 6223/- during the same time.

• Among the agricultural households having less than 0.01 hectare land (which also includes landless agricultural households), about 56% reported wage/ salary employment as their principal source of income and another 23% reported livestock as their principal source of income during the agricultural year July 2012- June 2013. Majority of the agricultural households, which possessed more than 0.40 hectare land reported cultivation as their principal source of income. The group of agricultural households which possessed little land (0.01 to 0.04 hectare) earned their income both from cultivation (42%) and wage/ salary employment (35%).

• Net receipt from farm business (cultivation and farming of animals) accounted for 60 percent of the average monthly income per agricultural household in the country during July 2012- June 2013. Nearly 32 percent of the average monthly income has been contributed by income from wages/ salary.

• There is an estimated total of 90.2 million agricultural households in rural India, which is 57.8 percent of the total estimated rural households during the agricultural year July, 2012- June, 2013.

• Uttar Pradesh, with an estimate of 18.05 million agricultural households, accounted for about 20% of all agricultural households in India. Among the major States, Rajasthan has the highest percentage of agricultural households (78.4%) among its rural households followed by Uttar Pradesh (74.8%) and Madhya Pradesh (70.8%). Kerala has the least percentage share of agricultural households (27.3%) in its rural households.

• About 45% of the total agricultural households in the country belongs to Other Backward Classes (OBCs). About 16% of agricultural households are from Scheduled Castes (SCs) and 13% are from Scheduled Tribes (STs). During the same period about 45% of the rural households of the country belongs to OBCs. SCs and STs, respectively, have a share of about 20% and 12% among the rural households.

• Agricultural households are dependent mainly on cultivation followed by wage/ salaried employment for their livelihood, as about 63.5% of the agricultural households reported cultivation as their principal source of income and about 22% reported wage/ salaried employment as their principal source of income.

• Agricultural activity (cultivation, livestock and other agricultural activities) has been reported to be the principal source of income for majority of the households in all the major states, except Kerala where about 61% of the agricultural households reported to have earned maximum income from sources other than agricultural activities. Among the major states, more than 80% of agricultural households from Assam, Chhattisgarh and Telangana reported agricultural activity as their principal source of income. More than 9% of agricultural households of Tamil Nadu, Gujarat, Punjab and Haryana have reported livestock as their principal source of income.

• About 93 percent of agricultural households in the country possessed some type of land other than ‘homestead land only' and little less than 7% possessed only homestead land. An estimated 0.1% of the agricultural households in rural India are landless. Among the agricultural households who possessed less than 0.01 hectare land, 70% possessed only homestead land. The share of landless agricultural households in the lowest size class of land possessed is estimated as 2.4%.

• In all major States, excepting Gujarat, Haryana, Kerala, Punjab and Tamil Nadu, more than 90% of agricultural households have both homestead and some ‘other type of land', whereas about 12% to 16% of agricultural households of these states possessed only ‘homestead land'. About 94% to 99% of agricultural households in all the states, except Haryana and Punjab, operated their land for agricultural activities.

• At the national level, around 78.5% of the agricultural households did not possess any land outside the village they were residing during the time of the survey. Among the households reported land possession outside the village, about 17.5% have land within the state itself and about 4% have land outside the state.

• In rural India, about 44% of estimated agricultural households have MGNREG job card. About 38% and 29% of agricultural households, respectively, in the lowest and the highest size class of land possessed have MGNREG job cards. The reported lower rate of possession of MGNREG job cards in lowest size class is noteworthy in the context of higher dependency of these households on wage/ salaried employment.

• More than 65% of agricultural households of Andhra Pradesh, Chhattisgarh, Madhya Pradesh, Rajasthan, Tamil Nadu, Telangana and West Bengal have MGNREG job card at the time of the survey.

• At the national level, about 12 percent agricultural households did not possess any ration card as on date of the survey. BPL card was possessed by about 36 percent of the estimated agricultural households. About 5 percent agricultural households possessed Antyodaya cards which are issued to ultra-poor households.

• More than 90 percent agricultural households of Andhra Pradesh and Telangana possessed BPL ration card. Agricultural households possessing Antyodaya card are the highest in Uttar Pradesh (8.1%) followed by Karnataka (5.8%) and Jharkhand (5.8%). About 37% of agricultural households of Jharkhand and 24% of Odisha did not possess any ration card as on date of survey.

• Majority of the production of all crops such as paddy, wheat pulses, oilseeds etc. is sold off to either local private trader or mandi (except sugarcane). The lower share of sale to cooperative & Government agencies shows the lesser utilisation of procurement agencies, which provide Minimum Support Price (MSP) to selected crops.

• The data shows a lower level of awareness about MSP and even lower level of sale of these crops to procurement agencies. Except for sugarcane, only less than half of the households, which are aware about MSP, sold off their crop to procurement agencies. Even for the households reported sale to the procurement agency, the quantity sold is a very small percentage of the total sale by these households during the period.

• The reasons behind not selling to procurement agencies despite having awareness about MSP are: non-availability of procurement agency, no local purchaser, and better market price over MSP.

• Only a very small fraction of agricultural households insured their crops against possible crop loss since most people are not aware of the same.

• At the national level, average actual expenditure for crop production per agricultural household during July, 2012-June, 2013 is Rs. 2192/- During the same period, average receipts from crop production per agricultural household in the country is Rs. 5542/-.

• At the national level, average monthly expenditure for farming of animals is estimated as Rs. 1388/-. The average monthly receipts from this activity during the same period is Rs. 2604/-.

• At the national level, majority of the cultivating households accessed technical help from any of the listed agencies/ sources (like extension agents, KVKs etc.) during the period July, 2012- June, 2013. 'Progressive farmer' and 'radio/ TV/newspaper/ internet' are the two main sources accessed by the agricultural households for technical advice. Majority of the households found the recommended advice useful.

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According to the Report no. 3 of 2013-Union Government (Ministry of Finance)-[inside]Report of the CAG on Implementation of Agricultural Debt Waiver and Debt Relief Scheme. 2008[/inside],
http://saiindia.gov.in/english/home/Our_Products/Audit_Report/Government_Wise/union_audit/recent_reports/union_performance/2013/Comm/Report_3/Report_3.html

•    The Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS), 2008 was launched in May 2008 to address the problems and difficulties faced by the farming community in repayment of loans taken by them and in helping them qualify for fresh loans. Under the scheme, complete waiver of eligible amount was to be provided to marginal/ small farmers while a one-time relief of 25 percent of the eligible amount was to be provided to other farmers subject to payment of the balance 75 percent of the eligible amount by the farmer. Agricultural loans meeting the following set of conditions were to be covered under the scheme: a. Loans disbursed between 1 April 1997 and 31 March 2007 and b. Overdue as on 31 December 2007; c. Remaining unpaid upto 29 February 2008. The scheme was to be implemented by 30 June, 2010.  

•    The Government of India estimated in May 2008 that about 3.69 crore marginal/ small farmers' accounts and about 0.60 crore other farmers' accounts would be covered under the scheme. Over the last 4 financial years, the GoI has waived more than Rs. 52000 crore related to approximately 3.45 crore small/ marginal and other farmers.

•    The review, carried out by the CAG from April 2011 to March 2012, covered 25 states involving field audit of a total of 90,576 beneficiaries'/ farmers' accounts in 715 branches of lending institutions situated in 92 districts. The sample included 80299 accounts of such farmers who were extended benefit under the scheme, 9334 accounts of such farmers who were not selected as beneficiaries even though they had received agricultural loans between 1 April 1997 to 31 March 2007 and 943 cases where complaints were received.

•    Out of 9334 accounts test checked in audit across nine states, 1257 accounts (13.46 percent) were those which were found in audit to be eligible for benefit under the scheme, but were not considered by the lending institutions while preparing the list of eligible farmers.

•    Out of 80299 accounts granted debt waiver or debt relief, in 8.5 percent of cases, the beneficiaries were not eligible for either the debt waiver or the relief. 

•    A Private Scheduled Commercial Bank have received reimbursement for loans, amounting to Rs. 164.60 crore extended to micro finance institutions (MFIs) in violation of the guidelines.

•    Maintenance of proper and complete documentation with respect to each claim was critical to efficient management of the scheme. Audit noted that in 2824 cases, with claims amounting to Rs. 8.64 crore, there was prima facie evidence of tampering, over-writing and alteration of records.

•    Audit scrutiny revealed that in 4826 accounts i.e. almost 6 percent of the test checked accounts, farmers were not extended the benefits according to entitlements. In 3262 cases, undue benefit totaling Rs. 13.35 crore was extended. On the other hand, in the remaining 1564 cases, farmers were deprived of their rightful benefits of Rs. 1.91 crores.

•    In violation of guidelines, lending institutions claimed amounts related to interest/ charges which was not allowed under the scheme. In 6392 cases across 22 states, although the lending institutions had not borne interest/ surcharge of Rs. 5.33 crore themselves, they were still reimbursed these amounts by the GoI.

•    Department of Financial Services (DFS) accepted the reimbursement claims of RBI in respect of Urban Cooperative Banks amounting to Rs. 335.62 crore despite the fact that even the total number of beneficiaries' accounts was not indicated.

•    Debt waiver/ relief certificates were not issued in many cases to eligible beneficiaries. In 21182 accounts (out of 61793 test checked accounts) i.e. 34.28 percent, there was no acknowledgement from farmers or any other proof of issue of debt waiver or debt relief certificates to the beneficiaries. Such certificates entitle the farmers to fresh loans.

•    The monitoring of the scheme was also found to be deficient. The DFS was completely dependent upon the nodal agencies for monitoring the compliance of its instructions issued from time to time in implementation of the scheme. But audit found that the nodal agencies themselves were relying on certificates and data of lending institutions without conducting independent verification of such data and certificates to confirm the veracity of claims.

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Steps taken (various sources)

• The draft policy, as suggested by the National Commission on Farmers, calls for developing and introducing a Livelihood Security Package for farmers by providing them technology choice according to agro-ecological conditions and market demand; soil health enhancement and water conservation; quality and affordability of inputs; credit and insurance and market tie-up, besides necessary health care facilities linked with the National Rural' Health Commission.

• The loan waiver and debt relief package announced by the Prime Minister of India provides for complete write-off of all outstanding debt held on December 31, 2007 to scheduled commercial banks and co-operative societies, of small and marginal farmers, that is those holding less than 2 hectares of land.

• For all other farmers, there will be a one-time settlement for the outstanding debt, whereby 25 per cent will be written off if the farmer repays 75 per cent.

• It excludes from full benefits all the farmers on dry land and poor quality land who hold more than 2 hectares, even though studies show that they are among the worst affected from the agrarian crisis. This package excludes the majority of farmers who have taken debt from private sources..

• The Government of Kerala established a Debt Relief Commission, to identify the pockets and categories of severe agrarian distress and provide relief accordingly

• In a bid to boost procurement of grains and provide competitive prices to farmers, the minimum support price (MSP) for rabi crop for the 2008-09 season has been raised in January, 2009. The MSP of wheat, which earlier was Rs.1,000 per quintal for the 2008-09 marketing season, has been raised by Rs.80 to Rs.1,080 per quintal. The minimum support price (MSP) for the common variety of paddy was raised to Rs. 850 a quintal from Rs. 745 and for Grade A to Rs. 875 from Rs. 775 as an “ad hoc measure.” 

According to the [inside]Interim Budget 2009-10[/inside],
http://indiabudget.nic.in/ub2009-10(I)/bh/bh1.pdf:  

• Plan allocation for agriculture increased by 300 per cent from 2003-04 to 2008-09. Rashtriya Krishi Vikas Yojna launched in 2007-08 with an outlay of Rs.25,000 crore to increase growth rate of agriculture and allied sector to 4 per cent per annum during Eleventh Plan period.

• Agriculture credit disbursement increased three times from Rs.87,000 crore in 2003-04 to about Rs.2,50,000 crore in 2007-08.

• To strengthen short-term cooperative credit structure, revival package in 25 states involving financial assistance of about Rs.13,500 crore is being implemented.

• Interest subvention to be continued in 2009-10 to ensure that farmers get short-term crop loans upto Rs.3 lakh at 7 per cent per annum.

• The Agricultural Debt Waiver and Debt Relief Scheme, 2008 was implemented by June 30, 2008 as scheduled. Debt waiver/debt relief amounting to Rs.65,300 crore covers 3.6 crore farmers.

• Despite higher procurement cost and higher international prices during the last 5 years, the central issue prices under Targeted Public Distribution System (TPDS) maintained at July, 2000 level in case of Below Poverty Line (BPL) and Antyodaya Anna Yojana (AAY) categories and at July, 2002 levels for Above Poverty Line (APL) category.

• Minimum Support Price (MSP) for common variety of paddy increased from Rs.550 per quintal in 2003-04 to Rs.900 per quintal for the crop year 2008-09. In case of wheat, increase was from Rs.630 per quintal in 2003-04 to Rs.1080 per quintal for the year 2009.

According to the [inside]Report of the Expert Group on Agricultural Indebtedness (July, 2007)[/inside], http://www.igidr.ac.in/pdf/publication/PP-059.pdf:

Recommendations

• There is an urgent need to expand the production base of agriculture with emphasis on small and marginal farmers so as to integrate them with mainstream development. This calls for appropriate technological innovations, institutional alternatives and introduction of novel instruments of intervention.

• Institutional credit availability to agriculture should be increased, excluded sections of the farmer households be brought into its ambit and a qualitative improvement in the credit delivery arrangements be brought about. The debt burden of farmers to informal sources should be reduced by formalising it through transferring the informal debt to formal institutions.

• Rainfed areas are particularly prone to year-to-year fluctuations of production and degradation of environmental resources. Concerted efforts are needed to rejuvenate their natural resource base as also to stabilise and augment the income sources of farm households.

• There is need to introduce space and information technology for weather forecasting.

• To ensure that rural development and poverty alleviation programmes benefit poor farmers, farmers’ organisations should have a role in their design, implementation and monitoring.

• The Government of India responded to the agrarian crisis through a package of relief measures for 31 distress-affected districts spread over Andhra Pradesh, Karnataka, Kerala and Maharashtra. In addition, the Governments of these states, as also the Government of Punjab, have come out with relief measures, inter alia, providing compensation to the bereaved farmers’ families

• It also recommends continuation of ‘Non-Credit Component’ of the Prime Minister's Relief Package for two more years

• The Expert Group recommends that the main focus of the programme of ‘financial inclusion’ should be on the basis of credit needs of all small borrower households. Institutional credit should be extended to those excluded farmer households who do not have access to any source of credit.

• Urgent steps should be taken to set up mobile branches of banks in rural areas to ensure that the farmers are served at the doorstep, simultaneously reducing transaction costs on either side

• The Expert Group recommends the conversion of the Kisan Credit Card (KCC) into a full featured Bharat Kisan Card (BKC) – an electronic document to be issued to each farmer incorporating the details of land, buildings, other assets and those of the credit facilities enjoyed. This has to be put on a mission mode.

• The Lead Bank Scheme (LBS) was designed to bring about close coordination between district planning authorities and banking institutions. In the context of emergence of new institutions such as federations of farmers’ SHGs and the growing need for credit counselling by farmers, the Expert Group recommends that RBI should revitalise LBS

• The Expert Group recommends that appropriate legislation should be enacted to facilitate creation of mortgages without procedural complexities

• The Expert Group recommends early updating and computerisation of land records. This would facilitate noting the charge on the land, and improve availability of credit

• The Expert Group recommends that crop loans should be extended to tenant farmers on the basis of tenancy records. To achieve this, it is necessary to legalise tenancy with due protection to small and marginal farmers and put tenancy in the Record of Rights (ROR).

• The Expert Group feels that Micro Finance Institutions (MFIs) should be an integral part of mainstream banking.

• National Bank for Agriculture and Rural Development (NABARD) should provide effective guidance and training to the banks in the formulation of projects related to agriculture and the rural non-farm sector.

• The Expert Group recommends that the banks should continue to make special efforts to induct qualified graduates in agriculture and allied sciences in their staff

• The Expert Group is of the view that the 18 per cent prescription of priority sector lending to agriculture by banks is a long-standing commitment, as a matter of public policy. However, this target is not being met by the banking system and there is a huge gap. The Expert Group recommends that the Government should ensure that banks fulfil this commitment.

• The Expert Group also recommends a Farmers Livelihood Improvement Mission (FLIM) at the state and district levels headed by the Chief Minister and the District Collector respectively. The mission should be supported by a Livelihood Support Centre (LSC) having professional expertise and manpower to organise the farmers, identify economic opportunities for the farmers, particularly for small and marginal farmers and create projects and systems in coordination with different stakeholders.

• Given the importance of the crop insurance scheme for covering yield risks, the Expert Group recommends that a high level committee should thoroughly evaluate the scheme with a view to making it more effective

• The Expert Group feels that the high level committee recommended above should also make a comparative evaluation of crop insurance, rainfall insurance and insurance based on moisture stress indices derived from satellite imagery data

• To mitigate the impact of price collapse in cases of commodities not covered under Minimum Support Prices (MSPs), the Expert Group recommends that financial support may be provided to farmers out of a ‘Price Risk Mitigation Fund’

• The Expert Group recommends that surveillance and advance crop assessment systems should be initiated in distressed districts of rainfed areas by using satellite imagery.

• The Expert Group further recommends that NRSA should strengthen its Research and Development (R&D) to establish links between satellite imagery data relating to soil moisture/ vegetative cover and actual yields based on crop cutting experiments

• An adequate number of input testing laboratories needs to be opened at the panchayat/block level to facilitate quality checks of inputs such as seeds, pesticides and fertilisers.

• The Expert Group further recommends that the extension system should be revived by strengthening the linkage between agricultural universities and extension personnel, setting up of Krishi Vigyan Kendras (KVKs), agri-clinics, Agricultural Technology Management Agencies (ATMAs), farmer field schools and technology kiosks. Adequate budgetary provision should be made for reviving the agricultural research and extension system

• The Expert Group underlines the need for expanding the livelihood opportunities for the rural population and recommends that income diversification opportunities should be created by promoting allied agricultural, agro-processing and other rural non-farm enterprises with a view to improving the sources of income of the farmers in general and the small and marginal farmers in particular as well as that of landless agricultural labourer households

• Expenditure on health is an unforeseen burden that leads to heavy borrowing, largely from informal sources, by affected families. This calls for immediate steps of strengthening the primary healthcare facilities. In addition, the Expert Group recommends implementation of health schemes for rural people.

 

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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

graf3

 

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

 

 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): [inside]Bt Cotton and Farmer Suicides in India[/inside], 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