A Report Points to Unfulfilled Promises

Newsreel Asia Insight #190
April 13, 2024

The central government set a target to double farmers’ incomes by 2022, from 8,058 rupees a month to 22,610 rupees, necessitating an annual income growth rate of 10.4%. It also promised that agricultural produce would be procured at a “minimum support price” (MSP) of at least one and a half times the comprehensive cost of production. Despite these plans, the reality on the ground has been starkly different, according to an analysis by the Financial Accountability Network – India.

Given below is a summarised version of the 10-year report card on farmers by the collective.

In 2014, the government, led by the Bharatiya Janata Party (BJP), said the MSP would be calculated as per the C2+50% formula recommended by the Swaminathan Commission. This formula was meant to include various costs incurred by farmers and ensure a decent profit margin.

The MSP was claimed to have been increased to 43% above the cost of production by 2017. However, this calculation excluded the cost of land, which significantly affects the total cost and hence the actual profitability for farmers.

The high hopes around the MSP were further diminished when the government filed an affidavit in the Supreme Court, stating that aligning MSP with the promised levels could distort the market. This statement was a setback as it signalled a potential retraction from earlier commitments.

The MSP system’s effectiveness is also limited by the actual procurement practices. For instance, despite the set MSPs, the procurement as a percentage of total production was minimal, with figures like 0% for soybean and only 2.05% for groundnut in the 2021-22 season. This shows that while the MSP may exist theoretically, its benefits do not reach all farmers uniformly, particularly affecting small, marginal and tenant farmers.

The lack of robust MSP enforcement and adequate procurement has contributed to continued financial distress among farmers. This situation exacerbates debt levels and, tragically, has been linked to high rates of farmer suicides. Data from the Ministry of Statistics and Programme Implementation (MOSPI) indicates a slight decrease in the percentage of indebted farmers, from 52% in 2013 to 50.2% in 2019.

From 2014 to 2022, a total of 100,474 farmers took their own lives according to the National Crime Records Bureau. This tragic statistic equates to almost 30 suicides daily over this nine-year period. The combination of unfulfilled promises, ineffective programs and insufficient funding has driven the farmers of our nation into profound despair.

The failure to effectively implement MSP commitments has thus been a significant factor in the agricultural sector’s struggles.

Regarding farmers’ income, a report by the State Bank of India’s Economic Research Department noted that it had doubled for specific crops in certain states between FY18 and FY22, such as soybean and sugarcane in Maharashtra, and cotton and paddy in Karnataka. However, the overall success of this initiative across the country has been questioned.

The Situation Assessment Survey of Agricultural Households conducted its 77th round in 2021, revealing that the estimated monthly income of farm households in 2018-19 was only 10,218 rupees in nominal terms, significantly below the targeted 22,610 rupees.

Public spending and investments in agriculture have not kept pace with the needs of the sector.

The share of public expenditure on agriculture relative to the total budget has been declining, and the growth rate of real wages for agricultural labour has remained below 1% per year between 2014-15 and 2021-22.

Funding for essential support mechanisms like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has significantly reduced, from 1.85% of the overall budget in FY 2014-15 to just 1.33% in FY 2023-24. The 2023 budget allocation was 600 billion rupees, a 33% decrease from the previous year.

Financial accessibility and the structure of credit distribution have critical impacts on agricultural productivity and farmer welfare. The allocation pattern for agricultural credit shows a disconnection from actual farming needs, with the largest disbursements occurring in the last quarter of the financial year when farming activity is minimal.

Recent changes have further diluted the focus on small and marginal farmers. For example, merging direct and indirect lending categories under agricultural credit allows banks to meet lending targets through large loans to the processed food industry, potentially at the expense of small-scale farmers.

The Pradhan Mantri Fasal Bima Yojana (PMFBY), designed to insure farmers against crop losses, allocated 146 billion rupees, but its actual effectiveness in aiding farmers has been limited, with only a small portion of the funds being claimed by farmers facing crop failures.

With these points, the report car sought to illustrate the disappointing landscape of agricultural policy in India, where lofty goals clashed with challenging realities on the ground.