During recent years farmers in India have been under great distress. The background to this is the governments’ neglect of investment in agriculture, which has decreased productivity, lead to a fall in farmers’ incomes and a burden of debts. Many farmers have had to borrow money from local lenders with annual interest charges of about 25 percent. These problems have plagued even the previously prosperous farming states, Andhra Pradesh, Karnataka, Maharashtra and Punjab.

Punjab’s problem is of particular concern as that state was once the granary of India. The state used to produce more than one-fifth of the country’s wheat and about one-tenth of its’ rice. Today, however, Punjab’s farming scenario is a far cry from the earlier years of the Green Revolution. The State of the Environment report, 2007, notes that the varieties of wheat, rice and other crops produced have been markedly reduced. And yet, with the neglect of government investment, farmers’ expenditures on chemical fertilizers and other production inputs have increased and they are faced with high debts.

The debt burden has recently been analyzed by the Institute of Development and Communication. In the decade up to 2008 the burden had increased five-fold and had reached about 80 percent of farmers’ annual incomes.

The use of chemical fertilizers has lead to widespread contamination in communal ground water and has caused cancer and other health problems. Greenpeace has reported very high levels of contamination. The contamination caused by one farmer can cause health problems to its’ neighbors.

The health problems often require medical treatment. With the declining role of the public health sector, many farmers have had to turn to the high-cost private sector and this, in turn, has aggravated the burden of debt. A study reported in the Economic and Political Weekly estimates that health debts are the highest single component of the overall burden.

Many farmers are not able to repay all of their debts. This is mainly because of the high interest charges but also because some farmers’ health problems have reduced their capacity for arduous work. In the worst-case scenario these problems could result in an increase in the level of debt.

The debt burden could even lead to inter-generational problems. Children’s schooling may be at risk. A reputable daily newspaper, The Hindu, has reported that some parents who were not able to repay their debts have had to take the children out of school and put them to work. A detailed study undertaken at the National Institute of Public Finance and Policy, New Delhi, has found that financial constraints have been a major reason why children have had to drop out of school.

Recently these bleak prospects have been recognized even by the state and central governments. The Planning Commission has approved loans for the state governments to help pay off farmers’ debts. The impact of this has, however, yet to be seen. There could well be bureaucratic hold ups in the transfer of the monies to the farmers..

In the long run there is also a need for other measures to help enhance farmers’ incomes and reduce the risks to their health. Fortunately there are encouraging signs that farmers are adopting the methods organic farming. This will help reduce the dependence on chemical fertilizers.

Currently there are about 300 thousand organic farms in India. Although this is only a small proportion of the total the experience so far has been encouraging. The use of organic fertilizers has helped provide more income, per unit costs, and reduced the risks of cancer and other health problems.

But could organic farming be a panacea for all, or most, of the distressed farmers? The answer, unfortunately, is ‘No’. The increased incomes and saving in health expenditures may not be sufficient to repay the outstanding debts and allow the children to continue at school. There would still be need for some other policy measures. One such measure, that could have significant long run benefits, is the provision of free school education, or school vouchers to be given to those that attend school.

Homi Katrak

Visiting Professor 1998 – 2012

University of Surrey