Shame of debt, steep costs driving farmers to suicide: RBI-commissioned study

The RBI-commissioned study listed faulty crop choices and aspirational consumption patterns as other major factors leading farmers to commit suicide

The study observed that close to 270,000 farmers have committed suicide in the past 15 years.

Shame arising out of inability to repay loans taken from relatives and acquaintances is a key reason for farmers resorting to suicide, a study commissioned by the Reserve Bank of India (RBI) found.

The study titled “Lives in debt: narratives of agrarian distress and farmer suicides”, conducted by researchers at Shiv Nadar University and published in the latest issue of Economic and Political Weekly, listed faulty crop choices, rising input costs, and aspirational consumption patterns as other major factors driving suicides, following field investigations in two of the most suicide-prone districts in India—Yavatmal in Maharashtra and Sangrur in Punjab.

The findings come at a time when a farm debt waiver in Uttar Pradesh has sparked demand for similar relief in these two states. In Punjab, despite a record harvest, farmer suicides have continued.

Despite formal credit to farmers growing tenfold between 2001 and 2012, commercial banks have “deepened” credit instead of “widening” it, making loans more accessible to farmers with large landholdings, the study said, adding that “it (the surge in formal credit) was insufficient to rule out the predominance of non-institutional sources”.

Citing data from the National Crime Records Bureau, the study observed that close to 270,000 farmers have committed suicide in the past 15 years, and despite wide differences in cropping patterns and access to irrigation, the crisis in farming is strikingly similar in districts like Yavatmal (rain-fed cotton belt) and Sangrur (irrigated region growing three crops in a year).

In Yavatmal, the survey showed that small and marginal farmers (owning less than 2 hectares) who lacked non-farm sources of income were most likely to commit suicide.

“The shame associated with one’s inability to repay is immense in a village society and it is all the more acute if money is borrowed from relatives,” the study observed.

In Sangrur, the study found that most families where a farmer suicide took place had outstanding debts over Rs200,000. Many families were indebted to traders and commission agents and had exhausted all formal credit channels, the study found.

It further said that crop choices in these districts were not in tune with the agro-climatic features of the region. Cultivation of Bt cotton in Yavatmal where rainfall is unpredictable and growing rice in Sangrur where water tables are depleting has put farmers under considerable stress, according to the study.

The researchers observed that a Bt cotton farmer is barely able to meet the rising costs of cultivation, let alone generate a profit sufficient to sustain the household. In Punjab, a highly input-intensive farming and low support prices that did not keep pace with production costs have meant little surplus left with farmers to repay loans.

While consumption expenditure of small farmers usually exceeds their income from farming, the mismatch is higher in Punjab, the study said, adding the state tops in purchase of consumer durables often financed by loans form non-institutional sources.

Due to massive defaults caused by repeated crop failures, “the most frightening point emerging from the field study is the exhausting of informal sources of credit” leading to a situation where moneylenders prefer buying out assets of farmers than mortgaging them, the study said.

It suggested several interventions, including discouraging loans to crops not suited to the ecology of a region, restructuring of loans into smaller instalments, and introduction of cashless loan components to avoid diversion of loans towards consumption expenditure, as possible measures to curb suicides.

Criticising the pitifully low public expenditure on agriculture (less than 1% of the GDP), the study said “an economy driven by jobless growth, compulsive migration” (from rural India) creates new “serfs” in informal services and construction, “while existing rural and agrarian problems remain unresolved”.