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[op-ed snap] The map of rural deprivation

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Note4students

Mains Paper 3: Economy | Development and employment

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The news card talks about SECC, rural employment issue and its relation with infrastructure/construction sector.


News

Information from the Socio Economic and Caste Census (SECC)

  1. The SECC informed us that ‘landlessness and dependence on manual casual labour for a livelihood are key deprivations facing rural families’, which make them far more vulnerable to impoverishment

Mapping of deprivation using seven indicators

  1. The rural census, or SECC, mapped deprivation using seven indicators
    (1) households with a kuchha house
    (2) without an adult member in working age
    (3) headed by a woman and without an adult male in working age
    (4) with a disabled member and without able-bodied adult
    (5) of Scheduled Castes/Scheduled Tribes (SC/ST)
    (6) without literate adults over 25 years; and
    (7) the landless engaged in manual labour
  2. The more the number of parameters on which a household is deprived, the worse its extent of poverty
  3. Nearly 30% have two deprivations, 13% have three
  4. Only 0.01% suffer from all seven handicaps’
  5. The intersection of any of the six other handicaps with “landless labour” makes it more acute

Farm size is dropping

  1. The overall farm size, which has been dropping since the early 1970s, and down from the 2.25 hectares (ha) average to a 1.25 ha average in 2010, will continue to become even smaller
  2. For these farmers, agricultural incomes are also likely to fall, hastening the exodus from agriculture

Two demographic groups are doing good reasonably well in labour market

  1. National Sample Survey (NSS) data show that there are two demographic groups which did reasonably well in labour market outcomes both in terms of job growth as well as wage growth between 2004-5 and 2011-12
    (1) the young who were getting educated at hitherto unheard of rates, and
    (2) the older, poorly educated cohort of landless labour in agriculture, who saw construction work rise sharply

Importance of the construction sector

  1. Employment in the construction sector increased 13 times during the past four decades, which led to its share in rural employment rising from 1.4% in 1972-73 to 10.7% in 2011-12
  2. This sector absorbed 74% of the new jobs created in non-farm sectors in rural areas between 2004-05 and 2011-12
  3. These trends indicate that rural areas witnessed a construction boom after 2004-05
  4. Further, growth in employment in the construction sector was higher than output growth during both periods under consideration

Possible reason behind construction sector boom

  1. One reason for the much higher growth in the number of rural workers in construction over the manufacturing or services sectors is that there are fewer skill and educational requirements in construction
    Other important reasons
  2. This was possible because of the sustained growth in investment in infrastructure, especially over the 11th Five Year Plan period (2007-12) of $100 billion per annum, two-thirds of which was public, and the remainder private
  3. In addition, there was a real boom in real estate, residential and commercial, throughout the country

Construction sector is slowing down now

  1. Since 2011-12 construction job growth has slowed, such that the share of construction in total youth employment fell to 13.3%
  2. Construction jobs are growing more slowly since 2011-12, as public investment has fallen
  3. And with the rising non-performing assets of banks, private investment has fallen as well
  4. The result: fewer workers have been leaving agriculture since 2011-12
  5. From the 5 million leaving agriculture per annum between 2004-5 to 2011-12, the number is down to just over 1 million per annum between 2011-12 to 2015-16
  6. This is hurting landless labour and small and marginal farmers the most

Government efforts to revive the infrastructure sector

  1. The Union government has sustained rural development expenditure for the last two years, especially for rural roads, under the Pradhan Mantri Gram Sadak Yojana and rural housing under the Pradhan Mantri Awas Yojana (Urban)
  2. The Surface Transport Ministry has also attempted to sustain public investment in infrastructure to generate construction jobs for growing surplus rural labour

The way forward

  1. The Budget for 2018-19 should sustain this public investment effort
  2. The announcement that the government plans to borrow an additional Rs. 50,000 crore in this financial year, is welcome
  3. Hopefully, the intention here is to raise public investment, especially for infrastructure investment

Why are farmers distressed across India?

Note4students

Mains Paper 3: Agriculture | Transport & marketing of agricultural produce & issues & related constraints

From UPSC perspective, the following things are important:

Prelims level: APMC Act, Economic survey

Mains level: Rural distress and ways to resolve it


Context

2017 a year of rural distress

  1. The year 2017 was marked by several farmers’ protests nationwide, with a few turning violent
  2. The protests highlighted the plight of farmers and the extent of agrarian distress

Why the crisis?

  1. The main reason for farm crises is the rising pressure of population on farming and land assets
  2. Government data show the average farm size in India is small, at 1.15 hectare
  3. The small and marginal land holdings (less than 2 hectares) account for 72% of land holdings
  4. This predominance of small operational holdings is a major limitation to reaping the benefits of economies of scale

Other factors

  1. Crop production is always at risk because of pests, diseases, shortage of inputs like seeds and irrigation, which could result in low productivity and declining yield
  2. The lower than the remunerative price in the absence of marketing infrastructure and profiteering by middlemen adds to the financial distress of farmers
  3. The predominance of informal sources of credit, mainly through moneylenders, and lack of capital for short term and long term loans have resulted in the absence of stable incomes and profits
  4. Uncertain policies and regulations such as those of the Agricultural Produce Market Committee (APMC Act), besides low irrigation coverage, drought, flooding and unseasonal rains, are some other factors that hit farmers hard

Price mechanism

  1. Farmers face price uncertainties due to fluctuations in demand and supply owing to bumper or poor crop production and speculation and hoarding by traders
  2. The government’s economic survey for 2016-17 points out that the price risks emanating from an inefficient APMC market are severe for farmers in India
  3. This is because they have very low resilience because of the perishable nature of produce, inability to hold it, hedge in surplus-shortage scenarios or insure against losses

Way forward

  1. Like any other economic activity, the farming sector has its own set of risks
  2. To increase and ensure a stable flow of income to farmers it is vital to manage and reduce the risks by analysing, categorising and addressing them

[op-ed snap] An impossible fiscal trinity for Arun Jaitley

Note4students

Mains Paper 3: Economy | Government Budgeting

From UPSC perspective, the following things are important:

Prelims level: Impossible Trinity in economics

Mains level: Rural distress and how to resolve it


Context

  1. It is impossible for India to simultaneously keep farm prices high, retail food prices low, and overall inflation under control through a tight fiscal policy

Three difficult policy choices

  1. First, the government can offer higher farm support prices as well as keep retail prices down, but only at the risk of letting inflation spiral out of control through a higher fiscal deficit
  2. Second, the government can focus on keeping retail prices low as well as the fiscal deficit under control by limiting the increase in farm support prices
  3. Third, the government can offer higher support prices to farmers and keep its fiscal policy on track, but only by making consumers pay higher food prices

Choice has to be made among these 3 alternatives

  1. The budget early next year will in all probability be the last full budget before the next general election
  2. Union finance minister Arun Jaitley will have to make a choice between these three imperfect alternatives when he unveils his new budget
  3. A further complication is that India now has a central bank that is legally mandated to keep inflation near target

Current fiscal constraints

  1. The Reserve Bank of India will be tempted to raise interest rates if it feels that a fiscal slippage could lead to higher inflation
  2. Increasing rural spending while maintaining fiscal goals will necessarily mean cuts in categories that are important for other interest groups

Way forward

  1. Government needs to raise farm productivity on the one hand as well as create non-farm jobs in rural areas on the other
  2. Higher real incomes in rural areas will provide the domestic demand needed to make new industrial production capacity worthwhile

Back2Basics

Impossible Trinity in economics

  1. The impossible trinity (also known as the trilemma, or the unholy trinity) is a concept in international economics which states that it is impossible to have all three of the following at the same time: a fixed foreign exchange rate, free capital movement (absence of capital controls), an independent monetary policy
  2. According to the impossible trinity, a central bank can only pursue two of the above-mentioned three policies simultaneously
  3. It is both a hypothesis based on the uncovered interest rate parity condition and a finding from empirical studies where governments that have tried to simultaneously pursue all three goals have failed

[op-ed snap] Loan waiver is not the solution

Image source

Note4students

Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices

From UPSC perspective, the following things are important:

Prelims level: Regional Rural Banks, NABARD, Kisan Credit Card scheme, Interest Subvention Scheme, Pradhan Mantri Jan-Dhan Yojana, International Food Policy Research Institute, Committee on Doubling of Farmers’ Income

Mains level: Disadvantages of Farm loan waivers and alternative measures


Context

Increase in institutional credit to farmers

  1. Since Independence, one of the primary objectives of India’s agricultural policy has been to improve farmers’ access to institutional credit and reduce their dependence on informal credit
  2. As informal sources of credit are mostly usurious, the government has improved the flow of adequate credit through the nationalization of commercial banks, and the establishment of Regional Rural Banks and the National Bank for Agriculture and Rural Development
  3. It has also launched various farm credit programmes over the years such as the Kisan Credit Card scheme in 1998, the Agricultural Debt Waiver and Debt Relief Scheme in 2008, the Interest Subvention Scheme in 2010-11, and the Pradhan Mantri Jan-Dhan Yojana in 2014
  4. The result is that the share of institutional credit to agricultural gross domestic product has increased from 10% in 1999-2000 to nearly 41% in 2015-16

Farm waiver scheme may slow down this pace

  1. While the flow of institutional farm credit has gone up, the rolling out of the farm waiver scheme in recent months may slow down its pace and pose a challenge to increasing agricultural growth
  2. The Uttar Pradesh government has promised a ₹0.36 lakh crore loan waiver covering 87 lakh farmers, whereas the Maharashtra government has announced it’s writing off ₹0.34 lakh crore covering more than 89 lakh farmers
  3. The demand for a loan waiver is escalating in Punjab, Karnataka, and other States
  4. This clamor is only poised to increase as the 2019 general election comes closer

International studies on farm loans and waivers

  1. At the global level, studies indicate that access to formal credit contributes to an increase in agricultural productivity and household income
  2. Such links have not been well documented in India, where emotional perceptions dominate the political decision quite often
  3. A recent study by the International Food Policy Research Institute reveals that at the national level, 48% of agricultural households do not avail a loan from any source
  4. Among the borrowing households, 36% take credit from informal sources, especially from moneylenders who charge exorbitant rates of interest in the 25%-70% range per annum

Advantages of formal credit

  1. The study using the 2012-13 National Sample Survey-Situation Assessment Survey (schedule 33) finds that compared to non-institutional borrowers, institutional borrowers earn a much higher return from farming (17%)
  2. The net return from farming of formal borrowers is estimated at ₹43,740/ha, which is significantly greater than that of informal sector borrowers at ₹33,734/ha
  3. Access to institutional credit is associated with higher per capita monthly consumption expenditures
  4. Access to formal institutional credit also tends to enhance farmers’ risk-bearing ability and may induce them to take up risky ventures and investments that could yield higher incomes

Need for formal credit

  1. A negative relationship between the size of farm and per capita consumption expenditure (a proxy for income) further underscores the importance of formal credit in assisting marginal and poor farm households in reducing poverty
  2. Statistics show that nearly 82% of all indebted farm households (384 lakh) possess less than two hectares of land compared to other landholders numbering 84 lakh households
  3. Those residing in the less developed States are more vulnerable and hence remain debt-ridden

Intended beneficiaries remain excluded from farm loan waivers

  1. Problem: A major proportion of farmers remain outside the ambit of a policy of a subsidized rate of interest, and, for that matter, of loan waiver schemes announced by respective State governments
  2. This sop provides relief to the relatively better off and lesser-in-number medium and large farmers without having much impact on their income and consumption
  3. Solution: This anomaly can be rectified only if the credit market is expanded to include agricultural laborers, marginal and small landholders
  4. It is, therefore, important to revisit the credit policy with a focus on the outreach of banks and financial inclusion

What more needs to be done?

  1. The government along with the farmers’ lobby should desist from clamoring for loan waivers as it provides instant temporary relief from debt but largely fails to contribute to farmers’ welfare in the long run
  2. This is because farmers’ loan requirement is for non-agricultural purposes as well, and often goes up at the time of calamity when the state offers minimal help
  3. If governments are seriously willing to compensate farmers, they must direct sincere efforts to protect them from incessant natural disasters and price volatility through crop insurance and better marketing systems
  4. It should be understood that writing off loans would not only put pressure on already constrained fiscal resources but also bring in the challenge of identifying eligible beneficiaries and distributing the amount

Report of the Committee on Doubling of Farmers’ Income

  1. The report of the Committee on Doubling of Farmers’ Income, Ministry of Agriculture and Farmers Welfare, has suggested accelerating investments in agriculture research and technology, irrigation and rural energy, with a concerted focus in the less developed eastern and rain-fed States for faster increase in crop productivity and rural poverty reduction

[op-ed snap] From plate to plough: Farm to distant shores

Note4students

Mains Paper 3: Agriculture | Transport and marketing of agricultural produce and issues and related constraints

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Expanding exports is an important issue for India, at the current economic situation. The article discusses some policies by which we can achieve our export targets, through agricultural exports.


News

Context

  1. The article talks about an effective policy for agricultural sector which can encourage exports of the country.

Suresh Prabhu’s comments on expanding country’s

  1. He has said that increase in agri-exports will not only increase the country’s export basket, but also augment farmers’ incomes and ameliorate farm distress

Importance of his statement

  1. His objective is laudable and achievable, provided there is a paradigm shift in policy-making from being obsessively consumer-oriented to according greater priority to farmers’ interests

Comparison of exports and imports

  1. Before elaborating Suresh Prabhu’s statement, Observe the trends(given in figure below) in agri-trade, both exports and imports, in the period when the UPA was in office (2004-05 to 2013-14) with that of the three-years of the current regime (2013-14 to 2016-17)

Important points from the observation given in figure

  1. It is interesting to observe that during UPA’s tenure in office, agri-trade surplus surged seven fold, from $3.6 billion in 2004-05 to $25.4 billion in 2013-14
  2. But then fell dramatically by two-thirds after the NDA assumed office, touching $8.2 billion by 2016-17
  3. The falling agri-trade surplus was the result of falling exports and rising imports
  4. Agri-exports, after peaking at $42.9 billion in 2013-14 fell to $33.7 billion in 2016-17, while imports kept rising — from $17.5 billion in 2013-14 to $25.5 billion by 2016-17

What do these trends mean for policy?
FIRST

  1. If India has to promote agri-exports, the country’s policymakers must build global value-chains for some important agri-commodities in which the country has a comparative advantage
  2. Estimates show that India is export competitive in almost 70 per cent of agricultural commodities, non-tradable in about 10-15 per cent commodities
  3. And import competitive in the remaining 15-20 % commodities
  4. The commodities to focus on in order to stimulate agri-export: On the exports front, India is relatively competitive in cereals, especially rice and wheat and maize, and, at times, oilseeds, especially groundnuts and oil meals
  5. The country can also be competitive in groundnut and mustard oil, provided there is an open and stable export policy
  6. India has also been the world’s second largest exporter of cotton
  7. The country has a great potential to export fish and seafood, bovine meat, and fruits, nuts and vegetables
  8. Infrastructure requirement: This would require infrastructure and institutional support — connecting export houses directly to farmer producer organisations (FPOs), sidestepping the APMC-regulated mandis, removing stocking limits and trading restrictions

SECOND

  1. India needs to adopt an open, stable and reliable export policy
  2. Abrupt export bans and high minimum export prices to restrict exports, must give way to a policy that does not put any fetters on exports

THIRD

  1. On the imports front, India loses out most in the edible oils sector, especially palm and soybean oil
  2. Palm oil is used to adulterate several other oils for the domestic market
  3. Similarly, among pulses, primarily yellow pea is used as an adulterant in besan (chickpea flour)
  4. The import policy must, therefore, be designed such that the landed price of palm oil and yellow pea never goes much below the domestic prices of their nearest rivals, say, soybean oil and chickpea, respectively

FOURTH

  1. Liberalisation of factor markets, especially land-lease markets, would also help in building more efficient and reliable export value-chains
  2. Long land-lease arrangements can facilitate private investments in building export-oriented global value-chains, generating rural non-farm employment and enhancing farmers’ incomes

The way forward

  1. It is time for the commerce and industry minister to steer a “farm-to-foreign” strategy, improve agri-trade surpluses by promoting agri-exports
  2. And most importantly create more jobs and bring prosperity to rural areas

[op-ed snap] Food for reform

Note4students

Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices

From UPSC perspective, the following things are important:

Prelims level: Price stabilisation policy, Essential Commodities Act, Union, Concurrent and state list of constitution

Mains level: Reforms required in Agricultural sector


Context

  1. Extreme volatility in the prices of some food commodities has, in recent years, been hurting producers as well as consumers, while also disrupting certain economic activities
  2. The reason for this appears to be the waning influence of non-price factors (technology, irrigation, extension) in driving growth, and the role of prices having become stronger

Reversal in trend

  1. Till mid-2000, the trend in output growth drove price trend (higher growth associated with lower price)
  2. During the last 10 years, price trends have driven output growth
  3. The so-called Cobweb phenomenon is becoming more apparent, leading to a price-production spiral

Price stabilisation policy and measures adopted by India from time to time

  1. Price instability at the macro-level is caused by supply shocks
  2. Trading and stocking up are the two options to stabilize supply and by extension, prices
  3. India has historically relied heavily on buffer stock to maintain price stability in staple food
  4. It was due to its policy of maintaining buffer stock that India ensured remarkable price stability during the global food crisis, when almost all countries, including the developed ones, faced a steep price rise

Should India use a similar option to achieve price stability in pulses?

  1. Some gains from the steps taken by the government to create a buffer stock of pulses are already visible
  2. The buffer stock, mainly aimed at stabilising consumer prices, has made it possible to procure pulses
  3. Last year, India recorded an unprecedented 40 percent increase in total pulses production over the previous year
  4. This kind of spike in production would have led to a serious crash or even a collapse in prices had the government not intervened
  5. Based on the experience of rice and wheat, the pragmatic approach appears to be to use the buffer stock option along with the trade option to stabilise the price of pulses

Other factors leading to price volatility

  1. Regulation and competition in the market also affect price volatility
  2. When there is a glut, there is a disproportionate price spread between retail and farm
  3. Price spikes are also sometimes created by cartels of traders, especially at the local level
  4. The reason for such price fluctuations is poor market integration across regions/states over time
  5. If there is an Essential Commodities Act with stock limits on traders, it will rule out the possibility of the private sector mopping up more than the normal marketed surplus, forcing prices to go down

Measures required

Price volatility and low and unremunerative prices for farm produce can be addressed to a large extent through competitive markets. This can be via

  1. Removing various restrictions under the APMC Act
  2. Facilitate private sector participation and investment in agri markets
  3. Promote storage, and
  4. Link the processing industry to the farm through contract farming

Remove agriculture from state list?

  1. Due to the delay and reluctance on the part of states to implement market reforms, it looks imperative to bring agricultural marketing into the Concurrent or Union list and implement a national-level model market act with all the required reforms
  2. Bringing marketing under the Concurrent or Union list is also justified on the ground that a large proportion of farm produce is sold and consumed outside the states they are produced in

Sikar farmers’ agitation: ‘Peanuts, guar, moong… not one crop on which I don’t make losses’

Image result for Sikar farmers’ agitation

Image source

Note4students

Mains Paper 3: Agriculture | Issues related to direct and indirect farm subsidies and minimum support prices

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Agrarian crisis; Problems faced by Indian farmers and solutions


News

Context

  • Farmers in Rajasthan city of Sikar took to streets for 13-day agitation

Reasons

  1. Agriculture in Shekhawati region has been deteriorating and farmer’s loans have been mounting.
  2. The region last saw good rainfall three years ago
  3. The cost of pesticides, manure, diesel etc. has been rising, but the prices for crops haven’t increased proportionally
  4. Prices of moong dal, peanut and even milk have fallen
  5. Evolving labour patterns have also affected farmers
    • People chose to work on farms on a daily basis as the pay was immediate. This increased input costs

Demands

  1. The farmers sought a debt waiver
  2. Fair price for their produce
  3. Implementation of the Swaminathan Commission report
    • Recommends minimum support price (MSP) for crops at “at least 50 per cent more than the weighted average cost of production
  4. Withdrawal of the Prevention of Cruelty to Animals (Regulation of Livestock Markets) Rules 2017
  5. A solution to the menace of stray cattle, free electricity
  6. Rs 5,000 monthly pension to those over 60

‘Study linking climate change and farmer suicides baseless’

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Note4students

Mains Paper 3: Environment | Conservation, environmental pollution and degradation, environmental impact assessment

From UPSC perspective, the following things are important:

Prelims level: Not Much

Mains level: Recently, we had a newscard on the same issue. This newscard presents the other side of the story. And presents some real errors, in the study by the PNAS.


News

Who are they saying it Baseless?

  1. Some professors have termed as “baselessthe claims of a recent study that links climate change and agricultural suicides
  2. According them, the claims are a consequence of “uncritical use of data, bad assumptions, flawed analysis” and “unacceptable neglect”
  3. These professors are from TISS School of Habitat Studies
  4. They have also submitted a formal comment on the study to PNAS

What did the study say?

  1. The study was published in the Proceedings of the National Academy of Sciences (PNAS) of the USA
  2. It found that temperatures during India’s main agricultural season have a “strong positive effect” on annual suicide rates
  3. The study calculated that “warming a single day by 1 degree Celsius during India’s agricultural growing season leads to roughly 65 suicides across the country
  4. Warming a day by 5 degrees Celsius has five times that effect

Arguments against the US’ study

  1. TISS professors have themselves conducted a detailed study of the impact of extreme temperatures on crop production in Karnataka
  2. But no study provides any corroborative evidence for the dramatic conclusions of this paper(PNAS)

Serious Errors in the study by PNAS

  1. Among the “serious errors” is the “incorrect use of suicide data”
  2. For example, the “paper uses state-level data on suicides, data that includes both urban and rural suicides
  3. But the study talked about farmer’s suicide(in rural area)

Studying the climate of farm suicides

Image Source

Note4students

Mains Paper 3: Environment | Conservation, environmental pollution and degradation, environmental impact assessment

From the UPSC perspective, the following things are important:

Prelims level: Not Much

Mains level: The article gives interesting connection between Farmers’ suicide problem in India and Climate Change


News

Proceedings of the National Academy of Sciences (PNAS)

  1. According to a study by the PNAS of the US, over 1,900 farm suicides were triggered every year over the last 30 years in India by warming related to climate change
  2. Name of the Study: “Crop-damaging temperatures increase suicide rates in India”

Other points from study

  1. The study calculates that “warming a single day by 1 degree Celsius during India’s agricultural growing season leads to roughly 65 suicides across the country, whenever that day’s temperature is above 20 degrees Celsius”
  2. Warming a day by 5 degrees Celsius has five times that effect

[op-ed snap] The difficult economics of the Indian farmer

Image result for crisis indian farmer

Image source

Note4students

Mains Paper 3: Agriculture | Issues related to direct and indirect farm subsidies and minimum support prices

Op-ed discusses about problems faced by Indian farmers. It gives some suggestions to reduce price risk. Please note down those points.

Once you are done reading this op-ed, you will be able to fully attempt the below.

“Policy should focus not just on higher production but also on helping farmers manage risks” Discuss. How price deficiency payments can address price risk?

From UPSC perspective, the following things are important:

Prelims level: MSP, CACP, Pradhan Mantri Fasal Bima Yojana, Price deficiency payment

Mains level: Multiple crisis faced by Indian farmers


News

Context:

  1.  Author discusses the hardships faced by Indian farmers on different fronts due to climate, price risk, Government policy problems etc.

Problems

  1. The risks begin with sowing. The production in the months ahead is deeply dependent on weather conditions.
  2. Price risk: A bumper crop can pull down prices in wholesale markets. Farmers are reported to have not been able to even recover the cost for some crops
  3. Recent report that the fall in inflation has increased the real debt burden of farmers, which has risen faster than real income in recent years.
  4. The opportunities for risk mitigation are minimal.
  5. MSPs was originally conceived as a way to mitigate risk through guaranteed prices. It later degenerated into a tool to buy the political support of large farmers.
  6. Farmers who suffered losses in the last year have not yet received compensation for 55% of the estimated claims from Pradhan Mantri Fasal Bima Yojana. Crop insurance will not benefit farmers if the compensation is not paid in time
  7. A more robust mechanism is needed to mitigate the price risk. The lack of future prices means that farmers base their production decisions on prices at the time of sowing.
  8. In majority of agri-products, the policymakers used restrictive export policies to keep domestic prices low. This showed the pro-consumer bias in the policy complex

How to reduce price risk?

  1. Price deficiency payment, which has been advocated by NITI Aayog
  2. In price deficiency payment, farmers can be compensated through direct benefit transfer if prices fall below a predetermined threshold level.
  3. A deeper derivative market in agricultural commodities will also help farmers in hedging against price risks.
  4. The market regulator has done well by allowing option contracts.
  5. However, the government should avoid its response of banning trading whenever prices rise.

 Way forward?

  1. Strike a balance between the interests of both the producer and the consumer
  2. The actual impact of higher remunerative farm prices can be contained by making markets more efficient and removing middlemen from the system.
  3. Building a common agriculture market is also necessary.
  4. Government policy should focus not just on higher production but also on helping farmers manage risks

 

 

[op-ed snap] Equity in taxes: Rich farmers should be treated on par with other taxpayers

Context:

  1. A controversial proposal by Bibek Debroy, a member of the government think tank NITI Aayog, to tax agricultural income above a particular threshold has led to a public exchange of views

Opinions:

  1. Chief Economic Adviser Arvind Subramanian made it clear that taxing farm income is a State subject
  2. The public image of farming being a poor man’s venture and the sizeable vote share that farmers enjoy have made the idea of farm taxes a political taboo
  3. There is frequent distress faced by poor or marginal farmers, which could be attributed to structural issues
    other than taxation

Taxing farmers:

  1. India has a presence of rich farmers as well and there exists as a strong justification for taxing them in order to
    widen the country’s embarrassingly narrow tax base
  2. Debroy suggested that an appropriate tax policy should draw a distinction between rich and poor farmers, thereby addressing the widespread political apprehension of bringing agriculture under the tax net

Low tax base:

  1. India’s tax base, standing at a minuscule 5.9% of the working population, is already among the lowest in the
    world
  2. This unnecessarily burdens the more formal sectors of the economy that are already overtaxed; at the same
    time, it handicaps government spending on the social sector
  3. The case for treating agriculture on a par with other sectors is thus clear

Issues concerned:

  1. Policymakers must also show equal care and urgency in addressing the structural issues facing the sector
  2. This includes reforms to the broken agricultural supply chain that still leaves farmers at the mercy of middlemen cartels
  3. Such reforms are crucial if farming is to become a sustainable enterprise in the long run
  4. Else, a tax on high-income farmers will result only in driving resources away from agriculture into other
    sectors
  5. It would make no difference to poorer farmers stuck in agriculture, merely because of the lack of opportunities
  6. A tax on lucrative high-value farm ventures, which affects their ability to absorb labourers from low-value farming
  7. This could make life more difficult for farmers unable to make the cut in industry or services

Farm suicides get attention of Supreme Court

  • Source: A study conducted across 13 States by the Union Agriculture Ministry throws up the all-too-familiar
    reasons that drive farmers to suicide
  • Reasons: Frequent crop failure, vagaries of the monsoon, absence of assured water resources, attacks of pests and diseases, debts, farming and social causes
  •  Union Home Ministry’s National Crime Records Bureau (NCRB) reports up to 2015 reveal identical causes of suicides among farmers — bankruptcy, farming-related issues, family problems, illness, drug abuse or alcoholism
  • Centre views: In an affidavit filed by the Agriculture Ministry in the Supreme Court last week, the Centre
    agrees with the court that the deaths of farmers are an “unfortunate issue”
  •  But it can only formulate a line of action to resolve the issue, the actual implementation at the ground level is
    the responsibility of the individual States
  • SC hearing: The court is scheduled to hold a hearing on May 1 on this affidavit filed on the basis of a petition
    filed by the organisation, Citizens Resource and Action Initiative (CRANTI), against Gujarat
  • The court expanded the ambit of the petition to farmers’ suicides across the country and had asked the Centre on March 27 to provide an action plan to end the human tragedy
  • The affidavit suggests crop insurance, crop and enterprise diversification, government intervention through minimum support price (MSP) covering cost of production plus a reasonable profit margin, establishing farmers’ welfare cells as support groups and regulating informal credit market as remedies
  • Alternate view: There is a disconnect between the Centre and States, which leaves the farmer empty-handed
  • “It is clear that the Centre controls most important policies pertaining to farm livelihoods whether it is MSP, credit, crop insurance, disaster compensation, trade policies and so on”
  • “Often, the States are not consulted on these matters. The MSP is not realised by most farmers. Credit is being cornered by non-farmers”
  • “Many of these policies are actually going against farmers’ interests. Unless these are addressed, farm
    suicides can’t be prevented”
  • The government affidavit: However, points to relief measures such as the Pradhan Mantri Fasal Bima Yojana

Maharashtra Cabinet approves climate-resilient agri project

  1. News: Maharashtra cabinet allotted Rs. 1.5 crore from the Emergency Fund to create 23 special posts to implement a project on climate-resilient agriculture
  2. The project will be supported by the World Bank
  3. Aim: Studying crop patterns as per climate change & promoting extensions to agri business, which will help the State government tackle challenges faced by the farm sector
  4. This will help farmers to not lose patience in adverse times and to ensure that they reclaim their original condition
  5. Context: Maharashtra had been tackling severe drought & water scarcity as a result of climate change
  6. Background: Growth rate of agriculture is on the decline as a result of severe drought, heavy rains and water scarcity, thereby decreasing agricultural production and profit
  7. Such a situation is ultimately responsible for the rising number of farmers’ suicides

Plea to stop water supply to breweries uncalled for: Supreme Court

  1. Context: SC has refused petition of Maharashtra Govt to stop water supply of breweries and distilleries in drought prone area
  2. Earlier: HC had directed the State to reduce water supply to the liquor industry by 60 per cent from May 10
  3. SC: A line on judicial intervention has to be drawn somewhere

Onus is on States to declare drought, Centre tells SC

  1. Context: SC had questioned Centre’s negligence towards the growing spread of drought-affected areas in the country
  2. News: The Centre told the SC that the onus of declaring drought rests entirely with the State govts
  3. Background: A PIL is filed by NGO Swaraj Abhiyan to declare drought as a national emergency
  4. Challenge: Union has only a limited role of providing funds and putting in place a monitoring system
  5. The provisions of the Disaster Management Act could not be applied to all events of tragedy or loss

Centre to draw up strategy for kharif season

  1. News: Union government is all set to formulate a crop production strategy for the coming kharif season
  2. Purpose: To ensure that the plan to double farmers’ income in the next 6 years gains momentum
  3. Background: The agrarian situation has deteriorated after two back-to-back droughts
  4. How? It would review the performance of the preceding crop season and formulate a crop production strategy for kharif season

Why low outgo for drought relief: SC

  1. Context: A PIL was filed in SC for drought-like situations in various areas like Bundelkhand and Marathwada
  2. News: SC Bench asks the Union govt why scarcity-hit States have been left in the vulnerable position
  3. The Court questioned Centre for not releasing sufficient funds to these States for employment generation under the MGNREGS

Govt plugging leakages in social expenditure, building infrastructure

  1. Context: Govt’s promise in the budget of doubling farmers’ income by 2022
  2. News: Govt. said that it can be acheived with a good strategy, well-designed programmes, adequate resources and good governance in implementation
  3. Earlier, the emphasis has been on agricultural output, rather than on farmers’ incomes

SC questions Centre on welfare schemes for drought-hit states

  1. The SC asked the Centre to come clean on the state of implementation of its welfare schemes in 12 drought-hit States across the country.
  2. It has asked whether the schemes like MGNREGA, National Food Security and mid-day meal are implemented properly.
  3. Court has asked Union to reach out to affected States and discuss criteria for declaration of drought and steps taken to alleviate hunger in these States.
  4. A total of Rs 61,291 crore has been earmarked for 2015-20 to provide relief to the States which may be hit by disasters.
  5. The PIL sought the court to examine the rainfall data in these States for the purpose of declaring drought-affected areas, districts and taluks.

Panel to revisit national policy on farmers

  1. The govt has told the SC that an expert committee will be set up to re-examine the National Policy for Farmers (NPF) amidst growing number of suicides by farmers.
  2. Suicides continue to be reported despite the NPF being in place for the past 8 years.
  3. It said that MSP for various crops was as per the Commission on Agricultural Costs and Prices to promote de-risk farming and cut losses.

Maharashtra saw 3,228 farmer suicides in 2015

With 610 deaths in just two months, State records highest ever suicides by farmers.

  1. Data obtained from the government shows Vidarbha was the worst hit last year, with around 1,541 farmers from Amaravati and Nagpur division committing suicides.
  2. Packages will no longer work for farmers and the government seems to be missing this point completely.
  3. There is a need of farmer oriented policy and not packages.
  4. PM Modi launched the PM Crop Insurance Scheme, which assures covering over 50% of the farmers in the coming 3 years.
  5. Under this scheme, 90% premium money will be paid by the Centre and not just the fully grown crop but even the stem will be insured.

725 farmers committed suicide in Maharashtra during Jan-Oct’15

The number of suicides by farmers in Maharashtra due to various causes was 2,568 in 2014.

  1. Maharashtra has reported 725 number of suicides by farmers from January-October 2015 due to agrarian reasons.
  2. As per report of National Crime Record Bureau (NCRB), total number of suicides by farmers in Maharashtra under the category ‘self-employed persons (agriculture farmers)’.
  3. The drought was declared over 38.42 lakh hectares during kharif 2013, 112.46 lakh hectares during kharif 2014 and 53.11 lakh hectares during kharif 2015.
  4. Compensation for current year still has to be made and the Centre has received a memorandum for financial assistance under NDRF.

Bundelkhand starves as rains give it a miss

A household survey by the Swaraj Abhiyan in UP’s Bundelkhand region has found that significant no. of households are in acute shortage of basic food items.

  1. They are forced to reduce consumption of all major food items including dal, vegetables, meat and fish.
  2. As a result, they are taking distress measures including sending their children to work, borrowing money, selling ornaments and selling land.
  3. Bundelkhand, the impoverished region, is experiencing its 3rd consecutive drought, and the rabi crop was also damaged by a hailstorm.

Well-stocked granaries may help hold rice price line, says trade body

  1. There is a growing concern that the price of rice may be next to shoot up.
  2. An Assocham study has warned of an increase in prices of rice owing to deficient rain and fall in output.
  3. The economy was likely to slow down considerably with inflationary pressures, coupled with a shortage of essential food items.
  4. However, Punjab and Haryana, the States that contribute the highest quantity of rice and wheat, have surpassed last year’s purchase of paddy.

Lessons from drought in Marathwada

Water availability has not deteriorated only because of the poor monsoon.

Amartya Sen’s seminal work on Famine

  1. Mass starvation is not necessarily the result of inadequate food supply. He opened up new areas of inquiry that focussed on what have come to be known as entitlement failures.
  2. Sen has famously argued that human mistakes forced people into starvation in Bengal in 1943 even though food production in that year was higher than it was in 1941.
  3. Many parts of India are now battling severe drought. There is no doubt that the water crisis in these areas is because of a monsoon failure.
  4. Yet, the main insight from Sen’s work on famines applies to drought as well. Villages are parched not only because of erratic rains. The political economy of water use in the region also deserves more public attention.
  5. One of the best examples of this right now is to be found in the parched Marathwada region of Maharashtra.

Then what’s wrong with farmers ?

  1. The rains have failed for the second year in a row but water availability has also deteriorated because of the rapid spread of water-intensive sugarcane cultivation, promoted by local political elites.
  2. Sugar dominates the political economy of rural Maharashtra. The successful spread of sugar cooperatives in the western districts of the state, especially because of the easy availability of water as well as the high social capital that helped the cooperative movement.
  3. Cooperatives have now been captured by powerful politicians who then use their heft to get subsidies for sugarcane farming.
  4. There are now 61 sugar mills in Marathwada, region accounts for around two-thirds of the total sugar production in Maharashtra, if the dry district of Solapur is also taken into account.
  5. One Research estimates that the total water required for sugarcane cultivation in Marathwada is 4,300 million cubic metres (mcm), or double the storage capacity of the largest dam on the Godavari in the region. Just crushing this year’s standing crop will need 17 mcm, enough to provide drinking water to 15.85 lakh people till the next monsoon.
  6. The longer-term issues also need to be honestly debated, from figuring out ways to price water so that water-intensive crops do not get implicit subsidies in dry regions to helping farmers shift out of sugarcane to creating a public culture that privileges water conservation.
  7. An interim solution suggested by former chief minister Prithviraj Chavan is eminently sensible: no more sugar factories should be allowed to be set up in Marathwada.

Water crisis in Marathwada highlights three overlapping issues 

  1. The structural problems in Indian agriculture, the inability to frame adequate policies to avoid a tragedy of the commons and how local political elites capture resources.
  2. The dominant narrative about a monsoon failure is the most important one, but it also allows the political class to pretend that entire villages have no water for reasons beyond the control of mere human beings such as themselves.
  3. The way water resources have been captured for sugarcane cultivation in Marathwada shows that there is another parallel narrative that does not absolve local political elites.

It is an important lesson for the rest of the country as well.

ASHA workers to detect farmers in depression

The ASHA workers will be taught to grade the farmer’s mental state under ‘mild’, ‘moderate’ or ‘severe’ categories.

  1. In a one-of-its-kind attempt, the state government is looking at controlling farmer suicides by getting psycho analysis questionnaires filled by them and subsequently treat them for depression, wherever required.
  2. The new initiative under the mental health cell of the public health department is in a bid to reduce farmer deaths across the 14 districts that have been massively hit by drought in Maharashtra.
  3. Training will be provided to 20,350 accredited social health activists (ASHA) for identifying depressed farmers and referring them for further treatment at district or taluka levels.
  4. ASHA workers are local women residents known to the villagers and are educated till Std VIII. They will visit farmers from door to door and get a set of 16 questions answered in a ‘yes’ or a ‘no’ format.
  5. The questions, prepared by a four-member committee of psychiatrists will revolve around the farmer’s crop produce, any existing disease that they might have, whether they have enough food to eat, financial crisis and remarks of family members.

Can you Suggest more solutions to solve suicide problems of farmers?

Agrarian distress and suicides

  1. There are loopholes in NCRB data due to data being sourced from police station level FIRs, which are often contested documents, not conclusive proof.
  2. Initial police reports often have little to do with the complex factors that drive someone to take his life.
  3. Studies suggest that lack of institutional credit is one of the major problems faced by farmers across country
  4. Income of an average household is grossly inadequate to meet the consumption demands.
  5. Farmer suicides must be tackled seriously on the basis of a comprehensive examination of the causative factors along with context.

[Discuss] Key problems with agriculture & how would you solve them?

Untie the farmer – empower him


 

 

This editorial articulates that agriculture should be made dynamic in such a way farmers produce enough as well as get more productively linked to the urban economy.

  1. There is a global trend across developing countries that the share of agriculture in GDP declines with economic development.
  2. However, stagnant agriculture can neither produce enough food nor release enough workers for industry whereas dynamic agriculture can do both.
  3. To leave farmers on land and not give them skills for urban and industrial lives is equal to trapping them in misery
  4. The policy intervention should shift from price incentives to investments in upgrading the technology base of agriculture.

[oped snap] Challenge of Agrarian Distress


 

  1. Successive governments have failed to accord agriculture the priority it deserves.
  2. Official records reveal that more than 2.96 lakh farmers have ended their lives over the last two decades.
  3. Indian farmer is suffering from following problems –
    • Adverse impact of climate change
    • Non-remunerative prices
    • Lack of adequate irrigation facilities
    • Absence of assured income
    • Paucity of crop insurance
  4. Classification – 85 % of India’s farmers are small and marginal, and 65% of farming is rain-fed.
  5. But high input costs, low returns, the consequent inability to repay farm loans, and general neglect have made agriculture unviable for the small and marginal farmer.
  6. A majority of farmers are in the clutches of private moneylenders who double up as sellers of seeds, fertilizers and other inputs.

If you do not hear the farmer

  1. Centre overshadowing the principles of cooperative federalism decreed states to not announce the crop bonus.
  2. The reason behind farmer suicides is increasing unseasonal weather accompanied with fall in prices of commodities.
  3. The economics behind MSP, which says it is outdated and leads to food inflation in a market-driven economy, made situation worse for farmers.
  4. Ramesh Chand Committee, setup in 2013, recommended a road map to achieve better farm margins, but that did not go well with government.

A subsidy and some questions


 

  1. Union govt. has decided to extend the interest subvention scheme on bank loans given to land-owning farmers at 7%.
  2. Recently, RBI investigation found apparent diversion of agricultural loans for unintended purposes .
  3. The loan amounts are used to repay existing debts to money-lenders, deposited in fixed amount schemes to earn higher interest, etc.
  4. Most farmers don’t earn enough to meet their basic needs, so these loans serve as an auxiliary income to meet consumption expenditure.
  5. Consumption expenditure is the expenditure on purchase of goods and services for use by households.
  6. Govt. should rethink the manner in which farmers are subsidised so as to finance farming rather than consumption.

India’s suicide problem


 

  1. Poor health and family problems explain nearly half the suicides in the country.
  2. A special package to farmers forgiving institutional debt is a reactionary rather than pre-emptive long-term policy.
  3. The policy interventions such as health reforms can have greater impact on distress and suicides among various demographic groups.
  4. Research studies indicate that sensitive reporting can play an important role in saving lives and preventing copycat suicides.


:( We are working on most probable questions. Do check back this section.







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