Farmer Suicides in India

by Francis Maindl

The issue of farmers’ suicides in India has been highly disseminated in the nation’s media sphere over the past decade. The phenomenon has started being observed in the middle of the 1990s and the increase in the number of cases has been rising every year since. Shocking statistics illustrate the severity of the situation; at least 284 694 farmers have committed suicide over the last 20 years in India according to the National Crime Records Bureau and, every day, 46 workers in the agricultural sector are killing themselves. What is puzzling though is that the high majority of all these cases have been reported in only 5 states in the federation composed of 29 states and 7 union territory. Over two-thirds of all cases (68.4%) have been occurring in Maharashtra, Andhra Pradesh, Karnataka, Madhya Pradesh and Chhattisgarh (Raghavalu 2013). While these states account for only a little over 25% of India’s total population, how can it be explained that these states account for such a disproportional ratio of the total number of suicide cases? And how can we explain that these states have suicides ratio among farmers so much higher than in states like Bihar, Uttar Pradesh and Jharkhand, where the agricultural sector is as important there in terms of employment (Sadanandan 2014)?

Liberalization reforms
This phenomenon was first observed a few years after the official liberalization of the Indian economy had occurred in 1991. Although it is argued that this globalizing process started in the early 80s, the formal announcement of the country’s economic liberalization in 1991 is generally recognized as the marker that instigated the nation’s transition to a free market economy that is more opened to the global market (Eashvaraiah 2001). The country progressively shifted from a previously strongly state-led economy to one that is increasingly shaped by a set of private actors, rather than by government organizations. The reforms can be divided in two sets of policies: macro-economic stabilization, which basically refers to the reduction of public expenditure and subsidy programs and structural adjustment that intends to promote economic efficiency through deregulation and integration of the Indian economy to the global market. This reform can be interpreted as a process of globalization primarily on the landscape of finance—but also of ideology if we consider the adoption of these reforms as part as the process of a diffusion of global norms and ideas supported by international organizations like the World Bank, the IMF and the WTO.  The rise of speed, scope and scale that characterize the intended and actual effects these reforms were supposed to have or had on the Indian economy directly rhymes with our definition of globalization, that is used empirically in this case, one of five broad ways in which the term is used (Lynn 2012). If the pre-reform and post-reform time frames are compared in terms of an average annual GDP growth rate, the contrast is striking. 1950-1980: 3.5% and 1991-2012: 6.4% (Sharma 2014). The development of the economy in the industrial and service sector has been spectacular for the country in the early stages of reforms; 5.93 and 8.18% of average annual growth rates respectively for these sectors between 1995 and 2003, while the agriculture has only grown by 1.87% on average during this period. It seems that the development of the Indian economy hasn’t been equal in all sectors. The general opening of the Indian economy with globalizing policies that extended the reach of financial, trade and labor flows to the world economy and led to the increase of globalizing measurements like FDI, export volumes or migration facilitated India’s growth, but the extension of its predicaments to the sector of agriculture seems to have somewhat condemned the development of this industry.

A precarious agricultural sector

Agriculture is a very important sector in India. As in early 2014, the agricultural sector on which 60% of the population is dependent only accounts for 17 per cent of the country’s GDP. (Raghavalu 2013). When we compare the average annual gross capital formation (GCF) in the agricultural and the non-agricultural sector during the periods of 1985-91 and 1991-1997, the result show a decrease of 60% and an increase of over 50% respectively. During the transition between these two periods, public GCF in agriculture decreased by almost 90%. But while these measures might have had a positive impact in some sectors, agriculture seems to have been left behind. It is agreed amongst many professional economists (Rao, 1998; Patnaik, 1998; Balakrishnan, 2000; et al.) that agriculture should never be left completely to the free market. The responsibility of the state is to ensure that adequate public investments are made in irrigation, agricultural research and infrastructure that ensures well-functioning markets and would facilitate exports (Eashvaraiah 2007).

We can identify here three different sets of factors that led to the stagnation of the agriculture sector. The deregulation of the financial sphere led to an increase of foreign banks entering the country and to the development of private banking. In contrast to the belief that foreign bank entry should improve credit access to all firms, a study indicated that foreign banks financed only a small set of very profitable firms upon entry, and that on average, firms were 8 percentage points less likely to have a loan after a foreign bank entry because of a systematic drop in domestic bank loans (Gormley 2010). Additionally, the observed decline in loans was greater among smaller firms with fewer tangible assets (Ibid 2010). This general atmosphere indicates a new era; banks are increasingly concentrating their activities with larger and wealthier firms and leave smaller economic players with smaller amounts of credit. While foreign banks’ presence is found to contribute negatively towards overall credit availability of urban regions, their positioning in rich states is found to improve urban credit availability, but also cause domestic banks within these regions to respond by squeezing their credit allocated in states where they are present (Sarma & Prashad 2014). That means marginal farmers that have by definition less land and fewer assets are one of the targets of this reality.

The diminution of public spending in the sector of agriculture represents another pillar of explanation for its deterioration. The constant decline of the public investment in agriculture since the liberalization transition to the market-based system had evident repercussions on the sector (Eashvaraiah 2007). This can be observed concretely with the lack of irrigation systems in some regions, funding in research bodies (which can help ameliorate productivity) and infrastructure (such as roads, electricity or storage facilities) that could ensure the well-functioning of the market and facilitate exports (Katke 2014).
Thirdly, the destruction of trade barriers had the effect of subjecting agricultural products to the fluctuation of the global market prices. The juxtaposition of this sector to the international economy has had some mixed results; the industry of coffee and cotton, for example, have been greatly affected because of the fluctuation of the international price and farmers cultivating them were much more likely to have debts that they are unable to pay back (Kennedy & King 2014). Coupled with the inaction of the state in implementing policies to provide direct or indirect subsidies that would have an effect of either supporting or cutting the price of goods, the free-market economy has led many farmers in India to massive debt and bankruptcy (Madare 2012).

The ensemble of those three factors has led the Indian economy to concentrate the source of its growth into the service and industry sector, while agriculture was at the mercy of a predatory neoliberal market structure. In the absence of any form of protectionist subsidizing measures generally observed in Western nations that are also paradoxically following the liberal dogma of international free trade, this sector that difficulty survives in countries around the world without public intervention was put in jeopardy. Between the early 1990s and 2007, the growth rates in agriculture and the employment in rural areas have both been in decline (Katke 2014). This reality has fomented the creation of a structure that enabled the spread of suicide cases among farmers in the rural regions of India.

Causal factors for the inter-state variations of farmers’ suicide

The phenomenon of farmer suicide in India can be explained by an amalgam of various complex causal factors. At first view, the story is simple; farmers are killing themselves because of debt. But, a quick glance at the map of the country will highlight a striking disparity in the number of suicide outbreaks within regions. As mentioned above, 68.4% of all cases have been reported as of 2013 in five Indian states. If we look at the political system of India and the competences of the different bodies of government that might be linked to the sector of agriculture, we can observe that its federal structure grants the management of land policies to the state governments while trade and banking are part of the central government’s duties (Fadia 1984). According to this observation, looking at the land policies of states might be an explanation as to why some states are more subjected to the phenomenon. Indeed, a statistical study looking at the variation between states in the suicide ratios among farmers found out that there was a link between the land allocation structure and the phenomenon. It is argued that states in which there were both high levels of cash crop production and high ratios of marginal farmers contributed to higher probabilities of suicides among farmers at similar levels of indebtedness (Kennedy & King 2014). Of course, the study also established a statistically significant positive relation between indebtedness and higher suicide rates. But it was argued that in some states—like Punjab for example that stands as the 3rd most indebted states for farmers—the effect of indebtedness was circumvented by the fact that farmers had larger landholdings. The authors although mentioned that their model doesn’t explain all the variations observed in the suicide ratios between states. And it is also important to determine what the reasons are for the wave of debt that is striking farmers throughout India rather than to operate the variable of indebtedness as an independent one.

Another study that attempted to explain the variation between states in suicide ratios among farmers found some interesting results that complement the findings of the Kennedy & King study. The article looked at the banking structure of India and suggested that the rising flow of foreign banks entering the country explained these variations (Sadanandan 2014). The logic behind this relationship is that the entry of those banks increased the competition in the banking sector and led to the concentration of loans outside the sector of agriculture. For example, in states like Bihar, Haryana and Punjab, where suicide ratio are relatively low and foreign banks hold less than 1% of all deposits, 20 to 25% of all bank loans went directly to farmers. And in highly afflicted states like Kerala and Maharashtra, where foreign banks hold 35-40% of bank deposits, less than 3% of lending went to the farmers. The entry of foreign banks in some states led to the diversion of financial resources from agriculture to other sectors of the economy. The scarcity of loans for farmers is generally associated with them reaching for financial assistance to informal money lenders, at higher rates of interest (Jalees & Shiva 2003). But why did foreign banks concentrated in only some states then, knowing that banking is a central competence and not a state one? While the study doesn’t really look at why these foreign banks targeted specifically the states which ultimately have seen the worst in terms of these numbers of suicides, it surely gives valuable insight in explaining the technical factors that contributed to the rising indebtedness of farmers in most affected states.

The story of farmers suicide in India is one of a world changing too quickly for some people who are living at the rhythm of older days. The free-market system advocates now for the transition of labor to the most profitable industry, which would implicate that the workforce in rural areas need to transfer to the cities and participate in the industries with better economic output. But in reality, the transition has not been observed at a sufficiently fast pace over the last decades, and all those casualties are a concrete representation of that failure. It is also a story of the world we live in, a story of rapid growth at the expanse of social stability.

In the next years in India, the Modi administration will need to determine what kind of strategy they need to implement in order to insure a more inclusive access to development through all the classes of the nation’s population, including in the affected agricultural sector. The BJP claims to be the government that will lead India’s economy to prosperity. They have promised in their manifesto last year more public spending in agriculture to promote the productivity through research, crop insurance and cheaper inputs as well as social security programs in rural areas. The central government and the different state constituencies will need to coordinate their efforts to solve the issue of farmers’ suicide as this will continue to act as a barrier to development on the social and economical sphere. The governments need to take leadership into this matter and treat the inefficiencies of the free-market system and, this way, the number of farmers in India committing suicide will begin to diminish.

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