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Resource centre on India's rural distress
 
 

NDA junks the ‘dumb peasant’ argument -Anil Padmanabhan
-Livemint.com

Traditionally, public policy has tended to view Indian farmers as what is described in economic history as the “dumb peasant”

Last week, the National Democratic Alliance (NDA) government launched a revamped crop insurance scheme. At first glance, the scheme, christened Pradhan Mantri Fasal Bima Yojana, looks mostly like a reworking of the risk cover already in place; actually, it is much more.

Not only does it take a big step in de-risking Indian farming, which due to its structural transformation away from the traditional two-crop cycle is today far more vulnerable to market risks, but probably for the first time, it has ensured that public policy acknowledges farmers for what they are: intelligent, rational human beings like the rest of us.

Traditionally, public policy has tended to view Indian farmers as what is described in economic history as the “dumb peasant”. Essentially a person who is viewed as slow-minded, risk-averse and in need of constant support.

This was an erroneous assumption to start with and persisting with it has inflicted singular damage to Indian farming. Since public policy is behind the curve, the Indian farmers have had to shoulder the bulk of the risk on their own—as they explored new opportunities by diversifying away from the two-crop cycle. While they are rational enough to make the more profitable choice, they are not skilled enough to manage the risks—and this is where public policy has failed them miserably. In fact, this is exactly why farmer suicides are gaining such frightening momentum in rural India.

Take, for instance, cotton farming, one of the segments most afflicted by farmer suicides. The introduction of high-yielding varieties of cotton dramatically increased the yield per hectare (ha). Yield per ha rose almost two-and-a-half times from 190kg per ha in 2000-01 to 491kg per ha in 2011-12. This was a temptation farmers could not resist. Consequently, the area under cotton cultivation grew a little over 40% from 8.53 million ha in 2000-01 to 12.18 million ha in 2011-12. Similarly, the Indian farmer has taken to horticulture farming. As a result, for the third straight year, production of fruits and vegetables surpassed foodgrains in 2014-15 (by more than 30 million tonnes).

While the diversification is fiscally desirable, it also brings along a new class of risks such as pest attacks and price volatility, over and above conventional weather risks. Alongside, due to large-scale migration and atomistic families, inputs like family labour and domestic animals have become scarce. As a result, these have to be procured from the market, suggesting that there is now a growing trend in the monetization of inputs into agriculture—in a bad year, this can be devastating.

A must-read series, India’s Fractured Farms (bit.ly/1Hjfg2K), published by Mint last year, succinctly explained the structural factors underlying rural distress. One of these causes was the inability to underwrite the new risks of farming using market-based instruments like insurance.

This is exactly why the NDA has done well with a revamped crop insurance scheme, which makes it more attractive for the farmers. Not only has it reduced the premium payable by the farmer—1.5% on rabi crops, 2% on kharif crops and 5% on commercial/horticultural crops—it has freed commercial and horticulture crops from risk assessment on an actuarial basis, which at times would push up the premium to 25% (making it unaffordable for most farmers). Further, since it proposes to use the intersection of the mobile phone, bank account and possibly Aadhaar, it will ensure direct transfer of compensation—an additional spin-off being the boost it is likely to give to the cashless economy.

Clearly then, the NDA has taken a first step (presumably among several on the anvil) towards integrating the Indian farmer into the emerging economic landscape. In the process, it has also created for itself political room to rewrite its own narrative with farmers—severely sullied in the aftermath of the aborted move to pass the new land acquisition ordinance.

Anil Padmanabhan is deputy managing editor of Mint and writes every week on the intersection of politics and economics.