Farm Debt Waiver in India: An Ephemeral Palliative or an Enduring Risk Management Tool? A SAP-LAP Analysis

Introduction

India, since the Green Revolution in the 1960s, has incurred rapid gains in agricultural productivity with increased producer incomes, higher labour wages and lowered food prices. With the objective to improve farmers’ accessibility to institutional credit and reduce their reliance on informal credit (such as borrowing from moneylenders and kinsfolks), the government has improved the flow of credit through nationalization of commercial banks, establishment of regional rural banks (RRBs) and the institution of National Bank for Agriculture and Rural Development (NABARD). Various farm credit and farm improvement programmes such as the Kisan Credit Scheme – 1998, Interest Subvention Scheme – 2006, Pradhan Mantri Jan-Dhan Yojana (PMJDY) – 2014, Soil Health Card Scheme – 2015, Pradhan Mantri Krishi Sinchai Yojana (PMKSY) – 2015, Paramparagat Krishi Vikas Yojana (PKVY) – 2015, Pradhan Mantri Fasal Bima Yojana (PMFBY) – 2016, have been launched over the years. As an outcome, the percentage of institutional credit to agricultural gross domestic product scaled up to 41% in 2015-16 as against 10% in 1999-2000 (Kumar & Bathla, 2017). However, despite decades of measures in rural development and spending in new agricultural technology, farmer indebtedness continues to plague the rural economy. In an agrarian economy, like India, nearly 70% of the 90 million agricultural households spend more than their income each month resulting in mounting debts (Saha, 2017). The 70^th Round of National Sample Survey states that the Incidence of Indebtedness (IOI) was about 31.4% among the rural households as on June 30, 2012; indebtedness within cultivator households was higher by 9 percentage points as compared to non-cultivator households (National Sample Survey Office, Government of India, 2013). In 2013, the average amount of debt (AOD) per indebted household was Rs. 1,03,457 in rural areas (Deccan Chronicle, 2016). However, the fundamental cause of the agrarian crisis is not merely indebtedness – indebtedness is only a cue. “The underlying causes are stagnation in agriculture, increasing production and marketing risks, institutional vacuum and lack of alternative livelihood opportunities” (Ministry of Finance, Government of India, 2007). Nonetheless, indebtedness has been the primary reason for the increasing numbers of farmer suicides across the country. Farmer suicides accounted for about 11.2% of all suicides in India (Nagaraj, Sainath, Rukmani & Gopinath, 2014). Considering the growing indebtedness of farmers, farm debt waiver scheme is reckoned as an important policy measure by the Government of India. Therefore, consideration of farm debt waiver is crucial and a pertinent issue for discussion in the present-day context. The present chapter aims to examine whether farm debt waiver is a lasting solution to India’s deepening agrarian distress by employing “Situation, Actor, Process, Learning, Action, Performance (SAP-LAP)” (Sushil, 2000) framework that attempts to adopt a holistic and all-inclusive approach for examining a problem at hand. Through SAP-LAP paradigm, the authors shall not only examine the viability of farm debt waiver in India but also offer recommendations to improve the resilience of farmers against diverse types of agricultural risks.

The rest of the chapter is organized as follows. The background section gives a timeline of farm debt waiver schemes in India, the consequences and associated risks of such schemes, and an overview of SAP-LAP paradigm — the framework used to examine the nuances of waivers. The following segments analyse farm debt waivers in India, using SAP-LAP method, from the standpoint of proposing solutions and recommendations to improve the overall state of farmers in India; identify directions for future research; and offer concluding remarks.