In the last 20 years, 3,21,428 farmers have committed suicide. Many studies had found that the crisis had hit their families badly. But there are many problems to identify such families and extending support to these families to overcome the crisis of losing the bread winner and pay back huge debts.
Agriculture contributes 15.11 per cent of GDP in India and there has been a considerable decline in the contribution from this sector to the economy. Agriculture is the only sector which accommodates rural workforce in the country. This could be considered as disguised unemployment or underemployment, yet it offers bare minimum living conditions to millions.
RBI governor Urjit Patel opposed the decision to waive off loans as it undermines the credit system of the country.
Theoretically, he is right when he says that such waivers affect the income generation of the banking sector. Such decisions do hit the institutional capability of banking systems. The government has to find alternative sources of capital to replace the lending agency's loss. And of course, this is not a long-term solution to rural distress.
GST regime may increase the cost of agriculture production.
After GST roll out, fertilisers will attract 12 per cent tax. Currently, fertilisers are taxed under VAT between zero and eight per cent. This means that the GST regime will make fertilisers costlier by over four per cent the least.
Similarly, pricing of pesticides may go upwards. Pesticides currently attract a VAT of 4-5 per cent in different states and a central excise tax of 12 per cent. Under GST regime, the prices are likely to go up slightly.
The prices of tractors may also rise. The tractors attract a VAT of 4-5 per cent in states while enjoy an exemption from central excise tax (zero per cent). From July 1, GST of 12 per cent will be applicable on tractors. Moreover, the accessories used with tractors in farming will attract 28 per cent of GST.
The combined increase in prices of fertilisers, pesticides and tractors will increase burden on farmers.
The farmers are trying to tell the government that they are victims of development policies and increasing rural distress in the country. However, state agencies often consider distress farmers a burden on the public exchequer and attribute their problems to their individual issues.
This is the reason why even farmers’ suicides are getting sidelined in mainstream discourse. The National Crime Records Bureau noted that the major reason behind suicides is mental health problems of farmers rather than rural distress and debt. Recent academic research also speaks the same.
One-time loan waivers as a political strategy need to be revisited and questioned. Allowing such promises by power-hungry politicians would gradually undermine the capabilities of institutions of lending in the country.
Strengthening lending structure and policies is more important for the country. Farmers’ access to institutions should be improved and rural distress should be considered as a development failure.
Otherwise, every political party will promise loan waivers in its manifesto and win on that basis, and later ignore the needs for capital flow into the sector.