As the threat of El Nino effect looms large, financial institutions and farmers in India are increasingly concerned about its potential consequences on agricultural loans. According to a recent report by CLXNS, a digital-first debt resolution company, cited by CNBC, banks with significant exposure to the agricultural sector face growing vulnerability as they prepare for a potential rise in loan defaults. With historical data indicating the adverse impact of El Nino on crop production, the report urges&nbsp;proactive measures to mitigate the risks and protect the stability of the agricultural sector.

Rising Vulnerability and El Nino's Historical Impact

The report highlights a concerning trend in banks' agricultural sector exposure. As of January 2023, their total exposure to agriculture loans stood at 14.4 per cent of outstanding loans, representing a significant increase from the previous year's 10.4 per cent. This surge raises urgent questions about the sector's ability to withstand the impending El Nino impact.

Past instances of El Nino and its associated droughts have severely affected crop production in India. Data from 2001 to 2020 cited by CNBC shows that the country experienced seven El Nino years, four of which resulted in droughts. These drought years -- 2003, 2005, 2009-10, and 2015-16 -- witnessed kharif or summer-sown farm output declines, leading to inflationary pressures and threatening nearly half of the country's annual food supply.&nbsp;

Concerns of Financial Institutions

The Reserve Bank of India (RBI) has also expressed concerns about the potential consequences of an El Nino event adversely affecting the southwest monsoon. The RBI's recent bulletin predicts inflation to range tightly between 5.0 and 5.6 per cent over 2023-24, citing global uncertainties.&nbsp;

While there was a 15 per cent growth in agricultural lending from October to December 2022, accompanied by a decline in non-performing assets (NPAs), the report by CLXNS warns of the reverse effect that El Nino could have on these numbers. The impending El Nino could lead to an increase in NPAs, warranting cautious attention from financial institutions.

Additionally, the exponential growth of Kisan Credit Cards (KCCs) poses a significant concern. Outstanding KCC loans witnessed a remarkable 25 per cent increase, raising worries about potential loan defaults among farmers and the associated risks for financial institutions.

Recognizing the potential risks, the CLXNS report emphasizes the importance of implementing proactive measures to alleviate the financial burden on farmers and safeguard the stability of the agricultural sector. It suggests support measures like loan restructuring, interest rate relief, and extended repayment schedules to&nbsp;mitigate the impacts of El Nino, ensuring farmers' continued livelihood and the agricultural sector's sustainability.

As the threat of El Nino effect looms large, financial institutions and farmers in India are increasingly concerned about its potential consequences on agricultural loans.

As the threat of El Nino effect looms large, financial institutions and farmers in India are increasingly concerned about its potential consequences on agricultural loans. According to a recent report by CLXNS, a digital-first debt resolution company, cited by CNBC, banks with significant exposure to the agricultural sector face growing vulnerability as they prepare for a potential rise in loan defaults. With historical data indicating the adverse impact of El Nino on crop production, the report urges proactive measures to mitigate the risks and protect the stability of the agricultural sector. Rising Vulnerability and El Nino's Historical Impact The report highlights a concerning trend in banks' agricultural sector exposure. As of January 2023, their total exposure to agriculture loans stood at 14.4 per cent of outstanding loans, representing a significant increase from the previous year's 10.4 per cent. This surge raises urgent questions about the sector's ability to withstand the impending El Nino impact. Past instances of El Nino and its associated droughts have severely affected crop production in India. Data from 2001 to 2020 cited by CNBC shows that the country experienced seven El Nino years, four of which resulted in droughts. These drought years -- 2003, 2005, 2009-10, and 2015-16 -- witnessed kharif or summer-sown farm output declines, leading to inflationary pressures and threatening nearly half of the country's annual food supply. Concerns of Financial Institutions The Reserve Bank of India (RBI) has also expressed concerns about the potential consequences of an El Nino event adversely affecting the southwest monsoon. The RBI's recent bulletin predicts inflation to range tightly between 5.0 and 5.6 per cent over 2023-24, citing global uncertainties. While there was a 15 per cent growth in agricultural lending from October to December 2022, accompanied by a decline in non-performing assets (NPAs), the report by CLXNS warns of the reverse effect that El Nino could have on these numbers. The impending El Nino could lead to an increase in NPAs, warranting cautious attention from financial institutions. Additionally, the exponential growth of Kisan Credit Cards (KCCs) poses a significant concern. Outstanding KCC loans witnessed a remarkable 25 per cent increase, raising worries about potential loan defaults among farmers and the associated risks for financial institutions. Recognizing the potential risks, the CLXNS report emphasizes the importance of implementing proactive measures to alleviate the financial burden on farmers and safeguard the stability of the agricultural sector. It suggests support measures like loan restructuring, interest rate relief, and extended repayment schedules to mitigate the impacts of El Nino, ensuring farmers' continued livelihood and the agricultural sector's sustainability.

Financial Institutions on high alert as El Nino poses risk to farm loans, says report 

Tamil Nadu Chief Minister K Palaniswami announced the waiver on Rs.12,10cr crop loans that farmers borrowed from cooperative banks. According to the Chief Minister, this move is to benefit 16.43lakhs farmers. &nbsp;This in addition to the earlier announcement of Rs.1,117cr as compensation for damaged crops, it was said to aid around 11 lakh farmers.&nbsp;

Palaniswami said that this announcement was meant to ease the burden on farmers who have been struggling owing to the pandemic, two cyclones and the unusual rains in the most of January. Tamil Nadu had seen unprecedented rainfall in the previous month, which had caused severe damage to crops that were ready for harvest.&nbsp;

Referring to his roots as a farmer, the Chief Minister said that he always understood the farming community’s woes. “In 2016, Rs.5780 worth farm loans were waived off. Its a matter of joy for me as a farmer, that Amma’s(Jayalalithaa's government) has waived off farm loans twice, during its tenure” he added. &nbsp;

Outlining the aid to farmers during their 10-year rule, the Government stated that 12.02lakh small-scale farmers had benefited from the waiver and that Rs.2,247cr was provided as an aid in 2017 owing to the severe drought. &nbsp;

In addition to the loan waivers, the Chief Minister said that cases filed against those who took part in the 2017 Jallikattu protests would be withdrawn, in consultation with legal experts. All charges except those of setting vehicles on fire, attacking policemen would be withdrawn, he added. &nbsp;

The Chief Minister also lashed out the opposition party DMK, by saying that they had been unable to fulfill their 2006 Assembly Poll promise on providing 2 acres of land for landless farmers. He also added that the 38 DMK MPSs had forgotten their promise made during the 2019 Parliamentary polls, of waiving off farm loans from cooperatives.

Tamil Nadu Chief Minister K Palaniswami announced the waiver on Rs.12,10cr crop loans that farmers borrowed from cooperative banks. According to the Chief Minister, this move is to benefit 16.

Tamil Nadu Chief Minister K Palaniswami announced the waiver on Rs.12,10cr crop loans that farmers borrowed from cooperative banks. According to the Chief Minister, this move is to benefit 16.43lakhs farmers. This in addition to the earlier announcement of Rs.1,117cr as compensation for damaged crops, it was said to aid around 11 lakh farmers. Palaniswami said that this announcement was meant to ease the burden on farmers who have been struggling owing to the pandemic, two cyclones and the unusual rains in the most of January. Tamil Nadu had seen unprecedented rainfall in the previous month, which had caused severe damage to crops that were ready for harvest. Referring to his roots as a farmer, the Chief Minister said that he always understood the farming community’s woes. “In 2016, Rs.5780 worth farm loans were waived off. Its a matter of joy for me as a farmer, that Amma’s(Jayalalithaa's government) has waived off farm loans twice, during its tenure” he added. Outlining the aid to farmers during their 10-year rule, the Government stated that 12.02lakh small-scale farmers had benefited from the waiver and that Rs.2,247cr was provided as an aid in 2017 owing to the severe drought. In addition to the loan waivers, the Chief Minister said that cases filed against those who took part in the 2017 Jallikattu protests would be withdrawn, in consultation with legal experts. All charges except those of setting vehicles on fire, attacking policemen would be withdrawn, he added. The Chief Minister also lashed out the opposition party DMK, by saying that they had been unable to fulfill their 2006 Assembly Poll promise on providing 2 acres of land for landless farmers. He also added that the 38 DMK MPSs had forgotten their promise made during the 2019 Parliamentary polls, of waiving off farm loans from cooperatives.

Tamil Nadu Chief Minister K Palaniswami announces waiver on Rs.12,110cr farm loans from cooperative banks  

Cooperative Minister Udayalal Awjana on Friday said that the Rajasthan government has waived short term loans of Rs 7,179 crores of state farmers.

"Rajasthan government has waived short term loans of Rs 7,179 crores of farmers. Out of 19,99,000 applicants, 200 applications of loan waiver received till February 17, 2019. Around 19,70,135 basis based certificates and 19,40,596 loan exemption certificates have been issued," Awjana said here in the Legislative Assembly.

He maintained that injustice will not be made to the state farmers due to loan waiver.&nbsp;

"The adjustment of the loan amount in the accounts of the farmers, whose debts have been waived, has been postponed and loan certificates have been issued to them," Awjana said.

He said that negotiations with scheduled banks regarding the loan waiver of 2 lakh farmers are continuing and the loan will also be waived once the consent is reached.

Cooperative Minister Udayalal Awjana on Friday said that the Rajasthan government has waived short term loans of Rs 7,179 crores of state farmers. "Rajasthan government has waived short term loans of Rs 7,179 crores of farmers.

Cooperative Minister Udayalal Awjana on Friday said that the Rajasthan government has waived short term loans of Rs 7,179 crores of state farmers. "Rajasthan government has waived short term loans of Rs 7,179 crores of farmers. Out of 19,99,000 applicants, 200 applications of loan waiver received till February 17, 2019. Around 19,70,135 basis based certificates and 19,40,596 loan exemption certificates have been issued," Awjana said here in the Legislative Assembly. He maintained that injustice will not be made to the state farmers due to loan waiver. "The adjustment of the loan amount in the accounts of the farmers, whose debts have been waived, has been postponed and loan certificates have been issued to them," Awjana said. He said that negotiations with scheduled banks regarding the loan waiver of 2 lakh farmers are continuing and the loan will also be waived once the consent is reached.

Rajasthan government waives short-term agricultural farm loans over Rs 7,000 crore

Won't let PM Modi sleep till he waives farm loans, says Rahul Gandhi

Kisan politics is back in India with a bang. Congress president Rahul Gandhi announced in Delhi that in case Prime Minister Narendra Modi fails to announce farm loan waiver for the farmers, the Congress would do so if it comes to power in 2019. He also said that Congress would mount pressure on BJP to announce farm loan waivers where they are required.

Rahul's claim came with a taunt that he would not allow the PM to sleep until this demand is met.

This statement comes in the wake of the announcement of farm loan waivers in Chhattisgarh, Madhya Pradesh and Rajasthan which were wrested away from BJP by Congress in Assembly elections.

Such has been the renewed focus on farm loans that Assam government also announced a loan waiver on Tuesday, and Gujarat waived off rural power bill to the tune of Rs 650 crore on the same day. 
&nbsp; 
Kisan politics dominated Indian politics from Independence till the 1980s when caste-based reservation, economic reforms and Babri Masjid demolition overtook agrarian issues. 
 
Unfortunately, Kisan politics evolved into&nbsp;the caste-based idea of social justice.&nbsp;Traditionally, Kisan movements were led by the OBC leaders who by 1990s were either firmly entrenched in social justice politics or had become mascots of BJP’s Hindutva stance. The example, in this case, is Kalyan Singh.

Loan waivers make for good politics. In 2008, Congress announced a loan waiver and they swept back to power with 200+ seats in Lok Sabha. The state governments who have announced loan waiver post-2014 have all been returned to power in India.

However, the waivers do not benefit all borrowers equally&nbsp;and rich farmers benefit from borrowing more. Moreover, waiver impacts credit culture and makes access to more credit difficult for the farmers.

The loan waivers also put state finances on razor’s edge. The waiver increases fiscal deficit without addressing the core issue. But with Lok &nbsp;Sabha election around the corner, Congress has decided to focus on the agrarian sector. The problem of farm sector is real in India. It is unprofitable and more people are employed than needed. It is this labour which needs to be re-directed to industry from the farming sector for employment. Loans are a short-term relief and do not solve the basic problem of the farming sector.

Ironically, the politics of loan waiver also breaks consensus between BJP and Congress on economic issues which emerged post-1991 when late Prime Minister PV Narasimha Rao liberalised the economy. It was done under the aegis of Manmohan Singh who then functioned as country’s finance minister. Liberal economic policies continued till Vajpayee’s tenure but were strongly peppered with social schemes during UPA 1 and 2 when Sonia Gandhi’s writ ran large.

Now it has become farm politics versus industry. This binary can harm India tremendously. One result of such focus is that religious polarisation done by BJP today can only be matched by popular agrarian politics by the Opposition.&nbsp;

Under Rahul Gandhi, the strong left turn in politics and economy has become strong. He cannot be blamed for it. Indian politics over the years has become competitive and partisan. It lacks political consensus on crucial issues. But farm politics under Rahul Gandhi is back as the main agenda of the Congress.&nbsp;

Rahul's Bhatta Parsaul campaign in Uttar Pradesh in 2011 did not work but loan waiver&nbsp;as a political campaign has clicked. 
 
How much will it work for the Congress as a national issue is a tough question to answer but Kisan politics as political debate point is here to stay till 2019. And that is a long shift from an anti-corruption campaign which BJP capitalised during 2014.

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL) 
&nbsp;

&nbsp;

Kisan politics is back in India with a bang. Congress president Rahul Gandhi announced in Delhi that in case Prime Minister Narendra Modi fails to announce farm loan waiver for the farmers, the Congress would do so if it comes to power in 2019.

Kisan politics is back in India with a bang. Congress president Rahul Gandhi announced in Delhi that in case Prime Minister Narendra Modi fails to announce farm loan waiver for the farmers, the Congress would do so if it comes to power in 2019. He also said that Congress would mount pressure on BJP to announce farm loan waivers where they are required. Rahul's claim came with a taunt that he would not allow the PM to sleep until this demand is met. This statement comes in the wake of the announcement of farm loan waivers in Chhattisgarh, Madhya Pradesh and Rajasthan which were wrested away from BJP by Congress in Assembly elections. Such has been the renewed focus on farm loans that Assam government also announced a loan waiver on Tuesday, and Gujarat waived off rural power bill to the tune of Rs 650 crore on the same day. Kisan politics dominated Indian politics from Independence till the 1980s when caste-based reservation, economic reforms and Babri Masjid demolition overtook agrarian issues. Unfortunately, Kisan politics evolved into the caste-based idea of social justice. Traditionally, Kisan movements were led by the OBC leaders who by 1990s were either firmly entrenched in social justice politics or had become mascots of BJP’s Hindutva stance. The example, in this case, is Kalyan Singh. Loan waivers make for good politics. In 2008, Congress announced a loan waiver and they swept back to power with 200+ seats in Lok Sabha. The state governments who have announced loan waiver post-2014 have all been returned to power in India. However, the waivers do not benefit all borrowers equally and rich farmers benefit from borrowing more. Moreover, waiver impacts credit culture and makes access to more credit difficult for the farmers. The loan waivers also put state finances on razor’s edge. The waiver increases fiscal deficit without addressing the core issue. But with Lok Sabha election around the corner, Congress has decided to focus on the agrarian sector. The problem of farm sector is real in India. It is unprofitable and more people are employed than needed. It is this labour which needs to be re-directed to industry from the farming sector for employment. Loans are a short-term relief and do not solve the basic problem of the farming sector. Ironically, the politics of loan waiver also breaks consensus between BJP and Congress on economic issues which emerged post-1991 when late Prime Minister PV Narasimha Rao liberalised the economy. It was done under the aegis of Manmohan Singh who then functioned as country’s finance minister. Liberal economic policies continued till Vajpayee’s tenure but were strongly peppered with social schemes during UPA 1 and 2 when Sonia Gandhi’s writ ran large. Now it has become farm politics versus industry. This binary can harm India tremendously. One result of such focus is that religious polarisation done by BJP today can only be matched by popular agrarian politics by the Opposition. Under Rahul Gandhi, the strong left turn in politics and economy has become strong. He cannot be blamed for it. Indian politics over the years has become competitive and partisan. It lacks political consensus on crucial issues. But farm politics under Rahul Gandhi is back as the main agenda of the Congress. Rahul's Bhatta Parsaul campaign in Uttar Pradesh in 2011 did not work but loan waiver as a political campaign has clicked. How much will it work for the Congress as a national issue is a tough question to answer but Kisan politics as political debate point is here to stay till 2019. And that is a long shift from an anti-corruption campaign which BJP capitalised during 2014. (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Raining farm loan waivers: Kisan politics is back with bang

Once again farmers have been killed in police firing while taking part in a protest. This time in Madhya Pradesh&rsquo;s Mandsaur district. It has trigerred the usual flurry of articles and emergency policy measures. The most prominent policy response has been the promise by several state governments to offer debt relief by waiving outstanding farm loans. In recent weeks Maharashtra, Punjab, and Karnataka have announced waivers with Adityanath announcing them earlier in Uttar Pradesh soon after his victory in the assembly polls. Other states may follow suit, because farm distress is a nation-wide phenomenon.

Much has been written as usual on what will happen to the states&rsquo; fiscal deficit, in particular if the centre refuses to contribute, as Finance Minister Arun Jaitley has indicated. Commentators have also weighed in on how repeated waivers punish those who repay in addition to reducing incentives for repayment of future loans and how past loan waivers have not worked to stem the farm crisis. Indeed we have been here many time before. Farm loans have been waived in times of drought, famine, or other rural distress since the colonial period. It is a legitimate short-run solution not only in agriculture but in any sector, provided, and this is key, it is a solution to an unforeseen problem, a sudden external shock, and is part of an overall strategy to prevent crises in the future.

Instead what we see is a refusal to deal with the long-run structural problems and the use of loan waivers as a cynical political measure in place of a vision. This makes the public discourse on agriculture to be about inefficient farmers who need to be bailed out with public money rather than about negligent or even malign government policy.

While debt relief is to be welcomed as a short-term measure, it should be borne in mind that it only works partially. If only cooperative bank loans are waived and not nationalised banks, that leaves some people out. Further, governments have no control over private loans, in particular loans issued by informal moneylenders, which have made a strong comeback in the rural economy. It also only works to the extent that the relief actually goes to those who need it most. And there is many a slip between the cup and the lip, ranging from definitinal issues on who qualifies for relief and who doesn&rsquo;t, whether banks actually stop collection efforts, official corruption and so on. Only promises have been made thus far.

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<h5>The crisis, as manifested in years of below average growth, unremunerative land holdings, and ultimately in the horrendous phenomenon of farm suicides, is very well-documented. Its principal causes are also well-known and have been known for years.</h5>
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Ultimately as veteran rural journalist P. Sainath said in a recent interview on the subject, the loan waiver is only a symptom of a crisis, it is not the crisis itself.

The crisis, as manifested in years of below average growth, unremunerative land holdings, and ultimately in the horrendous phenomenon of farm suicides, is very well-documented. Its principal causes are also well-known and have been known for years. Ever decreasing size of holdings, predictably rising costs of production, unpredictable output prices, and a woeful lack of public investment.

In the early 1990s investment in agriculture was around 3.8 per cent&nbsp;of GDP. Since then it has steadily fallen. The 2005-06 budget document lamented that it had fallen from 2.2 per cent&nbsp;in the late 1990s to 1.7 per cent&nbsp;in 2004-05 and that this was &ldquo;a matter of concern.&rdquo; Increased public investment was one of the key recommendations of the Swaminathan Commission also. While the share in GDP has gone up from its 2005 low, it is still well below the level reached in the early 1990s.&nbsp;

Given the extensive Swaminathan Commission report as well as many other studies, our problem is not lack of knowledge on what needs to be done to revive the rural economy. The really important issue is, how do we view agriculture and the rural economy in general? What place does it occupy in our imaginations? Is it a source of cheap labour, food, and raw materials for the urban economy? Do villages exist for the sake of the city? Or do they have their own autonomous existence and future? And if we believe the latter, do we act like we believe it?

I fear we don&rsquo;t act like we believe it. Take one example. RBI data shows that agricultural wage growth has slowed down dramatically over the past few years, in real terms from a high of 15-16 per cent&nbsp;to a low of 0-1 per cent&nbsp;from 2013 to 2016. &nbsp;The NSS Situation Assessment of Farmers survey (2012) showed that for households with 2.5 acres of land or less (which is 75 per cent&nbsp;of all households), 20 per cent&nbsp;report wages as their primary income source. This number goes up to 35 per cent&nbsp;for households owning an acre or less.

Now, take into account the fact that wages would constitute an important secondary income source even for those whose primary income comes from selling their own product. So, we are talking about half the rural population or more for whom wages matter as a source of income, not just as a cost of production. So, such a sharp decline in wage growth for millions of workers should be a matter of intense policy concern. Instead this collapse has mostly been interpreted in terms of its (positive) impact on inflation. So&nbsp;complete&nbsp;is the macroeconomic obession with inflation that a collapse of rural wage growth is considered to be a good thing.

Generally economists believe that wage growth should be commensurate with productivity growth. In other words, it is only when wages rise faster than productivity that inflationary concerns become salient. Now, output of foodgrains, setting aside fluctuations due to weather, has grown at around 3 per cent&nbsp;per year on average for the past decade or more. The growth of output is faster in case of cotton (around 10 per cent).

The State of Agriculture report (2015) attributes most of this increase to increases in productivity (as opposed to additional acreage or workers). Looking at these figures one is tempted to say that agricultural wage growth observed in the pre-2015 period was indeed a problem. Perhaps due to an unusually tight rural labour market due to increased opportunities in urban areas and MGNREGA, wages grew much faster than productivity. This is a fair point within conventional economic thinking.&nbsp;

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<h5>For an income of around INR 7000 a month to become equal even to what the lowest paid government servant gets today, it would have to more than double. Even at the rate of 10 per cent&nbsp;growth a year, incomes double only every seven years.</h5>
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But enough about growth, let us now bring in the level element. Recall that rural wages, like wages in many urban informal activities, are very low. For an income of around INR 7000 a month to become equal even to what the lowest paid government servant gets today, it would have to more than double. Even at the rate of 10 per cent&nbsp;growth a year, incomes double only every seven years. Thus, one of the Swaminathan Commission recommendations that the net take home income of farmers should be comparable to those of government servants, would require sustained growth of wages for several years at very high rates. For there to be changes in the quality of life in the villages in keeping with aspirations, wages may have to grow must faster than productivity. Employers will of course want to pass on these higher wages to buyers in the form of higher farm gate prices.&nbsp;

But the structure of agricultural markets is such that producers have almost no price setting power. They are forced to buy expensive inputs (input subsidies intended for farmers often do not reach them) and sell their output for very low prices, often less than the cost of production. This is because markets are competitive, the product is perishable and transaction costs (of transportation, storage, etc.) are high. So selling at the price being offered at the local mandi is the only option for the farmer.

Hence, the persistent and just demand for fair prices; a demand that has seen immense mobilisation by farmers across the country for years. The small and marginal farmers (which is the majority of farmers) are caught in a double bind. As wage-earners their wage growth has collapsed. As employers, when wages are growing strongly, they do not get a high enough price to recover the costs of production.

Here, we run into the crux of the problem. In our urban-centred imagination, it is not conceivable that the producers of food and raw materials will decide the price at which they want to sell their output. Because they exist for us. On the other&nbsp;hand, we will gladly allow large companies to sell us meals, clothes, and shoes at prices they set.

Selling at the price being offered at the local mandi is the only option for the farmer

Once again farmers have been killed in police firing while taking part in a protest. This time in Madhya Pradesh’s Mandsaur district. It has trigerred the usual flurry of articles and emergency policy measures. The most prominent policy response has been the promise by several state governments to offer debt relief by waiving outstanding farm loans. In recent weeks Maharashtra, Punjab, and Karnataka have announced waivers with Adityanath announcing them earlier in Uttar Pradesh soon after his victory in the assembly polls. Other states may follow suit, because farm distress is a nation-wide phenomenon. Much has been written as usual on what will happen to the states’ fiscal deficit, in particular if the centre refuses to contribute, as Finance Minister Arun Jaitley has indicated. Commentators have also weighed in on how repeated waivers punish those who repay in addition to reducing incentives for repayment of future loans and how past loan waivers have not worked to stem the farm crisis. Indeed we have been here many time before. Farm loans have been waived in times of drought, famine, or other rural distress since the colonial period. It is a legitimate short-run solution not only in agriculture but in any sector, provided, and this is key, it is a solution to an unforeseen problem, a sudden external shock, and is part of an overall strategy to prevent crises in the future. Instead what we see is a refusal to deal with the long-run structural problems and the use of loan waivers as a cynical political measure in place of a vision. This makes the public discourse on agriculture to be about inefficient farmers who need to be bailed out with public money rather than about negligent or even malign government policy. While debt relief is to be welcomed as a short-term measure, it should be borne in mind that it only works partially. If only cooperative bank loans are waived and not nationalised banks, that leaves some people out. Further, governments have no control over private loans, in particular loans issued by informal moneylenders, which have made a strong comeback in the rural economy. It also only works to the extent that the relief actually goes to those who need it most. And there is many a slip between the cup and the lip, ranging from definitinal issues on who qualifies for relief and who doesn’t, whether banks actually stop collection efforts, official corruption and so on. Only promises have been made thus far. The crisis, as manifested in years of below average growth, unremunerative land holdings, and ultimately in the horrendous phenomenon of farm suicides, is very well-documented. Its principal causes are also well-known and have been known for years. × Ultimately as veteran rural journalist P. Sainath said in a recent interview on the subject, the loan waiver is only a symptom of a crisis, it is not the crisis itself. The crisis, as manifested in years of below average growth, unremunerative land holdings, and ultimately in the horrendous phenomenon of farm suicides, is very well-documented. Its principal causes are also well-known and have been known for years. Ever decreasing size of holdings, predictably rising costs of production, unpredictable output prices, and a woeful lack of public investment. In the early 1990s investment in agriculture was around 3.8 per cent of GDP. Since then it has steadily fallen. The 2005-06 budget document lamented that it had fallen from 2.2 per cent in the late 1990s to 1.7 per cent in 2004-05 and that this was “a matter of concern.” Increased public investment was one of the key recommendations of the Swaminathan Commission also. While the share in GDP has gone up from its 2005 low, it is still well below the level reached in the early 1990s. Given the extensive Swaminathan Commission report as well as many other studies, our problem is not lack of knowledge on what needs to be done to revive the rural economy. The really important issue is, how do we view agriculture and the rural economy in general? What place does it occupy in our imaginations? Is it a source of cheap labour, food, and raw materials for the urban economy? Do villages exist for the sake of the city? Or do they have their own autonomous existence and future? And if we believe the latter, do we act like we believe it? I fear we don’t act like we believe it. Take one example. RBI data shows that agricultural wage growth has slowed down dramatically over the past few years, in real terms from a high of 15-16 per cent to a low of 0-1 per cent from 2013 to 2016. The NSS Situation Assessment of Farmers survey (2012) showed that for households with 2.5 acres of land or less (which is 75 per cent of all households), 20 per cent report wages as their primary income source. This number goes up to 35 per cent for households owning an acre or less. Now, take into account the fact that wages would constitute an important secondary income source even for those whose primary income comes from selling their own product. So, we are talking about half the rural population or more for whom wages matter as a source of income, not just as a cost of production. So, such a sharp decline in wage growth for millions of workers should be a matter of intense policy concern. Instead this collapse has mostly been interpreted in terms of its (positive) impact on inflation. So complete is the macroeconomic obession with inflation that a collapse of rural wage growth is considered to be a good thing. Generally economists believe that wage growth should be commensurate with productivity growth. In other words, it is only when wages rise faster than productivity that inflationary concerns become salient. Now, output of foodgrains, setting aside fluctuations due to weather, has grown at around 3 per cent per year on average for the past decade or more. The growth of output is faster in case of cotton (around 10 per cent). The State of Agriculture report (2015) attributes most of this increase to increases in productivity (as opposed to additional acreage or workers). Looking at these figures one is tempted to say that agricultural wage growth observed in the pre-2015 period was indeed a problem. Perhaps due to an unusually tight rural labour market due to increased opportunities in urban areas and MGNREGA, wages grew much faster than productivity. This is a fair point within conventional economic thinking. For an income of around INR 7000 a month to become equal even to what the lowest paid government servant gets today, it would have to more than double. Even at the rate of 10 per cent growth a year, incomes double only every seven years. × But enough about growth, let us now bring in the level element. Recall that rural wages, like wages in many urban informal activities, are very low. For an income of around INR 7000 a month to become equal even to what the lowest paid government servant gets today, it would have to more than double. Even at the rate of 10 per cent growth a year, incomes double only every seven years. Thus, one of the Swaminathan Commission recommendations that the net take home income of farmers should be comparable to those of government servants, would require sustained growth of wages for several years at very high rates. For there to be changes in the quality of life in the villages in keeping with aspirations, wages may have to grow must faster than productivity. Employers will of course want to pass on these higher wages to buyers in the form of higher farm gate prices. But the structure of agricultural markets is such that producers have almost no price setting power. They are forced to buy expensive inputs (input subsidies intended for farmers often do not reach them) and sell their output for very low prices, often less than the cost of production. This is because markets are competitive, the product is perishable and transaction costs (of transportation, storage, etc.) are high. So selling at the price being offered at the local mandi is the only option for the farmer. Hence, the persistent and just demand for fair prices; a demand that has seen immense mobilisation by farmers across the country for years. The small and marginal farmers (which is the majority of farmers) are caught in a double bind. As wage-earners their wage growth has collapsed. As employers, when wages are growing strongly, they do not get a high enough price to recover the costs of production. Here, we run into the crux of the problem. In our urban-centred imagination, it is not conceivable that the producers of food and raw materials will decide the price at which they want to sell their output. Because they exist for us. On the other hand, we will gladly allow large companies to sell us meals, clothes, and shoes at prices they set.

Indian farmers are dying from abysmally low wages

Following&nbsp;Uttar Pradesh and Punjab&#39;s example, the&nbsp;Karnataka Congress government today announced crop&nbsp;loan waiver of up to Rs 50,000 per farmer.

The loan waiver will cost the state exchequer Rs 8,165 crore, PTI reported.&nbsp; 
 
The move will help about 22,27,506 farmers who had&nbsp;taken&nbsp;loans of about Rs 10,736 crore from cooperative banks in the state.

&quot;Farmers are in distress. They have been demanding loan waiver. We have to respond to farmers, even though it will have an impact on state&#39;s finances,&quot; Congress chief minister Siddaramaiah said. 
 
He added that the Centre will now have to come to the rescue of farmers by waiving the loan obtained by them from nationalised and grameen banks.

Chief minister Siddaramaiah said the crop loan obtained by farmers from cooperative banks is just 20 per cent, the rest is from grameen, nationalised and others banks that come under the central government.

BJP&#39;s Yogi Adityanath-led Uttar Pradesh government was the first to <a href="http://www.wionews.com/south-asia/at-first-cabinet-meet-up-cm-adityanath-waives-rs-36359-crore-in-farmer-loans-14176">waive off farmer loans</a>&nbsp;worth&nbsp;Rs 30,729 crores in April.&nbsp;

Punjab&#39;s Congress chief minister Captain Amarinder Singh had last week <a href="http://www.wionews.com/preview/article/17024">announced</a> total waiver of entire crop loans up to Rs. 2 lakh for small and marginal farmers up to five&nbsp;acres, and a flat Rs. 2 lakh relief for all other marginal farmers, irrespective of their loan amount.

BJP&#39;s Maharashtra government is also planning to announce a loan waiver before October 31, which is expected to benefit about 1.07 crore farmers with less than five acres of land.&nbsp;

Earlier in June, the Reserve Bank of India governor Urjit Patel had said that unless the budgets of the state governments allow the fiscal space to waive off loans, it would be a risky path to tread on.

&ldquo;Past episodes in our country had shown that when there are significant fiscal slippages they do permeate to inflation sooner or later. So, it is a path that we need to tread very carefully and before it gets out of hand,&rdquo; he said.

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The waiver will cost Rs 8,165 crore to the Karnataka state?exchequer and?will help about 22,27,506 farmers

Following Uttar Pradesh and Punjab's example, the Karnataka Congress government today announced crop loan waiver of up to Rs 50,000 per farmer. The loan waiver will cost the state exchequer Rs 8,165 crore, PTI reported. The move will help about 22,27,506 farmers who had taken loans of about Rs 10,736 crore from cooperative banks in the state. "Farmers are in distress. They have been demanding loan waiver. We have to respond to farmers, even though it will have an impact on state's finances," Congress chief minister Siddaramaiah said. He added that the Centre will now have to come to the rescue of farmers by waiving the loan obtained by them from nationalised and grameen banks. Chief minister Siddaramaiah said the crop loan obtained by farmers from cooperative banks is just 20 per cent, the rest is from grameen, nationalised and others banks that come under the central government. BJP's Yogi Adityanath-led Uttar Pradesh government was the first to waive off farmer loans worth Rs 30,729 crores in April. Punjab's Congress chief minister Captain Amarinder Singh had last week announced total waiver of entire crop loans up to Rs. 2 lakh for small and marginal farmers up to five acres, and a flat Rs. 2 lakh relief for all other marginal farmers, irrespective of their loan amount. BJP's Maharashtra government is also planning to announce a loan waiver before October 31, which is expected to benefit about 1.07 crore farmers with less than five acres of land. Earlier in June, the Reserve Bank of India governor Urjit Patel had said that unless the budgets of the state governments allow the fiscal space to waive off loans, it would be a risky path to tread on. “Past episodes in our country had shown that when there are significant fiscal slippages they do permeate to inflation sooner or later. So, it is a path that we need to tread very carefully and before it gets out of hand,” he said.

After Uttar Pradesh and Punjab, Congress-led Karnataka govt waives farm loan up to Rs 8,165 crore

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