Govt policies are the main cause of suicide of farmers in the Vidharbha

Link: The Indian Economy Blog.

Sonia Faleiro writes in her superb article on Vidarbha’s farmers of something an activist there said to her:

    Women tell me that each evening, they stand at the door terrified that their husband may not return.

Read the full thing.

Would any of the readers or fellow contributors of this blog like to offer a diagnosis and a prescription for the situation in Vidarbha?

I hail from the Vidharbha region and we used to own agri land in the same region not very long ago. I read a lot of editorials in the local press blaming "illegal" moneylenders for "harassing" farmers and forcing them to commit suicide. To have a reality check I talked with one of the farmers in our native village. The feedback I received was that government is exploiting the farmers through its monopoly procurement of cotton scheme. Govt. is paying the farmers below the market price. Not only that, payment is not immediate and govt is also taking out previous years loan payments before paying the farmers. Moneylenders actually help farmers by lending money during their need. The land that is pledged against the loan is sold off at the market rate to recover the money and rest paid to the farmer. Therefore, there is no exploitation there. By restricting the entry of moneylenders through licensing and prosecuting "illegal" moneylenders govt is raising the interest rates and reducing the supply of the credit. The best solution is to allow anybody to lend money to the farmers and thus increase the supply of credit to the farmers and also reduce the interest rates. Coupling that with free market in the farm produce (by abolishing the monopoly procurement scheme) will solve most of the problems.

By prosecuting "illegal" moneylenders govt is ensuring that next time farmers won't even get whatever credit/loans they were getting. Thus, next time around farmers will commit suicide for the lack of access to the credit/loans.

Comments

[Satya]

Well, there are lot of issues with Indian agriculture. All of these contribute to tragedies like farmer's death. Lot of time it is the high risk taken by farmer which leads to their suicides. But they are helpless as well...
This risk needs to be hedged.