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Agrarian issues and Need for Social Protection

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 Content

  1. Introduction
  2. Agricultural Livelihoods And Productivity Context
  3. Social Protection For Farmers
  4. Interaction Between Social Protection And Agriculture
  5. Subsidies 
  6. Price Support
  7. International Trade Regime, The World Trade Organization
  8. Crop Insurance
  9. Conclusion

Introduction

With over 195 million, Even though more than half of India's 1.3 billion people work in agriculture and related industries, the farming sector's contribution to national income has been significantly dropping in India. Thousands of indebted farmers have killed themselves over the previous few decades. The lives of the poorest people are impacted by changes to the agricultural sector. Economic changes, trade liberalization, environmental challenges, land fragmentation, climatic stress, and pest-resistance are some of the forces behind the transitions. Agrarian concerns are a major social policy concern because of the growing effects of poverty and the lack of access to food.

The lives of the poorest people are impacted by changes to the agricultural sector. Additionally, agricultural livelihoods are plagued by a number of issues that are social policy concerns, including high rates of casual wage labor, wages that are below the minimum wage, an insufficient number of workdays, an absence of a formal social security system, patron-client relationships and labor bondage, competition from seasonal wage labor gangs, and interlocked markets for credit and labor. Growth in the agricultural sector lowers poverty both directly by raising wages and indirectly by creating more jobs. To feed the hungry and others, home agriculture production needs to be increased. In order to ensure the effectiveness of PDS and prevent food inflation, supplies must be increased. By lowering rural households' vulnerabilities and boosting their ability to resist various income and consumption shocks, agricultural development helps to ensure social protection. India contributes a quarter of the world's hunger problems related to undernourished individuals. In India, 4 out of 10 children, or almost 47 million people, are chronically undernourished or stunted, which prevents them from reaching their full potential. Stunting has negative effects on learning ability, academic performance, incomes, and likelihood of developing chronic diseases. The effects span generations since undernourished women and girls frequently give birth to babies with low birth weights. In India, the prevalence of overweight and obesity among children and adolescents has increased, with long-term effects on non-communicable diseases in adults. The government has extensive programs to combat poverty and provide food security, but there are serious inclusion and exclusion problems. Girls and women are particularly underprivileged. Even though the country is now self-sufficient in food, new problems have surfaced, including sluggish agricultural growth, climate change, land degradation, and declining biodiversity.

Agricultural Livelihoods And Productivity Context

Nearly half of India's workforce, according to the 2011 census, depends on agriculture for their living. However, there were fewer cultivators between 2001 and 2011. 8.9 million farmers are reportedly no longer in the business. The number of agricultural employees increased throughout this time, as 36.9 million more people entered the industry. The importance of this industry in creating jobs is highlighted by the fact that the poorest population groups are indirectly dependent on agriculture through their availability to inexpensive food and indirect dependence through wage labor employment and the use of CPR (common pool resources).

Small farmers are now examined and understood as meager commodity producers rather than as pre-capitalist peasants. However most of them, the rural masses, cannot reproduce themselves primarily through their own farming. Instead, they belong to the laboring classes and procreate mostly through paid work, with some of their food coming from farms. Rural salaries climb when employees leave agriculture, per capita incomes increase, economies diversify, and it becomes more efficient to operate progressively larger, mechanized farms. Small farms must evolve in order to thrive in this environment by purchasing or renting more land, diversifying into high-value agriculture, and/or diversifying into non-farm sources of income and employment. Few small farms would endure in the long run, which would lead to the phenomena of part-time farmers in Asia.

Numerous empirical investigations have demonstrated the negative correlation between farm size and land production. Compared to large farms, small farms achieve higher output at lower capital intensities. This is mainly because there is a lot of family labor available every farmed hectare. Methods that require a lot of labor are strong in economies where there is a surplus of labor; nevertheless, they become weak as labor costs rise. Small farm development can consequently aid the rural poor. In addition to fostering economic growth and improving food security by boosting local supplies and generating a national surplus, policies that allow for the equitable allocation of land also serve as a foundation for the diversification of rural livelihoods (Hazell 2011).

Small farms are disappearing, not because of economic progress, but because of it. Small farmers would experience rising poverty and unwelcome levels of rural-urban migration if they were compelled to leave before sufficient non-farm jobs become available. Consumer-driven markets, liberalization, and globalization are the current drivers of farm size transformation. Here, as they attempt to diversify into high-value products, small farmers must contend with competitive domestic and international marketplaces. The hazards that smallholders confront are increased by a number of variables. The privatization of the seed and input supply system, the lack of proper agricultural research, access to land, credit, technology, and markets, as well as the lack of subsidized public input delivery systems, are a few of these. International trade rivalry has also led to lower crop prices (ibid). 3

India's Green Revolution in the 1970s increased food grain output, allowing the nation to become self-sufficient in food grains and ward off the fear of starvation. During the agricultural intensification of the 1970s and 1980s, there was a rise in the need for rural labor, which resulted in higher rural salaries and, together with falling food prices, a decrease in rural poverty. However, agricultural growth in the 1990s and 2000s slowed down, averaging approximately 3.5% annually, and in that time, cereal yields only climbed by 1.4% annually. It is extremely concerning that agricultural growth has slowed down. The rice yields in India are roughly half those in Vietnam and Indonesia and only a third of those in China.

In recent years, farmer suicides have come to symbolize the agricultural catastrophe. In India, hundreds of distressed farmers have been killing themselves due to high levels of debt and low agricultural yields. Some analysts claim that the decline in government funding for agriculture is to blame for the current agrarian crisis. According to estimates, 320,000 farmers have killed themselves in the last 20 years, with 42 suicides each day on average. Unusual rainfall, a hailstorm, and a drought in 2015 exacerbated the farm issue. As a result, the states of Uttar Pradesh, Haryana, Madhya Pradesh, Punjab, and Maharashtra saw an unprecedented spike in farm suicides.  In this setting, social protection for farmers and agricultural support both gain increasing significance.

Social Protection For Farmers

Agriculture and social protection have been conceptualised as having a reciprocal relationship. Households in rural areas with low incomes are particularly vulnerable to idiosyncratic and covariate shocks. These dangers are frequently caused by a variety of variables, including diminishing agricultural output, restricted resource access, market exposure, and natural disasters. Social protection could be established to reduce these risks and boost the viability of agricultural livelihoods. By boosting farm production and output, agricultural policies and programmes can assist households in reducing. Small holders may be better equipped to manage risks and engage in agricultural activities if additional social protection measures are provided at the home level (such as food and cash transfers, public works programmes) (Tirivayi, Knowles and Davis 2013).

Input technology (chemicals, seeds, implements), marketing arrangements (contract farming, farmer producer companies), financial services (crop insurance and microfinance), transfers and subsidies (input subsidies), infrastructure, irrigation, and natural resource management are just a few examples of community and small-holder targeted agricultural interventions that can be used in conjunction with social protection measures (ibid:48). Initiatives for land reform, irrigation, and soil and water conservation methods improved household incomes in a number of nations. Agricultural intervention also improves household food security by lowering food costs and improving dietary quality. Farming households are able to purchase durable assets thanks to rising agricultural incomes (ibid:51). Additionally, input subsidies and market price supports help the local rural economy and rural communities to retain and grow their income and consumption (ibid:59).

Interaction Between Social Protection And Agriculture

  • DIRECT IMPACT ON FARM PRODUCTION
    • Agricultural Asset Accumulation
      • INDICATORS - Ownership and spending on Farm implements, livestock and land
    • Input Use
      • INDICATORS - Use of and expenditure on inputs and techniques
    • Labour Allocation
      • INDICATORS - Farm and off-farm labour hours, employment
    • Agricultural Output
      • INDICATORS - Yields of crops, livestock, fisheries, forest, Crop diversification, consumption of home-produce
  • INDIRECT IMPACT ON FARM PRODUCTION
    • Accumulating Human Capital
      • INDICATORS - Nutritional status, expenditure on health and education, school enrolment, attendance and completion
    • Off-farm investment
      • INDICATORS - Spending on Off-farm enterprise
    • Reduction of adverse risk-coping strategies
      • INDICATORS - Reduction in sale of assets, labour bondage, debtbondage, child labour, school drop out rate, low paid casual labour
    • Effect on local economy
      • INDICATORS - Local demand on goods and services, local employment, price and wage levels, social network and private transfers
Source. Tirivayi, Knowles and Davis, FAO Report2013:19

Subsidies

In poorer economies, agricultural input subsidies were a frequent form of policy intervention between 1960 and 1980. Input subsidies were necessary to encourage an increase in agricultural output. The majority of the impoverished population's main food grains were produced with subsidies, which were then used to increase their consumption. Subsidies helped farmers embrace contemporary farming practises or technical advancements by lowering the cost of agricultural inputs. Input subsidies, along with access to loans and extension services, reduced farmers' perceptions of the risks associated with using innovative agricultural inputs and growing techniques (Dorward 2009). As governments spend excessively and cause fiscal and macroeconomic issues, these subsidies are increasingly seen as being economically detrimental to the nation and as a transfer of wealth from taxpaying citizens to consumers and producers (ibid:2, 6). Increased interest in input subsidies has been sparked by rising food prices worldwide. These are increasingly seen as a social protection tool for less fortunate small farmers and a source of food security (ibid:7).

The World Trade Organization classifies subsidies into 4 main types. These include, 
  • a) Direct transfer of funds (grants, loans) and potential direct transfer of funds, 
  • b) Government revenue that is otherwise due is foregone or not collected, 
  • c) Provision of goods and services other than general infrastructure and 
  • d) Income or price support. Input policies play an important role in India’s Agriculture. 

Input use has increased recently as a result of these regulations affecting seed distribution, fertiliser use, energy use, water use, and farm credit. Farmers receive input subsidies for irrigation, electricity, and fertiliser. Less than 20% of operating and maintenance expenses are covered by irrigation fees, domestic and international fertiliser prices are heavily discounted, and in the majority of states, agriculture receives free or extremely inexpensive electricity (for recent reform in fertiliser subsidy see ePG entry on DBT). Some people believe that subsidies cause trade distortions.

India's national stockholding programme buys goods from farmers at markedly inflated rates compared to the market. Farmers are encouraged to boost output of subsidised commodities by such high buying prices. As a result, there are surpluses of wheat, sugar, and rice that are sent to foreign markets. India ranked first globally in the export of rice in 2013, fifth globally in the export of sugar, and ninth globally in the export of wheat. India's second-place position in the world in terms of fertile land emphasises the danger that its subsidies pose to international markets. To ensure that food security is not jeopardised, agricultural subsidies are required to make farming lucrative enough for farmers to make the necessary investments in technology to increase productivity per unit of land. India provided $ 56.13 billion in overall domestic support for the agricultural sector in 2010–11. 13.81 billion dollars of this were used to purchase public stocks for the purpose of ensuring food security.

Price Support

The purpose of agricultural price policy is to maintain a balance between the interests of farmers and consumers while reducing the impact of rising food grain prices on vulnerable populations. The Agricultural Price Policy has been effective in giving wheat and rice producers a 20% margin over their cost of production. Production, purchasing, and distribution have all benefited. In turn, farmers made technological investments and raised output. This made it possible to purchase enough goods to fill buffer stocks. The need to provide food to PDS and related poverty reduction programmes has been growing quickly. As an illustration, in 2005–2008, when maize prices jumped by 150% on international markets but only by 20% in India, APP protected the nation from supply shocks (Dev and Rao 2010).

The government announces the MSP (Minimum Support Price) for important commodities in accordance with the recommendations given by the CACP (Commission on Agricultural Costs and Prices). Recommended MSP is determined by manufacturing costs (COP). MSP is associated with increased production costs, farm lobbies, and less market price reflection. Every year during both crop seasons, the government announces the minimum support price for 25 commodities based on the CACP's recommendations. Additionally, the government coordinates the purchase of agricultural products through a number of cooperative and public organisations. The following crops are included in the MSP: Paddy, Jowar, Bajra, Maize, Ragi, Arhar, Urad, Mung, Ground Nut in Shell, Soybean, Sesame, Niger Seed, Cotton, Wheat, Barley, Gram, Masur, Mustard Seed, Safflower, Jute, Copra, and Sugarcane.

Farming yields and income have been impacted by post-economic liberalisation decreased public investment in domestic agriculture. Despite rising cultivation costs, productivity gains have remained modest. As a result, farmers are even more reliant on Minimum Support Price (MSP) support to continue production and make up for decreased incomes. Since the 1990s, increased rice minimum support prices have allowed farmers to sustain their incomes despite rising production costs (Dev and Rao 2010). Minimum Support Prices are also impacted by liberalised trade policies. Domestic food costs are impacted by high international food prices brought on by inadequate supplies. Obtaining food grains to sustain food security is challenging in such a situation. The government is compelled to increase the assistance price (wheat in 1997, 2007, 2008). Domestic politics make it challenging for the government to lower high costs when global prices decline (ibid).

The Farmer's Commission, which was established in 2006 and was headed by the agricultural scientist Prof. MS Swaminathan, had suggested that the MSP for grains be set at production cost + 50%. This was important due to the significant risk involved with smallholder farming in the context of climate change, where conditions are primarily rain-fed. 2 MSP should only be fixed at a rate of 10% over the cost of production, according to a more recent government panel (ibid). The requisite 50% over and above cost of production formula is not being used, according to recent MSP data for crops harvested in 2016–17.

International Trade Regime, The World Trade Organization

National governments' adherence to the international trade frameworks that direct such acts restricts their capacity to promote agriculture through a range of policies like those that have been outlined above. Part of the WTO's founding charter is the Agreement on Agriculture (AoA). The guidelines that control agricultural trade and production on a global scale are provided in this document. Countries' domestic strategies for promoting agriculture can be created with only a certain amount of latitude under the AoA. 4 The General Agreement on Tariffs and Trade (GATT) negotiations' Uruguay Round produced the AoA. (1986-94). Through the Uruguay round of trade negotiations, the WTO was created. The AoA headed by nations that export grains places an emphasis on agricultural deregulation and a reduction in domestic support for this industry by individual nations. Less trade barriers, in accordance with the AoA, would improve the supply of food to meet demand, improving food security. Some analysts claim that as export subsidies are permitted by the AoA, farmers may be more susceptible to the "dumping" of cheap food by transnational businesses that control the global market for agricultural commodities (see Murphy 2005). The majority of affluent nations have shown no inclination to cut back on domestic agricultural subsidies. The majority of developing nations look for adaptable agreements that would enable them to safeguard farmers' livelihoods and once more obtain access to export markets. Countries that import food look for protection against changing import prices (ibid). Farmers need protection, such as insurance programmes, because agricultural commodities are prone to boom and bust cycles as a result of international commerce, and national governments should have the freedom to control food supplies by stabilising prices. Additionally, AoA has been blamed for supporting industrial agriculture, which has adverse effects on the environment (ibid).

The three major pillars of the AoA are export subsidies, domestic support, and market access. Each of these required particular kinds of behaviours, which are described below (see Narayanan 2014). Three groups of linked actions—amber, blue, and green boxes—were created based on these components. While the amber box had measures that gave recommendations for reduction commitment, the green box interventions required minimal reductions. Measures in blue boxes constitute a specific category (ibid). Under the AoA, public food grain storage and food subsidies are regarded as green box initiatives; nevertheless, some operations, such as the process of buying and selling stock on the open market, whether domestic or international, are subject to examination (ibid:41-42).
  • MARKET ACCESS
    • Import Liberalization: conversion of all quantitative barriers to tariffs and reduction in these tariffs
  • DOMESTIC SUPPORT
    • Direct Payment to Farmers Price Support
  • EXPORT SUBSIDIES
    • Reduction of Export Subsidies Barriers to Export
Source. Based on Narayanan 2014
  • AMBER BOX
    • Domestic support measures considered production and trade distorting. Minimal supports that are allowed include: 5% of agricultural production – Developed countries and 10% for Developing countries Reduction commitments are measured as AMS (Total Aggregate measurement of Support) Domestic support that exceeds reduction commitment level are prohibited
  • BLUE BOX
    • Some Amber box supports are put in the Blue Box Special types of Conditional Subsidies tied to Production Exemption to Developing Countries
  • GREEN BOX
    • Subsidies that are allowed without conditions May include Direct Income Support to farmers Environmental protection
Source. WTO 2002, Agricultural Backgrounder/Fact Sheet

A recent WTO agreement in Bali established steps to lower trade barriers by streamlining and increasing the transparency of customs processes. India objected to the clauses that would prevent it from using the Right to Food Act's food grain subsidies to pay farmers to buy food for the poorest people. 5 Food grains are purchased in India in order to sustain supplies for the public distribution system, build up a strategic reserve of food grains, and support farmers' prices (Narayanan 2014). In India, non-product specific assistance, like as input subsidies for fertiliser and electricity, benefit low-income and resource-poor farmers and fall under the purview of "green box" policies (ibid).

Crop Insurance

A crop insurance programme called the Pradhan Mantri Fasal Bima Yojana was launched in 2016 to provide farmers with coverage against crop failure and other losses in agricultural output. A standard premium of 2% for all kharif crops, 1.5% for all Rabi crops, and 5% for all commercial and horticultural crops must be paid by farmers under this programme. Farmers would receive full insurance coverage in the event of crop losses caused by localised natural catastrophes because they are forced to pay a low uniform rate, and the government would cover the expense of paying the remaining premium (which amounts to a subsidy of up to 90% or more). The programme covers a variety of risks, including post-harvest losses, damage to standing crops, and blocked sowing and planting. The budget for this programme was increased from Rs. 5500 crores in 2016–17 to Rs. 13,240 crores in 2017–18. Everyone who cultivates the "notified crops" in the "notified zones," including sharecroppers and tenant farmers, is entitled for insurance coverage under the PMFBY. The programme is being carried out by public and accredited private insurance companies that fall under the general supervision of India's Ministry of Agriculture and Farmer's Welfare. To keep an eye on how the programme is being implemented, state and federal monitoring committees have been established. 7 In various districts, the insured amount ranges from Rs. 35000 to Rs. 75000. This programme will eventually provide insurance to 50 million farmers. Only 26% of India's cultivated area and 22% of all farmers are currently covered by crop insurance. State governments must share equally in the expense of the subsidy-premium with the Central government under PMFBY. This has resulted in PMFBY receiving a higher portion of the state's agriculture budget.

Conclusion

Even though more than half of India's 1.3 billion people work in agriculture and related industries, the farming sector's contribution to national income has been significantly dropping in India. Thousands of indebted farmers have killed themselves over the previous few decades. The lives of the poorest people are impacted by changes to the agricultural sector. Economic changes, trade liberalisation, environmental challenges, land fragmentation, climatic stress, and pest-resistance are some of the forces behind the transitions. Agrarian concerns are a major social policy concern due to the growing consequences of poverty and the availability of food. By lowering rural households' vulnerabilities and boosting their ability to resist various income and consumption shocks, agricultural development helps to ensure social protection.
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