Working Paper: Agrarian Distress in India: Possible Solutions

NO: WP-2019-017

AUTHOR: Barendra Kumar Bhoi and C.L. Dadhich

TITLE: Agrarian Distress in India: Possible Solutions


Agrarian distress in India, built-up over time, has further deteriorated recently. At the height of the farm output, Indian farmers are a disappointed lot. Despite spectacular rise in agricultural production, they continue to languish in poverty. The underlying reasons for agrarian distress in India are: a) unviable agriculture; b) ineffective Minimum Support Prices (MSP) system; c) adverse terms of trade; d) rural indebtedness; and e) inefficient value chain in agriculture. There is a need to provide medium term solutions to the problem so that sub-optimal solution like loan waiver can be avoided. Among available solutions, government procurement operation covering all major crops may not be feasible, while price-hedging mechanism through derivative instruments like forward/future trading in farm products is yet to be popular among farmers. There is a great potential to protect farmers from distress sale through a composite insurance scheme, which can cover risks arising out of both crop failure and market failure. The value chain of agricultural products needs to be completely revamped to integrate farmers directly to the ultimate consumers. Long-term solution of the agrarian distress lies in improving farm productivity by a series of measures like mass irrigation programme through inter-linking of rivers, diversification of agriculture, smart farming by using latest technology. A scheme of exit route for distress farmers may go a long way in alleviating the situation.

Keywords: Agrarian distress, crop insurance, minimum support price, inefficient value chain, smart farming, farm productivity.

JEL Code:  Q10, I13, H57, Q13, Q55, R14