If overproduction is a problem for Indian farmers, how can underproduction solve it?

Came across this strange article in today’s Dainik Jagran. The writer, an economist and a former professor at IIM Bengaluru, doesn’t just advocate less production by the farmers (so that their produce becomes expensive and hence, they get more money), he also seems to be obsessed with the farmers’ desire to purchase bikes.

The article is about why it isn’t advisable to waive loans of farmers. Recently the new Yogi Adityanath government in U.P. waived off farmer loans of worth Rs. 36,359 crores. Before proceeding I would like to state that I wouldn’t dare to question the professor’s logic because obviously, he is a learned person, and he knows more about the dynamics of the Indian economy than me. I’m presenting my thoughts only as a layperson trying to over-utilise his brains just because he is fortunate to have the luxury.

The writer says, may be rightly, that waiving off farmer loans doesn’t help much. 10 years ago, the Manmohan Singh government waived off farmer loans at the national level and now the Yogi Adityanath government has waived off loans at the state level. It was a pre-election promise of the BJP government.

Even after waiving off loans, the writer says, the farmers are back to the square one, primarily because farmers these days don’t take loans to spend money on farming, they take loans to marry off their daughters and sons or to purchase bikes. Since they cannot easily get loans for the actual purposes, they obtain the loans in the guise of purchasing farm equipment, seeds and fertilisers.

This makes sense — that simply waiving off the loans doesn’t help the farmers. The very fact that they couldn’t repay the loan proves that the loan never solved the problem that it was meant to solve — making the farmer financially self-reliant. I totally agree with the writer that instead of waiving off loans and indulging in more such populist activities, farmers should be provided subsidies according to the land they own and they should also be helped get the right price for their produce. Up till here I understand the professor’s argument.

What I don’t understand is, he wants the farmers to produce less because he thinks that when the farmer produces more the rates of his produce fall because then there is lots of farm produce available. As an economist, I think he is applying the rule of “scarcity creates demand and demand increases the rates and vice versa”. According to the professor, the farmer’s problem is not that he is unable to produce more, his problem is that he is already producing more and due to that, he doesn’t get the right price for his produce. The solution, according to the professor, is scarcity, rather than abundance. This is where the professor loses me. And, the professor insists, the farmer should be able to purchase his bike.

This Wikipedia link says that most primitive agricultural methods are still being used by a majority of Indian farmers. Even if you don’t want to believe a Wikipedia link, logically you may think increasing their harvest would be better for farmers than curtailing it.

One logical reason that the professor gives is that most of the farm produce goes waste because there are no cold storage and transportation facilities available. Recently Indian farmers had to throw their potatoes on the roads because they couldn’t sell them. They are also forced to sell their produce to agents and middlemen because they need to sell their produce before it gets spoiled. But the solution is not producing less. The solution is, managing the produce better. And producing more.

In that regard, instead of waving off loans the government should spend that money on creating the right infrastructure for farmers. Farmers should be able to sell their produce either directly to the consumers, or there should be agencies and individuals that can liaise between the farmers and the processed food manufacturers.

In order to help the farmers make more money, the following solutions come to my mind (some of these might already be implemented or in the process of being implemented):

  1. I remember in one of his speeches, Narendra Modi once mentioned that the banana farmers complained to him that 15% bananas get spoiled because of bumpy roads. So yes, building better roads in rural areas would be a good investment. While that is being done, shock-absorbing packaging should be encouraged to withstand the impact on the bumpy roads.
  2. Farmers should be assigned mentors. Just because someone is a farmer doesn’t mean he knows how to do better farming. For all you know, a kid living in Lajpat Nagar, New Delhi, may know more about farming than an actual farmer toiling in the fields. These mentors can play various roles according to the current need.
  3. Develop better cold storage facilities. A few years ago, during the UPA government, people were dying of hunger and wheat was being eaten by rats. This was because the storage facilities were highly inadequate. Cold storage facilities should be established near the farming communities and farmers should be able to use these facilities at a nominal charge.
  4. Farmers should be taught to sell their produce directly. It may require some innovation but I think the day the farmers can sell their produce directly to the consumers or the companies, they will become self-reliant. The demand is always there. In one way or another, the farm produce can always be used. Farm produce can also be used for fuel. The problem is, the farmers don’t have access to the right buyers and consumers.
  5. Food markets should be better regulated. Right now, since proper regulations don’t exist or if they exist they are not implemented, most of the farmers are at the mercy of the middlemen. Sometimes these middlemen purposely delay the purchase of the produce so that the farmers get desperate and sell their produce for pittance.
  6. Farming is inefficient because a majority of farmers don’t have enough land. Heavy machinery cannot be used. Small pieces of land are over utilized and never get time to recover. Farmers should be encouraged to create communities so that, using appropriate legal provisions, they can create large farms and use heavy machinery to increase their produce.
  7. Improved rural infrastructure. Successive governments, most probably purposely, have kept our rural areas as backward as possible. Electricity is not there. Schools are not there. Roads are not there. In terms of law and order, nothing is there. No banking was available uptil now. No connection with the outside world — some villagers in Uttar Pradesh and Madhya Pradesh think that India is still being ruled by the British! Health care centres are not there. It’s just now that Narendra Modi is telling rural folks to build toilets and stop defecating in the open — no previous PM actively encouraged people to focus on hygiene. If the rural infrastructure is improved, farming conditions will automatically improve.
  8. Processed food industry should be encouraged. Processed food isn’t always bad if there are strictly-implementable guidelines. Compared to the western societies, our food industry is at its nascent state and considering that we have got such a massive market in India, the possibilities are limitless.

I totally agree that waiving off farm loans are populist schemes and they’re not long term solutions. In fact, every government indulging in such schemes is wasting the exchequer’s money just to draw political mileage. I mean, when I pay tax, I’m not paying it so that the government can waive off loans. Having said that, I think waiving off farmers’ loans is much better than allowing industrialists like Vijay Malya get away with thousands of crores of rupees.

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