In 2012, nearly 48% of farmers who needed loans got it from informal sources such as moneylenders and landlords, according to the All India Debt Investment Survey. The number has risen from 36% in 1991 and 43% in 2001.
“This puts farmers in the risk category,” said Brajamohan Misra, principal advisor, department of economic and policy research, Reserve Bank of India, who presented these figures while speaking at a symposium on ‘Science and Technology for Inclusive Development’.
Misra said a majority of small farmers borrowed from moneylenders for exorbitant rates of interest. Among farmers who owned land parcels smaller than 0.1 hectares, 85% had pending loans from such informal finance sources. Among farmers who owned farms larger than 10 hectares, only 21% had outstanding loans from informal lenders. In 2010, the task force on Credit Related Issues of Farmers said 36% of debt had interest rates ranging between 20% and 25%. Another 38% of finance was borrowed at interest rates over 30%.
Misra said Maharashtra accounted for 26% of the suicide deaths by farmers in 2012. While explaining the reason for the deaths, Misra said a study showed in Yavatmal, a district in Vidarbha, there has been consistent decline in productivity of soya beans, cotton, tur and jowar.
“Empirical analysis suggests a higher penetration of formal credit is associated with lower occurrence of suicides,” said Misra. “The way forward is to strengthen the formal credit system, extend irrigation and improve the safety net for farmers by providing crop insurance and introduce a mechanism of price stabilisation.”