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Scale Neutrality in Indian Agriculture
Marginal and small farm sizes constitute more than 85% of the operational holdings in India. Several concerns regarding the sustainability, efficiency, access to formal sources of credit and the scale neutrality of such credit plague the smallholders. This study finds that the smallholders are efficient but the returns to them are woefully low, which threatens their sustainability. Further, the smallholders have to rely more on non-institutional sources for their credit requirement and often with a greater interest burden. In addition, the credit provided by formal sources is not scale-neutral. This posits a difficulty for policy praxis, which must urgently address these issues plaguing the smallholders.
This is a revised version of a working paper, “Scale Neutrality in Indian Agriculture” (Mishra and Singh 2019), and is dedicated to Subir Gokarn who had suggested the relevance of such a study. The authors thank S Mahendra Dev for encouraging them to take up this study. They also acknowledge Vaishnavi, who provided research assistance to help process credit-related data. The authors are grateful to the staff of Nabakrushna Choudhury Centre for Development Studies, Bhubaneswar, who facilitated the necessary logistics. They are also grateful to B M Misra, Rajiv Ranjan, and Satyananda Sahoo for their encouragement and support. Additionally, they would like to acknowledge the comments from D Narasimha Reddy and Sarthak Gaurav on an earlier version, and those received as part of the editorial process. The views expressed in the paper are those of the authors and are not to be attributed to the institutes/organisations that they have been affiliated to or associated with.
There is a persistence of crisis in Indian agriculture.1 The crisis can be analytically separated into two categories: the agrarian and the agricultural. Some aspects of the agrarian crisis are the declining share of the pie for those dependent on agriculture for their livelihood; relatively lower farm incomes such that in 2012–13 the farm sizes representing nearly 70% of farmer households had an income that was lower than their expenditure; high incidence of food and nutritional insecurity with India ranking 100 out of 119 countries in the 2017 global hunger index; and continuing farmers’ suicides. At the same time, some aspects identified as the agricultural crisis are lower or plateauing of growth in agricultural production, the widening gap between agricultural and non-agricultural sectors, increasing risk and vulnerability, and credit- or debt-related issues.
A thin line separates credit and debt. Credit is important for an enterprise as it facilitates its functioning. Credit, at times, may be required for day-to-day activities (working capital), but is a necessary requirement for expansion—both vertical (taking up more and more activities in the value chain) and horizontal (setting up of the activity in more and more locations). Hence, for any enterprise, it is important that the credit provided is adequate, timely and serviceable. In fact, inadequate and untimely credit would make the credit non-serviceable, but there could be other reasons also. Once credit is non-serviceable, it becomes a matter of concern—a debt, which is a burden for the debtor and adds to the non-performing assets of the creditor.
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