Q.45 “Institutional lending does not provide any safeguard to farmers’ suicides caused by bankruptcy and indebtedness”. Examine with illustration.

Ans. Farmers’ suicides have been a major concern for the country. Bankruptcy and indebtedness have been cited as a major causes for it—as per the latest data (NCRB-2015), accounting for around 37 per cent of all suicides by farmers. By surveys and studies, local money-lenders were usually portrayed as the villain.

But as per the latest data, 80 per cent of the farmers who committed suicides in 2015 due to ‘bankruptcy or debts’ had borrowed money from institutional sources (banks and registered microfinance institutions). Besides, the country has seen a threefold increase in the famers’ suicide due to bankruptcy and indebtedness within only one year period (from 1163 of 2014 to 3097 in 2015). In 2015, a total of 8007 farmers committed suicides due to various reasons. It was for the first time that the NCRB categorised farmers’ suicides due to debt or bankruptcy based on the source of loans.

It means, the believe that institutional lending is better than local money- lenders and can be more inclusive has proved to be partially wrong—such lending may be more inclusive but it may turn out to be equally bad (or even worse) for the farmers. As institutional lending lacks human touch its nature of hardship could be even higher in comparison to the local money-lenders.

Looking at the current scenario only the size of fund allocated by the government for agriculture credit does not look sufficient. India needs to strengthen other support systems such as—enhancing the farm income together with expanding the agriculture insurance in a speedy manner.

Note: The Model Answers have been prepared by consulting a restricted list of references only to make them relevant and useful for the competitive

examinations conducted by the various government bodies. Following main references have been consulted: various volumes of Economic Survey; various volumes of India reference manual; last four volumes of the India Development Report. Ministerial sources, websites of RBI, the Planning Commission and NITI Aayog.