Agriculture Policy

In Agricultural Households, Debt Amount and Incidence of Indebtedness Rises with Size of Holdings

Rice transplantation in Haryana. Photo by Vivian Fernandes

While the average debt of agricultural households was Rs 74,000, among those possessing 4-10 ha, it was Rs 3.27 lakh and in the 10 hectares plus category nearly Rs 8 lakh. Agricultural households in AP had the highest average debt at Rs 245,000 followed by those in Kerala, Rs 242,000 and Punjab, Rs 203,000.  Vivian Fernandes reports.

Indebted households reported higher levels of debt between two rounds of the national sample survey conducted six years apart with urban indebted families reporting an average debt of Rs 5.37 lakh at the end of June 2018, against Rs 3.78 lakh in 2012.

The debt of indebted rural households rose from Rs 1.03 lakh to Rs 1.71 lakh between these two dates. It may have been higher or lower in the intervening period. Families in debt were 22 percent of rural households, unchanged from the last time, while those in urban areas increased by four percentage points to 35 percent.

Another survey conducted alongside showed that the average outstanding debt of agricultural households in 2018-19 was Rs 74,121. Of the agricultural households, 50.2 were indebted. The indebtedness rose with an increase in size of holdings. Those owing 10 hectares and more had loans payable worth Rs 7.91 lakh. They accounted for 81.4 percent of the households in the category. Agricultural households owning between four and 10 hectares had Rs 3.27 lakh in loans payable and their share of their category of households was 79.3 percent.

In 2012-13, the average outstanding debt of agricultural households was Rs 47,000. Fifty percent of agricultural households said they were indebted. Those owing 10 hectares and more reported outstanding debt of Rs 2.9 lakh while those in the 4-10 hectare category said they owed Rs 1.83 lakh on average.

Agricultural households are those which report their principal source of income to be from crop cultivation or farming of animals and at least one member of the family is engaged in agriculture during the previous 365 days and the household gets at least Rs 4,000 more a year from agricultural activities. A household is a group of persons eating out of a common kitchen.

The number of agricultural households had grown to 93 million in 2018-19 from 90 million between 2012 and 2013. Their share in total rural households (172 million) has fallen to 54 percent from 57.8 percent of 156 million rural households in 2012-13.

Agricultural households reported their average monthly income in 2018-19 was Rs 8,337. Of this, 42 percent came from crop production and farming of animals. In other words, more than half of their income came from wages, leasing out of land and non-farm activities. In fact, marginal farmers, or those owning up to one hectare (2.5 acres) who constitute three-quarters of rural households get less than half of their monthly income from crop cultivation and animal husbandry. This is a big change from 2012-13, when 60 percent of the income of agricultural households came from crop cultivation and animal husbandry.

Assets were more than liabilities for both rural and urban households, but the share of liquid assets, like shares and bank deposits, was a fraction of the total. Rural households on average had 4.5 percent of their total assets as bank deposits. Among urban households, it was 9.2 percent, with a sliver in the form of shares. The rest was in bank deposits.  At end June 2012, liquid financial assets like deposits and loan receivables were less than 2 percent of the total in rural areas and 5 percent in urban areas.

The gap between rural and urban households in terms of value of assets owned has narrowed between the two rounds.  In 2012, urban households held assets worth 123 percent more than those owned by households in rural areas. In the latest survey, whose results were published earlier this month, the difference in asset values was 70 percent.

In 2012, a rural household held assets worth Rs 10.07 lakh. These rose by 58 percent to 15.92 lakh in 2019. The average urban household’s asset value has grown by 18 percent during this time to Rs 27 lakh. The asset prices have not been adjusted for inflation, so one cannot say in real terms how better off they are.

In 2012, indebted cultivator households had 73 percent more debt than non-cultivator ones.  Cultivator households are not the same as agricultural households. Since anyone who cultivates 20 square metres or more is considered a cultivator, even kitchen gardening qualifies. In urban areas, indebted self-employed households had 35 percent more debt than the others.  Thirty one percent of rural households and 22 percent of urban households were indebted.

Among states, assets owned by Haryana’s rural households were worth nearly three times the all-India average, reflecting the value of land on account of its productivity and well as proximity to cities.  Punjab came close, followed by Karnataka and Uttar Pradesh, whose average worth was a little more than the national average. Fifth in the list was Telangana.

Among urban households, the assets owned by those in Maharashtra were worth 1.5 times the national average, followed by those in Kerala, Haryana, Gujarat and Uttar Pradesh.

While almost all rural household owned assets, the average value of assets held by scheduled castes (Rs 1.3 lakh), scheduled tribes (1.89 lakh) and Other Backward Castes (Rs 2.12 lakh) was much lower than that held by the upper castes (Rs 4.05 lakh) in urban areas.  This was the case in rural areas as well, except that the assets were worth much less.

When surveyed in 2012, the lowest 10 percent of rural households had on average assets worth Rs 25,071. Their urban peers had nothing by way of assets – just Rs 291, perhaps because durables are not considered assets for the purpose of the survey. Bullion, gold and silver ornaments and commodities held in stock are not considered assets for the purpose of the survey as their value cannot be determined accurately.  Land and buildings, farm and transport equipment, and wholly owned household enterprises were considered to be assets.

(Top photo: Migrant workers transplanting rice in Haryana. Photo by Vivian Fernandes)