The American media has largely ignored the biggest news story of the year. So, unless you watch “The Daily Show” or “Fareed Zakaria GPS,” you probably don’t know this: India had an election. Narendra Modi, the new prime minister, won in a landslide. Modi, however, is extremely divisive. In 2002, more than a thousand Muslims were killed in sectarian violence in Gujarat. Modi was the chief minister of that state. While every investigation into his role in the tragedy — including one led by the Indian Supreme Court — has found him innocent, some remain convinced of a cover up. If Modi is to unite the country behind him, he must start his term by tackling an issue that crosses religious and economic divides. While India offers many urgent problems to choose from, Modi should address farmer suicides first.
There are two reasons for this. First, an Indian farmer commits suicide every 30 minutes, according to a 2011 Center for Human Rights and Global Justice report. This is a tragedy for millions and an embarrassment for India’s claim to global leadership. Second, while the problem has festered for years, analyzing the underlying cause shows it is absolutely — and in part, easily — solvable. So, why is there an epidemic of farmer suicides in India?
When I first started analyzing the problem, a strange pattern emerged. While farmer suicides can increase during years of bad harvest, we have, surprisingly, also seen spikes in years when production is above average. The economists reading this must think the reason is pretty obvious; increasing supply with constant demand lowers prices and could, on average, leave farmers worse off. This was a viable explanation back when India had export restrictions but today, if there is a large increase in grain supply, farmers can export the grains. Supply shocks should not hurt prices. What, then, is the real culprit?
In the military, there is the term “friendly fire,” when one accidentally shoots at allied forces. “Friendly fire” is also common in policy making. Policies, often with the best intentions, end up hurting the very people they seek to help. An urban legend circulating in Nepal captures the problem. A charity group decided to help Nepali villagers buy cows. Cows are an amazing resource for the poor, because they provide nutrition with minimal storage and manure, all at the relatively low cost they require to be fed. Getting cows to poor villagers sounds pretty good in theory, but in actuality it was a disaster. When rains wiped out roads connecting the villages to the towns, the town lost its opportunities for profit through sale. Further, Nepal is a highly patriarchal society in which girls have just begun to attend school. When the cows arrived, the girls were removed from school to tend to the cows instead! This story illustrates how “friendly fire” can arise from well-intentioned policies.
The Indian government buys large quantities of the country’s agricultural output at above-market prices. The problem is that the government has limited storage facilities for grains. So in years when output is high across the country, the government buys less grain from farmers as its storage facilities fill up. Desperate farmers are then forced to sell their output at short notice, often to private traders at very low prices. Also, based on the government’s promise to buy their output at a high price, farmers take on loans to use expensive fertilizers and pesticides. When the government fails to purchase as promised, farmers find themselves in deep debt and often kill themselves by drinking the same pesticides they used to raise output. This explains the spike in suicides when harvests are good. The solution? Increase storage facilities, improve the ability to export at short notice and institute a loan forgiveness program for desperate farmers. Finally, extending the reach of government banks and credit facilities should also be a priority. Many farmers are forced to take loans at exorbitant rates from local loan sharks because government banks are not available or don’t lend enough.
These three policies will provide an effective start to ending a tragedy that India cannot allow or afford if it is to take its rightful place in the global leadership.
