The latest data on agricultural households in India, released recently by the National Sample Survey Office (NSSO) of the Ministry of Statistics and Programme Implementation, raises some worrying questions for Andhra Pradesh and Telangana. The NSS 70th round survey for January to December 2013 says that, among major states, Andhra Pradesh had the highest share of indebted agricultural households in the country at 92.9 per cent followed by Telangana at 89.1 per cent.
The numbers seem alarming. Experts in the financial inclusion space look at different dimensions of these numbers. Vijay Mahajan, Founder and Chairman of BASIX Group, which focuses on livelihood promotion, says Andhra Pradesh and Telangana have the highest per capita debt with very low share of the formal sector lending and with no microfinance. Such high indebtedness also points to public policy failure.
Notwithstanding the figures of indebtedness, what is evident is that the two states, especially the rain-fed regions of Telangana and Rayalaseema, have also had their share of adverse agro-climatic conditions that have seen crop failures at periodic intervals and even farmer suicides.
To top it all, loan waivers have been an election issue. Many argue that such measures only lead to poor credit culture. This is on top of restrictions already imposed on the practice of microfinance in the region apart from tinkering with the independent cooperatives legislation leading to what some call a weakening of the Andhra Pradesh Mutually Aided Cooperative Societies Act (MACS Act).
To microfinance practitioners, the data have given a new weapon to argue that the indebtedness is a pointer to the increasing role of informal sources of debt and was to be expected given the turn of events since 2010, when the then united state of Andhra Pradesh had clamped down on microfinance institutions on allegations they were adopting coercive practices to recover loan.
Microfinance institutions say that after this development banks stopped lending to MFIs and even cut down lending to the government-backed, bank-linked Self Help Groups, with the private sector banks almost stopping lending to this segment. Moreover, in anticipation of the elections in 2014, and the political parties promising farm loan waivers, farmers stopped loan repayments and banks cut down lending to farmers. The data on indebtedness also raises a statistical and data computation issue. While on the face of it, few are surprised that there is talk of high indebtedness in Andhra and Telangana, some numbers in the survey seem hard to believe. M.S. Sriram, Professor of public policy at the Indian Institute of Management, Bangalore, feels the data need to be "unpeeled" and studied more closely.
For instance, the average amount of outstanding loan per farm household in the category of farmers with land holdings of less than 0.01 hectares, or .0.02 acres, is Rs 2,40,900, which seems high.
"This figure for Andhra Pradesh and that for Rajasthan (which also shows farmers with small land holding having high average amount of outstanding loan per household) is not in line with the overall pattern in the numbers of the survey," says Sriram. By implication, it is difficult to believe that farming households with such low land holdings will be able to take on such high debt. But then, if the NSSO data is indeed correct and what is pointed out is really the case then, the policy makers in the concerned states need to be worried.