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Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

India Today on cotton farmers

I have been playing on my Asus Padfone (review to follow) with an app called Zinio, which lets users buy electronic versions of print magazines. It came with a free sample of the November 2011 edition of India Today. As far as I can tell the magazine is run and written by Indians. According to Wikipedia it is published in Hindi, Tamil, Telugu and Malayalam as well as English. So I imagine it provides some kind of snapshot of the opinion and thinking that is going on inside India, rather than an outsider’s view. The cover story was about cotton farmers who are committing suicide because they can not pay their debts. A boxout by Dhiraj Nayyar entitled “Government the Culprit” reads:

Rahul Gandhi has a straightforward explanation for why farmers in Vidarbha commit suicide. Speaking on the perils of globalisation on October 18, he said, “The farmer in Vidarbha drinks pesticide as global prices tumble.” The economics behind the suicides of cotton farmers in Maharashtra is more complex.

Contrary to Rahul’s claim, it is the Government which has done more to depress the prices of cotton than the international market has. The Government has imposed numerous restrictions on the export of cotton since April 2010. This has led to a decline in the domestic price that farmers get.

The use of genetically modified Bt cotton has been at the centre of controversy, with activists blaming it for the plight of farmers. Evidence suggests that Bt cotton has been good for farmers. A position paper published by the Foundation for Biotechnology Awareness and Education, an NGO, quotes five independent academic studies conducted after the launch of Bt cotton in 2002, that say that Bt cotton has increased yields in India by 30.9 per cent to 63 per cent. The increase in profit to farmers, according to these studies, has ranged from 50 to 110 per cent over non-Bt cotton.

This seems like sound thinking so far. I wonder why the Indian government would restrict export of cotton.

While Bt cotton is resistant to pests, it is not resistant to droughts. So crops still fail.

In normal course, farmers are entitled to a concessional financial bailout from the local administration or public sector banks. They don’t always get it. “The administration will only help if the farmer was using a seed approved by the Government. A lot of farmers use unapproved seeds”, says [agricultural economist Yoginder] Alagh. By his estimate, there are 20 large firms and anywhere between 200-300 small firms which sell Bt seeds. Most small firms aren’t Government approved but sell seeds cheap. Banks are usually reluctant to lend to indebted farmers because they lack collateral. That sends farmers into the clutches of moneylenders who charge between 25 and 40 per cent interest instead of the 7-9 per cent charged by banks. It isn’t Bt cotton that has failed farmers. It is the failure of back-up systems that has.

I am not so sure about this appeal to government bailout schemes. The implication here is that the government is wrong to favour seeds from certain suppliers. There may be rational reasons for doing so, such as seed quality, or there may be political connections with certain suppliers. I imagine that a free market solution, such as insurance or futures trading, would be more likely to make only rational and proportional restrictions. Could the government scheme be crowding out such solutions?

In any case, I am encouraged to detect a somewhat pro-free-market stance in a mainstream magazine in India.

4 comments to India Today on cotton farmers

  • I think there’s a fair amount of free-market sentiment among educated Indians as a result of bitter experience; they’ve had the “Licence Raj” and their efforts at import substitution between Independence and the 90’s, and they know how it ends in stagnation.

    Unfortunately the dismantling of the Licence Raj is an incredibly drawn out process, resisted at every turn by vested interests and punctuated by reversals when the monster advances again under some new disguise – in this case environmental, I’d guess.

    Probably the malign influence of western NGOs is also present.

    Still, as you say, good to see this article.

  • 1. Governments resist exports of raw material because the profits/jobs/progress in finishing the raw material happen in another country. In India, this has historically been a problem, a century ago the cotton was shipped to England and returned as cloth and clothing which English workers and companies made and re exported.

    2. Suicide over debt, India needs those Western values where the debtor just blows it off!

  • staghounds

    Per Gandhi:

    # English people buy Indian cotton in the field, picked by Indian labor at seven cents a day, through an optional monopoly.
    # This cotton is shipped on British ships, a three-week journey across the Indian Ocean, down the Red Sea, across the Mediterranean, through Gibraltar, across the Bay of Biscay and the Atlantic Ocean to London. One hundred per cent profit on this freight is regarded as small.
    # The cotton is turned into cloth in Lancashire. You pay shilling wages instead of Indian pennies to your workers. The English worker not only has the advantage of better wages, but the steel companies of England get the profit of building the factories and machines. Wages; profits; all these are spent in England.
    # The finished product is sent back to India at European shipping rates, once again on British ships. The captains, officers, sailors of these ships, whose wages must be paid, are English. The only Indians who profit are a few lascars who do the dirty work on the boats for a few cents a day.
    # The cloth is finally sold back to the kings and landlords of India who got the money to buy this expensive cloth out of the poor peasants of India who worked at seven cents a day.

  • petronius

    Besides the issue of keeping the cotton cloth industry at home,could it be that the Indian Government doesn’t want to use GMO cotton for export, lest hippie-yippie Eurogreens refuse to wear the satanic fabric against their milk-like skin?