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From Credit To Land Holding : Challenges Faced By Indian Farmers 

India, an agrarian economy, relies heavily on its farmers. Among these, small and marginal farmers who account for 86.2% of Indian farmers, owning less than 2 hectares of land, form the backbone of the country's agricultural sector. Despite their crucial role, they face numerous challenges that hinder their economic growth and overall well-being. This blog explores the economic, social, and financial challenges faced by small and marginal farmers in India. Economic Challenges faced by Indian farmers Social Challenges faced by Indian Farmers

Economic Challenges faced by Indian farmers

1. Fragmented Land Holdings

Small and marginal farmers often possess fragmented and scattered landholdings, making it difficult to achieve economies of scale. This leads to inefficiencies in farming operations and higher costs per unit of output. Studies indicate that the average landholding size in India is shrinking, which exacerbates these issues. 

The average size of operational holdings has decreased from 2.28 hectares in 1970-71 to 1.08 hectares in 2015-16. This decline is attributed to the division of land among heirs, a process that continues across generations, resulting in smaller and more fragmented plots. Larger land units allow for better resource management, use of advanced machinery, and implementation of modern agricultural practices.

2. Low Productivity

Due to limited access to modern farming techniques, quality seeds, and fertilisers, the productivity of small and marginal farms remains low. According to a report by the Indian Council of Agricultural Research (ICAR), the yield per hectare for many crops in India is significantly lower compared to global standards. 

Small and marginal farmers often do not have access to certified seeds. They either use seeds saved from previous harvests or purchase cheaper, uncertified seeds, which may have low germination rates and are susceptible to diseases. The adoption rate of certified seeds among small farmers is considerably lower than that of their larger counterparts, contributing to reduced crop productivity.

3. Climate Change and Environmental Degradation

Irregular rainfall, extreme weather conditions, and declining groundwater levels affect crop yields and increase the risk of crop failure. The International Food Policy Research Institute (IFPRI) has highlighted how climate change impacts Indian agriculture, stressing the need for adaptive measures.One of the most immediate effects of climate change is the alteration in rainfall patterns. India's agriculture is highly dependent on the monsoon season, and any irregularities can have devastating effects on crop production. The India Meteorological Department (IMD) has observed that the monsoon season has become increasingly unpredictable, with instances of both droughts and floods becoming more frequent.The combined effects of irregular rainfall, extreme weather, and declining groundwater significantly impact crop yields. According to a study, climate change could reduce India's agricultural productivity by up to 25% by 2050 if no adaptive measures are taken.

Social Challenges faced by Indian Farmers

1. Lack of Education and Awareness

Many small and marginal farmers lack access to education and agricultural training, limiting their ability to adopt improved farming practices and technologies. This knowledge gap hampers their productivity and ability to innovate.A lack of education translates directly into a limited understanding of modern agricultural techniques. Traditional farming methods, often passed down through generations, may not incorporate advancements in technology and sustainable practices. For instance, many farmers still rely on age-old methods of irrigation, which are less efficient and more water-intensive compared to modern drip irrigation systems.

2. Social Inequality and Marginalisation

Social hierarchies and caste-based discrimination often marginalised small farmers, particularly those from lower castes and tribal communities. This social marginalisation affects their access to resources, markets, and government schemes. This research paper suggests that caste-based social segregation manifests in various spheres of life, and perpetuates economic inequality and oppression. 

3. Migration and Labour Shortages

Economic instability in rural areas forces many farmers to migrate to urban centres in search of better opportunities. This migration leads to labour shortages during crucial agricultural seasons, impacting farm operations and productivity. Indian rural output has increased by almost seven times—Rs. 3,199 billion to Rs. 21,107 billion at 2004–05 prices—but the share of agriculture in rural income has reduced from 72.4% to 39.2% (Chand, Srivastava, & Singh, 2017).

Financial Challenges faced by Indian Farmers

1. Limited Access to Credit

Access to formal credit remains a significant challenge for small farmers. Many rely on informal lenders who charge exorbitant interest rates, trapping them in a cycle of debt. A report by the Reserve Bank of India (RBI) indicates that despite various schemes, a significant proportion of small farmers still lack access to institutional credit. Investing through Rang De has a significant role in ensuring credit caps are bridged and our farmers prosper. 

2. High Cost of Inputs

The rising cost of agricultural inputs such as seeds, fertilisers, and pesticides adds to the financial burden of small farmers. Without sufficient financial resources, many farmers resort to suboptimal input usage, further reducing their productivity and income. Credit also plays a role in safeguarding Input costs, delay in sowing season or failure to procure essential input materials can lead to a loss making season which would be very difficult for the farmers to recover from. For example, crops like wheat and rice have specific sowing windows that, if missed, can lead to reduced yields. A one-week delay in wheat sowing can lead to a yield reduction of up to 15%.

3. Market Access and Price Fluctuations

Small farmers often lack direct access to markets, forcing them to sell their produce through intermediaries who take a significant share of the profits. Additionally, they are highly vulnerable to price fluctuations, which can drastically reduce their income. The Food and Agriculture Organization (FAO) discusses how market access and volatility impact smallholder farmers globally.

Rang De Social Investors have backed farmers by funding loans for storage and warehouse access as well as credit for farm inputs. This results in reduced distress selling as farmers know their harvest is safeguarded.

The challenges faced by small and marginal farmers in India are multifaceted and require a concerted effort from various stakeholders, including the government, private sector, and civil society. Addressing these challenges is crucial not only for the well-being of farmers but also for the overall food security and economic stability of the country.

The economical challenges can be largely mitigated through access to tailored loan products and affordable credit.

Invest in Indian farmers today at and give them access to credit that can transform their livelihoods. 

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3 days ago

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