Modi’s Note Ban Has Dealt a Severe Blow to Bundelkhand's Farmers

Given the lack of government support and weak institutional lending mechanisms, a demonetisation-induced supply shock in the farming sector has hit the region hard.


Villagers, many of them small and medium level farmers, wait in long queues outside the gramin bank in Mahoba, UP to withdraw cash on December 1. Credit: Hina Fathima

Jhansi: An overflowing canal gushing along the Shimariya has not helped the village fight the impact of three consecutive droughts and a flood this past monsoon. Hoping to recover the losses incurred during the long-drawn dry spell in the upcoming Rabi season, farmers and agricultural labourers of Shimariya – a tiny hamlet in Jhansi – have found themselves stranded in an unexpected spot.

“Spells of drought has forced us to look for work outside all these years. The ill-timed monsoon this year wrecked our urad (Kharif crop) but filled up our water resources after many years, raising our hopes. We thought we will recover some of our money from the wheat produce (Rabi crop). But notebandi has devastated us. Yet again, we have decided not to sow our fields. Only God can save my family from this man-made disaster,” said Balwant Yadav, a marginal farmer, while he cursed his destiny.

There was a time when the farmers who settled in this part of Bundelkhand – one of the poorest regions of North India comprising 13 districts spread across Uttar Pradesh and Madhya Pradesh – were tenacious enough to turn the rocky village terrain into one that was fit for cultivation. For years, the residents – mostly small farmers – of this largely agrarian region, have tilled their lands only for subsistence.

Water scarcity in the area over the last few years and constantly declining government support for agriculture have trapped them in an informal credit system that is managed by the Bania caste group in the area. Whatever little they earned was either spent in loan repayments or to fulfil their daily needs. With barely any savings to claim, most of them have remained outside the bank network despite their recently-opened bank accounts under the government’s Pradhan Mantri Jan Dhan Yojana.

As a result, the economy has been dependent on a cash-intensive market. A farmer usually sells his crop from one agrarian cycle to earn the capital required for the next sowing season. The month of November, therefore, is crucial as the farmers sell their Kharif crop in order to be able to sow the Rabi crop. Farmers sell urad or groundnuts and use the cash to buy wheat seeds and other essentials.

The earnings from wheat are much more dependable as it is procured by the government, unlike other crops, the prices of which are dictated by a volatile market controlled by an exploitative trader class.

Shortage of cash in the agrarian markets in Bundelkhand due to the government’s decision to ban 500 and 1000 rupee notes during the month-long sowing season has left many farmers like Yadav wondering how to pay off their debts. As November passed by without adequate cash, most of them could not sow.

 Farmers have been unable to plant wheat on time due to lack of cash to buy seeds. Many fields in Bundelkhand remain unsown. Credit: Hina Fathima

Farmers have been unable to plant wheat on time due to lack of cash to buy seeds. Many fields in Bundelkhand remain unsown. Credit: Hina Fathima

“The Bania paid us Rs 40 per kg of urad, citing that notebandi has affected him too. Usually, we never sold it for less than Rs 65. The huge losses aside, we do not have cash to sow wheat. While this [demonetisation] may erase black money, our conditions have gone from bad to worse,” said Lakhanpal Yadav, another small farmer with less than five acres of land.

“We require 16,000 rupees for sowing five acres of land. This includes the price of seeds, diesel and electricity costs, fertilisers and pesticides. The prices of all these have gone up. Banias (who also double up as private agricultural traders apart from their main business of money lending) say that notebandi has affected the supplies of these essential products,” said Shimariya’s Balwant Yadav.

While this may be a short-term disruption in the agrarian markets, the farmers have been caught off guard. In drought-hit Bundelkhand, the farmers don’t have an option of stocking the crop.

“Stocking would mean living on credit. Who would want additional burden at this time? Although the prices are low, it pays off a portion of our previous debts and helps us survive for a few days,” said Lakhanpal.

“The big farmers,” he added, “can afford to stock as their production is higher – enough to last for the next few months.”

Less than 1% of the farmers in Bundelkhand – mostly comprising upper caste Thakurs and Yadavs belonging to the OBC category – own more than ten acres of land, according to Census 2011. Referred to as the “big farmers” by Lakhanpal, a majority of them enjoy both political and economic goodwill and rule the feudal agrarian chain.

Demonetisation, however, seems to have affected them too.

“Our stocks can last only for a month. We cannot wait for the prices of urad to increase beyond the month of December,” said Satyavir Bundela in Mahakanth village in UP’s Mahoba. Bundela’s family jointly owns more than 30 acres of land. However, compared to small and marginal farmers, their debts are much higher in proportion.”

“We did not save at all in the last few years. We only produced enough to consume. Because of a good rainfall this time, I got a loan of almost ten lakhs from the market at a 15% interest rate. Now notebandi has destroyed us. However hard we try, we will not make profits. Our previous crop sold for much less than the standard prices, and at the same time, our input costs have doubled because of the notebandi-induced black market,” said Bundela.

Most farmers The Wire spoke to in the five districts – UP’s Mahoba, Jhansi and Banda and Madhya Pradesh’s Chhatarpur and Tikamgarh – narrated similar experiences of having been hit by the government’s demonetisation move in one way or another.

For instance, in every village, a few farmers risked sowing their wheat crop. But in order to do that, they had to get loans, which further added to their debts.

“With wheat, we have an assured buyer. The government procures the crop. And even if we do not make profits, we will not lose anything. And if we make a little profit, we may be able to repay our debts,” said Zahid Khan, a farmer in Chandranagar village of Uttar Pradesh’s Banda.

His decision to sow wheat, however, backfired. With inadequate supplies of fertilisers and pesticides in the market, the cropping pattern has suffered. “The 4,000 rupees that I loaned was not enough. After I used the amount to buy seeds and sow, it took me another week to arrange Rs 5,000 for pesticides and fertilisers. Because of this, I could not water the fields on time. This affects the final crop to a huge extent. I know the crop will not be a good one but I am still pinning my hopes on it,” Khan said.

Another resident of Chandranagar, Ramesh Chandra, said that he was given old notes when he sold his crop. “The Bania agreed to buy my urad at an extra five rupees if I accepted old notes. I deposited all the notes in my bank. But I can’t withdraw as the bank does not have cash for the last seven days, so I could not buy diesel to pump out water from the canal. A seven-day delay in watering the crop is bad enough for the crop. We have to take utmost care of the crop in the first month of the cycle,” he said.

Purane chal nahin rahe, naye mil nahin rahe (Old notes are not valid anymore, new notes are not avaliable). What should we do?” asked Chandra.

Change in cropping pattern 

Facing this acute crisis, many farmers of the region have shifted to mustard farming, which requires much less water but has a greater input cost. “We will be on the brink of death if our crops fail. So we have sown mustard in half of our fields. Mustard requires more cash but it is not as vulnerable to weather conditions like wheat. Most of our wheat crop may be a disaster as nothing went as planned this season. Mustard requires only one-time watering and has greater value in the market,” said Purab Khushwaha, a farmer in Banda.

Mustard farming requires almost double the cost if compared to wheat. Additionally, the crop produce is much lesser in quantity. It also means that the debts they incur are much higher. Yet, many farmers across Bundelkhand have chosen to take chances as they face this seesaw situation brought upon by demonetisation – like one last great risk before they surrender. 

In Chhatarpur, most farmers said that they were able to get new loans only after mortgaging a part of their land to the Bania. As most farmers suffered huge losses from the previous crop, a significant section in Jhansi was forced to use non-certified seeds that will affect quality and quantitiy of the next wheat crop.

In Tikamgarh, a substantial population has moved to cities in search of work. In all these districts of Bundelkhand’s hinterland, the agrarian community has fallen prey to burgeoning nexus of commission agents and traders.

With hardly any support from the government and an abysmal network of institutional lending mechanisms, a supply shock in the farming sector – induced by demonetisation – has wrecked many lives in Bundelkhand. The disrupted economic cycle may benefit the consumers in cities – as prices of finished products may dip – but the reduced prices of crops have taken a huge toll on India’s agrarian community.

Ek mahina pahle ya ek mahine baad hota toh behtar hota. Sarkaar ne toh kahin ka nahin choda (Demonetisation should have happened either one month before or one month after. The government has left us in tatters,)” was what echoed throughout Bundelkhand.

As farmers wondered about ways to come out of this vicious network of systemic exploitation, the government’s anti-rich posturing on demonetisation seem to have disintegrated as the trader class in Bundelkhand has used the crisis to further deepen its fangs.

Meera Devi and Geeta are reporters with Khabar Lahariya.