Why are Indian farmers poor?
In a country such as India, just 8% of the population is responsible for growing crops to feed the entire nation. With figures such as these, the profits made by the farmers should be quite large. However this is not the case as according to a recent study, 36.2% of the farmers in India fall in Below Poverty Line category (expenditure below Rs. 32 in a month for rural areas).
This would lead us to the question of where these profits go.
In India, farmers incur huge production costs in order to meet the demand for crops. But in order to distribute the crops to the population, there are middlemen, who purchase from the farmers and sell to the consumers. This seems to be pretty normal considering that most markets function in the same manner. However, a majority of the farmers are uneducated or have prior debts, which force them to sell their crops to the middlemen at extremely low rates. As a result of this, they end up receiving poor prices for their crops and hence hardly make any profits.
The middlemen purchase the food products for throw away prices but sell the same at high prices to the consumers. As a result, the cost of the farm product when it reaches consumers increases.
The high production costs as well as the low selling prices not only affects the profits being made by the farmers, causing a majority of them to fall in the BPL (Below Poverty Line) category, but also discourages people from entering the agricultural sector.
It can be concluded that in the Indian agricultural industry, the real profits are made by the middlemen. Elimination of the middlemen and connecting the farmers to the consumers, directly or through a single agency, would greatly benefit both the farmers and the consumers.