The great unravelling: Cotton suicides

The Economist
January 20, 2007

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Is globalisation killing India's cotton farmers?

RAW cotton from the fields outside Wardha rolls slowly into town, roped to the back of bullock carts. The animals' horns are painted as brightly as the trucks that rattle past them. Their cargo is off-loaded in the forecourt of a ginning plant, where it collects in steep white mounds that look much like the snowscape of a fancy Swiss ski-resort.

Only one in 12 of India's farmers has ever heard of the World Trade Organisation (WTO). The mostly illiterate cotton farmers of Vidarbha—the north-eastern corner of Maharashtra, where Wardha is located—surely count among the other 11. But even the most exalted of trade officials has heard of them. In the past 18 months more than 1,200 farmers in this, the cotton bowl of India, have taken their own lives to escape debts to money-lenders.

These men have become the most poignant example of India's "agrarian crisis". This was widely blamed for the previous government's defeat in the 2004 election and overshadows India's timorous position in the Doha round of global trade talks, where it heads a group of more than 40 poor countries that want to shelter their farmers from foreign competition. Last year Oxfam, a charity, published a study arguing that the farmers' plight was worsened by their "indiscriminate and forced integration" into an "unfair global system".

The Vidarbha suicides have many causes, most of them homegrown, says M.S. Swaminathan, the father of India's green revolution. The farmers borrowed money at punitive rates, so they could sink wells and buy costly "biotech" cotton-seeds. But diesel for the pumps leapt in price, and the seeds proved ill-suited to small plots, fed mostly by rain. If the crops fail, "a man loses hope," Mr Swaminathan says. "He has the moneylender waiting at the door every day and taunting him."

None of this is globalisation's fault. But farmers have also been hurt by the low world price of their crop, which has fallen by more than a third since 1994. Last season the state government cut the guaranteed price it paid for cotton from about 2,000 rupees ($56) per 100kg to 1750.

Prices are low partly because cotton is so heavily subsidised by rich countries, principally America. The Doha round aims to cut these handouts "ambitiously" and "expeditiously". If they were cut completely, it might add about 13% to world prices, according to one recent estimate by two World Bank economists. But the Doha round is unlikely to be so slick. A more likely scenario, in which cotton subsidies are cut by a third (and export subsidies eliminated), would add less than 5% to the price.

In the meantime, India's government could impose a "countervailing" tariff on dumped cotton. But cheap fibres please its textile industry, which is keen to take advantage of the end in 2005 of the old global quota regime. India's cotton tariff is just 10%, much lower than its tariffs on other commodities such as sugar. And exporters of yarn and cloth don't even pay that. Cheap cotton keeps the textile mills humming: were subsidies to be removed, India would lose out overall by the equivalent of about $84m, according to the World Bank economists.

In the abstract, the answer to the farmers' distress seems easy: move from growing cotton to weaving it in factories. But India's onerous labour laws inhibit industrial employment, and the lack of a safety net leaves farmers clinging to their marginal patches of land.

There is a deep historical irony in all this. India's long-fibre cotton was introduced by the British in the 19th century to feed the Lancashire cotton mills. Their cheap cloth put India's own weavers out of business: artisans were "thrown back on the soil". Today India's textile-makers are enjoying a renaissance. If only more of its farmers could escape the soil.

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