Is it cruel or stupidity offering financial advice to a marginal farmer!

In The Times of India dated December 5, 2016 under Personal Finance there is an article titled “Help the less privileged” with subtitle “It’s time for the honest to reap monetary rewards” written by one Uma Shashikant, Chairperson, Centre for Investment Education and Learning.
(Original article)

First of all, let us look at the profile of Dr Uma Shashikant listed in the website of CIEL.


Dr Uma Shashikant

Uma works out of Atlanta, USA and has earlier
– worked with Indian Institute of Capital Markets where she trained ministers, bureaucrats, regulators, fund managers, analysts, bankers and investment advisors,
– then worked with Prudential ICICI Mutual Fund
– followed by work as Chief R&D Officer at ING Vysya’s Multi_manager Division
– she has been on several committees and working groups in mutual fund industry

This glorious background gives her the authority and responsibility to offer financial advice to a marginal farmer. This article talks about “Babaji, our driver of years”, who visited Uma’s family in Mumbai recently. Apparently, Uma was on a visit from US or one of her family members informed her about Babaji’s visit over email, facebook or whatsup.

According to Uma, Babaji worked as a driver for their family and then settled in the village doing farming with 5 acres of land. She terms him a landowner, which is technically correct, but as she correctly mentions this puts Babaji in the glorious category of “marginal farmer”.

According to this report ( someone like Babaji holding 5 acres land falls within the 1.01-2.00 hectares of land ownership category (1 hectare = 2.5 acres). Let us look at the economic status of such a farmer. As can be inferred from Uma’s article, Babaji is meant as representation of a small property owner, not a concrete person, hence our exercise using statistical average is valid.

Farmers in this bracket earn a monthly income of Rs 4,209 from cultivation and Rs 818 from farming of animals. Babaji family’s total consumption expenditure per month is at Rs 6,457 which is Rs 1,430 more than their total income (Rs 5,027) from farming activities. Thus, Babaji is not a proud land owner living off the fruits of his family labour and bounty offered by land, he (or his wife or his sons) work for wages and earn as much as Rs 1,728 to make up the shortfall. Adding this wage income leaves the family finances with a net surplus of Rs 298.


A typical Indian farmer tilling his land.

So, Babaji is not earning any profit from farming, and is essentially a wage earner, either working on his own land or working for someone else.

Now, being a hard working and frugal family, they also earn about Rs 593 per month from non-farm business. We can glean from Uma’s report that the pickle business of Babaji’s wife is the secret behind this princely earning. This boosts the family savings to Rs 891 per month (Rs 7,464 per year).

This is all about Babaji’s income and expenses. He has sons in school dreaming of becoming doctors and engineers. That means, Babaji should be saving for their education expenses, (upto Rs 5 lakh for engineering studies and upwards of Rs 40 lakh to study medicine for fees alone). How Babaji should go about doing it, with his income deficit of Rs 837 every month, Uma fails to enlighten us.

In the mean time, he should take care of any sudden medical expenses, ever increasing school fees and expenses on family function. Let us assume all that is covered under Rs 6,457 consumption expenditure. That means this family of 4 spends about Rs 1,614 per person on food, clothing, transport, education, healt care, communication and entertainment. That works out to Rs 53 per person per day. They are definitely above Rangarajan poverty line of Rs 32 per person per day. This is less than a dollar a day per person for the family.. However, even at this low level, they are well above 36.3 crore others who are below that level. (see report)

Imagine a Rs 53 for all expenses paid day in a village!

Let us dig a little deeper and look at more statistics. There are about 1.5 crore Babaji’s in this country who hold 1.01-2.00 hectares of land. Furthermore, there are 6.1 crore farmers below this level of land holding whose total income from all sources is less than total consumption expenditure. Babaji’s segment and those below make up 86.6% of the number of agricultural households in our country.

Let us come back to Babaji’s family. His family makes a net investment of Rs 422 in productive assets every month (that is buying a new hoe or a few baskets or any other agricultural implement or pickle making utils).

With an annual household income of Rs 88,176 Babaji’s family is likely to have 62% of their annual income as outstanding loan of Rs 54,800. When will they repay this loan, when will they start saving, we will never know from Uma’s writeup. She piously wishes Babaji’s wife to “start her own food business” and to “see herself pulling the cart as an equal with her husband”


Wages for family labour itself not realised for majority of farmers in India.

To quote the above cited RUPE report

“The 2012-13 data show that, the smaller the landholding, the greater the dependence on the moneylender…. It is well known that interest rates on loans from moneylenders are at least 2 per cent a month, and are generally higher. Such rates of interest are sustainable for high-return speculative activity, but are ruinous for productive activity, especially for agriculture, with its low and uncertain returns.”

To this marginal farmer family Dr. Uma Shashikant opens her bag of consulting advices. Not a single word about how to ensure remunerative price for the farm produce, or how to manage the ever increasing farm inputs (seeds, fertilizer) prices, not a concern about how traders and money lenders suck a huge portion of value from their farming activities. We go straight into the nirvana of finance management, Dr Uma’s area of expertise. If you have a hammer, everything looks a nail, right!

Let us list advice proffered by Uma in short

1. “Add value to assets he already holds”
How? from where the money will come? Which bank will lend to a person who runs deficit farming and a subsistence pickle business?

2. “Build financial assets that are independent of his profession”
Who is going to pay for building these assets?

3. “Babaji should not sell or mortage his land to educate his children.”
He is supposed to save part of his income and his sons should take loans to pursue the education they desire. Uma must be living inside a bubble unaware of the realities of getting education in India or availing a loan from bank and she is supposed to be an expert at this.


Mobile banking for a 5th pass village woman?

4. “Babaji’s wife should convert her business of homemade pickles, preserves and papads, into a formal business. She should open a bank account and ensure that her revenues [Rs 7,116 per year] flow legally from the start. She will find that access to bank finance, newer and widers markets.”
One should be really cruel or totally dumb to offer such an advice to a 5th pass village woman either to deceive her with false promises or to cheat her outright. If anyone wishes they can figure out the financial muscle, political networking needed to build a pickle business from scratch and become a millionaire (like a bollywood song sequence).

Babaji’s wife is offered advice on how to operate her bank account using celphone and how to be wary of cyber theft, keep a watch on expenses and finally to go to Uma for advice before investing in any product (that is financial product, not a refrigerator or washing machine). Uma claims to be the the gate keeper of Babaji’s wife’s fortunes. This gate keeper definitly is asleep at the gate dreaming up wonderful images for her employers (Babaji and his family)/

The article is also meant for other businessmen, traders and professionals like doctors, shop owners and even politicians. Uma does not fail to shout a “hurrah” for the “resolve of the poor in ensuring that the movement against the black money succeeds”.

India of 9 crores farmers and 45 crore unorganised sector workers! don’t worry, your future is safe in the hands of finance professionals like Dr Uma Shashikant and media like Times group.

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