Indian farmers’ financial condition has long been a matter of national concern. Given that a large proportion of rural households depend on farming for their livelihood, farm income plays a crucial role in shaping the overall welfare of the rural population.

Traditionally, a farmer is seen as someone solely engaged in cultivation or animal husbandry. However, many farming households now derive income from multiple sources beyond agriculture.

This raises important questions: Who qualifies as a farmer today? And how much do they actually depend on agriculture? Understanding these questions is crucial for designing effective policies for agricultural communities and for formulating broader rural development strategies.

Distribution of farming households

The latest information on the share of farming households and its distribution across the States can be found from the 77th round of the NSS survey on the ‘Situation Assessment of Agricultural Households’, conducted between January and December 2019. It defines an agricultural household as one that receives a value of produce exceeding ₹4,000 from agricultural activities in the past 365 days. This definition of agricultural households can be considered as a functional definition of farming households.

Based on this definition, 54 per cent of rural households are categorised as agricultural households. Among 18 major States, six — Rajasthan (74 per cent), Chhattisgarh (66.8 per cent), Madhya Pradesh (66.5 per cent), Uttar Pradesh (65.5 per cent), Haryana (61.4 per cent) and Gujarat (61.1 per cent) — have more than 60 per cent of rural households falling into this category.

In another six States — Odisha (59.1 per cent), Jharkhand (55.9 per cent), Karnataka (54.8 per cent), Telangana (54.5 per cent), Maharashtra (54.1 per cent), and Assam (53.5 per cent) – the share ranges from 50-60 per cent.

The remaining six States – Bihar (44.4 per cent), West Bengal (43.5 per cent), Punjab (41.9 per cent), Andhra Pradesh (33.4 per cent), Kerala (33.2 per cent), and Tamil Nadu (26.6 per cent) — have less than 50 per cent of rural households engaged in agriculture.

Notably, this data shows a stark disparity: Rajasthan, with the highest proportion, has nearly three times as many agricultural households as Tamil Nadu, which has the lowest share among the major States.

Farming share in total income

Farm income, which includes earnings from crop cultivation and animal farming, constitutes 50 per cent of the total income for farm households at the national level. However, significant variations across States are observed.

Farming households In Kerala have the lowest dependency on farm income, with only 21.6 per cent of their total income coming from farming. In contrast, Madhya Pradesh has the highest dependency, with 66.4 per cent of household income coming from farming.

It is well known that not all farming households are equally dependent on agriculture. Analysis of unit-level data reveals that 15 per cent of farming households receive less than 10 per cent of their income from farming. And if we consider agricultural households receiving less than 30 per cent of their income from farming, the number rises to 31.8 per cent.

Similarly, for 43.3 per cent of agricultural households, farming contributes less than 50 per cent of their total household income. However, it is calculated that 38.9 per cent of agricultural households are fully dependent on farming.

However, there exists wide variation in farm dependence across States. Since presenting a detailed State-wise distribution is not feasible, we focus on households receiving more than 50 per cent of their income from farming and those fully dependent on it.

Majority farm-income households

If we define “Majority Farm-Income Households” as those receiving 50 per cent or more of their total income from farming, the highest proportion of such households are observed in Bihar (70 per cent), Uttar Pradesh (65.6 per cent), Madhya Pradesh (65.1 per cent), Karnataka (63.9 per cent), Punjab (62.3 per cent), Chhattisgarh (61.6 per cent) and Gujarat (61 per cent).

However, this proportion is lowest in Kerala (35.7 per cent), West Bengal (39.1 per cent), Tamil Nadu (41.8 per cent), Odisha (42.5 per cent), and Assam (44 per cent).

Exclusively farming households

These households derive their entire income exclusively from farming activities, without any supplementary earnings from other sources. Here again, Bihar tops the table with 56.6 per cent of farming households relying solely on farming for their livelihood.

Other States with significant shares include Uttar Pradesh (53.8 per cent), Punjab (50.1 per cent), Gujarat (49.5 per cent), and Karnataka (46.3 per cent).

In contrast, the lowest shares are observed in Telangana (20.5 per cent), Chhattisgarh (21.2 per cent), Odisha (24 per cent), Tamil Nadu (24.6 per cent), and Assam (26.1 per cent). In these households, farming is the exclusive source of income.

Earnings and diversification

According to the Survey estimates, the average monthly income for an agricultural household in India is approximately ₹10,084. Of this, farm income is ₹5,380, where ₹3,798 comes from crop cultivation and ₹1,582 from animal farming.

Beyond farming, agricultural households also earn about ₹4,063 per month from wages and ₹641 from non-farm businesses.

This highlights that income from cultivation now accounts for only about a third of an agricultural household’s total monthly income, with the remaining two-thirds coming from animal farming, wages, non-farm enterprises, and other sources. These figures indicate that farming households depend on multiple income sources beyond cultivation.

This income diversification reflects the adaptation strategies of agricultural households in response to stagnant or declining earnings from cultivation. Data shows that 38.9 per cent of farming households rely on one source of income (i.e. farming).

In contrast, 66 per cent have at least two sources of income: 56.8 per cent receive income from wages and 9.2 per cent receive income from non-farm business activities along with farming. Only 4.4 per cent of households earn income from all three sources — farming, wages, and non-farm businesses.

Notably, farming households with lower farm income have higher dependency on alternative income sources. For these families, wage income often acts as a financial buffer against shortfalls in farm earnings.

However, despite continued efforts by both the Union and State governments to promote non-farm activities, their contribution to farming household’s income is small.

Policy challenges

Understanding how farmers earn is critical for effective policy design. According to the Survey, while 38.9 per cent of households rely on farming, 66 per cent depend on at least two sources of income; income from wages and non-farm business activities. This duality suggests that a one-size-fits-all approach may not work. And, since agricultural households increasingly participate in the non-farm rural economy, and policy must evolve accordingly.

In States where the share of farming households and their dependency on farm income is high, agricultural performance has a greater impact on rural welfare and income distribution. However, this high dependency has a flip side too. Crop failures or climate change-induced disasters can severely disrupt livelihoods, potentially wiping out household incomes and pushing vulnerable populations into poverty, increasing their reliance on state support and welfare programmes.

To address these challenges, economists have advocated doubling of farmer’s income. Ramesh Chand in a 2017 NITI Aayog Policy Paper suggested a three-pronged strategy focusing on development initiatives, technology, and policy reforms in agriculture to double farmers’ income.

Similarly, economists Ashok Gulati, Devesh Kapur, and Marshall M. Bouton, in a 2019 CASI Working Paper, proposed structural reforms to raise agricultural incomes. While households that are heavily dependent on agriculture may benefit from targeted agricultural policies, these policies alone are not enough.

However, at the national level, around half of the income of farming households comes from non-farm sources. In fact, many small and marginal farmers earn very little from agriculture alone. Therefore, a narrow focus on doubling farm income may not substantially benefit the majority of farming households.

Hence, we need a 360-degree strategy to raise the income of farming households. First, strengthening climate-resilient agriculture such as crop diversification, use of drought- and flood-resistant crop varieties, improved irrigation efficiency, and natural resource management to enhance long-term sustainability.

Second, greater emphasis on diversified livelihoods through rural enterprises such as promoting agro-processing, craft in parentship with local SHGs. Third, strategic investing in skills, education, and training of rural youth. Research suggests that higher farmer education not only raises higher agricultural income but also makes farmers better prepared to adopt diversified livelihoods.

Further, enabling them with vocational training will help them absorbed in high-demand sectors such as construction, logistics, and health care.

The way forward

The farm sector — once the primary engine of rural welfare and livelihood — can no longer, on its own, ensure the well-being of farming households or broader rural households. While farming remains a core livelihood for many, growing proportion of rural households depend on more than one source of income.

This transition requires not only calls for a diversified and inclusive policy framework to rural development to secure the rural livelihoods but also balancing agricultural growth with non-farm employment opportunities. Only a diversified and inclusive policy framework can secure the livelihoods of India’s evolving farming households.

The writers are Assistant Professors at the Sardar Patel Institute of Economic and Social Research (SPEISR) and IRMA School,”Tribhuvan” Sahkari University, respectively

Published on June 24, 2025