Opinion

Why farm income in India is so low

A Narayanamoorthy | Updated on October 20, 2021

Recent data shows an alarming fall in income from crop cultivation. Improving procurement infra is the need of the hour

The report of the ‘Situation Assessment of Agricultural Households and Land and Holdings of Households in Rural India 2019’ released by the National Statistical Office in September 2021 reveals the pathetic income level of Indian farmers.

The average monthly income from different sources per agricultural household in July 2018 to June 2019 comes to only ₹10,218, where net receipt is obtained considering ‘paid out expenses’ approach. This amount of income further reduces to ₹8,337 when net receipt is obtained considering both the paid out and imputed expenses.

This means that the per day income of farm households is only about ₹277, which is not much different from the minimum wage rate paid under the national employment guarantee scheme.

Why is the farm income pathetically low? What is the income level of different States?

The income-related data of farm households in India was released by the NSSO for the first time in 2002-03, with the initiative of the Ministry of Agriculture. It is also popularly known as Situation Assessment Survey (SAS) of farm households. Following this, the second SAS data series was published by NSSO for 2012-13 and now the third survey of SAS for the year 2018-19 has just been released.

The all-India scene

The average annual income (in current prices) per farm household from all sources at the all-India level increased from ₹25,380 in 2002-03 to ₹77,112 in 2012-13 and further to ₹1,22,616 in 2018-19. But, unexpectedly the rate of increase in income decelerated between 2012-13 and 2018-19, as compared to the period 2002-03 to 2012-13. The average annual increase of total farm income was 20.38 per cent between 2002-03 and 2012-13, which decelerated to 11.90 per cent between 2012-13 and 2018-19.

What is more shocking is that among different sources of income (wages, crop cultivation, farming of animals and non-farm business) of farm households, the growth of income realised from crop cultivation decelerated sharply between 2012-13 and 2018-19. The annual increase of income from crop cultivation was just 4.65 per cent between 2012-13 and 2018-19, whereas in the 2002-03 to 2012-13 period, it increased by 21.80 per cent.

 

Given the poor income growth from crop cultivation, the question now is where do farm households get their income from? The SAS data clearly shows the income is not coming from crop cultivation, but mainly from wages and farming of animals; they registered an average annual increase of 19.24 per cent and 21.47 per cent respectively between 2012-13 and 2018-19. But for the income from these two sources, the annual income of farm households would have decelerated considerably in 2018-19.

State-wise situation

The average monthly income of agricultural households varied widely across States in 2018-19, ranging from ₹4,013 in Odisha to ₹26,973 in Meghalaya. But, similar to the national picture, the income of farm households across States is also dismal.

Of the 28 States for which SAS data is available for 2018-19, the average monthly income is more than ₹10,000 only in 12 States, of which four are from the north-eastern region. The rest of the 16 States’ incomes are in the range of ₹4,013-9,995. The income is less than the national average in seven States which include Bihar, Jharkhand, Madhya Pradesh, Odisha, Telangana, Uttar Pradesh and West Bengal; all of which are important in terms of agriculture (Chart 1).

 

The picture is deplorable in most States when one looks at the income from the source of crop production. Only in five States, the crop income share is more than 50 per cent in the total monthly income of agricultural households. In 16 out of 28 States, the crop income share is less than 40 per cent in the total monthly income. What is more shocking is that the share of crop income is less than 25 per cent in nine States. Clearly, the data suggests that the income realised on account of crop cultivation by the agricultural households in most States is very poor.

What needs to be done

With this deplorable income level from crop cultivation, it will be very difficult to double the farm income by 2022-23, as envisaged by the government in 2015-16. It will also be difficult to make farmers stay in farming.

Although the government has been giving top priority to increase farm income through various interventions, the SAS data shows a sharp deceleration in farm income in 2018-19 over its previous period 2012-13. Many price and market-related interventions are needed to increase farm income.

First, the government must move away from production-centric approach to a market-centric approach. Experience shows that increased production of agricultural commodities does not guarantee enhanced income for farmers even in highly irrigated areas.

Second, the mere announcement of MSPs will not help farmers unless procurement infrastructure is strengthened. The procurement level in most crops (except paddy and wheat) is poor, which is evident from SAS data as well. Therefore, it is necessary to procure 20-25 per cent of production in each mandated crop to benefit the farmers.

SAS data of 2012-13 shows that because of non-availability of procurement centres, farmers did not benefit from MSPs. Except in a few regions and crops, this is happening across India. Therefore, procurement infrastructure must be strengthened.

Through the PM-AASHA scheme, the Centre provides incentives to States for three schemes — (i) Price Support Scheme (which promises to provide assured price for farmers and protect them from making distress sales during bumper harvest), (ii) Price Deficiency Payment Scheme (which provides compensation when market prices go below MSP); and (iii) Private Procurement Stockiest Scheme (which allows the entry of private players in the procurement of oilseeds on a pilot basis). State governments must implement these schemes with full vigour for the benefit of the farmers.

Farmer managed markets in States such as Tamil Nadu and Andhra Pradesh is a win-win for farmers and consumers. Therefore, producers’ markets should be encouraged throughout the country to improve farm income and eliminate middlemen as underlined in the National Agricultural Policy of 2000.

To protect the farmers from distress sale during periods of glut, swift action should be taken through ‘Market Intervention Scheme’ (MIS), as suggested by Expert Group Committee on Indebtedness chaired by Prof Radhakrishna (2007). Besides price incentives and market support, there is also a need to reduce the cost of cultivation which is pulling down farm income growth.

The writer is former full-time Member (Official), Commission for Agricultural Costs and Prices, New Delhi. The views expressed are personal

Published on October 19, 2021

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