One of the key objectives of agricultural price policy in India is to ensure that agriculture remains a remunerative occupation so that farmers are incentivised to adopt modern technologies that help raise productivity and overall production of various crops in the country broadly in line with the emerging demand and supply patterns in the country. The challenge is how to do it in a manner that keeps our agriculture a globally competitive sector while ensuring rational utilisation of our scarce land and water resources so that agri-growth is sustainable to feed a large and growing population.
How has the Indian crop sector fared on this account during the last decade or so? Has the country's agriculture become more remunerative? This is the key question that we attempt to respond very briefly here.
The best way to examine how remunerative is agriculture in India is to find out what is the cost of cultivation for a particular crop and what is the gross value of output produced of that crop on a per hectare basis. The costs that the farmer normally considers to see his income is what he pays for various inputs—seeds, fertilisers, pesticides, hired labour (human, bullock, machine), rent on leased in land, if any, etc. These are categorised as cost-A2 in the Comprehensive Scheme (CS) for cost of cultivation surveys being conducted by the government agencies under a common methodological framework across various states. Agriculture in India is quite labour intensive, and being dominated by small holdings, it also uses a lot of family labour. The Commission for Agricultural Costs and Pricing (CACP) considers the cost of family labour, in addition to cost A2, or (A2+FL), as a relevant cost concept. There is another cost concept, called the comprehensive cost (C2) which includes imputed values of rent on owned land and of interest on owned capital.
Here, we present the profitability of major crops based on two cost concepts, namely A2+FL and C2. The direction of results does not change, although levels will obviously vary. We have worked out profitability for major states, and then weighted them with state-level area weights to arrive at all-India figures for the period 2000-01 to 2011-12. To smoothen out the effects of drought or below-normal rainfall years, we have taken four-year averages—2000-01 to 2003-04 as period I and, 2008-09 to 2011-12 as period II. The results