Ramesh Chand, PA Lakshmi Prasanna & Aruna Singh
The share of agriculture and allied sectors in GDP stands at less than 20%, while more than 50% of the workforce is still engaged in agriculture. Because of this imbalance in structural changes in output and occupations, the disparity between per worker income in agriculture and non-agriculture has sharply increased. Accompanied by a slowdown in the growth rate of agriculture, this has put serious strain on smallholders? income and livelihood. Against this background, we revisit the debate on farm size and agriculture productivity to suggest policy measures to address the twin problems of raising productivity and growth of agriculture as well as improving the income and livelihood of smallholders, who constitute more than 80% of farming households, 50% of rural households and 36% of total households in India.
It has been hypothesised in some studies that many of the advantages of smallholders disappear as countries develop and it becomes more efficient to have larger and more mechanised farms. This has been experienced in western economies where economic transformation has been associated with an increase in the size of holdings with a near obliteration of smaller farms. But, as can be seen from Table 3, the experience of Asia has been totally different from the western economies.
China continues to have a much lower size of landholding than India but its agricultural productivity and growth are significantly higher. Between 2000 and 2009, China recorded a 4.4% annual growth in GDP agriculture compared to 2.9% in India. Per hectare productivity of major crops in China is 6-190% higher than India. Similarly, China?s productivity in all the crops except soybean is much higher than the average productivity in the world. China also has a high concentration of workforce in agriculture, like India, but this has not come in the way of improving the livelihood of smallholders and the rural population. The country has reduced the level of poverty (based on the World Bank measure of per day income of $1.25 in terms of PPP 2005) from 84.0% to 15.9% between 1981-2005. Compared to China, India?s record in reducing poverty has been dismal. The incidence of poverty in India in the year 1980 based on the norm of $1.25 per day per person income was much lower than China (59.8%) but in the next 25 years India?s poverty level turned out to be much higher than China.
China?s experience shows that there are ways to eliminate poverty even with high concentrations of workforce in agriculture and predominance of marginal holdings. It also offers some interesting lessons for India?s policy towards smallholders. The tiny size of holdings did not constrain the attainment of high level of productivity and growth of the agriculture sector. Second, unlike developed countries in the west, the farming population in Asia has a strong preference to hold agricultural land. It is, thus, imperative to look for ways and means to improve productivity and livelihoods of smallholders without worrying too much about the size of the holdings per se.
Between 1970-71 and 2005-06, the total number of operational holdings in India increased from 71.01 million to 128.89 million and operational holding area declined from 162.18 million ha to 156.62 million ha. This resulted in the reduction of the average farm size from 2.28 ha to 1.21 ha, while the share of small and marginal holdings in the operated area doubled. Smallholders now cultivate 42% of operated land and constitute 83% of total landholdings (Table 2). The growth in rural population is the main factor underlying an increase in the number of holdings in India.Note that since 1970-71, both, the number of landholdings and rural population increased exactly at the same rate (1.76%). This broadly reflects the inheritance pattern in India.
We have estimated productivity and input use in all the crops grown by farmers on an annual basis to compare across farm size categories. In Indian agriculture, the overall productivity of a farm depends on the use of yield enhancing inputs like fertiliser, access to irrigation, technology, crop intensity and choice of crops. All of them decline with an increase in farm size.
As Table 1 shows, land productivity is inversely related to farm size class. Per hectare value of crop output was R25,173 at holdings below 0.4 ha and R18,921 at holdings of size 0.4 ha to 1 ha. As the farm size increased towards 2 ha, productivity declined to less than R17,000 per hectare. In large farms (4 ha to 10 ha) the value of aggregate crop production declined to R13,500 per hectare. Farmers operating on landholdings above 10 ha (very large size category) were found to have very low productivity (R7,722)?about half the productivity at large holdings and less than one-third the productivity in the bottom farm size category. Agriculture productivity in marginal and small holdings was found to be much higher than the average productivity for all size categories.It seems that emerging changes in labour market and rising demand for labour will further increase the advantage of smallholders.
But, smallholders earn an awfully low amount of income from agriculture on a per capita basis, primarily due to a very adverse land-man ratio (Table 1). Based on the Tendulkar Committee norm, we find that a minimum 0.8 ha of land area is needed to keep a farm family above the poverty line, if this family lives only on agricultural income. This implies that 62% of farmers in India, who own less than 0.80 ha of cultivable land, would be under poverty if they do not have an opportunity to earn income outside agriculture. This figure is going to rise with the division of landholdings.
It is clear that with the present level of productivity, three-fourths of smallholders cannot meet their livelihood from farm income alone. There are mainly two ways to improve their income. One, an increase in the land-man ratio, which is possible only if a sizeable segment of smallholders is moved out of agriculture. Two, provide alternative sources of employment to smallholders in or around their habitation to supplement their farm income. The experience of past six decades in India and of China show that the strategy of raising the land-man ratio by shifting a sizeable number of farmer cultivators away from agriculture has not worked. Despite the rapid growth of the economy during the last three decades, the size of landholding in China is only 0.6 ha. Similarly, the acceleration in India?s economic growth after the early 1990s could not check the growth in population of smallholders. India needs to take serious steps to create employment avenues for smallholders outside agriculture but within the countryside itself so the workforce in smallholder households partly works on the farm and partly outside farm.
This is an edited extract of an article that first appeared in the June 25, 2011, edition of the Economic & Political Weekly
The authors are with the National Centre for Agricultural Economics and Policy Research
rc@ncap.res.in, lakshmi@ ncap.res.in, arunasingh_11@yahoo.com
