The growth in this space is demand-driven, and the trend will get reinforced in the years to come as income of the people goes up and diets diversify.
By Ashok Gulati & Ranjana Roy
After two successive droughts, in 2014-15 and 2015-16, prime minister Narendra Modi set out an ambitious target to double farmers’ incomes by 2022-23. The Dalwai Committee, which was set up to chalk out a strategy to achieve this, confirmed that the target of doubling farmers’ incomes in real terms was to be achieved over seven years with the base year of 2015-16, and it would require a growth rate of 10.4% per annum to double farmers’ real income by 2022-23. There is an estimate on farmers’ income for 2015-16 conducted by NABARD, and as per this survey, farmers’ monthly income for 2015-16 was Rs 8,931.However, unless a similar survey is done in 2022-23, we won’t really know what happened to this ambitious goal.
But what we have is the recently released data for 2018-19 based on Situation Assessment Survey (SAS) of agricultural households conducted by the National Statistical Office (NSO). As per this SAS, an average agricultural household earned a monthly income of Rs 10,218 in 2018-19 (July-June) in nominal terms, which increased from Rs 6,426 in 2012-13. In nominal terms, the compound annual growth rate (CAGR) turns out to be 8% between 2012-13 and 2018-19. If one deflates nominal incomes by using CPI-AL (consumer price index for agricultural labour), which should be the logical choice, then the CAGR turns out to be just 3%, and if one uses WPI (wholesale price index of all commodities), the CAGR in real incomes turns out to be 6.1%. This vast difference is just due to choice of the deflator. However, there is another SAS that NSO conducted for the year 2002-03. Although there were minor differences in the definition of agricultural household in that SAS, when you compare CAGR in farmers’ real income (deflated by CPI-AL) over 2002-03 to 2018-19, it turns out to be 3.4% (and 5.3% if deflated by WPI). Obviously, in such point-to-point comparisons, the situation in the base year and terminal year influences the growth rates dramatically. A better method would be to look at average annual growth rates (AAGR) if yearly data was available.
The AAGR for agri-GDP is available and at the all-India level, between 2002-03 and 2018-19, it turns out to be 3.3%, which is very close to the real income growth (CAGR) of 3.4% for the same period. However, at state level, the variation is much more as state agri-GDP growth is very volatile, depending upon the monsoon, especially in states that have low levels of irrigation. A disaggregated, state-level analysis shows huge gap between agriculture GDP and farmers’ income growth in many states (Kerala, Gujarat, Jharkhand, Madhya Pradesh). But a closer look at the individual states indicates that Gujarat and Saurashtra & Kutch region had 27% and 38% deficient rainfall than its Long Period Average (LPA), respectively, in 2018-19. Similarly, Jharkhand had 31% deficient rainfall, while Kerala experienced major flood in 2018-19. No wonder agricultural GDP growth of Gujarat was negative (-8.7%) in 2018-19, resulting probably in lower farmers’ income. But overall, for the period of 2002-03 to 2018-19, agri-GDP growth is 6.5% in Gujarat, one of the highest in India. The upshot of this analysis is that, at state level, it is important to consider both the indicators (growth in agri-GDP as well as farmers’ incomes) to get a clearer picture of the state of affairs at the farmer level.
What is the policy message that one can derive from comparing these three rounds of SAS, (2002-03, 2012-13 and 2018-19)? The accompanying graphic gives the changing composition of farmers’ real income.
There has been a dramatic rise in the share of income from livestock sector from 4.3% in 2002-03 to 15.7% in 2018-19, while contribution from cultivation of crops has declined from 45.8% to 37.7% in the same period.
What these indicate is that the scope for augmenting farmers’ incomes is going to be more from farming of animals (including pisciculture). It is worth noting that there is no MSP for products of animal husbandry or fisheries and no procurement by the government. It is demand-driven, and much of its marketing takes place outside APMC mandis. This is the trend which will get reinforced in the years to come as income of the people goes up and diets diversify. Those who believe that farmers’ income can be increased by continuously raising MSPs and government procurement, irrespective of the fact that government grain stocks are more than double the buffer stocking norms, are living building a very expensive food system that will fail sooner or later. Wisdom lies in investing more in animal husbandry (including fisheries) and fruit & vegetables. The best way to invest is incentivise private sector to build efficient value-chains based on a cluster approach. The Modi government has started working in this direction, but much more needs to be done.
The authors are, respectively, Infosys Chair professor for agriculture, and research fellow, Icrier