As the Narendra Modi-led government completed two years in office, almost each of its arms issued hordes of advertisements celebrating achievements and delineating policies and programmes that were transforming India. The ministry of agriculture and farmers’ welfare came out with a big picture of prime minister Modi, spelling out 10 points reflecting the government’s agri-vision and strategic interventions to transform Indian agriculture. Topping this list were: “Farmers’ income to be doubled in five years”, followed by the PM’s Fasal Bima Yojana, Krishi Sinchayee Yojana, Soil Health Cards, promotion of organic farming, self-sufficiency in pulses and oilseeds, neem-coated urea, National Agriculture Market (e-NAM), mobile apps for the farm sector and disaster relief.
Any assessment of performance would necessitate a rigorous scrutiny of each one of these 10 points. Here, we take up the issue of doubling farmers’ incomes in five years—at the top of the Modi government’s agri-agenda.
Let us first map the existing landscape of Indian farmers’ incomes and later identify the associated challenges of doubling it. It is common knowledge that Indian farmer households do not depend solely on cultivation of crops; they also earn portions of their income from farming animals, undertaking businesses in non-farm sector and/or even from working as wage/salary earners within or outside agriculture. The NSSO, in its Situation Assessment Survey (SAS) of farmers (SAS), conducted every 10 years, assesses major sources of income of the average Indian farmer. The latest required information is available for agricultural year 2012-13. The SAS 2002-03 results are also available, which we use for comparison. The income of farming households is shown under four heads: cultivation of crops, farming animals, rural non-farm activities (RNF) and wages/salaries (WS).
The SAS 2012-13 counts 9 crore agricultural households in India, with each earning, on an average, Rs. 77,112 per annum. This was more than 3 times of what a farm-sector household earned in 2002-03, i.e., Rs.25,380. In real terms—using CPI for agri-labourer (CPI-AL) as deflator with the base year being 2004-05—however, the average agri-household’s income increased from Rs.26,901 per annum in 2002-03 to Rs.38,096/year in 2012-13 (at 2004-05 prices). The 10-year compounded annual growth rate(CAGR) of the respective incomes was 11.8% in nominal terms and 3.5% in real-terms. This means that it took about 6 years for nominal incomes to double, and it would take about 20 years for real incomes to double! Now, the question that arises is whether the Modi government targets doubling farmers’ incomes in real terms or in nominal terms. If it is real, as some enthusiasts within the government claim, it would be a daunting task to double farmers’ incomes in five years as it would require an average annual growth rate of 14.4%. If the present government can achieve that, it would be most superlative performance of any government, benefiting millions of households in the country, and could prove to be a real game-changer. But if it is in nominal terms, the job is relatively easy and closer to what India has already experienced during 2002-03 to 2012-13.
In terms of income sources, cultivation remains the main source of income for an average Indian agri-household, and, in the 10 years between 2002-03 and 2012-13, its contribution increased from 46% to 48%. Contribution to household income from farming of animals showed the most change: from a 4%-share in 2002-03, it increased to 12% in 2012-13, perhaps on account of rising livestock demand. Share of income coming from RNF and WS fell from 11% and 39% in 2002-03 to 8% and 32% in 2012-13, respectively.
As far as dependence on farming animals and wages and salaries is concerned, it reduced with rising size of landholding. About 67% of India’s operational landholdings are smaller than 1 hectare and clearly, and for them, the major source of income (about 70%) is from farming of animals and from daily-wage employment.
A state-wise analysis reveals that growth in nominal incomes varied between 17.5% (Haryana) and 6.7% (West Bengal) and that of real incomes varied between 8.3% (Odisha) and minus 1.1% (West Bengal).
What lessons can the Modi government learn from this decadal change for his vision of doubling farmers’ incomes in next five years?
The biggest learning is clear: Within a horizon of five years, the government can possibly aim to double only nominal incomes and not real, unless there is something dramatic in the package of reforms, which we don’t see in the list of 10! This should bring some humility to the announcements. Further, with two-thirds of the country’s landholdings being marginal, the relevance of farming animals, rural non-farm activities and wages and salaried employment cannot be overstated. This means the future strategy for doubling incomes has to be bolder towards livestock sector and towards RNF employment. Large-scale skilling of farmers and agri-labour will support this.
As cultivation of crops still continues to contribute the most to an agri-household’s income, combining a productivity augmenting drive with diversification into high-value agriculture is more necessary than optional. Building value-chains for fruits and vegetables, for example—somewhat akin to what India did for milk from aggregation of produce at the village-level, grading and packaging it, and then moving through a modern logistic network, and distributing it through organised retail—can augment incomes in a sustainable manner. A model building on Safal/Mother Dairy in Delhi can be a good example, too.
Therefore, unless the whole agri-system is revamped, we are afraid that the dream of doubling farmers’ income in five years may remain a dream. And a farmer may still have to look up at the sky for any hope of revival and survival!
Gulati is Infosys chair professor for agriculture and Saini a consultant at Icrier. Views are personal