Crop production paying dwindling dividends

The income of agricultural households from crop production is decreasing and the dependence on wages and salaries is increasing, especially for marginal and small farmers. Unprofitable farming on small farms is compelling farmers to lease out land or become labourers themselves. Hence, there is a need to safeguard the ownership of small farms and legalise tenancy so that insurance, credit and other support can be availed by the actual cultivators.

AFTER 2000, there were notable structural changes in the principal sources of income of agricultural households (AHHs), as revealed by the Situation Assessment Surveys (SAS) of 2003, 2014 and 2019.

Sher Singh Sangwan

AFTER 2000, there were notable structural changes in the principal sources of income of agricultural households (AHHs), as revealed by the Situation Assessment Surveys (SAS) of 2003, 2014 and 2019. These are termed SAS-2019, SAS-2014 and SAS-2003, even as the reference years for the collection of data were 2018-19 (July 2018 to June 2019), 2012-13 and 2002-03. The AHHs are those earning around Rs 3,000 (SAS-2014) and about Rs 4,000 (SAS-2019) from agricultural activities with or without owning land, whereas in SAS-2003, ownership of some land was a condition. The SAS-2019 estimates that about 93 million agricultural households were living in rural India in 2018-19; out of them, about 45,000 AHHs were surveyed in two visits from January to December 2019. The types of principal sources of income were almost the same, except that in SAS-2019, the earnings from leased-out land were shown separately.

*Share of income from leased-out land is 1.31% (all India), 9.93% in Punjab and 2.72% in Haryana in 2018-19.
**Deflated by wholesale price index base 2004-05 Source: RBI Handbook of Statistics of India; SAS-2019, SAS-2014 and SAS-2003

Income from crop production and leased-out land is 38.48 per cent (all India), 42.52 per cent in Haryana and 57.11 per cent in Punjab. If we take out about 10 per cent of the income from leased-out land in Punjab (the highest in India), the income from production is just 47 per cent. As per SAS-2019, only a few states — Karnataka (51 per cent), Madhya Pradesh (52 per cent), Meghalaya (71 per cent) and Telangana (52 per cent) — have more than 50 per cent income from crop production in the total HH income. Besides, the income from the allied activity of livestock farming is about 15, 17 and 18 per cent (all India, Punjab and Haryana, respectively). The share of livestock income in SAS-2019 has jumped by about 4 percentage points (all India) and 7 percentage points (Punjab), but slipped by nearly 1 percentage point in Haryana compared to SAS-2014. Overall, the share of livestock income in Haryana has remained relatively high in both SAS-2014 and SAS-2019. The greater sale of Haryana’s milk in cities such as New Delhi, Gurugram and Chandigarh is one of the reasons for its higher income from livestock, especially dairy farming.

Farm size matters

The combined income from crop farming and its allied activities of livestock was about 54 per cent in India, 74 per cent in Punjab and 57 per cent in Haryana in 2018-19. Most of the AHHs are still dependent on agriculture, though the dependence has decreased nationwide and in Haryana but increased in Punjab compared to 2012-13. The dependence on agriculture is positively associated with the farm size. Across farm sizes, the dependence on agriculture and livestock income is about 31 per cent for sizes up to 0.4 hectare, whereas it is 83 per cent and 92 per cent for farm sizes of 4-10 hectares and above 10 hectares, respectively.

Income from non-farm enterprises is just about 6, 4 and 5 per cent in India, Punjab and Haryana, respectively. Moreover, it has decreased compared to 2012-13.

At the all-India level, the largest source of income for AHHs is wages/salary, which accounts for about 40 per cent, though it is 22 per cent and 34 per cent in Punjab and Haryana, respectively. It is negatively associated with the farm size. This source gives income up to 50 per cent to AHHs owning up to 1 hectare, while it is around 10 per cent for farm sizes above 4 hectares. It may be mainly wage income for marginal farmers. It is to be noted that the dependence on wages and salaries has increased by 7.5 percentage points over 2012-13, mainly for marginal and small farmers. Hence, it can be inferred that the average Indian farmer is becoming more of a labourer today.

During two periods — 2012-13 to 2018-19 and 2002-03 to 2012-13 — the annual growth rate in the income of AHHs was slightly higher at 6.31 per cent at the all-India level, but it decreased in Punjab and Haryana in the latter period. It means the productivity in these states may have reached a plateau, whereas it may have increased in other states due to higher procurement at the minimum support price (MSP) and a higher yield.

Banking on wages & salaries

From this analysis, we can conclude that the income of AHHs from crop production is decreasing and the dependence on wages and salaries is increasing, especially for marginal and small farmers. Unprofitable farming on small farms is compelling farmers to lease out land or become labourers. Hence, there is a need to safeguard the ownership of small farms and legalise tenancy so that insurance, credit and other support can be availed by the actual cultivators. The income of AHHs from non-farm enterprises has decreased from 2012-13 to 2018-19. Farmers owning 4 to 10 hectares are leasing in land to make use of their tractors and other machinery. It requires policy changes to incentivise farmers and farmer producer organisations (FPOs) as well as cooperatives for involving them in the processing of the surplus produce.

The author is former Professor, SBI Chair, CRRID, and ex-General Manager, NABARD

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