INFOCUS: Agriculture — Farmers’ Income
A Amarender Reddy
The loan owed by an average farming family has risen from Rs 47,000 to over Rs 74,000 between 2013 and 2019, whereas the average monthly income has increased from Rs 6,442 to Rs 10,218, as per the recently released NSS 77th Round on ‘Situation Assessment of Agricultural Households and Land and Livestock Holdings of Households in Rural India, 2019’. In a month, the average family makes just Rs 3,798 from growing crops, Rs 1,582 from rearing animals, Rs 641 from petty business and Rs 4,063 from wages and salaries.
So, farmers are getting just above one-third from crops and 15% from livestock rearing; these together contribute to 53% of the income, while the remaining is coming from business and wages. Now, farm families are no more dependent on a single income — they are involved in pluriactivity. Various surveys have shown that farm families earn a significant income from non-farm activities, with some of the family members involved in petty business, manufacturing, retailing etc. Overemphasising the crop income skews policy priorities. Understanding this structural shift in farmers’ income is import to evolve policies to increase the same. The farmers’ income needs to be increased on all fronts, including crops, livestock and non-farm activities.
To increase farmers’ income by considering pluriactivity, we need to adopt a six-pronged strategy: cost reduction; productivity increase; increasing share of farmers in consumer’s price; increasing livestock income; increasing non-farm and related income; income from government support and direct money transfer schemes.
Cost reduction per unit of output is important not only to increase farmers’ income, but also to make our agriculture export-competitive in the globalised world. Growing indebtedness of farmers is an indicator of the increased input costs, as they mostly borrow for agricultural operations. The cost can only be reduced through the adoption of modern technologies like balanced use of fertilisers, adoption of right crop varieties, timely agricultural operations through farm mechanisation and most importantly through providing cheap and hassle-free credit.
Productivity increase can be addressed for drylands and irrigated lands separately. Although there is rapid growth of productivity of the agricultural sector over the years, our yields are still only one-third or half of the world average for many crops. Although there are high-yielding technologies on the shelves of the research stations, the adoption rate is quite low, especially in dryland areas on which 60% of the farmers depend. The problems of dryland areas are complex, ranging from low soil fertility and moisture to uneven distribution of rainfall and dry spells. Solving these problems is a gigantic task which involves stakeholders such as the departments of rural development, agriculture and irrigation, along with local NGOs. It needs huge investment from the public sector for the rejuvenation of drylands through watersheds, soil and water conservation, adoption of drought-tolerant varieties of different crops and propagation of zero tillage.
Although productivity on irrigated lands is higher than on drylands, they are trapped in the paddy-wheat cycle. Their profitability can be further increased through diversification to high-value export-oriented agriculture. As these areas are already endowed with good irrigation facilities, further investments should focus on post-harvest market infrastructure like cold chains, refrigerated transport, food safety standards and soft infrastructure like market intelligence. In the past, such diversification was promoted through contract farming by private companies promoting bell pepper, beans, broccoli, cauliflower, sweet corn etc. in Punjab. Private sector-led collection and aggregation centres such as e-Choupals are another success story.
Increasing farmers’ share in the consumer’s price is a more difficult task. The key is to enhance the bargaining power of farmers through collective bargaining by cooperatives and farmer producer organisations (FPOs). Past experience shows that only one out of 10 FPOs will survive and scale up for long-term viability. There is a need to focus on handholding and experimentation to identify successful FPOs for further scale-up. In addition to increase the bargaining power, FPOs encourage contract farming to move to the higher end of the value chain.
The livestock sector has a major advantage: it doesn’t require a large parcel of land; the only investment is in terms of selection of high-yielding breeds and labour. There is a growing demand for dairy, poultry and meat in domestic and international markets. Scientific rearing of livestock increases productivity by 2-3 times over the traditional methods.
With regard to non-farm and related activities, priority has to be given to employment generation in rural and cottage industries such as textiles, pottery, small-scale manufacturing and other service sectors.
The sixth component is targeted income transfer schemes like PM-KISAN. Since the 1990s, the gap between the incomes of a farm family and an urban household has been rising significantly. This growing gap is structural and cannot be reduced, as we are seeing the same phenomenon in developed and developing countries. Supporting farmers’ income through the government’s intervention is inevitable — for instance, the Minimum Support Price (MSP) system under which the government procures agricultural produce at a guaranteed minimum price. During the past decade, several governments have shifted from the MSP regime to direct money transfer schemes as the latter are cost-effective and will not interfere in the operation of free markets.
Overall, the components require huge financial resources to be contributed by the government as well as the private sector in terms of creation of infrastructure, technological support and also for direct money transfer or even procurement at MSP for pulses and oilseeds for crop diversification. The immediate target should be to export at least 30% of the agricultural produce to international markets. For this goal to be realised, India has to create world-class market infrastructure and maintain food safety standards, which can only be possible through public-private partnerships and by attracting huge private investments. Investments, technology, exports and direct money transfer schemes are the four pillars for increasing farmers’ income.
The author is Principal Scientist, ICAR-Central Research Institute for Dryland Agriculture, Hyderabad
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