The structural shift in Indian agriculture is worrying

The increase in wages as a component of the income basket shows that farmers are not moving into a higher-paying, stable, productive economy but are becoming more reliant on informal labour to sustain their incomes

In an authoritative official study of the transformation in Indian agriculture, the National Statistical Organisation (NSO) has published a report — Situation Assessment of Agricultural Households and Land and Holdings of Households in Rural India — based on a survey conducted in 2019. The headline numbers seem attractive. Farm incomes have risen by 57% between 2012-13 and 2018-19, at a compounded annual growth rate (CAGR) of 7.3%. The share of agricultural families in debt has decreased from 51.9% to 50.2% in the same period.

An NSO report show farm incomes have risen by 57% between 2012-13 and 2018-19, at a compounded annual growth rate (CAGR) of 7.3%. (AP File)

But a closer look shows worrying trends. Adjusted with rural inflation, growth in incomes in this period is actually 16.5%, at a CAGR of 2.5%. More significantly, the basket of income sources has changed. In 2012-2013, wages contributed 32% of the income; in 2018-19, they contributed 40% of a farmer’s income. Cultivation contributed 48% of a farmer’s income then, it is now down to 38%. Farm incomes from animals contributed 12% of the income in 2012-13; this number is now up to 16%. And non-farm business incomes have dipped from 8% to 6%. This means that in real terms, income from cultivation has actually dipped by 8.9%. On farm loans too, while the share of families in debt has dipped, the average amount of outstanding loans has increased by 57%; in real terms, this increase is 16.5%.

To be sure, diversification of sources of income is inevitable as the economy changes. But the increase in wages as a component of the income basket, with a decrease in income from both cultivation and non-farm businesses, shows that farmers are not moving into a higher-paying, stable, productive economy but are becoming more reliant on informal labour to sustain their incomes. Indian agriculture needs a more planned structural transformation; the risk of millions with depleted incomes, in debt, reliant on informal seasonal jobs can have a destabilising impact.