An Indian farmer earned ₹27 per day on average from cultivation in 2018-19. This is less than what they would have earned doing MGNREGS work through the year.
These numbers underline the magnitude of the viability crisis in Indian agriculture.
India’s inability to shift a large part of its workforce from agriculture to non-agricultural work, especially manufacturing, is considered one of the biggest failures of its economic policy. Agriculture is considered to be the employment of last resort in India. This became apparent during the lockdown last year, when share of agricultural employment increased for the first time in India (read.ht/J9kZ).
Markets, however, always find a way to surprise. The latest Situation Assessment Survey (SAS) – it is the most comprehensive official survey on economic conditions of farmers in the country – published by the National Statistical Office (NSO) on September 10, and first reported by Hindustan Times on September 11, presents one such surprise.
SAS – it was conducted in calender year 2019 and collected data for the July 2018-June 2019 period – shows a unique contradiction in the Indian economy. Agriculture continues to be the largest employer . The corresponding Periodic Labour Force Survey (PLFS) for 2018-19 put the share of agricultural employment at 42.5%. But cultivation of crops – the activity considered synonymous with agriculture by most people – is no longer the largest source of income for the average Indian farmer or agricultural household (more on this later).
Experts believe the declining share of cultivation in the overall income of farmers highlights the marginalisation of farming itself within the Indian economy. This is a development that does not bode well for private investment in improving farm yields and ensuring sustainability.
{{/usCountry}}Experts believe the declining share of cultivation in the overall income of farmers highlights the marginalisation of farming itself within the Indian economy. This is a development that does not bode well for private investment in improving farm yields and ensuring sustainability.
{{/usCountry}}Almost half of India’s rural households have insignificant stakes in agriculture
SAS estimates that there are 93.1 million agricultural households in rural India. It also lists another 79.3 million non-agricultural households in rural India (SAS is a rural survey). An agricultural household is defined as one which produced field or horticultural crops, livestock, or other specified agricultural products worth more than ₹4,000 and had a member self-employed in agriculture in the 365 days preceding the survey.
This means that almost half of India’s rural population does not even have the minimal economic stakes in agriculture, which is what it takes to qualify as an agricultural household. Almost all (99%) of non-agricultural households possess less than one hectare of land and the major source of income for almost half of them is from casual employment. Approximately one in five non-agricultural households reported having salaried work, which might be a sign of economic well-being – salaried employment is the highest paying kind of work in India – rather than distress.
Cultivation incomes are losing importance even for agricultural households
Self-employment in cultivation and animal farming is the largest source of income for 71% of the estimated 93.1 million agricultural households . An average agricultural household earned a smaller share of its total income from cultivation (38%) than from wages (40%). Unfortunately, SAS surveys are not conducted as regularly as NSO’s employment and consumption surveys. So, a proper historical comparison of the declining importance of cultivation is not possible. However, in the last SAS round, which collected data for the July 2012-June 2013 period, the share of income from cultivation in total income was 48%. While cultivation incomes were not an overwhelming majority of farmers’ incomes even earlier, this is the first instance where cultivation is not even the largest source of income for India’s agricultural households.
An MGNREGS worker can earn more than the average farmer in India
The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) provides guaranteed unskilled work for hundred days in a year in India’s villages on demand. Wages under MGNREGS are slightly below par with unskilled wages in the open market. This makes the programme very good at self-targeting. Only those who find nowhere else to work will ask for manual work under MGNREGS.
In the traditional village hierarchy, an MGNREGS worker will be seen as the poorest of the poor. SAS shows that for all but five states, average income from cultivation per agricultural household is actually less than what MGNREGS work would theoretically pay in 365 days.
The average wage under the MGNREGS for each month by states is available from the scheme’s public data portal. This can be used to calculate annual earnings for an MGNREGS worker if that work was available on all 365 days in the July 2018-June 2019 period, when SAS was carried out. The potential earning numbers under MGNREGS in 23 out of 28 states is higher than the average annual income from cultivation per agricultural household given in SAS. To be sure, it is higher than the total income of an agricultural household in only Jharkhand and Odisha. At the all-India level, average annual income from cultivation per agricultural household would be 0.7 times potential MGNREGS wages in 365 days. This comparison does not include income from sources other than cultivation.
Whither “progressive farmer”?
The SAS report gives detailed accounts of receipts and expenses for agricultural households reporting crop production. This balance-sheet, however, does not include investment spending, which is important for augmenting yields.
Summary statistics present a dismal picture. Paid out expenses, as a share of receipts, rise as cultivation incomes increase with land-size. This suggests diseconomies, rather than economic of scale in farming, as it is practised in India.
Net incomes, i.e. receipts less expenses, left an average of ₹816.5 per person per month or ₹27 per person per day for agricultural households. The average household size for agricultural household given in the SAS report is 4.9. Even if one person of the agricultural household worked on average MGNREGS wages of ₹179.7 a day throughout the year – farming normally occupies more than one member of the household – per person daily incomes would have been ₹36.7. This makes it clear that cultivation leaves very little surplus for long-term investment.
“The latest SAS report clearly shows that farming is an economic burden rather than a gainful activity. Per person daily earnings of ₹27 from farming makes older poverty lines, which were criticised as being too low, look good” said Himanshu, an associate professor of economics at Jawaharlal Nehru University. “That this has happened under a government that promised to double farm incomes and claims to offer guaranteed returns through Minimum Support Prices, speaks volumes about the efficacy of agricultural policy. These numbers also show the pointlessness of trying to offer small cash transfers instead of focusing on the larger viability crisis in farming.”