Agrarian Crisis

Farmer’s Incomes and Agrarian Crisis

By: Elumalai Kannan
A strong trend towards agricultural diversification from food to commercial crops and from enterprise to allied activities is emerging. This shift is driven by both, state policies and the domestic market and has a bearing upon small and marginal landholders.
Crops

Agriculture continues to play an important role in the overall growth of the Indian economy despite a structural shift towards the service sector during recent decades. Despite a decline in the share of agriculture in national income from 55.1 per cent in 1950-51 to 13.9 per cent in 2013-14, agriculture still holds the key to transformation of India’s rural economy. But, there are many challenges too. The country achieved self-sufficiency in food production at the macro level, but still confronts massive challenges and faces an agrarian crisis of high prevalence of malnourished children and high incidence of rural poverty.

The dependence of the rural workforce on agriculture for employment has not declined in proportion to its contribution to gross domestic product (GDP). This has resulted in widening the income disparity between the agricultural and non-agricultural sectors (Chand, 2017). In this context, achieving a higher growth in agriculture assumes great importance. A matter of concern for policy planners and research scholars in recent times (Vaidyanathan 2010, Sen 2016). Sustained agricultural growth, facilitated through constant policy and institutional support, has the potential to augment growth in the rural economy and associated secondary activities such as food processing and retail trading. However, agriculture-led rural industrialisation has not received due attention from policy makers in the country notwithstanding the fact that maintaining the growth of agriculture per se was lost sight of during the 1990s (Bhalla and Singh 2009). After a splendid growth performance during the 1980s, agriculture’s decline during the 1990s was attributed to the reduction in and/or stagnation of public expenditure on agricultural infrastructure, defunct extension services and biased economic reforms (Mahendradev 2000; Vyas 2001; Rao 2003).

Although there was a reported revival of agricultural growth since the mid-2000s, improvement in yield of major crops was not as remarkable as it was in the 1980s. In fact, the agricultural sector showed higher variability in production since 1990s. Studies have also shown that crop diversification and raising minimum support price of agricultural produce have been the important drivers of output growth in recent years (Birthal et al 2014; Chand et al., 2015). However, these sources of growth alone may not sustain the interest of the farmers in cultivation unless the support system moves towards providing income security to them. With this background, the present article discusses trends in India’s agricultural growth, changes in real income and issues related to agrarian crisis.

Trends in agricultural growth

Annual growth rates revealed that agriculture and allied activities registered more volatile growth than overall GDP due to vagaries of rainfall, fluctuations in temperature and other natural conditions. Growth in agriculture and allied activities declined continuously during 1993-94 to 2002-03; annual average growth rate during this period was 2.9 per cent (Fig. 1). The growth rate seems to have recovered thereafter registering an impressive rate of 3.2 per cent during 2003-04 to 2007-08. This was also the period during which the overall GDP growth was higher at 7.2 per cent. However, the growth in agriculture as well as the overall economy has plummeted since 2008-09, which coincided with the global financial crisis and frequent occurrence of drought in different parts of the country. The annual average growth in agriculture was 3.1 per cent and that of overall GDP was 7.1 per cent during 2008-09 to 2014-15. Agriculture and allied activities registered average growth rate of 3.0 per cent for the entire period from 1993-94 to 2014-15 whereas overall GDP recorded 6.4 per cent during the same period. Thus although the share of agriculture in overall GDP has declined overtime, the magnitude of agricultural growth continues to matter.

Within agriculture and allied activities, the crop sector dominated the total value of output even though its contribution has declined during the recent times (Fig. 2). Within the crop sector, the share of field crops was more or less constant, while the share of horticulture has shown a declining trend. The growth in output from livestock was higher at 6.5 per cent than that of the crop sector. The share of fishery in total value of output has remained more or less constant overtime. However, the contribution of forestry has increased from 3.9 per cent in 2002-03 to 9.7 per cent in 2007-08 and then declined to 7.4 per cent in 2013-14. The annual growth in output from forestry was as high as 12.4 per cent. The reasons for sudden spurt in the contribution of forestry needs further exploration. Nevertheless, it is useful to observe that there is a strong trend towards diversification of enterprises from crop agriculture to allied activities.

Demographic pressure on the agricultural sector has affected the distribution of agricultural land holdings resulting in progressive marginalisation of holdings in most parts of the country. As per the Agricultural Census, the proportion of marginal and small holdings has increased considerably from 74.5 per cent in 1980-81 to 85 per cent in 2010-11 with an addition of about 51 million holdings between these periods. The area cultivated by these operational land holders has also increased nearly by 20 per cent between the periods 1980-81 and 2010-11. The size of holdings affects the scale of production, adoption of technology, marketable surplus, credit and access to other support services.

Various studies have shown that farmers shift their cropping pattern in response to changes in consumption and dietary pattern. As the cultivated area has remained more or less constant at 140 million ha in the last two decades, the increased demand for diverse food has put agricultural resources under severe stress. In fact, intensification and substitution of food crops with commercial crops have taken place in many parts of the country. Area under foodgrains has declined from 75.5 per cent during triennium ending (TE) 1970-71 to 62.5 per cent in TE 2013-14. This decline in area under foodgrains can be attributed to fall in area under coarse cereals such as jowar, bajra and small millets. There is concomitant increase in area under the cultivation of oilseeds, cotton, fruits and vegetables. Although the shift in cropped area from coarse cereals to these high value crops is likely to increase farm output and income, it will expose the marginal and small landholders to serious weather-borne risks in dry land regions.

Changes in agricultural income at national level

The National Sample Survey Organisation (NSSO) had conducted the Situation Assessment Survey of Farmers/Agricultural Households in 2003 and 2013. Among other information, details about the value of output and input costs for different economic activities help to estimate the farm household income. The overall real income of farmer households has increased annually at 3.9 per cent between 2002-03 and 2012-13 (Table 1). Income from crop cultivation constituted nearly 50 per cent, while wages and salaries accounted for about one-third of total income. Income from farming of animals was as high as 15 per cent between these periods. These estimates imply a rosy picture about the condition of the peasantry suggesting that the wellbeing of the cultivators has improved overtime. However, analysis of the relationship between growth in agricultural income and growth in consumer price index shows that they are not at par with each other; consumer price index is higher than the agricultural income.

India’s National Accounts Statistics provides agricultural GDP, which is estimated in terms of gross value added by deducting value of intermediate inputs consumption from the value of output from the sector. This also includes gross value added from the operation of government irrigation system. The trend in annual growth in gross value added and consumer price index for agricultural labourers (CPIAL) is plotted in Figure 3. Gross value added (GVA) indicates agricultural income, while CPIAL shows the price that rural persons pay for purchase of consumer products. It is evident that the percentage change in CPIAL was higher than agricultural income during most years under study. The years which marked with high agricultural income over consumer price index, were affected by drought and hence higher base value has resulted in higher growth.

However, trend in movement of agricultural income clearly indicates that the purchasing power of farmers has remained low and has been worsening during recent years. This is mainly due to neo-liberal policies of the government, which advocate phasing out of input subsidies and allow the market forces to determine their prices. At the same time, they fail to increase productivity through investment in research and rural infrastructure. In fact, it is discomforting to note that annual growth in public spending in agricultural research and education slowed down from 6.0 per cent in 1980s to 3.0 per cent since 1990s (Singh and Kumar 2012). This has already affected new technological advancements and forced the farmers to incur higher input costs to achieve the same level of production. Therefore, the worsening state of income implies deterioration of welfare of farmers leading to agrarian distress.

There is a strong trend towards diversification within the crop sector from food to commercial crops and from cultivation of crops to allied activities, entailing a shift from food grains to cash crops. This process has been driven by both, state induced policies and developments in the domestic market, promoted by transnational corporations. In both the cases, cultivators switch from production for household consumption to production for domestic and international markets, thus exposing themselves to precarious market forces. Market dependency for purchase of inputs and sale of output in a way has initiated an agrarian crisis in the country, reflected through weakening purchasing capacity of farmers during the
recent decades.

Endnote

Of late, there is increasing discussion among the farmer groups, academia and policy makers to provide income security rather than price security to the farmers. In fact, many developed and developing economies have progressively shifted from the price-based support to income support policy, which is considered to be more equitable and perhaps easy to implement due to the large size of landholdings in those countries. However, in the context of India, the income support policy will certainly benefit the marginalised sections of the farming community as also the underdeveloped regions and crops. But, this proposition is fraught with many challenges and constraints in terms of the preponderance of small and marginal holdings, absence of a major breakthrough in technology, inadequate investment in rural infrastructure, inefficient marketing system and a defunct extension system. Despite these hurdles, a sustained policy support is required to protect the interests of the farmers and provide basic income support to withstand against the vagaries of weather and volatile market forces.

References

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Bhende, M. J. and Thippaiah, P., 2010. An Evaluation Study of Prime Minister’s Rehabilitation Package for Farmers in Suicide Prone Districts of Karnataka. Agricultural Development and Rural Transformation Centre (ADRTC), ISEC, Bangalore.

Birthal, P.S., Joshi, P.K., Negi, D.S., Agarwal, S., 2014. Changing Sources of Growth in Indian Agriculture: Implications for Regional Priorities for Accelerating Agricultural Growth. Discussion paper 01325, International Food Policy Research Institute, Washington, D.C.

Chand, R., Saxena, R., Rana, S., 2015. Estimates and Analysis of Farm Income in India, 1983–84 to 2011–12. Economic and Political Weekly, 50(22):139-145.

Chand, Ramesh, 2017. Doubling Farmers Income: Rationale, Strategy, Prospects and Action Plan. NITI Policy Paper No.1/2017. NITI Aayog. Government of India.

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Sen, Abhijit, 2016. Some Reflections on Agrarian Prospects. Economic and Political Weekly, 51 (8): 12-15.

Singh, A., and Kumar, S., 2012. Trends in Public and Private Investments in Agricultural R&D: Implications for Growth. Asian Biotechnology and Development Review, 14(2): 39-49.

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