By N Chandra Mohan
Ahead of the forthcoming national elections, it is time to revisit Prime Minister Narendra Modi’s commitment seven years ago to double farmer incomes by 2022. To boost farmer incomes, the ruling NDA regime hiked minimum support prices for key crops and political parties in recent poll-bound states even announced a bonus over the MSPs. As farmers are a key electoral constituency, more announcements are likely to garner their support. The farmer income question also featured in the PM’s address at the 17th Cooperative Congress, in which he stated government’s spending on agriculture since 2014 provided Rupees 50,000 in some form or the other to 130 million farmers. Farmers are “guaranteed” to get this amount, he emphasised as a riposte to the promises of opposition parties in election season.
On the doubling of incomes, although the PM referred to the nominal income of farmers, an inter-ministerial committee—constituted in April 2016 to examine this issue and indicate a roadmap—interpreted this commitment in real terms after adjustment for inflation. Niti Aayog member Ramesh Chand recently stated that the last 10 years have been good for the agricultural sector and that if one considers the various elements which go into calculating farmers’ incomes, “they have been mostly favourable”. In an earlier interview to FE, Chand stated that the real income of farmers may increase by around 70% through June 2023. The various elements that go into calculating farmer incomes indicated by him provide reference points to assess this question.
The difficulty in assessing the doubling question is obviously because there are no estimates of farmer incomes published by the National Statistical Office although quarterly and annual estimates are available for gross value addition in agriculture. The situation assessment reports of 2018-19 and 2012-13 are too dated in this regard. Since the Modi government came to power, the average annual growth in real GVA in agriculture, forestry and fishing till Q2FY24 has been 4.2%. As a proxy for real farm income, any doubling would take 17 years. The absolute increase was only 38% till June 2023. The higher increase in real farmer incomes of 70% is plausible if the number of cultivators has declined over this period. But this cannot be verified.
The Niti Aayog member pointed to the terms of trade for agriculture relative to non-agriculture which refer to the ratio of prices that farmers receive for their produce to what they pay for goods and services they purchase. Since the NDA regime assumed office, the ToT have been higher than 100, indicating that farmers have better pricing power and there has been a shift of income in their favour. However, for all the electoral promises for higher MSPs, the ToT index was lower at 105.29 in 2021-22 than 106.76 in 2015-16, according to Agricultural Statistics at a Glance. While farmers received higher prices, cultivation costs, too, have risen. ToT is an important indicator to assess incomes but it also depends on crop yields and commodity price cycles.
Lastly, Chand pointed to the second source of farmer income in non-agricultural activities, which was 40% for an average family farming family in 2012-13 and 47% in 2017-18. When the next survey results (for 2022-23) come, “we may see that share crossing 50%”, he said. The reality is that an average farmer is now more of an agricultural labourer than cultivator. Their indebtedness is also high. Their income is also low relative to those of non-agricultural workers. On the wage front, the situation is grim as the average annual growth of 5.5% in daily wages for agricultural workers has been eroded by inflation of 4.9%, implying a sluggish real increase of only 0.6% during the last nine years, according to RBI’s Handbook of Statistics on States.
All of this suggests that the narrative of distress persists with small farmer incomes coming under stress as cultivation at the margin is increasingly unviable due to costlier inputs. Most of them continue cultivation on holdings that are diminishing in size as there are limited possibilities to move to urban areas due to the absence of opportunities in industry. There has been some shift but the process has been uneven with long periods of stasis followed by a quickening pace and now a reversal. Notwithstanding decades of post-Independence development, India still is “one of the few examples left in the world of an enormous population still largely dependent on agriculture,” according to the late historian Eric Hobsbawm.
The upshot is that there have been undoubted gains in farmer incomes since 2014 but the narrative of doubling in real terms is still a work-in-progress. Forget doubling, the need is to make cultivation more viable by stepping up investments not just in crop cultivation but also animal husbandry, dairy and fishing. There is also the need for crop diversification from staple cereals to high-value crops that can boost farmer incomes. Reducing monsoon-dependence is also necessary by building more irrigation facilities and developing drought-resistant and short duration crops by investing more in research and development. Every rupee spent on agri R&D yields better returns in improving farmer incomes than on subsidies.
(The writer is an economics and business commentator based in New Delhi. Views are personal)
