Firstpost
Oct 03, 2018
The current farmers’ agitation demanding a
higher minimum support price (MSP), among others, is puzzling for many since it
had been raised by 15 percent for 13 kharif crops, on an average, in July this
year – the highest since 2013. The Union Cabinet is expected to raise MSP for
rabi crops also when it meets in a few hours from now.
So is the farmers’ agitation purely a
political arm-twisting ahead of the 2019 elections or is there more to it? A
part of the answer could be found in the income generated from farming.
Ironical as it may seem, a 2017 Niti Aayog
report says that farmers’ income has not kept pace with the growth in
agriculture output – which has been low to begin with – resulting in low income
for farmers. It quotes a NSSO survey for 2011-12 to show that 22.5 percent farm
households had income less than the poverty line – ranging from 0.5 percent in
Punjab to 45.3 percent in Jharkhand.
Niti Aayog further says, farmers’ income
has also remained considerably lower than that of non-agriculture workers.
During the early 1980s, farm income per cultivator was just 34 percent of that
of non-farm worker, which remained unchanged in the next decade but after
1993-94, it worsened and reached 25 percent of non-agriculture farmers. There
was an improvement during 2004-5 to 2011-12 but no change over the 1983-84
level. The past four years (2012-13 to 2015-16) again witnessed deterioration
in relative income of farmers. This low income and income disparity are a
major cause of the agrarian distress, leading to farmers’ suicides and
youngsters leaving farming.
There isn’t adequate information on
farmers’ income. However, some estimates are available. One 2015 study (Chand
et al 2015) observed that income from farming is not adequate to keep 53
percent of farm households out of poverty, who operate on less than 0.63
hectare of land holdings. The average landholding in India is 0.59 hectare (including
landless) and 0.64 hectare (excluding landless) – according to a NSSO report of
2015.
A Situational Assessment Survey (SAS) of
farm households released in 2016 says, the average monthly income of farm
households during 2012-13 was Rs 6,426. It also says that only 60 percent of
this income came from farm business – cultivation and farming animals. Thus
farm income accounted for only Rs 3,855 per month. Now to give it a
perspective, compare it with the minimum wages for industrial workers. In October
2012, the minimum wage for unskilled labour was Rs 6,960 (at Rs 232 per day for
30 working days), for semi-skilled Rs 7,870 (Rs 262.3 per day) and for skilled
Rs 9,090 (Rs 303 per day). Farmers’ income, in comparison, was just about half
that of an unskilled industrial worker.
In terms of growth in farmers’ income, Niti
Aayog estimates show in the first decade of economic
liberalisation – 1993-94
to 2004-5 – the growth in real income per farmer was 1.96 percent. It went up
to 7.46 percent from 2004-5 to 2011-12 and fell to 0.44 percent from 2011-12 to
2015-16. Taken together, farm incomes per farmer grew at 3.4 percent annually
during 1993-94 to 2015-16. In fact, Niti Aayog says, it took 22 years from
1993-94 to 2015-16 for the real income of farmers to double!
In terms of GDP growth, agriculture growth
has been lagging behind the rest of the economy. Growth of both farm and
non-farm sectors had remained the same until 1990-91. Thereafter, non-farm
growth picked up from below 6 percent to above 8 percent for most of the period
while farm growth has taken a cyclical path with a long term trend of 2.8
percent, according to Niti Aayog.
Now to double farmers’ income by 2021-22
from the 2015-16 level – the avowed policy of the central government – Niti
Aayog says two key things need to happen: (a) real income of farmers need to
grow annually at 10.4 percent, which means the on-going and previously achieved
growth in farm income has to be sharply accelerated and (b) various sources of
growth – productivity of crops and livestock, efficiency of input use, high
value crops, price realisation etc. – has to be accelerated by 33 percent. Niti
Aayog concluded that “increase in real farm prices has a very high scope to
raise farmers’ income”.
Now, increasing MSP is a direct way of
improving price realisation for farm produce and income of farmers. RBI
database shows that the real MSP for paddy and wheat – two major items procured
under MSP – has been declining since 2007-8. A 15 percent increase in MSP for
the kharif crops in July 2018, therefore, was a welcome move.
But the trouble with MSP is that only 6
percent of farmers directly gain from selling paddy and wheat to the government
agencies. However, a higher MSP pushes up market price of the commodities,
benefitting a far larger number of farmers. That is why farmers have been
clamouring for higher MSP but face stiff resistance from governments and
economists who seek to contain subsidies to improve fiscal health of the
economy. That, however, is a hotly contested debate for another time.
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