Context: National Sample Survey Office’s (NSSO) ‘Situation Assessment of Agricultural Households and Land and Livestock Holding, 2019’ survey, which was released in 2021 has highlighted that average monthly income of a farmer household in India was as low as Rs. 10,218.
Farming in India:
- Agriculture sector contributes to 16% of the overall GDP and accounts for employment of approximately 50% of the Indian population.
- According to Economic Survey 2019-20, the share of agriculture and its allied sectors in India's export was around 11%.
- Agricultural sector is a major contributor to rural economy, with majority of rural households being dependent on agriculture for sustenance and income.
- Income disparity across states: There is a wide disparity in farming incomes at the state level as shown below. States such as Punjab, Haryana has highest average monthly income among states with farming households earning more than Rs 20,000 per month. While farmers in Jharkhand and Odisha fare poorly with average monthly incomes around Rs 5,000.
Issues with agriculture/farming in India:
- Subsidy issues: Expenditure on subsidies account for around 8% of agricultural GDP but capital expenditure by government in agricultural sector is only around 3.2% of GDP. This in turn has become an obstacle for structural reforms in agricultural sector such as market reforms, high yield variety seeds, etc.
- Production issues: Dalwai panel has spoken about the rising input cost of farming inputs. Also, the lower rate of adoption of modern farming techniques has made the production process quite inefficient. Ex: farm mechanisation rate is only around 25% in India.
- Productivity issues: agricultural yield is found to be lower in the case of most crops, as compared to other top producing countries such as China, Brazil and the United States. Ex: India ranks third in the production of rice, its yield is lower than Brazil, China and the United States. The same trend is observed for pulses, where it is the second highest producer.
- Market Issues: The agriculture market in India Is highly fragmented, with multiple restrictions- not allowed to sell in market area of one's choice, only 15% of the APMCs have cold storage facilities and less than 50% of mandis have weighing machines. Farmers are forced to indulge into distress sale of their produce.
- Stagnant model of farming: Rice and wheat account for 40% of area under cultivation. The cereals account for 42% of area under cultivation but contribution to agricultural GDP is 20%. But horticulture cultivation accounts for 14% of area under cultivation but contribution to agricultural GDP is 33%.
- Lower Export performance: India's processed form of agricultural exports is only around 16%. Also, India has been lacking in market intelligence to cater to ongoing demands of the market. Ex: Lower rate of adoption of organic farming in India, although in market there is a greater demand of it.
- Low procurement on MSP: States with efficient procurement at MSP such as Punjab and Haryana have relatively higher incomes for farming households, while eastern states have fared poorly. In this context, Shanta Kumar Committee has pointed out that only 6% of farmers have benefitted from MSP regime.
Measures to increase the income of farmers:
- Crop diversification: According to Dalwai Panel, increase in 1 ha area of diversification can lead to increase in 1 lakh of income annually to farmers.
- Boosting productivity: Productivity of agriculture can be increased by introducing high yielding variety seeds, promoting farm mechanization, shifting to micro-irrigation, etc. Dalwai Panel- micro-irrigation can lead to 45% increase in productivity.
- Investing in R&D in agriculture: According to ICRIER study, every rupee spent on agricultural R&D yield better returns (11.2 times) as compared to fertilizer (0.88) and power subsidy (0.79). The enhanced productivity will in turn lead to better income for farmers.
- Market reforms: Digitalization of agricultural market(E-NAM), better infrastructure in terms of cold storage facilities, increasing accessibility of agricultural market to rural pockets, etc.
- Alternative strategies: Promotion of FPOs, contract farming can help in connecting the farmers directly to their consumer base by eliminating the middlemen. Ex: success of dairy sector in Gujarat and Punjab via contract farming.
- Realizing the export potential: The Indian agriculture stands 2nd in terms of agricultural production globally but 9th in terms of exports. In this context, it is important for the Government to incentivize the exports of processed, high value products.
Conclusion:
Agriculture sector in India embodies three thrust areas i.e. to promote inclusive growth, to enhance rural income and to sustain food security. Going forward, it is important to promote structural addressal of agricultural problems to achieve the vision of inclusive and sustainable development in India.