Changing face of agriculture
Though India is becoming increasingly less agricultural, food grain and horticulture production continue to rise every year
The All India Rural Financial Inclusion Survey 2016-17, conducted for the first time by the National Bank for Agriculture & Rural Development (NABARD), seems to have some flaws in its findings. One of the reasons could be that the survey was conducted, as pointed out by one of its members Ashok Gulati, in a drought year, resulting in some distortion as it may not have captured the true picture during normalcy in the rural economy.
This is evident from one of its major findings that agriculture generates not even a quarter of rural household incomes. True that farm income might not be adequate, but the fact is that it is the major source of income for farmers, though the number of persons having it as a livelihood is gradually falling due to the fragmentation of landholdings and migration.
According to the survey released in August this year, in the so-called agricultural households, just over 43 per cent of average income comes from the cultivation of crops and rearing of animals. What else could one expect from such a survey in a drought year?
The NABARD survey estimates the total number of rural households in India for 2016-17 at 21.17 crore. The definition of 'rural' is a broad one, covering revenue villages and semi-urban centres with a population of less than 50,000. Out of the 21.17 crore rural households, 10.07 crore, or under 48 per cent, are 'agricultural' – those with at least one member self-employed in farming and reporting an annual value of production at more than Rs 5,000. The remaining 11.10 crore households or 52 per cent are 'non-agricultural'.
If there is less Krishi in Bharat, as claimed by it, how is it that India's food grain and horticulture production is increasing year after year? Last year, India achieved a record 275 million tonnes of food grain production and 375 million tonnes of horticulture production, including fruits and vegetables. This year, food grain production is expected to better at 285 million tonnes.
According to the survey, whose reference period is 2015-16, the average net monthly income of Indian rural households – after deducting expenses incurred in the course of economic activity – was Rs 8,059. The highest share of this (Rs 3,504) was accounted for by wage labour (both farm and non-farm), which was followed by government or private service jobs (Rs 1,906). On the other hand, agriculture – that is income from crop cultivation and livestock rearing – contributed only Rs 1,832. But what's interesting is that even within agricultural households, the share of average income from cultivation and livestock rearing was just over 43 per cent. The remaining 57 per cent income in their case, too, was from non-agricultural sources. Though this does not reflect the correct picture as it is a drought year, one thing is clearer: farmers are trying to augment their farm income from other sources. The national rural employment generation programme (MNGREGA) could be a contributory factor, considering it was a drought year. As it is, agriculture is seasonal in nature and, hence, there is inherent disguised unemployment or underemployment, as it is called in economic parlance. In such a scenario, it is a welcoming development, particularly as small farmers do have other sources of livelihood to augment their farm income since returns are low beside the high risks due to vagaries in weather.
The NABARD survey not only reconfirms but magnifies the findings of the National Sample Survey Office's (NSSO) Situation Assessment Survey of Agricultural Households conducted for 2012-13. That survey had estimated agricultural households to constitute 57.8 per cent of all rural households. One reason for the higher share could be that the NSSO's definition of rural did not extend to semi-urban centres with below 50,000 population, which made up to 16 per cent of households in the NABARD survey. In the NSSO survey, 67.2 per cent of the average income of agricultural households came from cultivation and livestock rearing. That share is even lower, at 43.1 per cent, in the recent NABARD survey. The methodological differences notwithstanding, both surveys highlight the same fact – of rural India becoming less agricultural, both in terms of the share of families engaged in farming and a diversification of income sources. There is, however, nothing much to quarrel with this finding as it only states the obvious. With landholdings becoming smaller and economic activities progressively increasing in the country, the trickle-down effect comes into play and economic development becomes more inclusive, which needs to be appreciated.
The NSSO survey reckoned the average monthly net income of agricultural households in India for 2012-13 at Rs 6,426. That figure in the NABARD survey for 2015-16 is Rs 8,931, an increase of 39 per cent over three years. A doubling of incomes would require this to go up to Rs 17,862 by 2021-22, the target date set by the Narendra Modi-led NDA government. It is significant to note that the doubling is with reference to agricultural household incomes, which could be from both farm and non-farm sources. This, however, is going to be a tough task considering the hiccups in the domestic as well as global economy.
The vigorous implementation of the government's flagship programme, the Jan Dhan Rural Yojana, to ensure that every household gets a bank account, has secured banking facility and savings for rural households. But investment levels, pension and insurance coverage still remain very low. Low insurance cover is one of the reasons for the farm distress as it leads to high indebtedness, particularly in times of crop failure, which is quite frequent in India due to droughts and floods.
The survey also showed, for obvious reasons, that levels of indebtedness were high. A majority of the agricultural households were indebted, with the amount of loans nearly equalling annual incomes. More than one in two agricultural households surveyed were indebted. The average outstanding debt for these households was Rs 1.04 lakh, but most borrowed from financial institutions rather than moneylenders. One in two rural households saved in 2016-17. Nearly one in two rural households that saved did so in financial institutions, with more agricultural households saving in such institutions compared to the non-agricultural households.
The survey covered 245 districts across 29 states and was done across Tier-III to Tier-VI cities. It covered 40,327 households and 187,000 people, covering all aspects of financial inclusion, including loans, savings, investments, pension, insurance and remittance. There are, however, questions about whether the sample is really a true representation of the ambit of farm households in the country, which is quite large and varied.
NABARD chairman Harsh Kumar Bhanwala said, the survey shows that there is scope for banks to provide loans to more people rather than lending to the same set of people. Insurance coverage remains poor. Only around one in four households has access to insurance coverage. Old age income security in the form of pensions is worse. Only one in five households has access to any type of pension. This is one area where the government will have to work hard as a lot still needs to be covered to fully achieve financial inclusion, particularly in rural India.
(The views expressed are strictly personal)