Inequality plagues rural India
As in the formal economy, the farm economy also suffers from the concentration of landholdings within a small group
The National Bank for Agriculture and Rural Development (NABARD)'s All India Rural Financial Inclusion Survey (NAFIS) released in 2018 shows that in the last four years a farm household registered a cumulative income hike of just Rs 2,505/month, with an average of only Rs 626/month every year.
In 2016-17, the average agriculture household income was Rs 8,931/month. But, this income is not inflation adjusted — meaning in real terms it would be less. So, it doesn't come as a surprise when the report says that 43 per cent of India's indebted households are farm households.
In 2017-18, reports by a Committee on Doubling of Farmers' Income, set up by the Union government, came out in 13 volumes. Going by this committee's study, the national average income from cultivation increased by just 3.8 per cent over the 2001-11 decade, when the overall farm sector grew by 3 per cent annually.
Little wonder remains over the fact that the number of farmers in the country reduced by 8.5 million between 2001 and 2011. At the same time, farm labourers rose by 37.5 million.
In fact, in 16 states farmers reported a dip in income after adjusting inflation. These include states like West Bengal (4.2 per cent dip), Bihar (1.4 per cent) and Uttarakhand (3.4 per cent). Clearly, farmers are not earning a profit from their produce.
A survey of 23 crops for investment and income during 2004-2014 shows that barring a few ones, farmers are no more making any money. In the case of paddy — a major crop — farmers in only seven states reported an increase in their net income, while in six states, including poor states like Bihar, Jharkhand and Odisha, farmers incurred losses.
Similarly, for wheat, profitability is coming down across the country, with Chhattisgarh, Himachal Pradesh, Jharkhand and West Bengal reporting losses. In major wheat-producing states like Punjab and Haryana, the cost can be recovered due to assured buy-back by the government.
While the whole agrarian sector reels under a crisis, what comes out as a big challenge is the income inequality among farmers. Inequality of income among the small and marginal farmers group — the semi- and medium- and large farmers group — is stark.
The lowest among the farmer groups in terms of landholding earns the least. And, India primarily consists of small and marginal farmers, defined as those holding less than two hectares (Ha) of land. About 85 per cent landholdings in India are below two Ha.
Let's look at the income equality among various landholding groups. According to the Committee, the average annual earning of a small and marginal farmer household was Rs 79,779 in 2015-16.
Now compare this with the earning of large farmers having a landholding above 10 Ha. Such farmers earned seven-and-a-half times more than a small and marginal farmer, or to be specific Rs 605,393 each year. A medium and semi-medium farmer's household earned Rs 201,083 or two-and-a-half times more than a small and marginal farmer's household.
This means that 85 per cent of farmer households earn 9 per cent of the total income, while the rest earn 91 per cent. If you compare this with overall inequality in India, it's far too high.
"The initial promise of agrarian reforms was to distribute land to the landless and provide a title of ownership to the cultivators. However, unfortunately, India's agrarian reforms did not ensure egalitarianism in the agricultural community," says the Dalwai Committee Report asking for agriculture policies to factor in this aspect while crafting ways to double farmers' income by 2022, as promised by Prime Minister Narendra Modi.
This raises a pertinent issue that has policy ramifications. The Green Revolution in the 1960s focused on increasing productivity and yield. But since then, landholdings have become significantly fragmented. Marginal landholdings have tripled in the last 40 years. It means that the old strategy might not reap the same objectives.
This aspect is important in the context of the government's target of doubling farmers' income. Small farmers take longer to increase their income in comparison to large farmers.
For example, during 2003-13, households with over 10 Ha of land were able to double their income. But a small farmer with up to one Ha of land could increase income by just 50 per cent during the same time.
The government needs to apply income group-specific strategy to achieve its target of doubling farmers' income. And just to reiterate the country's massive small farmer population: average size of 67 per cent of all landholdings in India is just 0.39 Ha.
(The views expressed are strictly personal)
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