Is farmers’ income rising at all?

Finally, the day of reckoning for doubling the farmers’ income by 2022-23, which the Centre promised in 2016, is here. While this year’s budget was silent, here is a window into the Centre’s thinking on the subject.

On March 24, 2022, the standing committee on agriculture’s “demand for grants (2022-23)” report was tabled in the Parliament. It paints a dismal scenario.

The report said: “It appears from the reply furnished by the Department that the Department is far from Doubling the Income of Farmers, rather in some States, between 2015-16 and 2018-19 i.e., in four years, like Jharkhand it has come down from ₹7,068 to ₹4,895, for Madhya Pradesh it has come down from ₹9,740 to ₹8,339, for Nagaland it has come down from ₹11,428 to ₹9,877, for Odisha it has come down from ₹5,274 to ₹5,112.

“This has happened when the monthly agricultural household income of the country has increased from ₹8059 to ₹10,218, that in the opinion of the Committee is a praiseworthy and timely intervention by the Government to double the Farmers’ Income. The Committee also note that as per the Situation Assessment Survey carried out by the National Statistical Organisation for all India, the question remains to be answered …why in some States monthly household income is declining…and whether the Department of Agriculture and Farmers Welfare remains as a mute spectator. The Committee, therefore, recommend that the Department should formulate a Special Team to figure out the reasons…and take some course corrective measures…”

Commenting on the agriculture ministry, the panel said its attitude was “lackadaisical”; it didn’t have relevant information (about states where income was falling) and when asked if a mere 3.1% of budget allocation for FY23 (for the Department of Agriculture and Farmers Welfare) was enough to double farmers’ income in “near future”, it merely presented data to show a rise in fund allocations, without revealing funds utilisation since 2015-16 even while asserting that the allocation was “adequate” to do the magic.

Is farmers’ income rising at all?

Two key facts presented by the parliamentary panel need closer examination: (a) rise in farm households’ income between 2015-16 and 2018-19 and (b) agriculture ministry’s optimism without relevant information.

First, a few facts.

The farm household’s average monthly income of ₹8,059 in 2015-16 is an “extrapolation” of the Situation Assessment Survey (SAS) of 2012-13. The extrapolation was done by the Ashok Dalwai-headed committee (DFI committee) constituted in 2017 to suggest how to double farmers’ income. It said for the doubling, farmers’ income needs to grow annually at 10.4 for 7 years (from 2015-16 to 2022-23).

The farm households’ income of ₹10,218 in 2018-19 comes from the SAS by the NSO (National Statistical Office), released in 2021.

The panel repeatedly said the datasets of 2015-16 and 2018-19 “are not strictly comparable” because there was no SAS in 2015-16 and ₹8,059 was an “extrapolation” (of ₹6,426 in 2012-13).

How can one measure the rise in income then and by what extent?

The second question arises from the SAS of 2018-19 data quoted by the parliamentary panel without qualifications – which the SAS doesn’t do.

The SAS of 2018-19 presents two monthly incomes using two different approaches: (i) ₹10,218 by “paid out expenses approach” and (ii) ₹8,337 by using “both the paid out expenses and imputed expenses” (page 6).

The difference being, as is clear, in the first case the income is taken after “deducting total expenses from total receipts for each source of income”, while for the second in addition to “paid out” expenses, “imputed” expenses (family labour, animal feed from own sources, receipts in exchange of goods etc.).

The better measure of income would then be ₹8,337, not ₹10,218.

Now, even the SAS of 2018-19 is not comparable with the SAS of 2012-13. Here is why.

The SAS of 2012-13 (income of ₹6,426) didn’t take into account imputed expenses for crop production. It said so (page 41): “However, only the actual expenses (out of the pocket expenses) were considered for reporting under this block (crop production). Imputed expenditure against inputs which were not purchased…was not considered…Since the value of certain critical inputs like family labour, seeds and manure from own sources etc., were not included in the expenses side, the estimates of receipts from crop production are likely to be over-estimates.”

A few more things need to be made clear.

What is farmer’s income?

What does a farm household mean and what constitute its sources of income? These are critical to know the ground realities.

The SAS of 2018-19 defines farm household as one “receiving more than ₹4,000/- as value of produce from agricultural activities (e.g., cultivation of field crops, horticultural crops, fodder crops, plantation, animal husbandry, poultry, fishery, piggery, bee-keeping, vermiculture, sericulture, etc.) and having at least one member self-employed in agriculture either in the principal status or in subsidiary status during last 365 days”.

In the SAS of 2012-13, the threshold for income from agricultural activities was ₹3,000.

Now what constitute its income?

The SAS of 2018-19 lists 5 sources: incomes from wages, leasing out of land, net receipt from crop production, net receipt from farming of animals and net receipts from non-farm business.

The SAS of 2012-13 lists four, excluding income from the leasing of land. (This is the second difference from the SAS of 2018-19, the other being imputed costs not considered for crop production).

Let us see what is the income from agricultural activities – (i) crop production (ii) farming of animals (animal husbandry) and (iii) arguably, leasing of land (presumably farmland) and (ii) non-agricultural activities like wages (not specified as from agricultural labour) and non-farm business.

Taking out wages and non-farm business, the income from agricultural activities falls drastically.

As per the SAS of 2018-19, the monthly average incomes add up to just ₹5,514 (paid out expense method) and ₹3,633 (paid out plus imputed expenses method). When wages and non-farm business area are added, the respective figures rise to ₹10, 218 and ₹8,337.

As per the SAS of 2012-13, the income from agricultural activities comes to ₹3,844 (paid out expenses method only). If wages and non-farm business income are added, it becomes ₹6,426 (the land leasing income is missing from it, as mentioned earlier).

So, income from agricultural activities went up to ₹5,515 in 2018-19 from ₹3,844 in 2012-13. Don’t forget, ₹5,515 is the nominal value (not indexed against inflation). The ‘real’ growth during this period (6 years) would be too small to matter.

The point of all these is to demonstrate that the actual and ‘real’ income from agriculture is pathetically low. It would make sense to rethink the policy prescriptions afresh.

Rise in farmers’ income from 2015-16

Since the parliamentary panel praised the Centre for raising the farmers’ income from 2015-16 level (₹8,059) to ₹10,218 in 2018-19, it needs to be examined too.

Its praise came after the ministry claimed “a growth of 26.8%” (from ₹8,059 in 2015-15 to 2018-19), on the basis of nominal values, not ‘real’ values.

Remember, when the Dalwai committee was set up to find ways to double farmers’ income, it talked about ‘real’ growth in income and calculated that this would require an annual average of 10.4% growth in income for 7 years, starting with 2015-16 base.

If 'real' growth in farmers’ income is calculated by indexing against the CPI-rural here is what one gets. This period (2015-16 to 2018-19) witnessed a 12% rise in the CPI-R. Indexed against this, the real value of ₹8,059 in 2015-16 becomes ₹9,034 in 2018-19. Now, the growth in income from ₹9,034 to ₹10, 218 is just 13% in 3 years.

That is, an annual growth of 4.3% against the Dalwai committee’s estimate of 10.4% annual rise for 7 years for doubling the income.

Just how unreachable that possibility comes from Kirankumar Vissa, an activist working for farmers. He wrote last month that for the farmers’ ‘real’ income to double from the 2015-16 level (₹8,059), the monthly income of farm households needs to go up to ₹21,146 in 2022.

But why all these long expositions and complicated calculations?

Simple. Since the promise in 2016, are farmer incomes on course at all?

Will corporatisation of farming help?

A fresh case is now being made to revive the repealed farm laws. Those laws sought to corporatise farming. It would be naïve to believe that corporatisation has helped farmers anywhere in the world or those in India.

That is because the entire developed and free economies of the world, like the US, the UK, other OECD countries and 12 developing countries spend billions in USD in farm subsidies to help farmers. An OECD study, “Agricultural Policy Monitoring and Evaluation 2020” said 54 countries it studied (OECD, EU and 12 emerging economies) provided over $700 billion a year in total support to their agricultural sector in 2019. Of this, $536 billion was payments to farm producers alone.

India is not part of the list because, it said, although it spends over $11 billion on farm subsidies every year in direct payments and input subsidies (irrigation water, power and fertilisers), these subsidies are offset by “negative market price support” – that is farmers are implicitly taxed due to complex regulations and trade policy, to the tune of $77 billion (a net loss for farmers).

Had corporatisation and free-market helped farmers why would the advanced economies spend billions of dollars every single year as farm subsidies?

At the height of the farmers’ protest, political scientist and India watcher Christophe Jaffrelot made an apt observation.

In December 2020 he wrote: “Why should agriculture be liberalised in the first place when in most countries governments subsidise this sector? In the US, the agriculture sector is expected to receive $46 billion in federal subsidies this year. This accounts for about 40 per cent of the total farm income and, if not for those subsidies, the US farm income was poised to decline in 2020, according to a report by The New York Times. Similarly, the European Union’s Common Agricultural Policy spending has averaged €54 billion annually since 2006…Without some support from the state, the smallest of Indian peasants would be even more vulnerable…”

No wonder the protesting farmers continue to demand legalising minimum support price (MSP) for a wider range of produces (other than wheat and rice) to help them raise their meagre income.