Unsustainable agriculture: Why Modi’s promise to double farmer income by 2022 is a mirage

The numbers

According to a Niti Aayog policy paper, during the early 1980s, farm income per cultivator was just 34% of the income of a non-agriculture worker. After 1993-94, the farm income of the cultivator dipped to 25% of the income of a non-agriculture worker. The income of the cultivators marginally increases during 2004-05 to 2011-12, but this increase never surpassed the levels of the early 1980s and finally the past four years - the years between 2012 and 2016 saw a further deterioration in the relative income of farmers.

The National Sample Survey Office (NSSO) data on consumption expenditure for the year 2011-12 shows that the income of more than one fifth of rural households, whose principal occupation is agriculture, puts them well below the poverty line. Some states like Jharkhand have as much as 45.3% farm households under the poverty line, with Odisha closely following at 32.1% and Bihar at 28.4%.

According to the Situation Assessment Survey of Agriculture Households (70th Round), the average annual income of a farm household from farm as well as non –farm sources amounted to Rs 6426/month in 2012-13 and the average annual income of the median farmer net of production costs from cultivation is less than Rs 1667/month in 17 states.

The devil is in the detail

Promising farmers to double their income when the overall mood in the agrarian sector was gloomy was a very welcome move. But the devil lies in the details.

Earlier on, it was not clarified that, whether the “Real Income” of the farmer will be doubled or it would be the “Nominal Income”. Real income refers to the income after taking into consideration the effects of inflation on purchasing power. Nominal income is the income unadjusted for what is termed as inflation.

This confusion has been cleared by the report of the Committee on Doubling Farmers Incomes under the chairmanship of Ashok Dalwai, which stated, that the government will seek to double real incomes of the farmers by 2022-23 over the base of 2015-16. Niti Aayog has identified sources of growth in farmer’s income, which can contribute to Doubling Farmer Income by 2022. These include improving productivity by increasing the crop yields, cutting the cost of production, increasing cropping intensity, diversifying towards high value crops such as fruits, vegetables, spices, improving terms of trade and getting farmers better prices.

The most recent estimates prepared by Niti Aayog's Ramesh Chand show that the total farm income of all farmers increased from Rs 1,77,954 crore in 1993-94 to Rs 1,63,4625 crore in 2015-16.

It took 22 years for the nominal income of farmers to increase by 9.18 times. It is noteworthy that between 1993- 94 and 2015-16, CPIAL (Consumer Price Index for Agriculture Labor), which is the measure of price change in rural India, also increased by 4.62 times.

After factoring the effect of inflation, it is clear that it took 22 years to double the “real” income of farmers. Chand further states that, “Doubling Real Income of farmers till 2022-23 over the base year of 2015-16 requires annual growth of 10.4% in farmer’s incomes”.

But the point to be noted is that the farmer’s real income has been increasing at a much lower rate of 3.5% per annum during 2002-03 and 2012-13.

A precarious situation

Another indicator which does not augur well with Modi’s dream of doubling the farmer income by 2022 is, that agri-growth has plunged to 1.8% annually in the first three years of the NDA government. Farmers are unable to recuperate their input costs.

This year too, farmers in Rajasthan, Madhya Pradesh, Gujarat were again forced to sell urad, soyabean, moong and ground nut at rates which were well below the Minimum Support Prices (MSP).

The situation was more precarious for farmers producing vegetables. The National Agriculture Market, which was supposed to create an all-India market, with the goal of increasing farm incomes, has fizzled out. There is no worthwhile interstate/intra-state trade being done through E-NAM. Moreover, agri-imports showed a significant increase from 1.23 lakh crore in 2013-14 to 1.63 lakh crores in 2015-16.

As a result, trade surplus declined from 1.44 lakh crore to .59 lakh crore during the corresponding period. The decline in agri-trade surplus was the result of increase in imports and decrease in exports. Restrictive export policies, duty free imports and an inherent consumer bias in the policy establishment needs to be reviewed.

As if this was not enough, this government introduced an “Inflation Targeting Mechanism”, which aims to restrict annual rise in consumer price index to six percent. Since food items have a combined weightage of 45.8% in the Consumer Price Index, it will be the farmer who will remain underpaid in the name of reining in inflation. This claim is further substantiated by a recent CRISL Report, which claims that the denial of a rightful income as the major reason behind the agrarian crisis sweeping through the country.

“While the average annual growth in Minimum Support Price (MSP) was 19.3 per cent between 2009 and 2013, it was only 3.6 per cent between 2014 and 2017,” the report states.

The ongoing decline

In order to double farmer income by 2022, the report of the Committee on Doubling Farmers Incomes under the chairmanship of Ashok Dalwai talks about an additional investment of Rs 6,39,900 crore. To achieve 10.41% annual increase in farmer’s income, the required rate of increase in investment on private account is estimated at 7.86% per annum.

The estimated increase in weighted public investment (together in agriculture, irrigation, rural roads and transport and rural energy) is slated at 14.17% per year. There has been deafening silence in the report and in the policy-making circles about the means of generation of this huge sum. Such omissions show the lackadaisical approach of the government toward the mammoth task of doubling the farmer income by 2022.

According to NSSO, the number of cultivators fell from 16.61 crore to 14.62 crore between 2004-05 and 2011-12, which marks an annual decline of 1.8%. Now, the Niti Aayog is optimistically contemplating that, if the number of cultivators keep on declining at the same rate as experienced between 2004-05 and 2011-12, then the number of cultivators can decline by 13.4% between 2015-16 and 2022-23. Hence, the farm income will be distributed in 13.4% less farmers, thus increasing the individual farmer income.

Test of time

Though, this assumption will be tested in time, but then a question arises, what will happen to the farmers who will leave farming? Can the government provide jobs to this agri labour? One thing is for sure - the rural economy will not be able to absorb this influx.

It is quite clear that there is no one solution for the agrarian crisis which is plaguing our farmers. It needs a multi pronged approach, which can be initiated by reviewing the agri pricing mechanism, so as the farmer realisations are according to his input costs and formulate a policy which ensures a minimum farm income to every farmer.

The need of the hour is to design and implement State specific Crop Insurance Schemes, with emphasis on speedy disbursal of claims. Further, the government needs to ensure that every farmer gets the Minimum Support Price for his produce.

It would be prudent on the part of the government to desist from using restrictive export policies to keep domestic prices low and adopt an open and stable export policy, which is free of sudden Export Bans and excessively high Minimum Export Prices (MEP).