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Since 2016, India has seen farmer’s protests in Tamil Nadu, Chattisgarh, UP, Madhya Pradesh, and Maharashtra (twice). Agriculture accounts for 17% of GDP but almost half of India’s population depends on it (Economic Survey, 2018). Hence, the per capita income in agriculture is low. This can be analysed in two ways; one is the problems with the primary sector and the second is the problems facing the Indian economy at large.

Agriculture in India is characterised by inequalities. There are a few large farmers on one side and a number of small and marginal farmers on the other (IANS, 2015). The roots of this inequality can be traced back to the incomplete implementation of land reforms in the initial decades after Independence. The small and marginal farmers have fragmented land holdings, which exhibit poor land productivity. They also do not have access to formal credit sources, and hence have to depend on informal money lenders, thus ending up paying large interest rates for their loans (Mohan, 2006). This prevents long term investment in agriculture, and any surplus that can be accrued goes to the money lenders.

In recent years, there has been feminization of agriculture since men have been moving out of rural areas into urban areas in search for better incomes (TNN 2017). However, women are not recognized as land owners owing to patriarchal social norms; nor can they get easy access to credit.

Green Revolution, initiated in the 1960s, has promoted capital-intensive farming, with high costs incurred in seeds, fertilisers, pesticides and farm mechanization (UNAPCAEM, 2011). This restricts the growth of small farmers. Moreover, mechanization prevents growth of farm wages. The entry of Bt Cotton in Indian agriculture has increased the indebtedness of the farmers, causing large number of farmer suicides in areas where it is being cultivated. The reduction in government’s role in the economy has led to a focus on Minimum Support Price only for rice and wheat only, and a subsidy for urea fertilisers (Gulati, 2014). This has caused monocropping and excess use of urea causing decline in fertility of land.

Even for crops where MSP is given, the small farmers do not materialise the full value because of the poor reach of the commodity procurement agencies in India (Sanyal, 2006). India also has poor availability of cold storage and logistics facilities. Hence, farmers are forced to sell their produce quickly for fear of perishing, thereby reducing their bargaining power which prevents them from getting maximum value for it.

The macroeconomic developments in Indian economy have exacerbated the problems in agriculture. The reduction in public investment meant that instead of building canals, the focus thus shifted to tube wells, which required substantial capital investment by farmers (IANS, 2015). Around 55% of cultivable land is rainfed, rendering agriculture subservient to the vagaries of the monsoon.

The liberalisation of the Indian economy in 1991 exposed Indian farmers to price fluctuations in the international markets (De Roy, 2016). There has been import of grains when there has been poor production. But during bumper production years, there has not been subsequent export of the excess grains citing food security as the reason, thus not letting farmers get maximum value in good years. There is problem of excess supply in the domestic market, reducing the price of the produce and reducing the remuneration for the farmers.

Moreover, India has been witnessing jobless growth since a decade. The Lewisian structural transformation is not taking place in India. There is no vibrant manufacturing sector absorbing surplus labour from agriculture as Lewis envisioned. The dearth of other opportunities is forcing people to go back to agriculture, thus increasing disguised unemployment. The falling share of agriculture in GDP without a concomitant decline in the proportion of population engaged in it has kept incomes nearly stagnant.

In recent years, climate change has added to the woes of the agriculture. Due to increase in farmer suicides, Swaminathan Committee was constituted in 2003 to suggest reforms to enhance productivity, profitability and sustainability of farmers. A few of the recommendations were completing land reforms, increase in public investment in irrigation to ensure that farmers have equitable access to water, promotion of conservation farming, increase the reach of insurance, and promoting diversification into animal husbandry and other sources of livelihood. However, the recommendations have never been implemented.

In 2015, Prime Minister Narendra Modi announced a strategy to double farmers’ income by 2022. The average annual growth rate of agriculture has been 3.2 per cent in the post-reform period. Applying the Rule of 72[1], it will take 22 years to double the income, which is a near impossible task. Agriculture also falls in the State List under the Constitution, thus reducing the Centre’s involvement in implementation of land reforms.

A vibrant manufacturing sector will help in a successful Lewisian transformation. However, a vibrant manufacturing cannot exist without a dynamic agriculture sector, hence leading to a chicken and egg situation. With Indian per capita income rising, there will be demand for milk and poultry. Farmers should be incentivized for diversifying into animal husbandry to meet this future demand. The Launch of Operation Greens[2] in the Budget 2018, with focus on agri-logistics and processing facilities will go a long way in ensuring remunerative prices for farmers and raising farm incomes.

[1] Rule of 72 in finance states that the time required to double the initial investment is 72 divided by the average annual growth rate.

[2] Operations Green is a focus on Food Processing industries to reduce volatility in the price of agriculture commodities.

References

Department of Economic Affairs, Ministry of Finance (2018). Economic Survey Volume 1 2017-18. New Delhi: Government of India.

De Roy, S. (2016). Changes in the Distribution of Cultivated Land and Occupational Pattern in Rural West Bengal. Indian Journal of Agricultural Economics, 71 (4), 439.

Gulati, A (2014, December 11). A fertile Mess. The Indian Express. Retrieved from  http://indianexpress.com/article/opinion/columns/a-fertile-mess/

IANS (2015, December 9). Nearly 70 percent of Indian farms are very small, census shows. Business Standard. Retrieved from http://www.business-standard.com/article/news-ians/nearly-70-percent-of-indian-farms-are-very-small-census-shows-115120901080_1.html

Mohan, R. (2006, March 18-24). Agricultural credit in India: Status, issues and future agenda. Economic and Political Weekly, 41 (11), 1013-1023.

Sanyal, K. (2006). Report Summary: Swaminathan Committee on Farmers. PRS Legislative Research. Retrieved from http://www.prsindia.org/parliamenttrack/report-summaries/swaminathan-report-national-commission-on-farmers--662/

Singh, G. (2011). Farm Mechanization in Punjab: Social, Economic and Environmental Implications. [PowerPoint presentation]. United Nations Asian and Pacific Centre for Agricultural Engineering and Machinery (UNAPCAEM). Retrieved from http://www.unapcaem.org/Activities%20Files/A1112Rt/IN.pdf 

TNN (2017, Februrary 28). Women not prioritised for farm credit: Swaminathan. The Times of India. Retrieved from https://timesofindia.indiatimes.com/business/india-business/women-not-prioritised-for-farm-credit-swaminathan/articleshow/57381307.cms

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Written By Pranav Mayekar

Masters in Economics from TERI School of Advanced Studies

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