Where do we stand for ‘farmers income’?

The present government’s agrarian policies have inspired the whole spectrum of people – the farmers, researchers, policy makers and other stakeholders, and of course, the general public as well. A number of schemes have been launched by the centre in recent years, aimed to increase income farmers’ income. The honourable Prime Minister’s specific call to double the farmers’ income by 2022 reflects the priority being paid to the sector. An array of literature has emerged thereafter, discussing the scope of achieving the income-doubling process. A notable question of concern is – what makes the ‘farmers income’ in fact? Does it mean the income from agriculture alone? Or it refers to what a farmer earns? The question is of critical importance as the strategies to be devised in doubling the income depends on the idea with which the call is made. For example, if it refers to the agricultural income alone, one would focus on varietal improvements that aim for higher yield, increasing access to input, capital and product market, increasing public investment in agriculture, information dissemination, technology transfer and measures that bridge existing yield gap in agriculture. Marketing and price policies could effectively be combined with production scenarios to improve income received by the farmer. Or if it refers to the idea of increasing income as a whole, that would demand different sets of strategies as agriculture is not the only earning choice of farmers.

The definitional differentiation is necessary on the ground that occupational diversification has increased in pace with nation’s development and agriculture sector is not an exception to this. One would trace the process of farm non-farm diversification as a way of income earning even since the early periods of green revolution. As per the recent survey of National Sample Survey Office (NSSO), one could see that income from crops and livestock contribute only 60% of total income of the agricultural households (Figure 1). Rest of the income earned is by offering labour services in farm and/or non-farm enterprises.

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Figure 1. Sources of income earnings in agricultural households (2013, Rs/month)

Such diversification has been the product of both pull and push factors that are specific to the agrarian environment. Factors such as droughts, floods, depleting soil and water resources, diminishing terms of trade, wage inadequacies with respect to expected living standards, capital demanding farm technologies, rising costs of primary inputs, labor and capital market imperfections drive away the farmers out of cultivation on one side. On the other side, developments in agriculture, higher wages in non-farm enterprises, urbanisation, increasing demand for non-farm goods and services arising out of growing population and rising income per capita pull the labor towards non-farm occupations. Improvements in living standards and development of infrastructure are the other factors that drive farmers towards non-farm earning.

Thus, the approaches to double the income as a whole might require understanding and addressing farm non-farm linkages. The aspect one should consider in detail is the pattern of income diversification. Figure 2, which is generated from the details of around 35,000 agricultural households surveyed by the NSSO during the year 2013, illustrates the pattern of diversification of different groups of farmers ordered as per the size of land they possess. The positive values represent income from crops & animals and the negative values indicate (positive) off-farm earning. The different sets of colours group farmers earnings based on their size of holdings i.e. less than 2 hectares, 2-4 hectares, 4-6 hectares and above 6 hectares of land, respectively.

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Figure 2. Farm and off-farm income earnings of agricultural households (2013)

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Figure 3. Labour earnings from agriculture and rural nonfarm sectors (2013)

What we observe is that the marginal and small farmers tend to move towards off-farm earnings more often than the rest, showing an inverse relation with the size of holding they possess.  Many a times, of course not all, off-farm earnings surpass the income from agriculture depicting the role of off-farm choices in sustaining livelihood of the poor. Such relation is perceivable from that fact that small and fragmented landholdings limit the production potential in agriculture, reduce the scope of household investment in farming, restrict the risk bearing ability and access to credit, forcing the farmers to search for other income sources.  The other feature one might note is the choice of farm households in offering labour services in agriculture and non-agricultural enterprises.

In general, the data show that preference had been towards wage earnings within agriculture (Figure 3) than entering into non-agricultural jobs.  The non-agricultural enterprises are knowledge intensive and highly productive when compared with the farm sector.  Accordingly, labor absorbance in non-farm enterprises is faster for the literate than the illiterate, which results in sustenance of major share of rural labor in agriculture whose literacy levels are relatively less.  Hence, while attempting to increase farmers income as a whole, policies that aim to increase rural literacy levels would help for labour-transfer towards off-farm occupations.  On the other end, improvement in agricultural technologies and relevant marketing and price policies would help raise the income from agriculture.  The policy towards literacy is just one factor that influences entry and exit between farm and off-farm occupations.  One could trace number of forces like literacy that simultaneously influence the occupational choices.  Hence, to conclude, a precise definition of ‘farmers income’ i.e. clear demarcation between farm and farmers income is necessary to devise appropriate strategies in succeeding the ambitious goal of doubling the farmers income.

(The views expressed on solely of the author and not of the the institute)

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Balaji SJ is a scientist with the National Institute of Agricultural Economics and Policy Research (NIAP)