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The state of agriculture in India is only going from bad to worse

Essentially, our agrarian economy has been in a state of perpetual distress after 2012-13. (Photo: Reuters)Premium
Essentially, our agrarian economy has been in a state of perpetual distress after 2012-13. (Photo: Reuters)

  • The latest Situation Assessment Survey adds to findings that reveal worsening agrarian distress
  • Our agricultural sector has been in a state of perpetual decline after 2012-13 and is reeling under such shocks as back-to-back droughts, demonetization and the covid-19 pandemic

Earlier this month, the National Statistical Office released the Situation Assessment Survey (SAS) of agricultural households for the 2018-19 agricultural year, which runs from July to June. This is the third survey of the SAS series; the earlier two were for 2002-03 and 2012-13 agrarian years. The latest one holds importance, given the unprecedented crisis in India’s economy driven by declining demand and supply disruptions, but also in the context of agrarian issues taking centre- stage with the intensification of the farmer agitation against three farm laws enacted last September.

The crisis in agriculture has been brewing for quite some time. Even before the present National Democratic Alliance alliance came to office in 2014, there were signs of distress following a sharp slowdown in the economy and a rise in input costs driven by rising wages, faulty implementation of India’s fertilizer-subsidy reforms and higher fuel prices. The back-to-back drought in 2014 and 2015 added to the misery. But before the agricultural sector could revive in 2016, demonetization caused disruptions that left many farmers unable to sell. Since then, the economy has experienced a sharp slowdown, followed by the covid pandemic.

Essentially, our agrarian economy has been in a state of perpetual distress after 2012-13.

The results of SAS 2018-19, therefore, are not surprising. The average income of an agricultural household from all sources—cultivation, livestock, wage earnings as well as non-farm incomes—increased in real terms from 6,436 in 2012-13 to 7,683 in 2018-19. However, this was mainly on account of higher wage incomes, which rose 6.7% per annum. More than 90% farmers during July 2018-June 2019 reported being engaged in crop cultivation, and for a majority of them, real incomes from it declined 1.3% per annum. This decline was experienced not by any particular class, but by all farmers, from those with small and marginal to medium and large farms. One of the worrying outcomes of this decline in income has been a fall in investment in productive assets. Net investment in them in 2018-19 was less than half the level in 2012-13, even in nominal terms. While it has impacted all categories of farmers, marginal farmers actually saw a fall in investment in 2018-19, as against net positive investment in 2012-13.

These estimates from the situation assessment survey are worrying, given that a large proportion of rural households are still engaged in agriculture; and within agriculture, an overwhelmingly large proportion are dependent on crop production. While higher than average growth in wage labour may have protected agricultural households from a decline in real incomes, it is unlikely that the non-farm sector will continue to protect farmers’ incomes in the future. The country’s rural areas are suffering. The fall in real cultivation incomes has been partly responsible for hurting demand and in turn economic growth even before the pandemic. But the fact that it has caused investment in agriculture to weaken points to further distress for our agricultural economy.

These estimates pertain to 2018-19, or two years before the pandemic struck the Indian economy. Events after 2018-19 suggest that the situation would certainly have worsened on account of a rise in input costs driven by energy and fertilizer prices. At the same time, data from the wholesale price index suggests that farm-gate prices for a majority of crops have either declined or remained stagnant. But with real wages declining in real terms in the last two years, even the cushion of wage incomes compensating for the loss of cultivation incomes may not be enough.

The priority at this juncture for the government should be to protect the real incomes of farmers that they were getting before it assumed office. The challenge gets harder knowing that the recently released Periodic Labour Force Survey showed an actual increase in workers dependent on agriculture. This would imply a sharper reduction in real incomes per agricultural worker.

Together, both these reports suggest a reversal of the trend of a structural transformation in India’s economy. This not only has implications for the living and working conditions of Indian farmers, but also raises a more serious concern of the sustainability of growth itself. For an economy attempting a recovery from the covid pandemic, these are warning signs of a worsening agrarian crisis, as also of a broader problem of falling incomes, demand and the country’s overall potential for economic growth.

Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi

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