IFPRI Panel Discussion on Evidence based Policy for Growth of Indian Farm Income

Doubling Farm Income : Policies and Strategies

Raka Saxena, Senior Scientist

ICAR-National Institute of Agricultural Economics and Policy Research

New Delhi

• Agricultural sector received continuous attention of the policy makers and stakeholders.

– A number of initiative were undertaken to improve the performance of this sector.

• For the first time in our history, Hon’ble Prime Minister of India exhorted to “Double the Farmers’ Income” by 2021-22 and helped in channelizing the efforts in the unified direction.

• A holistic approach is being followed from top to bottom in an integrated manner and the slogan is catching the momentum and attention of one and all.

• DFI goal was also coupled with many new and well-thought out schemes

– Pradhan Mantri Fasal Bima Yojana

– e-National Agricultural Market

– Paramparagat Krishi Vikas Yojana

– Pradhan Mantri Krishi Sichai Yojana.

Which income to be doubled? Farm income or farmers’ income

Whether nominal or real?

Which dimension needs to be considered? Gross farm income Per cultivator income Per household income

What would be the timeframe? From 2016-17 to 2021-22 (Six years)

• DFI Mission, requires accurate information on certain indicators which reflect the farmers’ income and welfare.

– The most appropriate measure of farmers’ well-being is the level of farm income.

• A few attempts made by some scholars to prepare estimates of farm income in the past based either on a sample of farmers or a particular segment of agriculture.

• Various methodologies and estimates of farmers’ income are available only on point basis.

• The studies largely referred to the growth in agricultural output (VOP/AgGDP/GSDP), output and input price behaviour along with price spread, rise in wages, rising indebtedness, to indicate the given state of Indian framing.

• Chand et al (2015) provided series of farm income based on NSSO data.

Farm business income from CACP data

Aggregate and disaggregate farm income using CSO and NSSO data

Income purely on the basis of Situation Assessment Survey of NSSO

Year Per Cultivator Per Hectare NSA

Per

Holding

Wage Earning Per

Labourer

Real Income

1983-84 16103 14798 22603 5513

1987-88 17030 16770 22298 6630

1993-94 21110 21345 27147 8168

1999-00 26875 26437 31325 9931

2004-05 26146 30755 34103 10043

2011-12 42781 44176 44688 17662

Income at Current Prices

2011-12 78264 80817 81753 32311

Period Total Per Cultivator Per Holding Per Hectare of NSA

1983-84 to 1993-94 3.67 2.74 1.85 3.73

1993-94 to 2004-05 3.30 1.96 2.10 3.38

2004-05 to 2011-12 5.36 7.29 3.94 5.31

Source: Ramesh Chand, Raka Saxena and Simmi Rana

Year

Farm income

per

cultivator

(Rs) F

Wage earning

per agricultural

labour (Rs) L

Income per

non

agriculture

worker (Rs) N Ratio L:F Ratio N:F

1983-84 4286 1467 12786 0.34 2.98

1987-88 5653 2201 18036 0.39 3.19

1993-94 12365 4784 37763 0.39 3.05

1999-00 24188 8938 78565 0.37 3.25

2004-05 26146 10043 106688 0.38 4.08

2011-12 78264 32311 246514 0.41 3.15

Source: Ramesh Chand, Raka Saxena and Simmi Rana

Disparities in Agriculture and Non-Agriculture Income

1.96

7.29

10720

18241

13754

0

1

2

3

4

5

6

7

8

10000

11000

12000

13000

14000

15000

16000

17000

18000

19000

Gro

wth

in p

er

cult

ivat

or

inco

me

Nu

mb

er

of

suic

ide

s

Growth rate in farm income per cultivator Farmers' Suicide

Growth during 2004-05 to 2011-12

Growth during 1993-94 to 2004-05

Trend in Farmers’ Suicides and Growth in Farm Income before and after 2004

Source: Ramesh Chand, Raka Saxena and Simmi Rana

All India Farmers’ Income

Wages, 2071, 32%

Cultivation, 3081, 48%

Farming of Animal, 763, 12%

Non-Farm Business, 512, 8%

All India Average Income per year per household: Rs 77112

Farm Households’ Income: Major Sources Category I States

Punjab 18059

Haryana 14434

Jammu & Kashmir 12683

Kerala 11888

Arunachal Pradesh 10869

Karnataka 8832

Himachal Pradesh 8777

Category II States

Gujarat 7926

Maharashtra 7386

Rajasthan 7350

Tamil Nadu 6980

Telangana 6311

Madhya Pradesh 6210

Andhra Pradesh 5979

Category III States

Chhattisgarh 5177

Odisha 4976

Uttar Pradesh 4923

Jharkhand 4721

Uttarakhand 4701

West Bengal 3980

Bihar 3558

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

PB HR JK KE ARP KR HP

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

GJ MH RJ TN TL MP AP

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CG OD UP JH UT WB BH

• A Committee has been constituted under the chairmanship of Dr. Ashok Dalwai, Additional Secretary, Department of Agriculture, Cooperation and Farmers’ Welfare, Ministry of Agriculture and Farmers’ Welfare for institutionalization of the effort.

Committee for Standardization of Methodology for Estimating Farmers’ Income

• The National Institute of Agricultural Economics and Policy Research of Indian Council of

Agricultural Research has been entrusted with the task of finalizing and publishing the estimates of farmers’ income at all India and state level.

Dr. Suresh Pal Member, CACP

Member

Dr. S. K. Mukherjee, Adviser DES

Member

Dr. Raka Saxena, Senior Scientist, ICAR-NIAP

Member-Convener

1. The first and foremost indicator reflecting the farmers’ welfare may be the Net

State Domestic Product (NSDP) from agriculture of the country/states.

2. The NSDP agriculture and allied consists of NSDP from crops, livestock,

fisheries and forestry sub-sectors. As entire output from forestry will not be

directly accrued to the farming community, it was proposed that the NSDP

forestry may be adjusted by a certain fraction which indicates the share of

farm forestry in NSDP forestry

3. Three approaches for estimation of farmers/household income were decided

1. Estimating the household agricultural income after deducting the paid-out cost of hired labour. This is equivalent to returns to family labour and fixed factors of production, i.e. land.

2. Estimating Net farm Income from Agriculture by deducting the paid-out labour cost, imputed value of family labour and rental value of land.

3. As farmers derive a certain proportion of income from non-farm sources, it would be worthwhile to consider the non-farm income of agricultural households and thus, total household income (farm and non-farm) may be computed.

4. There is need to include certain indicators which reflect welfare of agricultural labour. Few indicators were decided as:

1. Nature (regular, casual)

2. Labour employment in different sectors and sub-sectors

3. Wages/wage earnings across different sectors

• Gross income doubled from 2015-16 to 2021-22

• Based on the assumption that there is no growth in CPIAL

570285

1140571

0

200000

400000

600000

800000

1000000

1200000

1983/84 1987-88 1993-94 1999-00 2004-05 2009-10 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22

Desired growth in farm income: 12.25 per cent per year during 2016-17 to 2021-22

• Based on the assumption that – inflation (CPIAL) grows at the recent growth during (2011-12 to 2015-16) i.e. 10.48 per

cent (A different CPIAL reported in NAS, which indicates approximately 9.40 per cent) – Share of wage bill remains the same

0

100

200

300

400

500

600

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

4500000Net value added (Rs crore)

Real farm income projected with 10.48 per cent growth in CPIAL

CPIAL (Base 20004-05)

Growth in NVA: 11.22 per cent per year during 2011/12 to 2014/15 Growth in CPIAL: 10.48 per cent per year during 2011/12 to 2015/16

Growth in real farm income: 0.67 per cent per year during 2016/17 to 2021/22

• Real income projected assuming the recent growth in CPIAL i.e. 10.48 per cent

• Cultivator and holding growth during 2004-05 to 2011-12 taken to project the number of cultivators (-1.80 per cent) and holdings (1.36 per cent). NSA assumed to be constant

14

79

8

42

93

1

40

27

4

44

66

0

16

10

3

41

57

5

41

94

3

51

86

9

22

60

3

43

42

9

38

59

1

39

45

1

0

20000

40000

60000

80000

100000

120000

140000Per unit of NSA

Per cultivator

Per holding

Growth in income per unit of NSA: 0.67 Growth in income per cultivator: 2.52 Growth in income per holding: -0.68

• Current growth in number of cultivators: -1.80 per cent

• Let us assume this growth as -5 per cent per year for six years – This implies transformation of agricultural units/holdings into one agricultural enterprise

• Let us examine the impact on per cultivator income

72234

41575

51864

0

10000

20000

30000

40000

50000

60000

70000

80000Per cultivator income with cultivator growth @ -5 per cent

Per cultivator income with cultivator growth @ -1.80 per cent

5 per cent decline in cultivators per year for six years leads to more than 50 per cent increase in per cultivator income.

-15

-10

-5

0

5

10

15

20

19

81

-82

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82

-83

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-84

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-85

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85

-86

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-87

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-88

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-90

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-92

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92

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93

-94

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94

-95

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-96

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96

-97

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-98

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-99

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99

-00

20

00

-01

20

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-02

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-04

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-11

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-12

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-13

20

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-14

20

14

-15

Crop LivestockFisheries Total ag incl fisheries

1. Base data: Value of production @ 2004-05 prices (From 1980-81 to 2013-14)

2. HP Filter used to separate the trend and cyclical components in the time series

3. Trend growth rates during 2004-05 to 2013-14 computed based on smooth series obtained using HP Filter

4. The growth, thus obtained, used to make projections for 2014-15 to 2021-22

Three growth scenarios assumed for 2014-15 to 2021-22

1. Business as Usual: The growth obtained for projected series (based on smoothened series using HP Filter)

2. Optimistic Scenario: For Potential Growth, year-on-year growth computed during 2004-05 to 2013-14. The best growth obtained during the decade considered as potential growth. Due care was taken not to select highest growth in recovery period from a bad year.

3. Pessimistic Scenario: The lowest growth obtained during the decade was considered here.

Actual and Potential Growth Scenario across Sub-sectors

Categories/ Sub-Sectors

Current Growth (2004-05 to 2014-15)

Projected Growth

(2015-16 to 2021-22)

Business as Usual Optimistic Scenario Best Scenario

Cereals 2.4 2.0 6.3 7.9

Pulses 2.6 2.2 14.4 18.0

Oilseeds 1.4 2.1 18.5 23.1

Sugar 2.7 2.0 13.8 17.2

Fibers 5.3 6.0 19.7 24.6

Drugs & Narcotics 4.8 4.3 12.8 16.0

Spices & Condiments 5.6 5.1 9.6 12.0

Fruits & Vegetables 4.9 4.3 6.1 7.7

All Crops 3.1 2.9 7.8 9.8

Livestock 4.9 4.6 5.2 6.4

Fisheries 3.6 3.2 5.8 7.2

Overall 3.6 3.3 6.9 8.6

Sub-Sector Contribution to

Potential Growth of 8.6%

Livestock 1.84

Horticulture 1.74

Cereals 1.53

Oilseeds 1.44

Fruits & Vegetables 1.43

Fibers 0.83

Sugar 0.71

Pulses 0.51

Fisheries 0.38

Condiments & Spices 0.31

Drugs & Narcotics 0.22

Others 0.04

Livestock 17%

Horticulture 16%

Cereals 14%

Oilseeds 13%

Fruits & Vegetables

13%

Fibers 8%

Sugar 6%

Pulses 5%

Fisheries 3%

Condiments & Spices

3%

Drugs & Narcotics

2%

Others 0%

Scenario Assumption Incremental Charges

(Rs. Crore)

Contribution to

Growth (% to VOP

Ag. & Allied)

Scenario I 2.50 per cent growth in TFP 184023 20

Scenario II 3.00 per cent growth in TFP 220828 24

Scenario III 3.50 per cent growth in TFP 257633 28

Scenario Assumption Incremental

Changes (Rs crore)

Contribution to

Growth (%)

Scenario I Bringing 15 per cent potential area

under micro-irrigation

38985 4.2

Scenario II Bringing 30 per cent potential area

under micro-irrigation

77970 8.5

Scenario III Bringing 45 per cent potential area

under micro-irrigation

116955 12.7

15

24

5

30

48

9

45

73

4

1.7

3.3

5.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

Addressing 25 per cent ofyield gap

Addressing 50 per cent ofyield gap

Addressing 75 per cent ofyield gap

Scenario I Scenario II Scenario III

Co

ntr

ibu

tio

n t

o G

row

th (

%)

Incr

emen

tal C

har

ges

(Rs.

Cro

re)

Incremental changes (Rs crore) Contribution to growth (%)

Scenario Assumption Incremental

Changes (Rs crore)

Contribution to

Growth (%)

Scenario I Shifting 5 per cent cereal area to horticulture 27026 2.9

Scenario II Shifting 10 per cent cereal area to horticulture 54052 5.9

Scenario III Shifting 15 per cent cereal area to horticulture 81078 8.8

45163 62403

41575 41941 51864

0

20000

40000

60000

80000

Per cultivator income with cultivator growth @ -3.6 per cent

Per cultivator income with cultivator growth @ -1.80 per cent

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0

5000

10000

15000

20000

25000

30000

35000

Reducing post-harvest lossesby 20 per cent

Reducing post-harvest lossesby 35 per cent

Reducing post-harvest lossesby 50 per cent

Scenario I Scenario II Scenario III

Co

ntr

ibu

tio

n t

o g

row

th (

%)

Incr

em

enta

l ch

ange

s (R

s cr

ore

) Incremental changes (Rs crore)Contribution to growth (%)

A. Movement in CPI and WPI B. Gains from better price realization

Better Price Realization Scenario Increase in price

realization by farmers through domestic market and trade

Incremental changes

(Rs crore)

Contribution to growth

(%)

Scenario I Up to 15 per cent 138018 15

Scenario II Up to 30 per cent 276035 30

Scenario III Up to 60 per cent 414053 45

0

50

100

150

200

250

300

WPI AG

CPIAL

Non-farm sources of Growth

• Improved value addition and processing • Reducing dependence on agriculture • Review of current programmes and schemes

– ACABC – MIS

• Governance related – Linkages among high powered think tanks – Prioritization of research areas for investment – Making the farmers party to the mission – Centre-state linkages – Consensus among stakeholders

1. Finalizing the Growth Scenario for entire agricultural sector and sub-sectors

2. Identification of potential sources of growth across sub-sectors

3. Consensus among stakeholders to promise and deliver the targeted growth

4. Formulating Strategic Framework for Achieving the Targeted Growth in Different Sub-sectors.

5. A Core Committee to observe and monitor the performance of Strategic Groups. The Committee will act as Think Tank and linkage between the Planners/Planning Unit and Actors/Implementing Units and provide quarterly feedback /review of the implementation.

6. Annual Progress to be reviewed in every March to examine the current year growth and revisit the targets for the next year

• Prioritizing the areas for investment

• Identifying and prioritizing the constraints (biotic/abiotic/ environment/marketing related) based on the potential to contribute to the targeted growth

• Preparing schematic plan and possible interventions to address the constraints

• Breaking the strategies and plans for maximizing the revenues and at the same time minimizing the losses

• Identifying the mode of intervention through public, private or participatory approach

• Integration among different Ministries and Departments for proper surveillance and monitoring

….LET’S WORK FOR FULFILLING THE DREAM OF DOUBLING FARMERS’ INCOME

THANK YOU!!