Editorial 1. Revisiting a Dream: How to double India’s farmers’ income
Recent Context:
- Indian government is making effort dream of doubling farmers’ incomes in the year when India completes 75 years of Independence and enters Amrit Kaal.
- Now that we have entered Amrit Kaal, it is a good time to revisit that dream and see if it has been fulfilled, and if not, how best it can be done.
Development of agriculture is necessary for overall growth of nation
- Unless the incomes of farmers go up, we cannot have sustained high growth of overall GDP.
- This is because the manufacturing sector starts facing a demand constraint soon after meeting the demand of well-off urban consumers.
- As, agriculture engages the largest share of the workforce (45.5 per cent in 2021-22 as per PLFS). So, focusing on agriculture is the right way to ensure long-term high growth of the overall economy.
- Agriculture also has to provide food and nutritional security to the largest population on this planet.
- However, if this objective has to be achieved in today’s context, it must encompass policies that also protect the basic resources of this planet, say soil, water, air, and biodiversity. It is here that one encounters a paradox. Let me elaborate.
Government subsidies and scheme in agriculture sector and related issue:
- Government has taken certain steps to release the burden of farmers in the in the input cost by providing schemes and subsidies such as
- fertiliser subsidy whose budget crosses Rs 2 lakh crore. Even when global prices of urea crossed $1,000/metric tonne, the Indian price of urea remained flat at around $70/tonne. This is perhaps the lowest price in the world.
- PM KISAN scheme to provide income support to the farmers.
- Further, many small and marginal farmers also get free ration of at least 5 kg/person/month through the PM Garib Kalyan Anna Yojana.
- There are also subsidies for crop insurance, credit and irrigation (drip).
- States also dole out power subsidies in abundance, especially on irrigation. Even farm machinery for custom hiring centres is being subsidised by many states.
- All this is true and the numbers of these subsidies, if combined, would easily cross Rs 4 lakh crore per annum. However, we need to evaluate the impact of all these on farmers’ incomes and also on the environment.
- CAG should take up the audit of all subsidies given by the Centre and by the states to examine their outcomes in terms of the incomes of farmers and environmental consequences.
- The results of such an audit, if taken up, are not likely to be very palatable. But that can induce us to streamline these policies
Certain schemes related to agricultural sector which are being criticised
- While input subsidies do help raise farmers’ incomes on one hand, there could be output trade and marketing policies adopted by the government that suppress farmers’ incomes.
- For example, the ban on exports of wheat or the 20 per cent export tax on rice, the suspension of several commodities from the futures markets, and the imposition of stocking limits on certain commodities from time to time
- The results that we have estimated are not showing a “pro-farmer approach”. In fact, the approach is pro-consumer. This is the fundamental problem with our policy framework.
- The policy of heavy subsidisation of input subsidies, especially fertilisers and power, along with assured and open-ended procurement of paddy and wheat at least in some selected states, is playing havoc with the environment. They are all crying out for rationalization.
Conclusion:
- Undoubtedly, increasing the farmer income will take time. However, It can be done by increasing productivity through better seeds and better irrigation.
- It will have to be combined with unhindered access to the best markets for their produce.
- Further, diversifying to high-value crops, and even putting solar panels on farmers’ fields as a third crop will be needed. It is only with such a concerted and sustained effort can one hope to double farmers’ incomes. Else, the dream will remain unfulfilled.
Way forward:
- One of the ways to move forward is to realign these support policies keeping in mind environmental outcomes. Millets, pulses, oilseeds, and much of horticulture could perhaps be given carbon credits to incentivise their cultivation. They consume less water and fertilisers.
- Government need to wider he domain of MSP in Millet crops so that diversification of cops can be done and also increase the income of millet growing farmers
- There is need for innovations in technologies, products, institutions and policies for more diversified high-value agriculture that is also planet friendly
Editorial 2. Agriculture and Employment
Recent Context:
- Recently, Two recent sets of data released by the National Sample Survey Office (NSSO) and the National Statistical Office (NSO) offer insights into the process of structural transformation in the Indian economy, especially in relation to the agriculture and manufacturing sectors.
- Economists refer to structural transformation as basically a compositional shift that entails the transfer of surplus labour from agriculture to sectors where productivity (output per worker) and average incomes are higher — particularly manufacturing and modern services.
- NSSO’s latest annual Periodic Labour Force Survey (PLFS) report for 2021-22 (July-June) shows the farm sector’s share in the country’s employed labour force at 45.5%. That’s down from 46.5% in 2020-21, but still higher than the 2018-19 low of 42.5%.
- Clearly, the effects of the pandemic-induced economic disruptions, which had forced a reverse migration to the farms, haven’t fully subsided.
Stalled transformation
- Chart shows the share of agriculture in the total workforce over a longer time period, based on previous years’ PLFS reports (also called ‘Employment and Unemployment’ surveys until 2011-12). That share fell from 64.6% in 1993-94 to 42.5% in 2018-19.
- There is major decline, from 58.5% to 48.9%, happened between 2004-05 and 2011-12.
- During this seven-year period, the workforce engaged in farming registered, for the first time in India’s history, a fall even in absolute terms — from 268.6 million to 231.9 million. The share of the labour force employed in manufacturing too, peaked at 12.6% in 2011-12
- In 2017-18, the latter two sectors accounted for 11.7% and 12% of the total workforce respectively, as against manufacturing’s 12.1%. But in 2021-22, manufacturing’s share, at 11.6%, was below that of construction (12.4%) as well as trade, hotels & restaurants (12.1%).4
- Therefore, structural transformation hasn’t just slowed it has stalled, if not reversed. There is not much labour transfer taking place from farms to factories.
- The jobs that are getting generated outside agriculture are mostly in construction and low-paid services, whose share has overtaken that of manufacturing.
- The construction sector has now become the second-largest employer after agriculture. Five years ago, it was at No. 4, after agriculture, manufacturing and trade, hotels & restaurants. Today, manufacturing has been relegated to the fourth spot.
- This links up with the second set of data, which are from the NSO’s first revised estimates of national income for 2021-22, released on February 28. It also contains estimates of ‘output’ and ‘value-added’ by different sectors of the economy.
- Output is simply the gross value of production by an industry or sector. For the economy, it would mean the total value of all goods and services produced during a financial year. However, production involves the use of inputs.
- Since the producer merely adds value to the inputs that he uses, economists consider gross value added (GVA), and not gross value of output (GVO), as a measure of aggregate production.
- Chart 2 shows these ratios for various sectors in 2021-22, based on the NSO’s latest revised estimates of national income.
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- It can be seen that value addition is the highest in agriculture. For every Rs 100 worth of produce coming from Indian farms, Rs 80 is the value generated by those owning and working the lands
- On the other hand, value addition is the lowest, at just over a fifth, for manufacturing. Although the GVO from manufacturing (Rs 156.90 lakh crore) was more than three times from agriculture,.
- As a result, the GVA by manufacturing, at Rs 33.97 lakh crore in 2021-22, was way below agricultures.
- “Purchased inputs are very little in agriculture, unlike manufacturing. The value produced comes mostly from the land rather than the seeds, fertilisers, pesticides, diesel and electricity that farmers consume,” explains Pronab Sen, former Chief Statistician of India
Link with employment
- High value-addition is a key reason why agriculture is able to employ so many people.
- The sector’s share in GVO the total value of all goods and services produced by the country was only 11.4% in 2021-22.
- When measured in terms of value-added or GVA though, the share rose to 19%. It was the other way round for manufacturing: its share in overall GVO was as high as 35.4%, while being just 15.8% relative to GVA.
- However, even taking into account high value-addition, a sector generating 19% of income accruing to the primary factors of production, namely the owners of land (farmers), labour (agricultural workers) and capital (lenders) cannot support 45% of the country’s population.
- Moreover, the GVA-GVO ratio is not a measure of productivity. An agriculturalist may be adding more value to every unit of input he consumes than a manufacturer.
- But productivity is a function of output per worker or per unit of land which is low in agriculture compared to modern manufacturing and services.
Conclusion:
- There is no escaping the fact that India has too many people in agriculture. They need to be enabled to find employment in other sectors, which will, in turn, raise agriculture’s productivity.