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

Synopsis: 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. The latest Situation Assessment Survey adds to findings that reveal worsening agrarian distress.

Introduction

Recently, 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 3^rd 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, and also in the context of an intensification of the farmer agitation against three farm laws.

What are the reasons behind the agrarian distress?

The crisis in agriculture has been developing for quite some time. Essentially, our agrarian economy has been in a state of perpetual distress after 2012-13 due to the following reasons:

– 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 problems.

– Demonetization caused disruptions that left many farmers unable to sell. Since then, the economy has experienced a sharp slowdown, followed by the covid pandemic.

What are the results SAS 2018-19?

i). Increase in wage income: 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.

ii). Decline in cultivation income: More than 90% of 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.

Why SAS 2018-19 results are worrying?

Due to the following reasons:

i). Incomes from non-farm sector are not reliable: 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.

ii). The country’s rural areas are suffering. The fall in real cultivation incomes has been partly responsible for a slow demand and 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.

iii). Impact of COVID: These SAS 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.

iv). Declining and Stagnant prices: Data from the wholesale price index suggests that farm-gate prices for a majority of crops have either declined or remained stagnant.

v). Decline in real wages: With real wages declining in the last two years, even the cushion of wage incomes compensating for the loss of cultivation incomes may not be enough. Moreover, the recently released Periodic Labour Force Survey showed an actual increase in workers dependent on agriculture. This would result in a sharper reduction in real incomes per agricultural work.

What needs to be done?

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.

Source: This post is based on the article “The state of agriculture in India is only going from bad to worse” published in Livemint on 24th Sep 2021.