Doubling of Farmers’ Income in India:

Backdrop and Challenges

March 7, 2017

NCAER Research Team

NCAER Research Team Rajesh Chadha

Prem S Vashishtha

Devender Pratap

K Elumalai

Seema Bathla

Sanjib Pohit

Anjali Tandon

Ruchi Jain

Nishtha Ruhil

Gautam Kumar Das

Yashvardhan Singh Rathore

• India’s agricultural sector has made significant progress over time

• Low and volatile growth – serious concern

• Declining average size of operational holdings

• Growing disparity between agriculture and non-agriculture

incomes

• Rising aspirations among rural people

• Inadequate institutional arrangements to mitigate risk and crop

loss

• Persistent distress among agrarian society and lack of effective

mitigation policy

• Emerging entrepreneurship but lack of adequate investment in

agriculture-based activities

Background

Trend in Growth Rates (3-Year Moving

Average Series at 2011-12 Prices)

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

19

92-9

3

1993

-94

1994

-95

1995

-96

19

96-9

7

19

97-9

8

19

98-9

9

19

99-0

0

20

00-0

1

20

01-0

2

20

02-0

3

20

03-0

4

20

04-0

5

20

05-0

6

20

06-0

7

20

07-0

8

20

08-0

9

20

09-1

0

20

10-1

1

20

11-1

2

20

12-1

3

20

13-1

4

20

14-1

5

Pe

r ce

nt

Agriculture & allied Non-agriculture Overall GDP

Source: Computed form CSO (various issues)

1.84

1.69

1.55

1.41 1.33

1.23 1.16

56.4

57.8

59.4

61.6

62.9

64.8

67

50

52

54

56

58

60

62

64

66

68

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

1980-81 1985-86 1990-91 1995-96 2000-01 2005-06 2010-11

Sh

are

of

Ma

rgin

al

Ho

ldin

gs

(%)

Av

erag

e H

old

ing

s S

ize

(h

a)

All Sizes Marginal

Average size of Operational Holdings

Source: Agricultural Census (various issues)

0

20

40

60

80

100

120

140

0

10

20

30

40

50

60

70

1991 2001 2011

La

bo

ure

rs (

Mil

lio

ns)

Sh

are

in

to

tal A

gri

cult

ura

l W

ork

ers

(%)

Labourers (Absolute) Cultivators Agricultural Labourers

Composition of Agricultural Workers

Source: Population Census

Strategy

• Irrigation- “Per Drop, More Crop”

• Quality seeds-Improving seed replacement rate

• Soil test based nutrient management- Distribution of soil health

cards

• Post-harvest crop losses- Large investments in warehousing and cold

chains

• Value addition to farmers

• Creation of a national agricultural market, removing distortions and e-

platform across 585 markets.

• New crop insurance scheme – Pradhan Mantri Fasal Bima Yojana-

Minimum Premium and Maximum Security.

• Promotion of ancillary activities- poultry, sericulture, beekeeping and

fisheries

PM’s Vision: Doubling Farmers’

Income by 2022/23

• Focus on doubling of farmers’ income, not farm income (base 2015-16)

• Farmers’ income to be doubled in real terms in 7 years (2016-17 to 2022-23)

• Agricultural household activities comprise of

Crop sector (field crops and horticulture)

Livestock sector (dairy, poultry, piggery, small ruminants)

Farm linked activities (mushroom, beekeeping, sericulture)

Post production activities (off-farm enterprises)

• Use technology to increase the productivity of food crops in a sustainable

way

• Give due emphasis to non-wheat, non-paddy and less water intensive crops

• High priority to diversification towards high value activities (Horticulture,

Dairying, Food Processing, etc.)

• Linking farmers and markets with integrated value chains

Committee on DFI

(Chairman Dr Ashok Dalwai)

Union Budgets: Agriculture Issues

Budget-2014-15

Established National Adaptation Fund for climate change

Set up Long-term Rural Credit Fund

Bhoomi Heen Kisan- Providing financial assistance to 5 lakh joint farming groups of Bhoomi Heen Kisan through NABARD

Launching of Soil Health Cards Set

up -100 Mobile Soil Testing

Laboratories

Pradhan Mantri Krishi Sinchayee

Yojana

Agri –Tech Infrastructure fund

Budget-2015-16

Emphasis on Rural Infrastructure Development

Long Term Rural Credit Fund

Short Term Cooperative Rural Credits Refinance Fund

Paramparagat Krishi Vikas Yojana

Budget-2016-17

Doubling Farmers’ Income by 2022

Long-term Irrigation Fund

Expansion of Soil Health Card Scheme

Continuation of Paramparagat Krishi Vikas Yojana

Organic Value Chain Development in North East

• Ensure adequate flow of credit to under serviced areas (Allocation: Rs 10 lakh crores) Agricultural

Credit

• Coverage of the scheme to be increased from 40% in 2016-17 to 50% in 2018-19 (Allocation: Rs. 9000 crores)

Pradhan Mantri Fasal Bima Yojana

• Establishment of mini labs in Krishi Vigyan Kendras (KVKs) and ensure 100% coverage of all 648 KVK

• 1000 mini labs will be set up by qualified local entrepreneurs.

Soil

Health

• Coverage of National Agricultural Market (e-NAM) is expanded from 250 to 585.

• curremt e-NAM

National

Agricultural

Market

• Corpus of long term irrigation fund has been doubled (Allocation- Rs. 20000 crores)

• A dedicated Micro Irrigation Fund will be setup in NABARD to achieve the goal, per drop more crop (Allocation- Rs. 5000 crores)

Irrigation

• Emphasis on contract farming for strengthening linkage between fruits & vegetable cultivators and agro processing units.

Agro

Processing

Units

• A dairy processing and infrastructure development fund would be set up in NABARD for modernising milk processing unit setup under operation flood programme (Allocation- Rs. 2000 crores)

Dairy

Union Budget: 2017-18

Definition of Agricultural Household

NSSO 70th Round (2012-13) IHDS-II (2011-12)

• An agricultural household is defined

as a household receiving more than

Rs.3000/- from agricultural activities

(e.g., cultivation of field crops,

horticultural crops, fodder crops,

plantation, animal husbandry, poultry,

fishery, piggery, bee-keeping,

sericulture etc.) and having at least

one member self employed in

agriculture either in the principal

status or in subsidiary status during

last 365 days.

• Agricultural households are drawn

from a sample of rural households in

IHDS subject to the condition that the

value of produce from agriculture and

allied activities is comparable to

NSSO definition.

Components of Agricultural

Household Income

NSSO 70th Round (2012-13) IHDS-II (2011-12)

Four component of income-

Cultivation, livestock, non-farm

business, and wages & salaries

Wages and salaries include

components such as agricultural

wages, remittances, pension, and

other miscellaneous sources

IHDS has 9 components of income

Agriculture wages, remittances &

pension are shown as separate

sources of income

Wages & salaries are collated

separately for farm-linked and non-

farm business

This highlights the role of farm-

linked activity to enhance income

and employment for agriculture

households

Share of Different Components in Total Income of

Agricultural Households, 2011-12 (IHDS)

38.73

6.33 7.60

0.36

24.78

0.21

8.36

6.94

6.68

Crop

Livestock

Agri wages

Non-agri wages+salary (farm linked)

Non-agri wages+salary (other than farm

linked)

Non-farm business (farm linked)

Non-farm business (other than farm linked)

Remittances

Other

NSSO- Agricultural Household Income

Components

of Income

Current Prices

(Rs)

Constant Prices

At (2011-12) Prices

(Rs)

Growth Rate

(%)

NSSO 50th

Round

(2002-03)

NSSO 70th

Round

(2012-13)

NSSO 50th

Round

(2002-03)

NSSO 70th

Round

(2012-13)

At Current

Prices

At 2011-12

Prices

Cultivation 11455 36950 21830 33383 12.4 4.3

Livestock 1189 10016 2266 9049 23.8 14.9

Non-Farm

Business 2786 6209 5309 5610 8.3 0.6

Wages &

Salary 9840 24801 18753 22407 9.7 1.8

Total

Annual Income 25271 77977 48160 70449 11.9 3.9

Source of Income of Agricultural Households

Land Size classes, 2012-13 (%)

0.0

20.0

40.0

60.0

80.0

100.0

120.0

Marginal Small Semi Medium Medium Large

% S

ha

re o

f In

com

e

Land Size

Cultivation Livestock Non-farm Business Wages & Salary

Ratio of Kharif to Rabi Income in 2012-13

Cultivation Livestock

Manipur (12.8) Manipur (11.9)

Chhattisgarh (7.0) Nagaland (4.0)

Himachal Pradesh (6.7) Arunachal Pradesh (1.8)

Jammu & Kashmir (4.5) Assam (1.7)

Maharashtra (3.4) West Bengal (1.6)

India (1.4) India (0.9)

Rajasthan (0.9) Meghalaya (0.7)

UP (0.9) Rajasthan (0.6)

Bihar (0.8) Chhattisgarh (0.5)

Tamil Nadu (0.8) Bihar (0.3)

Andhra Pradesh (0.7) Jharkhand (0.3)

Income to Value of Produce (%) :

Low Performing States in 2012-13

Composition of Inputs (expenditure) in

2012-13 (%)

UK

Odisha Assam

Bihar

Chhattishgarh

UP

Jharkhand

TelanganaRajasthan

Maharashtra

APGujarat

MP

North East

Karnataka

HP

TN

Kerala

-20

24

68

Ave

rage

_Gro

wth

_of_

NS

DP

50000 100000 150000Average_Income

Growth rate of NSDP (2004-05 to 2015-16) and average income per

agricultural household

(Benchmarking NSDP 2015-16 current prices)

# Punjab and Haryana are in low growth & high income group and not shown in the Graph

# Average growth rate of NSDP in India from 2004-05 to 2015-16 was 3.3 %

# Average real income of agricultural household in 2015-16 was Rs. 96703

Access to Technical Advice for Crops

All India, 2012-13 (%)

0.0 5.0 10.0 15.0 20.0 25.0

Agricultural University

NGO

Krishi Vigyan Kendra

Extension Agent

Private Commercial Agent

Radio/TV/Newpaper/Internet

Progressive Farmer

Technical Advice adopted by farmers

All India, 2012-13 (%)

0.0 20.0 40.0 60.0 80.0 100.0

Radio/TV/Newspaper/Internet

NGO

Agricultural Universiy

Krishi Vigyan Kendra

Extension Agent

Private Commercial Agent

Progressive Farmer

Growth of yield: average 2004-05 to 2016-17

All India: (1.7 %)

Rajasthan, (8.4 %)

Maharashtra: (5.4 %)

Andhra Pradesh: (3.8 %)

Chhattisgarh(2.8 %)

MP (2.7 %)

Karnataka (2.2 %)

Horticulture- Fruits and Vegetables

• Insurance against risk and post harvest management is the key to

improve production and productivity

High Volatility of Yield and Price

Coefficient of Variation

States Yield Implicit Price

Chhattisgarh 11.63 19.02

MP 14.97 25.55

Maharashtra 25.37 23.45

Rajasthan 19.98 38.23

UP 8.61 35.91

West Bengal 9.32 33.26

India 7.40 23.33

NCAER and NIAP – Work-in-Progress

• Background, Relevance and Scope for Doubling Farmers’ Income

• Agricultural Growth and Performance across states

• Status of Farm and Non-Farm Income across States

• Potential growth rates for DFI

• Role of Technology in Doubling of Farmers’ Income

• Role of Inputs: Gains from Irrigation

• Marketing, Prices and Trade

• Post-Harvest Management, Value addition and processing

• Role of Diversification

• Rural Credit and Investment in Agriculture

• Policy Interventions

Proposed Structure of the Report

Thank You