A Way Forward to Double Farmers’ Income
The Prime Minister of India, Shri Narendra Modi, made an ambitious target to double farmers’ incomes by 2022-23, at a kisan (farmer) rally in Bareilly on 28 February 2016. The statement was followed by forming a committee for Doubling Farmers’ Income (DFI) under the chairmanship of Ashok Dalwai with an objective to formulate a plan of action to achieve this goal (MoA&FW, 2017).
The committee prepared 14 volumes proposing strategies on almost every aspect of agriculture. As per the committee, the PM’s target was to double the real incomes of farmers in seven years, i.e. by 2022-23 when India sets out for Amritkaal over 2015- 16 income level. To achieve the DFI target, the required growth rate at all-India level was estimated to be 10.4 percent. As we have completed the target year, it is the right time to revisit that dream to see if the goal is achieved and how best it can be fulfilled.
The only official database available to estimate farmers’ income is the Situation Assessment Survey (SAS) of agricultural households released by the Ministry of Statistics and Programme Implementation (MoSPI). The latest data available is for the year 2018-19 which was released in September, 2021. This data was earlier available for only two years 2002-03 1 and 2012-13.
Agricultural Households’ income increased both in nominal and real terms from 2002-03 to 2018-19. In 2002-03, an average Indian farming household earned about Rs. 2115 (Rs. 6830 in 2020- 21 prices), which increased to Rs. 10,218 in 2018-19 (Rs. 11,572 in 2020-21 prices). In nominal term, the compound annual growth rate (CAGR) turns out to be 10.3 percent per annum between 2002-03 and 2018-19 (Figure 1). But the actual situation of the farmers can be captured from the real income growth. Even so, the choice of deflator in estimating real income is critical. If nominal incomes are deflated by using consumer price index for agricultural labour (CPI-AL), which should be the rational choice and also used by Dalwai Committee to forecast required growth rate to double farmers’ income, then the CAGR turns out to be just 3.4 percent (2002-03 to 2018-19), and if one uses WPI (wholesale price index of all commodities), the CAGR in real incomes turns out to be 5.3 percent.
However, if we use GDP deflator, the growth rate of income turns out to be 4 percent in this period. This vast difference, from 3.4 percent to 5.3 percent, is entirely due to the choice of the deflator.
The agriculture sector employs 45.5 percent of the workforce (PLFS, 2021-22) and unless the incomes of farmers are augmented, a sustained overall GDP growth cannot be achieved. Therefore, the govt. needs to adopt some groundbreaking policies otherwise DFI will remain a distant dream.
Budget 2023-24 and Famers Income
In the following section, we have analyzed the necessary policies and budgetary allocation that are directed to boost farmers’ income.
Firstly, farmers’ return can be maximized by increasing productivity through better seeds, irrigation and optimum use of fertilizers keeping in mind the environmental outcomes. This depends on how much the govt. allocates on agricultural research and development. The budget for the Department of Agriculture Research and Education (DARE) has been provisioned at Rs. 9,504 crore, up by about 9.7 percent over the RE of Rs. 8,659 crore in FY 2022-23 (Union Budget, 2023-24). The Department of Agriculture and Farmers’ Welfare has provisioned Rs. 7,066 crore for Krishionnati Yojana and Rs. 7,150 crore for Rashtriya Krishi Vikas Yojana. These provisions although helpful but not adequate enough to achieve climate resilient agriculture. There is a need to double the allocation towards agri-R&D to protect farmers from losses due to weather vagaries and to increase their income with increased productivity and high resource use efficiency.
Secondly, farmers need to move from low value crops like cereals to high value items like poultry, fishery, dairy, and horticulture. The latest SAS data reveals another interesting fact. The share of income from cultivation has fallen over the years from 46 percent in 2002-03 to 38 percent in 2018-19. In the same period income from livestock sector (includes dairy, poultry/duckery, piggery, fishery) has increased quite noticeably from 4 percent to 16 percent. In the gross value of output from agriculture, forestry, and fisheries, crop sector still constitutes the highest share.
In terms of sub-sector wise growth in real value of output, fishery sector grew at the fastest rate (6.9 percent) followed by livestock (5.3 percent), pulses (5.0 percent), and horticulture (4.8 percent) in the period of 2005-06 to 2020-21 (Figure- 3). Within livestock, poultry meat (10.6 percent) is growing at the highest rate followed by meat group (7.6 percent), eggs (6.21 percent), and milk group (5.56 percent) (2012-13 to 2020-21).
Allocation to the department of fisheries for the budget 2023-24 has increased to Rs. 2,248 crore from a revised estimate (RE) of Rs. 1,624 crore in 2022-23 with considerable increase in expenditure on centrally sponsored schemes under blue revolution. Similarly, the net allocation to department of animal husbandry and dairying has increased from a revised estimate (RE) of Rs. 3105 crore in 2022-23 to a budgeted estimate (BE) of Rs. 4327.85 crore in 2023- 24 with increase in provision for centrally sponsored schemes like Dairy Development, National Livestock Mission, Dairying through Cooperatives etc.
These are welcoming steps, but the fast-growing sector needs more attention from the government. Commercial poultry is a sustainable choice for the income of a large number of farming households in the rural sector. It is vital to provide policies that inspire institutionalization of smallholders. Poultry farming model in line with Amul will benefit small farmers to market their products across India. To improve efficiency in the milk value chain, the government needs to build infrastructure of milk processing units in the cooperative structure across states.
A positive step towards encouraging high value horticultural crops was announced under the Atmanirbhar Clean Plant Programme that intends to enhance the availability of disease-free, quality planting material. An outlay of Rs. 2,200 crore has been assigned for the programme . However, more devotion from the government’s side is needed to correct inefficiencies in the horticulture value chain.
To substantiate any increased demand of processed horticulture commodities, there is a need to enhance the processing capacity in the major producing states so that post-harvest loss is minimum. There is a need for greater awareness of usage of processed forms like potato flakes, dehydrated onions, tomato puree, and banana biscuits etc. among Indian consumers. The demand of these processed items can be increased through large-scale distribution in mid-day meal schemes, government run hostels, army canteens and so on.
Thirdly, provision from the government through different input and output support programmes also help in boosting farmers’ income. For instance, expenditure on fertilizer is one of the biggest subsidies that has crossed Rs. 2 lakh crore in 2022-23, but declined to a BE of Rs.1.75 lakh crore in 2023-24 owing to lower cost of import as the shock of the Russia-Ukraine war has subsided to some extent.
To summarize other major schemes, the revenue expenditure (RE) and the budget expenditure (BE) under PM-KISAN for the years 2022-23 and 2023-24 are fixed at Rs. 60,000 crore respectively, as against actual expenditure of Rs. 66,825 for the year 2021-22. Farmers have been expecting increase in the amount per family from Rs. 6000 to Rs. 8000 but decrease in allocation shows government’s restraint towards expanding income support programs. The BE allocation under Pradhan Mantri Fasal Bima Yojana (PMFBY) for FY 2023-24 has been kept at Rs. 13,625 crore, marginally higher from the RE of Rs. 12,375 crore of FY 2022-23.
There has been a major decline in the food subsidy from Rs. 2.87 lakh crore to Rs. 1.97 lakh crore in the budgeted estimate for 2023-24 compared to the actual spending in 2022-23 (Union Budget, 2023-24). It was expected that savings from these subsidies will be diverted towards building infrastructure and improving the inefficiencies in the agri-value chain. But the budget did not promise any critical policy towards fulfilling that goal.
The crucial point is that in order to achieve the dream to double farmers’ income, there is an urgent need for innovations in technologies, crops, institutions and policies for more varied high-value agriculture that is also responsible towards the planet.
(This is a ICRIER report)