Only one-third of an agricultural
household’s income in India comes from cultivation
iStock photo for representation

Only one-third of an agricultural household’s income in India comes from cultivation

Agricultural households bear a debt burden nearly seven times their monthly gross income; this is why most farmers spend their entire lives servicing debts
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India’s agrarian roots remain deeply entrenched, with agriculture continuing to support the livelihoods of a majority of its population. The recently released second edition of the “All-India Rural Financial Inclusion Survey 2021-22” by the National Bank for Agriculture and Rural Development reveals that 57 per cent of rural households still depend on agriculture for sustenance. This survey sheds light on the economic conditions of these agricultural households, especially in an era marked by increasing agrarian distress and growing farmer disconten

Despite these challenges, the survey highlights an interesting trend: agricultural households have seen a higher income rise compared to non-agricultural ones in rural areas. In 2021-22, the average monthly income for an agricultural household was Rs 13,661, while non-agricultural households earned Rs 11,438.

But where is this income coming from? Is cultivation truly driving these earnings? The data paints a complex picture. Cultivation accounts for only about a third of an agricultural household’s monthly income, with the remaining two-thirds sourced from government or private services, wage labour and “other enterprises”.

India remains predominantly a nation of small and marginal farmers (those with land holding less than 2 hectares or ha). The survey’s data reveals significant income disparities based on land size. Households with over 2 ha of land earn twice as much as those with smaller holdings, which make up the majority of farmers. As landholding sizes decrease, income from cultivation falls sharply, forcing families to rely more on non-farm activities. “The income from cultivation among households having the land size of more than 2 ha reporting to have earned over 57 times the income from the same source for households possessing less than 0.01 ha of land,” reads the survey.

More than 56 per cent of agricultural households now depend on three or more income sources, compared to 66 per cent of non-agricultural households that rely on just one. This diversification, described as an “effective adaptation,” highlights the resilience of small and marginal farmers as they face declining cultivation income. Agricultural households with four or more income sources earn nearly four times more than those relying on just one.

Does this signify increasing economic well-being among agricultural households? Not exactly. In the five years preceding the Survey, 30 per cent of agricultural households reported crop failures because of irregular rainfall, pest attacks, cyclones and droughts. Additionally, 12 per cent of households experienced losses because of price fluctuations. To cope with these setbacks, many households had to dip into savings or take loans from informal sources. Moreover, an agricultural household’s average monthly consumption expenditure is Rs 11,710, leaving a surplus of only Rs 1,951 (termed as net income) for an average family of five. Small and marginal farmers, in particular, spend a larger share of their income on food. In this uncertain, multi-source economy, coupled with increasing economic shocks, agricultural households are more financially constrained than ever. This is reflected in the level of debt among agricultural households: on average, they carry a debt of Rs 91,231, while non-agricultural households have Rs 89,074. This means agricultural households bear a debt burden nearly seven times their monthly gross income. This is why most farmers spend their entire lives servicing debts.

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