Agriculture

Home truth of Indian agriculture: Farm income declined in India in 7 years

The average monthly income per farm household (considering only the paid out expenditure) is not the same as ‘net income / receipt earned by a farm household from crop cultivation’

 
By Shambhu Ghatak
Published: Tuesday 05 October 2021
Photo: istock
Photo: istock Photo: istock

In popular imagination, rise in food production is often confused with the income and prosperity of farmers.

The quarterly data on the Gross Domestic Product (GDP) and the Gross Value Added (GVA) is produced by the Ministry of Statistics and Programme Implementation or MoSPI). 

It is related to the various sectors of the economy such as ‘agriculture, forestry & fishing’, ‘constructions’, ‘manufacturing’, etc. But even it does not shed much light on the incomes earned by the farmers or farming households.

The most reliable estimates on agricultural households’ income (and not the average income of a farmer in a particular time period) is produced by the National Statistical Office (under the MoSPI).

However, agricultural researchers, social scientists and economists had to wait for almost seven years this time to get the latest available data pertaining to the National Sample Survey (NSS) 77th Round.

The Situation Assessment Survey (SAS) of Agricultural Households and Land and Livestock Holdings of Households in Rural India (NSS 77th Round), was released recently.

It informs one about farm households’ income in the crop year 2018-19 and indebtedness in 2019 (as on the date of survey), among other things.

The data pertaining to the earlier SAS (under the NSS 70th Round), which was conducted in 2013, became available in 2014. 

Change in nominal farm incomes

Let us try to understand the changes that happened to the incomes of farm households between crop years 2012-13 and 2018-19.

It needs to be mentioned at the outset that in the 77th Round of NSS, a farm household was defined as a household receiving value of produce more than Rs 4,000 from agricultural activities.

These activities included cultivation of field crops, horticultural crops, fodder crops, plantation, animal husbandry, poultry, fishery, piggery, bee-keeping, vermiculture, sericulture, etc.

The other criterion was that such a household must have at least one member self-employed in agriculture, either in the principal status or in subsidiary status during the last 365 days.

Households which were entirely agricultural labour households and households receiving income entirely from coastal fishing, activity of rural artisans and agricultural services were not considered as farm households.

They were kept outside the scope of the survey. The income cut-off used in the NSS 77th Round for identifying the agricultural households has been updated by adjusting for inflation.

However, in the 70th Round of NSS, a farm household was defined as a household receiving value of produce more than Rs 3,000 from agricultural activities.

Such a household also had at least one member self-employed in agriculture either in the principal status or in subsidiary status during the last 365 days.

Readers should note here that in the NABARD All India Rural Financial Inclusion Survey 2016-17 (ie NAFIS 2016-17), the threshold level of annual agricultural income was Rs 5,000, which has not been discussed in this piece.

Average monthly income (in Rs) per agricultural household (considering only the paid out expenditure) in crop years 2012-13 and 2018-19

 

 Note: Rate of inflation calculated by the author

Source: SAS 2019 NSS 77th Round; SAS 2013 NSS 70th Round; Handbook of Statistics on Indian Economy 2020-21, RBI; Handbook of Statistics on Indian Economy 2015-16, RBI

The above graphic shows that the average monthly income of a farm household (when only the paid out expenditure is considered) was Rs 10,218 during crop year 2018-19.

It was arrived at by adding together various constituents ie ‘income from wages’ (Rs 4,063), ‘income from leasing out of land’ (Rs 134), ‘net receipt from crop production’ (Rs 3,798), ‘net receipt from animal farming’ (Rs 1,582) and ‘net receipt from non-farm business’ (Rs 641).

The average farm income (ie Rs 6,427) of an agricultural household (when only the paid out expenditure is considered) during crop year 2012-13 was computed by totalling various components.

These included ‘income from wages’ (Rs 2,071), ‘net receipt from cultivation / crop production when only the paid out expenditure is considered’ (Rs 3,081), ‘net receipt from farming of animals’ (Rs 763) and ‘net receipt from non-farm business’ (Rs 512).

The newly released report (NSS 77th Round) clearly mentions that the ‘income of agricultural households from leasing out of land’ was not collected in the previous rounds of the SAS.

However, in most media reports, this fact was ignored. They compared the average farm incomes of an agricultural household between crop years 2012-13 and 2018-19.

They subsequently concluded that the average monthly farm incomes grew by almost 59.0 per cent between those two crop years. However, this kind of comparison is methodologically incorrect as it compares apples against oranges.

In order to compare apples against apples, the ‘income from leasing out of land’ ought to be deducted from the average monthly income of an agricultural household in crop year 2018-19.

Once done, the modified average monthly farm income turns out to be Rs 10,084 in crop year 2018-19.

It would be now methodologically correct to state that the average monthly income (in nominal terms) of a farm household increased from Rs 6,427 to Rs 10,084 between the crop years 2012-13 and 2018-19 ie by around 56.9 per cent. 

Change in real farm incomes

It is found after computing that the average ‘Consumer Price Index - Combined’ grew by almost 34.0 per cent between crop years 2012-13 and 2018-19.

If we take that into account, then the growth in the average monthly income per farm household (considering only the paid out expenditure) in real terms during this time period was 22.9 per cent in India.

The average ‘CPI - Rural’ increased by around 35.3 per cent between the crop years 2012-13 and 2018-19.

If we take that into consideration, then the growth in the average monthly income per agricultural household (considering only the paid out expenditure) in real terms during this time period was 21.6 per cent at the national level.

Put differently, in real terms, the average monthly income of a farm household (considering only the paid out expenditure) increased between the crop years 2012-13 and 2018-19. Seeing this, many would conclude that everything is well and fine with the farming community.  

It should be kept in mind that the average monthly income per farm household (considering only the paid out expenditure) is not the same as ‘net income / receipt earned by a farm household from crop cultivation’.

As explained above, the latter is just one of the components of the former.

If the rate of inflation of 34.0 per cent between the crop years 2012-13 and 2018-19 (in average ‘Consumer Price Index - Combined’) is taken into account, then the growth in the average monthly ‘net receipt from crop production or cultivation’ per farm household (considering only the paid out expenditure) in real terms during this time period was -10.7 per cent in India.

If the rate of inflation of 35.3 per cent between the crop years 2012-13 and 2018-19 (in average ‘CPI - Rural’) is taken into consideration, then the growth in the average monthly ‘net receipt from crop production or cultivation’ per farm household (considering only the paid out expenditure) in real terms during this time period was -12.0 per cent in India.

Therefore, it can be said that in real terms, the average monthly ‘net receipt earned by a farm household from crop cultivation’ (considering only the paid out expenditure) fell between the crop years 2012-13 and 2018-19.

Between crop years 2012-13 and 2018-19, the highest increase (in per cent) in real terms was noticed for the average monthly ‘income from animal farming’, followed by the average monthly ‘income from wages’.  

Reference period

For the NSS 77th Round, information was collected primarily for the agricultural year 2018-19 in two visits, namely visit-1 and visit-2.

For crops, information on expenses and receipts from cultivation were collected for the period July to December 2018 in visit-1 and for January to June 2019 in visit-2.

However, it was ensured that all the crops, whether principal or not, harvested during agricultural year 2018-19 were duly considered in either visit-1 or visit-2.

The same reference period was used for collecting information on productive assets. For other items of information, different reference periods were used, such as, ‘as on the date of survey’ for indebtedness, ‘last 30 days’ for farming of animals and non-farm business.

For information on land possession, productive assets and expenses and receipts from cultivation, earnings from wages / salaried employment, earnings from pensionm / remittances the reference period was July to December 2018 in visit-1 and January to June 2019 in visit-2.

The NSS 70th Round survey was conducted during the calendar year 2013 (January 1, 2013 to December 31, 2013). The same household was visited twice during the survey period.

The period of first visit (visit-1) was January to July 2013 and that of second visit (visit-2) was August to December, 2013. For crops, information on expenses and receipts from cultivation were collected for the period July to December, 2012 in visit-1 and for January to June, 2013 in visit-2.

However, it was ensured that all the crops, whether principal or not, harvested during agricultural year 2012-13 were duly considered in either visit-1 or visit-2. The same reference period was used for collecting information on productive assets.

For other items of information, different reference periods were used, viz., ‘as on the date of survey’ for land possession and indebtedness, ‘last 30 days’ for farming of animals, non-farm business and consumer expenditure and ‘last 365 days’ for principal source of income.

For information on productive assets and expenses and receipts from cultivation, the reference period was July to December 2012 in visit-1 and January to June 2013 in visit-2.

Shambhu Ghatak is Senior Associate Fellow, Inclusive Media for Change project, www.im4change.org 

Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth

Subscribe to Weekly Newsletter :

Comments are moderated and will be published only after the site moderator’s approval. Please use a genuine email ID and provide your name. Selected comments may also be used in the ‘Letters’ section of the Down To Earth print edition.