Highest rice acreage in six years, more farmers in farms, a bounty monsoon and an expected bumper harvest don't enthuse farmers as their earning dips
It is a piece of news that everybody would love to cheer about, except those who made this possible.
The current kharif season is exceptional. In comparison to last year, over eight million more hectares of farms are under cultivation this season.
There are more people engaged in cultivation now due to the huge reverse migration of workers after the countrywide lockdown over the novel coronavirus disease (COVID-19). Most of them are those who had quit farming.
All types of crops have reported an increase in acreage. But the increase in acreage of rice — the staple crop in kharif that sustains the maximum number of farmers — is the highest in the last five years. The monsoon is expected to be above normal.
To add to the cheer, the State Bank of India (SBI)’s latest research report shows that the agriculture sector has been immune to the impacts of the COVID-19 pandemic. Rather, this is the only major economic sector that would witness a growth rate of three per cent this fiscal year; the rest are going to shrink significantly.
Before this, to provide relief to farmers amid the countrywide lockdown, the Union government increased the minimum support price (MSP) of 14 kharif crops on June 2, 2020.
Hopes float in the corridors of the finance ministry. Many have started talking in terms of this fuelling the revival of the country’s economy, if not this fiscal, then definitely in the next one.
Basically, it is premised on the belief that an increase in agricultural yield will lead to more income; and this, in turn, would lead to more consumption among rural Indians. So, the revival of the rural economy would ultimately add on to the sluggish national economy.
But, as usual, farmers don’t seem to be jubilant. In recent times, they don’t see a natural correlation between their physical yield from farming and that of income from it. Rather, the more they produce, the less they earn for their produce.
This is despite the consistent increase in demand for food in the country. Immediately after the declaration of MSP, farmers were on streets, demanding more assured prices, citing huge losses even with enhanced support price.
India ranks second in agricultural production globally, overtaking countries such as the United States, Russia and Brazil. But our farmers’ per capita income from farming is negligible in comparison to these countries.
According to a report by the Organisation of Economic Cooperation Development and the Indian Council of Agricultural Research, Indian farmers have lost Rs 45 lakh crore due to “non-proper” pricing of the product between 2000 and 2017. Even MSP, that the government pursues as the primary support system to ensure fair price, covers just six-10 per cent of farmers.
This is also a concern for the political leadership as the promise to double farmers’ income by 2022-23 is hardly 30 months away. Arguably, this year would have been that springboard to catch up with the target, given all favourable conditions.
By 2022-23, to achieve this target, a farmer’s annual income has to be Rs 192, 694 (2015 price), from Rs 96, 703 in 2015-16. This needs a 10.4 per cent annual income growth till that target year, according to the government's own estimate.
To achieve this growth rate, the current income ratio of a farmer has to fundamentally change: The current 60:40 ratio of income from farm and non-farm has to be turned into 70:30. But this involves a farmer increasing his / her investment on farming by 12.5 per cent annual. This is possible if he / she earns enough to invest more.
And the government committee that recommended various ways to double farmers’ income clearly said that the biggest challenge is to monetise farmers’ produce, meaning to ensure more economic return. This has not been possible. Rather, in the last five-six years, farmers are increasingly facing a market glut.
If farmers from this exceptionally favourable year can’t earn, it is going to be a troubling time for the country and also for the government’s target to double farmers’ income. Going by the prevailing situation, there is not much to be expected in terms of the government actually ensuring a fair price for the expected bumper harvest in winter.
Its own stock of food grain is already too high to accommodate further, thus curtailing its capacity to buy more at MSP. For the farmers, it means another round of distress selling or even not being able to sell their harvests. This is a loss in income as usual and an addition to its legacy debt burden.
The SBI research estimates that due to the COVID-19 pandemic, the per capita loss for the whole of India is around Rs 27,000. This is also for the farmers who would be incurring further losses this year due to the market glut.
It is a scary climax to a seemingly milestone year for farmers. And for those who hope a rural revival would lead to a national economic boom, the same research report says that the rural revival would have not much impact on the country’s gross domestic product as the urban population spends more than the rural people on food and other commodities. And they are not spending now due to loss in income.
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