In today's Finshots we see how farm income has been growing over the past few years

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The Story

17,000 Indian farmers died by suicide between 2018 and 2020. And for a country that’s predominantly agrarian, it’s a cause for major concern. Now we don’t have to rack our heads too much and wonder why this is happening. The reasons are obvious and you can boil most of it down to crop failures and debt.

Crippling levels of debt.

You see, farming in India is still largely dependent on the monsoon. And when the monsoons aren’t kind, farmers suffer. Crops fail, income levels tank and farmers resort to debt to try again another season. And when the next time the monsoon ravages the crop, they get a paltry sum in return. They plunge into a vicious cycle of debt.

And eventually, they’ll have no recourse.

In fact, things are so bad that even during a bumper harvest, things may not go exactly to plan. If this harvest coincides with a period of excess supply, farmers don’t get a fair price. You probably have seen reporting of farmers dumping juicy tomatoes on the roadside after failing to get adequate compensation. And when you throw in this kind of return in conjunction with costs associated with sowing, storing and selling the produce, you can see why so many farmers are in debt.

Now you may look at this and go — “What about Minimum Support Price? Won’t that guarantee farmers a decent return on investment? “

Well, not always. The MSP is only offered on select crops and it costs the government a fair penny. Which explains why they keep tinkering with the calculation. And since the MSP levels don’t rise in line with farmer expectations, there’s discontent here as well.

Then there’s the problem of land ownership. You see, 86% of farmers in India own less than 2 hectares of land. If you look at it a bit closer, you’ll see that close to 126 million farmers own just 0.6 hectares each (on average). And that’s not nearly enough for these people to sustain a living on agriculture alone.

Not only that, it leaves very little room for these small farmers to grow multiple crops at the same time, which is why many indulge in monocropping — growing just one crop at a time. There’s also the matter of poor soil health and falling crop yields. To compensate, farmers resort to excessive use of fertilisers. And while this helps in the short run, it is a death knell in the long run.

At the end of the day, this means that over 20% of farm households live below the poverty line.

So when in 2016, Prime Minister Narendra Modi proclaimed that the government had a goal of doubling farmers’ incomes by 2022, there was considerable fanfare. However, now that we are in the middle of 2022, it’s perhaps time to take stock of the situation.

Did we hit the target?

Well, we don't know. But we do have some indicators.

This latest report from the State Bank of India sheds some light on the matter. After poring through data between FY18 and FY22, researchers noted that farmers’ income in India has risen by 1.3 to 1.7 times during the period. In some cases, it did double. But this is only restricted to cash crops like soybean, tea, coffee, and cotton. In the case of non-cash crops like wheat, rice, maize, and millets, farmers' income didn’t rise as much.

Now bear in mind, that this doesn’t include data from the base year FY16 and FY17. So the analysis isn't reflective of the original promise and we can’t say for certain if farmers’ income has in fact doubled. But as we noted, it does give you some indication of where we’re headed and it doesn’t seem as if we are there yet.

In fact, if you dive into the report a bit more, you’ll see that things may be a bit worse than originally imagined.

Back when the government came up with the goal of doubling farmers’ income, it set up the Ashok Dalwai Committee to provide suggestions. And that committee had categorically stated how to measure the goal: “It is the real income of farmers that is to be doubled and not their nominal income.”

And as you may have guessed, real income isn’t the same as nominal income. Farmers’ income could rise simply by virtue of inflation. This wouldn’t increase their purchasing power in any way. But if we adjust for inflation and then measure income, it gives us a more realistic picture of prosperity.

So the original target was to grow farmers' income by about 10.4% every year. This would have effectively doubled farm income in real terms (after accounting for inflation). But if you look at the recent report from SBI, there is no mention of real income. A quick search of their document for the words “real” and “inflation” doesn’t reveal anything. So maybe this is just nominal growth?

And if you consider the most recent survey conducted by the National Sample Survey Office (NSSO) on agricultural household income between 2012–13 and 2018–19 (once again not the specific period we want), you’ll see that the growth in income is just about 3.5% in real terms.

Could we have improved on this figure? Maybe. But you also have to consider that the government was pinning a lot of hope on its flagship agricultural reforms to turn the tide. Which as you know, they’ve rolled back since (due to immense pressure from different farm groups).

So yeah, it seems farm income isn’t exactly growing as expected. But we hope and pray that things change in the near future.

Until then…

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