The sector needs a more focused approach
The initial government estimates suggest kharif grain output this year would hit another record. A higher output should ideally result in higher income for households engaged in farming. But market realities and subsistence farming don’t necessarily make a large number of such households significantly better off even after a bumper crop. This results in distress, and is perhaps one of the reasons why the agitation against three farm laws has continued for so long. Farmers, largely from Punjab, Haryana, and parts of Uttar Pradesh, are demanding the withdrawal of the three laws, and guaranteed minimum support price (MSP). While the government has categorically said the public procurement of food grains will continue, protesting farm groups are against the idea of private mandis, among other things.
However, withdrawing the farm laws or guaranteed MSP for select crops would not change much for most farm households, though the latter is simply not feasible. This is largely because most farmers do not produce enough to make a living. Clearly, this is not a tenable position and could lead to more social and political tensions. The government, therefore, needs to look at the agriculture sector more holistically. A recent study by Harish Damodaran and Samridhi Agarwal could be useful in this context. Based on the National Statistical Office’s (NSO’s) report on the situation assessment of agricultural households for 2018-19, the study has estimated the number of farm households that are significantly dependent on farm income. The study categorises regular or full-time farmers as households that derive at least 50 per cent of their overall income from farming. It concludes that the number of farmers earning a significant share of income from agriculture is only about 40 million. Official estimates suggest the number of farm households could be 90-150 million. Financial support under the Pradhan Mantri-Kisan Samman Nidhi, or PM-Kisan, is being transferred to about 110 million farmers.
Further, the data shows that 50 per cent farm income dependence is possible only when the landholding size is more than 2.5 acres. Most households do not have this much land and are unlikely to benefit significantly from procurement or subsidies. The government should thus review its policies and extend support differently to different groups. It should first ascertain the number of farmers who need support. In this context, transfers under PM-Kisan can be linked to landholdings, instead of providing the same amount to all farming households. It is also worth noting that agricultural schemes don’t benefit labourers. The government needs to work on a mechanism to support this section. Odisha, for example, supports agricultural labourers, which can be studied and adopted in the rest of the country. Since a large number of farm households derive the bulk of their income from other sources, improving the ease of doing business in rural areas will help create more employment.
The real failing of the Indian policy establishment over the decades, however, has been its inability to create a large enough manufacturing base to generate ample employment opportunities and pull surplus labour from agriculture. Till this happens, it would be difficult to address distress in the farm sector. The latest employment survey showed that the labour force in agriculture has increased. Although this happened largely because of the pandemic, it would have further depressed earnings. In sum, while the government needs to refine its intervention in the agricultural sector, the problem can be addressed durably only through rapid industrialisation.