The math behind doubling farmer income

The goal is possible with policy reforms, says NITI Aayog

Sometime back, a BusinessLine analysis showed that it may take about 16 years for farm incomes to double (based on farm income data between 2002-03 and 2012-13).

A recent policy paper released by NITI Aayog says that achieving this feat could take as long as 22 years!

The report’s findings, arrived at after compiling farm income data upto 2015-16, show that farm income (per cultivator) has grown to ₹1,20,193 in 2015-16 from ₹12,365 in 1993-94 — an increase of 10.89 per cent annually. But taking away the inflation effect, growth in real terms drops to about 3.39 per cent.

But no matter what the numbers foretell, NITI Aayog is still confident of achieving Prime Minister Narendra Modi’s dream of doubling farmer income by 2022-23. To that effect, it has drawn up a detailed action plan around improving productivity, ramping up contribution from other sources of income and pushing market reforms through the implementation of e-NAM, etc.

Sources of income

To stoke growth in farm income, NITI Aayog has identified a few sources of income that need to be targeted. These include improving agricultural productivity by focussing on increasing the yield of different crops, reducing the cost of production through usage of technology and infrastructure, increasing cropping intensity (raising short-duration crops), diversification towards high-value crops, which is fruits, vegetables and spices, and diversifying to allied activities such as forestry and bee-keeping, improving terms of trade and getting farmers better prices.

The Centre’s new schemes — ‘Har khet ko pani’ and ‘Pradhan Mantri Krishi Sinchayee Yojana’, Soil Health Card Scheme, e-NAM and ‘Pradhan Mantri Fasal Bima Yojana — can also help, adds the NITI Aayog.

But given that many of these schemes are stuck because of poor implementation at the State level, doubling farm income in the next five years looks a Herculean task. Many States are in dire straits after two successive years of monsoon failure and large fiscal burden from farm loan waivers.

NITI Aayog has highlighted the success of the Unified Market Platform created by Rashtriya e-Market Services, particularly in Karnataka, and has reiterated the benefit of the online market system to farmers.

In the mandis in Karnataka, between 2013-14 and 2015-16, the average increase in price of commodities was 38 per cent. In real terms, the increase was 13 per cent. NITI Aayog says that a 13 per cent increase in crop prices can raise a farmer’s income by 9.1 per cent. But after one year of launch, the Electronic National Agriculture Market (e-NAM) stills covers only 417 mandis, of the 2,477 regulated APMCs in the country.

There is also the need to shift farmers to non-farm activities by showing them ways to generate income through, for instance, forestry, making of handicrafts and processing.

Already, there is a trend of farmers moving away from agriculture. According to data from the National Sample Survey Office (NSSO), workforce in the agriculture sector in rural areas declined from 16.61 crore in 2004-05 to 14.62 crore in 2011-12.

The declining workforce in agriculture, according to NITI Aayog, can in turn help the goal of doubling farm income. If the number of cultivators keeps declining at the same rate as experienced between 2004-05 and 2011-12, then the tally can decline by 13.4 per cent between 2015-16 and 2022-23. Farm income will then need to be distributed among fewer farmers, according to NITI Aayog. In its calculation, the Think Tank has assigned a 2.4 per cent drop in number of farmers every year.

If all sources of farm income remain the same as in the last 10-15 years and there is some increase in crop prices, NITI Aayog expects to achieve a 75 per cent increase in farm income by 2022-23.

However, to double the income, growth has to be accelerated by 33 per cent and it will require market reforms through implementation of the new model APMC Act and e-NAM, adds NITI Aayog.

It identifies that crop productivity has to increase by 4.1 per cent, rather than 3.1 per cent seen in the previous years and contribution from livestock should grow at 6 per cent rather than 4.5 per cent. Likewise, all other sources of income should also contribute significantly higher. From e-NAM and other market reform initiatives, it expects a contribution of 17 per cent (as against 13 per cent after UMP in Karnataka).

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