Doubling Farmers’ Income by 2022: Where do we stand?

Doubling Farmers’ Income by 2022: Where do we stand?

Prof. (Dr.) M. K. Ghadoliya*

ABSTRACT

Many schemes have been launched to reduce farmers’ distress yet the conditions of farmers have not shown significant improvement. It is therefore necessary to assess the new slogan and scheme of the government to Double Farmers’ Income (DFI) by 2022. The Economic theory gives two distinct approaches of growth i.e. Balanced Growth Vs Unbalanced Growth. Our planners chose the second option and argued that agriculture is in very poor stage so it cannot be developed as leading sector of the economy. We gave much emphasis on basic and heavy industries sector arguing that once industrial sector develops it will benefit agriculture through it backward and forward linkages. The emphasis on agriculture in third five year plan was a necessity as we were at the starvation stage but even then terms of trade always remained against agriculture.

The present government has for the first time took a paradigm shift and focused on doubling farmers’ income and his welfare from agricultural growth. Agriculture contributes nearly 15% to GDP but provides employment to nearly 48 percent of Indian workforce. This indicates that agriculture is overcrowded perhaps this is the root cause of poverty, farmers’ distress and increasing farmers’ suicides. Some experts doubt the target of DFI and refer it as impossible and unrealistic. (Gulati 2016)

A holistic approach for the development of agriculture sector was therefore followed by introducing multiple reforms such as: improvement in crop productivity; improvement in livestock productivity; resource use efficiency or savings in the cost of production; increase in the cropping intensity; diversification towards high value crops; improvement in real prices received by farmers; and shift from farm to non-farm occupations". The paper makes an attempt to review the work done so far on these parameters so that if needed corrective action may be initiated in time.

Key Words:

Balance Growth; Unbalanced Growth; Backward and forward linkages;  productivity; input cost; investment; farmers’ welfare; Green Revolution; Soil health; cropping intensity; livestock productivity; diversification; non-farm occupation; micro irrigation, e-NAM; post- harvest infrastructure and value addition.

 

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*Vice Chancellor           

Shri Khushal Das University,  Pilibanga, Hanumangarh (Raj.)

International Conference on “ Innovative Research on Science, Humanities, Engineering & Management (IC-IRSHEM-2020) jointly organised by Shri Khushal Das University, Pilibanga, Hanumangarh and Research Foundation of India on 15-16 Feb 2020.

 

 

            INTRODUCTION:

Reduce the yield risk and price risks are two important milestones in the journey of Doubling the Farmers’ Income (DFI) in next few years. Many governments have launched a numerous schemes to reduce farmers’ distress and increase their welfare during more than past seven decades. These include diversification of crops, using new technologies, agricultural extension services to disseminate knowledge to farmers, increase in irrigation facilities, rural roads, and other public investment in agriculture. Yet during the last few years issue of farmers’ suicides have necessitated policy revisit and assess ourselves as where exactly do we stand and what is the way ahead. 

The present government has for the first time took a paradigm shift and focused on farmers’ income and their welfare through agricultural growth. For the first time we heard that the government wish to double farmers’ income by 2022 to mark 75^th year of India’s independence.

In pure economic theory we have heard of two distinct development approaches; Balanced Growth, and Unbalanced Growth. In balanced growth it is believed that the growth of various sectors and regions in underdeveloped countries needs large investments simultaneously the theory was pioneered by Ragnar Nurkse. In contrast to this Hirschman gave his thesis of unbalanced growth. The theory emphasises on investments in strategic sectors of the economy instead of all the sectors simultaneously.  According to this theory other sectors would develop automatically through sectoral linkages. Following this theory our planners thought that being in a very backward and poor stage agricultural could not become a leading sector due to its weak backward and forward linkages and followed the path of heavy industrialisation following Mahalanobis Model in the Second Five Year Plan.

Although it was always said that agriculture sector plays a pivotal role in the economy but there was a parallel view that increase in terms of trade in favour of agriculture would reduce profits for industry (Lewis, 1954).  Therefore never we made a serious effort to make Terms of Trade in favour of agriculture. Look at the statistics agriculture contributes nearly 15% to GDP but provides employment to nearly 48 percent of Indian workforce. This is the root cause of poverty and agrarian distress and large number of farmer’s suicides in some parts of the country.

The emphasis on agriculture after the third five year plan in the name of Green Revolution was a necessity rather than policy shift in favour of agriculture. But the success of Green Revolution helped India to achieve self sufficiency in food grains particularly in rice and wheat. But, soon it was recognised that we have to move beyond green revolution as it has neglected rain fed areas, nutrition crops like millets, non–cereals and resource poor farmers. It has also created ecological and environmental sustainability problems. Low farm income led to farmers’ agitations in many states of India.

A holistic approach for the development of agriculture sector was therefore necessary to follow. Accordingly, doubling farm income (DFI) requires initiating multiple reforms and programmes which includes the following aspects¹:

1)      Increase in productivity/ production and reduce losses

2)      Increase market access of agriculture produce through marketing reforms, post harvest infrastructure and value addition

3)      Reduce input costs of farmers through optimisation of resources used as inputs.

4)      Undertake governance and reforms.

5)      Expand risk mitigation measures to protect farmers against losses due to yield and price risks.

6)      Increase investment in and for agriculture

7)      Link development activities in sectors such as water resources, soil health, food processing, rural development, power, information technology, environment, fertilisers, and other sectors to agricultural development.

8)      Address background risks through initiatives such as Ayushman Bharat, Ujjawala, Poshan Abhiyan, Pradhan Mantri Matru Vandana Yojana, Sukanya Samriddhi Yojana, Beti Bachao Beto Padhao, Pradhan Mantri Awas Yojana, Swatch Bharat Mission and Mission Indradhanush.

           

Let us discuss some of these important pillars:

 

(1) INCREASE IN OUTPUT AND PRODUCTIVITY:

The agricultural output can be raised either by raising agricultural productivity or by bringing more land under cultivation. The possibility of second option is negligible therefore we will have to concentrate on increasing productivity. Agricultural productivity of crop sector increased at the rate of 3.1 per cent during 2000-01 to 2013-14.  If the same rate continues it will contribute about 16.7 per cent increase in total farm income in seven years i.e. 2015-16 to 2022-23. Live stock constitutes nearly 30 per cent of the total income from agricultural sector. This sector has shown growth rate of 4.5 per cent during 2000-01 to 2013-14. Thus, it will contribute 10.7 % in the seven years  (Chand, Ramesh 2017 p. 15)

With regard to increasing productivity and production what has been achieved during past few years. The total production of food grains which was 264 Million Tonnes (MT) in the year 2014-15 increased to 291 MT during 2018-19 showing an increase of about 10.2 percent.

Similarly, increase in total factor productivity and diversification towards high value crops offers a great scope in raising the income. The production of fruits and vegetables increased by about 18.86 per cent during the same period from 265 MT to 315 MT. Milk, production fish production, and other agricultural commodities have also shown upward trend so broadly speaking the strategy of realising higher output through productivity growth has been on the right track. 

(2) REDUCING COST OF PRODUCTION:

As for reducing cost of cultivation, the two important initiatives of the government are (i) the introduction of soil health card, and (ii) use of micro irrigation. The soil health card saves application of chemical fertilisers thus reduce cot of cultivation and raise productivity if farmers follow the advice of scientists, similarly use of micro irrigation techniques saves water. The newly introduced neem coated urea reduces the amount of urea in the crops. Thus work is under progress on this important pillar also.

(3) MARKETING:

Creation of National Agriculture Market Scheme (e-NAM) and integration of mandies  with e-NAM, Development and up gradation of  22000 rural markets haats,  is important in providing best possible price to  farmers. Already 585 markets are on board. A Committee of Chief Ministers of states to transform agricultural credit has also been set up. The amount of agriculture credit which was 8.2 lakh crore in the year 2014-15 has gone up to 11.5 lakh crore in the year 2018-19. The government has adopted the recommendations of the Swaminathan Commission (Principle of 50% margin of profit for all crops) for determination of MSP for addressing yield risks and providing reasonable return to farmers. No doubt there are economic arguments against the very concept of MSP there are issues of imperfect markets and risk of survival faced by poor farmers. In medium terms till workable alternatives are put in place, it is reasonably good for farmers.

Government has also tried to address the issue of price risks through creation of buffer stock of pulses, passing of Contract Farming Act, Agricultural Land Leasing Act, and covering nearly 50% of the population under Pradhan Mantri Fasal Bima Yojana (PMFBY) by 2019-20.  In addition Direct Transfer of Rs. 6000/- per year to farmers is another incentive which guarantees some monies going in the pocket of farmers. PM Maan Dhan Pension Scheme has also been introduced⁴.

The emphasis is on addressing the problems of risks adversely affecting farmers’ income and to work on more comprehensive, integrated and holistic approach towards fulfilling the target of doubling the farmers’ income within the time frame. The efforts are certainly based on good knowledge, extensive research and use of technology yet the desired outcomes could not be achieved.

(4) INCREASE INVESTMENT IN AND FOR AGRICULTURE:

As per a report of the Committee on Doubling Farmers’ Income (DFI) said an additional investment of Rs 6,39,900 crore is required from both public and private sectors to enable doubling of farmers' real income by 2022-23, on  2004-2005 prices⁵.

To boost farmers’ real income the committee said an additional Rs. 617 billion private investment is required. The committee strongly recommended the stepping up of institutional credit on a large scale as only 50 to 60 percent of the requirement is being fulfilled through institutional credit. In back States the investment requirement will be still more.

During last few years we have witnessed higher budgetary allocations e.g. the total budgetary allocation of the Ministry of Agriculture and Farmers which was Rs. 25460 crore in the year 2015-16 gone up to Rs. 58080 crore in the year 2018-19. But still it is not sufficient in relation to the projections made by the Committee on DFI.

The public investment for agriculture also needs to be stepped up but looking at the fiscal situation and shrinking collection of GST we may only hope that these dreams will be fulfilled in coming next few years.

(5) LINKING VARIOUS ACTIVITIES:

Inter-Ministerial Committee to examine issues relating to Doubling of Farmers’ Income (DFI) has identified the below mentioned seven sources of income to double farmers' income by 2022.  A holistic approach for linking of development activities in sectors such as water resources, soil health, food processing, rural development, power, information technology, environment, fertilisers, and other sectors to agricultural development is needed to achieve the goal of DFI but we do not witness any such sign except a few scattered efforts here and there.

(6)  POST HARVEST INFRASTRUCTURE AND VALUE ADDITION:

Report of the Committee on DFI expands the post-production value capture activities by going beyond ‘marketing’ and advocating ‘monetisation’.³ On the lines of the well-known ‘marketing efficiency’, the Committee adopts ‘monetisation efficiency’ as the right measure of value capture. Agricultural production is not the sole output from the rural economy. Agriculture in turn, sets off other near-farm and non-farm economic activities in the rural landscape. Agro-food processing industries have the potential to generate significant employment in production activities and also indirect employment through its forward and backward linkages. These industries would help in reducing post harvest losses and wastes as well as in using by-products more efficiently. This in turn will increase rural income.

The overall well-being of the rural population therefore depends on agriculture as a primary sector, and various associated secondary and tertiary sector activities that either support agriculture or are supported by agriculture.

As part of the DFI strategy, the farming household should be empowered, not only to capture the maximum value from all that is produced off the farms, but also from other near-farm economic activities. The secondary sources of income help mitigate some of the risks associated with agriculture and allows for shared income sources in a household.

(7) EXTENSION AND KNOWLEDGE DIFFUSION:

Past strategy for development of agricultural sector in India has primarily focused only on raising agricultural output and raising farm productivity.  The strategy proved successful as it led to Green Revolution and not only made India a self sufficient at aggregate level but also a net food exporter country. The new strategy focuses on farmer’s welfare by using various measures to achieve the targeted income including agricultural extension services.

Agricultural extension has been understood as an important techno-social enabler that supports farmers in their endeavours to produce more. If extension is to serve the purpose of effecting a paradigm shift in agriculture from production-centricity to income centricity it deserves to be redefined⁶.

Accordingly, the DFI Committee redefines Agricultural Extension as follows:

“A system of empowering farmers with information, knowledge, technology, skills, risk and farm management practices, across agricultural sub-sectors and along all aspects of the agricultural supply chain, so as to enable the farmers to realise higher net income from their enterprise on a sustainable basis”

 The new definition covers not only the cropping systems, but also other sub-systems including horticulture, animal husbandry, fisheries, etc. emphasising thereby the importance of diversification, demand centric innovations and farming system approach.

Doubling real income of farmers till 2022-23 over the base year of 2015-16 requires annual growth of 10.41 per cent in farmers’ income (Chand, Ramesh 2017). This calls for a multipronged action of all above strategies and plans in a time bound action plan.  The above set of activities initiated by the government, symbolise the diligence and commitment to double the farmers income in a time bound manner. A major impediment to the success of these strategies is small farm sizes. A unique ‘Small Farmers, Large Field’ (SFLF) model has been first successfully experimented in Vietnam. In this model farmers physically pool their land and set up companies that operate like private businesses.  This experiment has been successfully tested in Odisha informally which shows the way forward for achieving economies of scale and reducing cost of cultivation inturn, resulting in rise in income of farmers. NITI Aayog member Ramesh Chand, in a 2017 policy paper, advocated collective action for minimising the scale disadvantages faced by small and marginal farmers. The Farmer Producer Organisation/ Company approach is one way to enable them to improve their bargaining power, by pooling resources and linking them to the market.

 

The strategies proposed for doubling farmers’ income include planting better seed varieties/hybrids, improved production practices, diversification towards high-value crops, development of infrastructure and market linkages, and providing access to institutional credit. Thus, government initiatives and intensions are clear and are visible in the schemes launched and multipronged efforts made during past few years but sustained and incremental efforts will be needed to achieve the goal.

 

REFERENCES

1.      Gulati Ashok and Sweta Saini (2016), From Plate to Plough, raising Farmers’ Income by 2022, March 28.

2.      Mishra, Promod K. (2019) Driving Indian Agriculture towards Farmers’ Welfare: Current Policy Perspectives, Inaugural address delivered at the 78^th Annual Conference of ther ISAE, at Institute of Economic Growth New Delhi, Ind. Jn. of Agri. Econ. Vol 74, No. 1 , Jan-March2019

3.      Economic Survey, GOI , 2019

4.      Doubling Farmers’ Income – Volume XIV Comprehensive Policy Recommendations, Department of Agriculture, Cooperation and Farmers’ Welfare, Ministry of Agriculture & Farmers’ Welfare. Sept. 2018.

5.      PM Kisan Maan Dhan Yojana, http://vikaspedia.in/agriculture/agri-insurance/pm-kisan-maan-dhan-yojana

6.      Economic Times, The committee on Doubling Farmers’ Income, 14^th  August 2017

7.      Doubling Farmers’ Income – Volume XIV , p. 155

8.       Chand, Ramesh (2017) Doubling Farmers’ Income: Rational, Strategy, Prospects and Action Plan, Niti  Aayog, GOI, New Delhi.

9.      Samarendu Mohanty & Sampriti Baruah,2018 Agricultural economics: How doubling of farmers’ income is possible even with small landholdings, Indian Express, 1 Nov.