Increasing income of smallholder farmers in India

Agriculture is the backbone of Indian economy. Although its contribution to gross domestic product is now around one sixth, it provides employment to 56% of the workforce. Also, the forward and backward linkage effects of agriculture growth increase the incomes in the non-agriculture sector. However, there have been exclusion problems like problems of poverty, unemployment, inequalities in access to health and education and poor performance. Real development in terms of growth shared by all sections of the population has not taken place. One of the excluded sector during the reform period was agriculture which showed low growth and experienced more farmers’ distress. There are serious concerns on the performance of agriculture sector in the country and need attention of policy makers.

Small holdings agriculture is important for raising agriculture growth, food security and livelihoods in India. Indian agriculture is the home of 80% small and marginal farmers. Therefore, the future of sustainable agriculture growth and food security in India depends on the performance of small and marginal farmers.

The number of smallholdings has been consistently increasing in India since the first Agriculture Census in 1970-71. The number of holdings, which was 71 million in 1970-71 went upto 138.35 million in 2010-11showing a compound annual growth rate of 1.68% during the period. However, the operated area which was 162.3 million hectares in 1970-71 marginally declined to 159.59 million hectares in 2010-11. The average size of holdings had shown a consistent decline over all the census periods. For instance, in 1970-71 it was 2.28 hectares which was reduced to 1.15 hectares in 2010-11.

The access to irrigation has increased for all categories of farmers. It is the highest for marginal farmers followed by small farmers. Data indicate that the percentage of area under irrigation for small farmers increased from 40 in 1980-81 to 51 in 2000-01.

The fertiliser per hectare is inversely related to farm size for both irrigated and unirrigated areas. It increased from marginal farmers in irrigated areas from 100 kgs in 1980-81 to 252 kgs in 2001-02. In fact, the per hectare consumption for all farm sizes was similar on irrigated areas in 1981-82 but it rose faster for marginal farmers and small farmers in 2001-02. This is true in the case of unirrigated areas also.

The percentage of area under high yielding varieties (HYV) is also inversely related to farm size. In the irrigated areas, the coverage of are under HYV was 89%, 86% and 78% respectively in marginal, small and large farmers in 2001-02. In the case of unirrigated areas, the coverage was above 50% for marginal, small and semi-medium but it was only 30%for large farmers in 2001-02.

Multiple cropping index is higher for marginal and small farmers than that for medium and large farmers. For marginal farmers, cropping intensity increased from 134 in 1981-82 to 139 in 2001-02. In the case of large farmer, it rose from 116 to 121 during the same period. The differences across farm sizes persisted over time.

The contribution to output is higher for marginal and small farmers as compared to their share in area. The share of these farmers was 46.1% in land possessed but they contribute 51.2% to the total output of the country at all India level in 2002-03.

In terms of production, small and marginal farmers also make larger contribution to the production of high value crops. They contribute around 70% to the total production of vegetables, 55% to fruits against their share of 44% in land area.

Their share in cereal production is 52% and 69% in milk production. Thus, small farmers contribute to both diversification and food security. Only in the cases of pulses and oilseeds, their share is lower than other farmers. There has been debate in India on the relationship between farm size and productivity. The results of NSS 2003 Farmers’ survey has empirically established that small farms continue to be produce more in value terms per hectare than the medium and large farms.

Data show that value of output per hectare was Rs.14754 for marginal farmers, Rs.13001 for small farmers, Rs. 10655 for medium farmers and Rs.8783 for large farmers. It shows that from efficiency point of view, small holdings are equal or better than large holdings.

The sustainability of these farmers is crucial for livelihoods in rural areas and for the entire country. The cost of cultivation per hectare is also high on small and marginal farmers than medium and large farms.

However, the monthly income and consumption figures across different size class of land holdings show that marginal and small farmers have dis-savings compared to medium and large farmers. According to NSS 2003 data, the monthly consumption of marginal farmers was Rs.2482 and monthly income was Rs.1659. It shows that they have dis-savings of Rs.823. The dis-savings for small farmers were Rs.655. On the other hand, for large farmers, monthly income and consumption respectively were Rs.9667 and Rs.6418 with savings of Rs.3249.

In an effort to boost the agriculture sector, the Government of India has set a goal to double farmers’ income by 2022 but failed to achieve same. Government of India has to unveil strategies ranging from irrigation to crop insurance. But if the agriculture sector is to undergo true transformation, it needs to move from a production-driven system to one driven by demand, one that increasingly connects consumers with producers. This will require new approaches and innovations, as well as increasing collaboration between the private sector and other stakeholders in the sector. It will require integrated approach that connect farm to fork, competitive markets that provide better prices to farmers, and an enabling environment that supports innovation and action.

Agriculture is a complex sector. No one stakeholder – whether governmental, corporate or from civil society – can do this alone, especially given climate change and increasing pressure on land and water resources. Real impact will come from combining the competencies of diverse organizations and stakeholders and creating better alignment through partnership platforms. More investment, more infrastructure, more on-the-ground resources, financial linkage, market linkage, agriculture value chain, post harvest management, new collaboration models that combine the knowledge and resources of diverse stakeholders, and which share best practices, risks and mutual accountability will help in achieving the targeted outcome.

(The writer is a Bhubaneswar-based economist.)