Farm contribution to GDP dips; so does farmers’ income in past decades

Experts list several factors affecting agriculture to emphasize a complete new set of thinking to support the sector

A huge variance in the agricultural growth has an impact on farm incomes as well as farmers’ ability to take credit for investing in their landholdings.

Over the past few decades, the manufacturing and services sectors have increasingly contributed to the economic growth, while the agriculture sector’s contribution has decreased from more than 50 per cent of the GDP in the 1950s to 15 per cent in 2019.

The agricultural growth has been fairly volatile over the past decade, ranging from 5.8% in 2005-06 to 0.4% in 2009-10 and 0.2% in 2014-15. Such a variance in the agricultural growth has an impact on farm incomes as well as farmers’ ability to take credit for investing in their landholdings.

The PRS research in its State of Agriculture in India says the key issues affecting agricultural productivity are: the decreasing sizes of agricultural landholdings, continued dependence on the monsoon, inadequate access to irrigation, imbalanced use of soil nutrients resulting in loss of fertility of the soil, uneven access to modern technology in different parts of the country, lack of access to formal agricultural credit, limited procurement of food grains by government agencies, and failure to provide remunerative prices to farmers.

Arun Kumar, Malcolm Adiseshiah Chair Professor, Institute of Social Sciences told The Federal that the agriculture in India is going down due to bad policies. “The government doesn’t want farmers to grow, otherwise it is effortless to make farming in India profitable. It is only due to the government that the farmers continue to live in poverty,” he said.

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Low effectiveness of MSP

Although MSPs are declared for various crops, procurement at these prices mainly happens for wheat, rice, sugarcane and cotton, in a few states. As a result, in procuring states, farmers focus on cultivating these crops over other crops such as pulses, oilseeds, and coarse grains. In a report to measure the efficacy of MSPs, the NITI Aayog found that a low proportion of farmers (10%) was aware of MSPs before the sowing season. Around 62% farmers were informed of MSPs after sowing of their crops.

According to the Shantha Kumar Committee on restructuring FCI, only 6 per cent of the farmers in India benefit from procurement. The committee also suggested that the farmers are not getting enough MSP and that it should be increased by 50 per cent of the input cost.

“The Shanta Kumar committee report tells everything about the plight of farmers and why they are living in poverty. The MSP system is best in the states like Haryana and Punjab where the per capita income of farmers is also maximum and they are also living in poverty with 96 per cent of Punjab farmers are poor, 86 per cent are debt-ridden, 80 per cent of farm labourers (landless) are under debt and every third farmer in Punjab falls in the below poverty line (BPL) category,” said Arun.

He said while the states like Bihar and Maharashtra, which have done away with the MSP system, the farmers’ per capita income is the lowest, one can imagine plight in other states. The farmer’s suicides in Maharashtra are recorded the most every year and this is only because of non-availability of a system that acts as a benchmark of price, he said.

Other issues with the implementation of the MSP regime include long distances to the procurement centres, increasing cost of transportation for farmers, irregular hours of the procurement centres, lack of coverage storage godowns and inadequate storage capacity, and delays in the payment of MSPs to farmers.

While the levels of food production have increased over the past few decades, it has also led to issues such as an imbalance of nutrients in the soil, a decline in the water table as well as the quality of water, and overall depletion of soil health. The Ministry of Agriculture has noted that the quality of Indian soil is deteriorating. About 5.3 billion tonnes of soil gets eroded annually, at a rate of about 16.4 tonnes/hectare. An overuse of urea and pesticides is also observed, which is also affecting the productivity of crops.

The productivity of crops is coming down at the time when we need to grow at 2% per cent to meet the grain targets of 2025. Taran Grewal, a farmer based in Ludhiana, said that his cost of farming goes up every year and yields come down. “We used to get nearly 15 quintals of wheat per acre, which has now come down to 12-13 quintals now. The cost of fertilizers, pesticides, fuel, seeds and electricity is increasing every year. The government increases the minimum support price (MSP) once in two years or three years that too after we protest, which is not enough to meet the input cost,” Grewal said.

Lack of post-harvest activities

After agricultural produce is harvested, it requires a robust storage infrastructure in order to minimize any losses due to adverse weather conditions or in the process of transportation. The quantity of food which is wasted during the harvest and post-harvest processes in the country has increased over the past five years. The highest losses are observed in the case of fruits and vegetables (4.6%-15.9% of production), pulses (6.4%-8.4%) and oilseeds (5.3%-9.9%).

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Food wastage occurs at the level of the farmer, transporter, wholesaler and retailer. Some of the reasons for this wastage are crop damage, improper harvesting techniques, poor packaging and transportation, and poor storage. Some of the issues with the state of storage facilities in the country are inadequate capacity and poor conditions of storage. In cases where the storage capacity is found to be sufficient, the conditions of godowns are unfit, either because of the damp condition of the storage or because of its remote location.

Apart from the lack of food storage, India has a lack of trade & processing capacity which is impacting the farmers’ produce and income. The major commodities imported to India are pulses, edible oils, fresh fruits and cashew nuts and the major commodities exported by India are rice, spices, cotton, meat and its preparations, sugar, etc.

Farm imports rising

Over the past few decades, the share of agricultural imports in total imports has increased from 2.8 per cent in 1990-91 to 4.2 per cent in 2014-15, whereas the share of agricultural exports has reduced from 18.5 to 12.7 per cent. India’s trade policy is affected by factors such as domestic availability of commodities, cost of production as well as global price levels.

However, frequent changes in trade policy, such as reducing the import duty on a commodity in response to a shortage in supply, or decreasing minimum export price of a commodity to facilitate its exports have an adverse effect on the development of the agro-processing sector in India.

The food processing sector in India has only 10 per cent share in India’s agriculture sector. The exports have come down from 12 per cent from 2014 to 7 per cent in 2019. Arun Kumar said that there is a need for a complete package for farming.

“The new farm laws are brought to serve the big corporates of India. There is no other possible reason that such laws have been brought amid the lockdown and passed in such a manner. These laws are not needed, but a better MSP on more crops and good irrigation facilities are needed. A good food processing unit and export facilities are also needed,” said Arun.

(This is the last of a two-part story on the plight of farmers in spite of India being the world’s second-largest agricultural producer. Read the first part here: Farmers fight a tricky sludge of poor credit, odd monsoon, crop loss).