Indian Farmer Incomes: 1983-2012

• The paper analyzes farmer incomes in India over three decades.
• It covers 1983-84 to 2011-12
• It finds varying growth rates but no overall decline in farmer income or profitability

Background

• Appropriate estimates of farm income are lacking in most countries, including India.
• Conclusions on the state of farmers often rely on policies, indirect indicators, or proxies.
• Some studies suggest policies are biased against agriculture and markets may favor manufacturing.
• Other studies indicate fluctuating terms of trade for agriculture, with a rise after 2005-06.
• Disparities exist between the income per worker in agriculture vs non-agriculture.
• Non-agricultural sectors rise at a much faster rate.
• Some suggest farm income is low, leading to agrarian distress.
• There isn't enough information to state definitively whether farm income is low or rising
• Actual farm income estimates are needed to determine the real situation.

Estimates

• Estimates are made based on selected crops and surveys
• These estimates aren't truly representative of Indian farm income.
• Early income attempts focused on farmer samples or specific agricultural segments.
• A 2006 study estimated a very low annual net income of Rs 2,837 per farmer household in 2002-03 as one-fourth of the actual income of Rs 11,628.
• The previous study: excluded income from livestock.
• When livestock income was added, the per farm income increased to Rs 12,720.
• A 2011 study estimated per hectare farm income at Rs 33,267 (2004-05 prices).
• It was derived from value-added in agriculture, deducting hired labour costs.
• Sen and Bhatia (2004) estimated farm business income, including crop cultivation and livestock
• Farm business income was found to be hardly sufficient.
• This study serves as a basis for preparing accurate and timely estimates of farm income in the country

Shortcomings and Limitations

• Data represents major growing states and crops, but not the entire country or agriculture sector.
• Sample crop productivity differs significantly from state averages.
• Data doesn't cover horticultural or minor crops (38% of crop sector value in 2011-12).
• The importance of horticultural crops is rising; India's productivity is four times greater than other crops
• This results in a significant difference in the level and growth in farm business income

Estimates not available

• Farm income estimates are not prepared or published by any official agency, which is surprising.
• The study constructs a farm income series (1983–2011) to address this gap

Estimation Procedure

• Sectoral income does not accrue exclusively to farmers, so it is shared with hired farm labour.
• Farm income and agricultural income often follow divergent paths

Farm Income based on GDP

• Farm income = GDP agriculture and allied sectors, minus capital consumption, and the wage bill for hired labour
• The Wage bill estimated by multiplying hired agricultural laborers by per day wage earnings and days of wage employment.
• Data primarily comes for these variables come from NSSO (National Sample Survey Office) reports.
• Farm income obtained at current prices was deflated by the Consumer Price Index for Agricultural Laborers (CPIAL).
• Farm income was estimated per cultivator, per land-holding, and per unit of net sown area.

Cost of Input, Wage Bill, Farm Income

• Input data is from quinquennial NSSO surveys on employment and unemployment.
• Input use increased 15 times and the wage bill increased 23 times since 1983-84.
• Total agricultural production costs increased 17 times when labor was included.
• Agricultural output at current prices multiplied 18.6 times over the same period.
• Farmers' income multiplied 20 times at nominal prices.

CPIAL

• CPIAL (Consumer Price Index for Agricultural Labourers) increased 6.9 times.
• Actual farm income increased by three times.
• Farmers earned Rs 2,11,000 crore from farming in 1983-84 (base year 2004-05)
• That increased to Rs 6,25,500 crore in real terms by 2011-12.

Agricultural Output

• The cost of various expenditures makes up a significant portion
• Inputs constituted 29% of agricultural output during 1983-88
• Decreased to 22.75% during 2011-12.
• From 1983-2000, Share of wages paid to hired labour for agricultural work increased (increased the most between this time period)
• The number of labourers employed in agriculture increased but not the days they worked
• After 2000
• the number of agricultural labourers decreased
• small decline in agricultural labourers between 1999-2004 caused 20% decline in share of wage bill in output
• large decline after 2004 caused almost 10% increase in wage share
• Implies that initial labor shifts from agriculture may not initially raise wage rates