Level of non-farm incomes three times that of farm incomes

February 11, 2016 04:48 AM

By P.S. Vijayshankar

Recent reports say India has become the world’s fastest-growing economy in terms of GDP growth, overtaking China. While this may be the case, we must pause and reflect over what this means for the 800 million-plus population that lives and works in our rural areas. The picture there is a lot less spectacular.

Between 2003 and 2012, there was a clear turnaround in our agricultural performance. But the rate of growth in agriculture and allied activities is down from about 4 per cent per annum in the 11th Plan period to just 1.7 per cent in the first three years of the 12th Plan (2012-15). Over 300,000 farmers have committed suicide in the last decade, and in Maharashtra alone, over 2,000 such cases have been reported last year. Worse, India is currently reeling under the impact of an unprecedented drought. For the second year in succession, rainfall in the monsoon season has been less than normal; 302 districts in the country have been declared drought-hit. Since agriculture is the source of livelihood for millions in rural India, droughts push the already precarious lives of smallholder farmers and agricultural labourers to the brink, leading to massive rural distress.

Available evidence shows that even as the overall rate of women’s labour force participation has declined, there has been high labour force participation of women from poorer households, especially in times of increasing agrarian distress. This underscores the need to revive MGNREGA, which has a proven track record of providing relief employment to a large number of rural women.

The changing rural economy

The World Bank’s World Development Report 2008 shows that agricultural growth is at least twice as effective in reducing poverty compared to growth originating in non-agricultural sectors. In India, too, 80 per cent of the people officially counted as poor lived in rural India in 2011-12. This means that for making a significant dent in poverty, rural incomes have to grow at a faster rate. The gap between urban and rural consumption levels has increased over the years. Recent studies have shown that despite the spurt in rural incomes between 2005 and 2012 caused by a rise in commodity prices and favourable terms of trade for agriculture, the level of non-farm incomes is at least three times that of farm incomes even today.

The rural economy in its current juncture is a lot less “agricultural” than it used to be earlier. With the fall in the average size of landholding, over 90 per cent of farmers are now in the small and marginal category and they cultivate over 50 per cent of the cropped area. Smallholder farmers are increasingly forced to combine non-farm work with work on their own land. Data from the 68th round of the National Sample Survey (2011-12) show that about 36 million workers have shifted from agriculture to non-agricultural sectors between 2004-05 and 2011-12, meaning that a major part of their income comes from work outside agriculture. On account of this inter-sectoral movement, the share of agriculture in the total workforce has fallen below the 50 per cent mark for the first time after Independence. While this number has been contested, the fact remains that sectors like rural construction are now the sites employing substantial numbers of workers. Given the poor working conditions in these sectors and the overall decline in quality of employment in the economy, this is likely to be the result of a swapping of low-income farm work for low-quality non-farm work, as many observers point out.

Hence, the huge challenge of employment generation needs to be addressed. As the Economic Survey 2014-15 shows, regardless of the data source used, employment growth (1.40 per cent) has lagged behind growth in the labour force (2.23 per cent) between 2001 and 2011. Clearly, employment elasticity of growth, showing the effectiveness of the economic system in generating employment, seems to have declined over time. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has provided relief employment to around 5 crore rural households per year over the last decade. However, since 2012, both the number of households covered and the number of person days of employment generated under MGNREGA in the country as a whole has undergone a steep decline.

Public investment the key

For rural India to be vibrant, the way forward seems to be to simultaneously address the twin challenges of reviving the dynamism of the farm sector by building its climate resilience on the one hand and creation of quality employment in non-farm segments of the rural economy on the other.

Public investment holds the key to addressing the long-term structural constraints of the rural economy. Official land use statistics show that 55 per cent of cultivated area still has no access to irrigation. Variations in the pattern of seasonal rainfall themselves create extreme vulnerability in this rainfed segment of Indian agriculture. The experience of watershed projects over the last three decades has shown that local harvesting of monsoon run-off can be a good drought-mitigating mechanism as it provides supplemental irrigation to crops at crucial periods of plant growth. Investments under MGNREGA and watershed programmes need to be converged in this overall framework of drought-proofing rainfed agriculture. Since rainfed agriculture produces about 40 per cent of our foodgrain and a major share of pulses, millets and oilseeds, investments are urgently required from the point of view of food security.

Soil is another critical area where investments are needed. Due to poor organic matter incorporation, organic carbon in soil is below the required level in most parts of India. Indiscriminate use of chemical fertilizers has further eroded soil health. Many methods of soil enrichment, including by recycling organic matter and converting “waste to wealth”, have been demonstrated on the ground by scientists as well as farmers. The task at hand is to scale up these for greater farmer uptake. This would also mean a reframing of the current fertilizer subsidy regime, which is heavily biased in favour of synthetic chemical fertilizers. Though there is a growing awareness about the harmful effects of chemical pesticides on environment and human beings, the fact still remains that chemical pesticide use has gone up over the years. The pesticides used in India are more harmful than those in many other parts of the world. There is an urgent need to promote alternative ways of pest management, such as non-pesticidal management (NPM) practices to eventually phase out the use of synthetic pesticides and make agriculture chemical-free.

Promoting crop diversity

Crop diversification is another big challenge. Even with changing consumption patterns, pulses are the main source of protein for the poor. They have a crucial place in the country’s food security architecture. Millets impart greater resilience to the cropping systems against climate risk in traditional millet-growing areas. Minimum Support Prices (MSPs) have been beyond the reach of most of the farmers growing pulses or millets, and there has been no system of public procurement of these crops. The recent experience of States like Madhya Pradesh is useful in organising decentralised procurement of pulses and millets in those rainfed States where they constitute a major share of the cropped area. Such procurement of local foodgrain, feeding into programmes providing supplementary nutrition like the Mid Day Meal Scheme (MDMS) and Integrated Child Development Services (ICDS) Scheme, can be effective in reducing pervasive undernutrition among children, adolescent girls and pregnant women in India.

Agricultural research plays a crucial role in promoting diversified cropping systems. Currently, the public expenditure on agricultural research is only 0.7 per cent of the agricultural GDP. There is a strong case for raising this by at least three to four times. While doing so, attention must be paid to include crops like pulses and millets and attempt to develop climate-resilient cropping systems. Scientists and extension workers of the public-funded agricultural extension system have played a huge role in the agricultural transformation of the country. However, this system is virtually defunct in many parts of the country, especially in the rainfed tracts. Concentrated efforts are required to revive the agricultural extension system and build its capacities by both human resource as well as technical know-how. Organisations like the Agricultural Technology Management Agency (ATMA) and Krishi Vigyan Kendras need to be energised to become active agents of change in rural areas.

There is also the major challenge of employment generation to be addressed. Projecting the current trends of employment growth to the future, estimates show that the number of non-farm jobs to be created has to be at least thrice as much as the current growth rate of 5-6 million jobs per year. A significant number of these jobs will have to be created in the rural non-farm sector. Hence, we need to identify sectors within the rural economy which have high growth and employment generation potential and support them through a carefully worked out policy package. Sectors like agro-processing and value addition to agricultural produce offer huge scope for local employment and for greater control by the local producers over the value chain. Public investment in rural infrastructure is known to leverage substantial private investment and generate significant local employment multipliers. Available evidence shows that even as the overall rate of women’s labour force participation has declined, there has been high labour force participation of women from poorer households, especially in times of increasing agrarian distress. This underscores the need to revive MGNREGA, which has a proven track record of providing relief employment to a large number of rural women.

(P.S. Vijayshankar is founder-member, Samaj Pragati Sahayog, an NGO

based in Madhya Pradesh.)


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