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India Booked | Farm Income: Myths and Realities
158 Plays3 years ago
The Green Revolution resulted in spectacular advancements in Indian agriculture. Having achieved food security for its citizens, the country has now become a net exporter of different agricultural commodities. But sadly, this does not reflect the real state of the Indian agricultural sector. In truth, our farmers are plagued by crop failures, poor income, and indebtedness. Such is their misery that they are of late driven to commit suicide.
Join the author Prof. Narayanamoorthy in conversation with host Ayushi Mona where we dive into temporal and spatial data to figure what's right and what's gone terribly, terribly wrong!
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Transcript
Introduction to 'India Booked' Podcast
00:00:11
Speaker
I'm your host Ayushi Mona and you're listening to India Booked, a podcast where we lean into the idea of India through its literature and we speak to authors who bring this to life. Hello, this is Ayushi Mona and you're listening to India Booked, a podcast where we lean into the idea of India through its literature.
Professor Murthy's Book on Farm Income
00:00:38
Speaker
Today, I have with me Professor Narayan Murthy, who's written a book on farm income in India and the myths and realities around it. The book's very interesting because it identifies the root causes of Indian farmers' problems and how to overcome these. In today's time, when reforms around agriculture are buzzing not just in our Twitter feeds but in our news and affecting a large part of our world, it answers very pertinent questions facing Indian agriculture today.
00:01:08
Speaker
does increase productivity, guarantee increased income, has the agricultural price policy benefited farmers. And the book through data analysis shows us that if we can double farm income by 2022, which is a target set by the present union government. First of all, Professor, welcome to the show. And thank you so much for doing this with us. Thank you. Good morning.
Origins of the Book Idea
00:01:32
Speaker
So professor my first question to you really is that what was the genesis of the book and why was this something that you wanted to structure in a particular way because the book really is very nicely divided into a macro analysis of farm income and then price policy and profitability and then some of these things right one would think that this is slightly academic
00:01:56
Speaker
But the truth is that in today's time when everything from MSP to sugar gain cultivation affects how you will be consumer and not just news but food, right? Where did really the idea of the book come from? You know, this idea came I think possibly during 2000, late 90s exactly.
Analyzing Historical Farm Income Data
00:02:22
Speaker
When we noticed a large number of farmers committing suicides in different parts of the country, particularly in Maharashtra more, there were discussions about the farmers are committing suicide because of various other reasons, but nobody was mentioning about
00:02:41
Speaker
the farm income related issues. But in my research, I found that when the root cause is from the reduced farm income, that only motivated me to look into this data from 1970 onwards.
00:03:01
Speaker
We have a data called Cost of Cultivation Survey data, which is published by the Ministry of Agriculture Government of India. You can also see this data in Commission for Agriculture Cost and Prices, which only recommends the minimum support prices for 23 crops. So it started in the late 90s when this idea started, but I have been writing about this, but I could structure it only during the last two years.
Insights on Price Policies and Profitability
00:03:30
Speaker
Was there a particular piece that stood out for you in terms of this structure? Because while there is, of course, you've dabbled into the price policy, you've dabbled into profitability, how is this infrastructure being used?
00:03:48
Speaker
researching for which of these parts made you go like oh this is very concerning or this is something that a lay person should know about and be worried about. No really I you know in fact we don't have a big work on farm income in India. If you really look into the literature you will not see any detailed work on farm income in India but that is the core issue today. Last 20 years we have been talking about farm income but we don't have any data
00:04:16
Speaker
Except, you know, two thousand two three and two thousand twelve thirteen, we have two survey that was called a situation assessment survey. We have no data on farm income in India. Whatever data we have from CSEP, Commission for Agriculture, Cost and Prices, that's only about crop income. You don't have any data on farm income. And therefore, I looked at from 1970 to till 1314, the time series data.
Changes in Farm Profitability Post-90s
00:04:43
Speaker
of firm income across states among different crops we have data for about 23 crops for which we are announcing minimum support prices so I studied all these things where what is happening you know before mid 90s we didn't see much of problem you know from the firm field we didn't see much of noise from the firm field nobody was talking about firm income nobody was talking about firm profitability but suddenly post mid 90s
00:05:11
Speaker
People talked about income, firms should have started, inductance increased. So that only forced me to look into what is the reason.
Impact of Cropping Patterns and Infrastructure
00:05:19
Speaker
So when you study about firm income, you cannot simply look at only firm profitability. You will have to see what is happening in your cropping pattern, what is happening to your cost of cultivation, which is very, very important because cost of cultivation has increased tremendously over the years, for the last 15 years. So operation-wise cost of cultivation, what is happening to your input prices,
00:05:39
Speaker
what is happening to our minimum support prices whether that is really increasing in consonance with your cost of cultivation because that is very very important. Why we should fix prices only based on year to cost, why cannot we fix prices based on year to cost and what is happening to market whether the you know whether farmers are really getting the real income from the real profit that they are expecting from the market.
00:06:03
Speaker
Markets are very very exploitative and then I also looked at whether the price policy is really helping the farmers or not. So you cannot study farm income in some I am saying.
00:06:16
Speaker
by only looking at the cost of cultivation and productivity. So I traveled from cost of cultivation, production, productivity, then price policies, market, all these I have covered in this. In fact, the input efficiency is also very, very important. Market infrastructures are very, very important. Rural infrastructure is very important because we have studies in Asia and different parts of the country where you have a better
00:06:43
Speaker
road infrastructure that really helps the farmers to make more profit. So, I related all these factors to see what kind of impact these are having on farm income and farm profitability.
Myths About Profitability in Agriculture
00:06:57
Speaker
In fact, you do not have any book covering data from 1972 to 2013-14 in India.
00:07:04
Speaker
you will not see at all and tattoo on different crops covering irrigated region covering unirrigated region which is very very important because there is an argument in India that you know irrigated farmers are you know generating more profit more income is that true we didn't see that in fact in the irrigated regions the farmer spent more you know we asked on cost of cultivation
00:07:28
Speaker
They spend more on your fertilizer, they spend more on better quality seeds, they spend more on labor. So, we did not see. There is a myth that you know the farmers of irrigated regions are generating more profit. I checked it. It is not true. Similarly, there is an argument that you know the commercial crops like sugarcane is really giving more income for farmers.
Policy Content and 2020 Farm Laws
00:07:50
Speaker
It is not true everywhere.
00:07:52
Speaker
It may be true in Maharashtra, it may be true in Tamil Nadu, but that is not happening in UP because your productivity is very low, cost of cultivation is very high. So all this myth I studied, I have provided answers and finally it's not simple academic work I'm telling you. It has huge amount of policy content.
00:08:10
Speaker
In fact, if you look at the three form losses that was passed during 2020, September 2020, market related formulas, and then you have your contract form related formulas, and then you have an essential commodities act amendment. All these I have discussed in my book.
00:08:32
Speaker
before this form laws were passed I have recommended that you must implement the APMC model act of 2017 you can see in some of the chapters I have implemented you restructure the market allow the farmers to sell anywhere any places where they get better prices all this I have recommended in fact I have recommended that minimum this essential commodities act should be removed.
00:08:57
Speaker
because that is making a lot of hindrances to the farmers to make a profit. All this they have done it now which I have included in my book before they were implemented in the past in the parliament. So it has more policy content than pure academics. I absolutely agree professor because I haven't read the book right. I was also struck by
Temporal Analysis and Green Revolution Myths
00:09:21
Speaker
the fact that this is something that's not purely academic and it actually should be understood and read by more people. For me a lot of things that stood out right were for instance the temporal analysis that you've done on farm profitability in Andhra right which is actually goes to show you right because a lot of times you know there are these myths that that have sort of stayed on in our imagination for instance
00:09:51
Speaker
everything and anything to do with the green revolution, right? Because the narrative is that it was all good. A lot of the gaps are completely missed out on, right? And in your book, right, while you talk about how it resulted in spectacular advancements in Indian agriculture and, you know, sort of help achieve food security. But also, you know, we're also now a net exporter of different agricultural commodities.
Cyclical Issues: Crop Failure and Indebtedness
00:10:18
Speaker
But there is such a chasm between this versus the real state of Indian agriculture, right? In fact, why can't you help us and perhaps shed a little light on, say, the issues around crop failures and indebtedness? Because while we hear of lone wavers so often, what is the story there, really? It is just something that we read off whenever a waiver is announced, and then there are a few opinion articles. And then the issue gets lost, right? And there's something else that keeps us
00:10:47
Speaker
you know in the news but what really is this trifecta of crop failure poor income and indebtedness that today affects our farmers so grievously you know this crop failure that happens every you know once in three years once in five years because of monsoon failure and what happens you know in our country most of the farmers are smaller in marginal almost 85 percent of the farmers are smaller in marginal they have the land less than two hectares
Critiques on Loan Waivers and Procurement System
00:11:17
Speaker
What they do, they don't have any surplus income in their hand. Whenever they cultivate some crops, they take loan from either from institutional sources or the money lenders. They invest and when the cop fails, their inductance increases. That is what is happening. It happened. You can see, you know, till 80, 90, 91, the level of inductance start, you know, declined between 50, 51 to 1991, the inductance
00:11:44
Speaker
in the rural areas decline but the post 90s if you look at the data there has been an increase in darkness among the farm household I am not talking about rural households I am talking about farm households so farm this all because of the crop failure and then the every now and then the farm you know the government is announcing loan waivers I don't know that is you know that is not a permanent solution I am not against you know in fact I wrote in and I didn't include much of
00:12:18
Speaker
I wrote in some other places that you see as and when you announce for loan waiver it is like a temporary thing. It cannot solve your root cause. Root cause is what? See you must have assured income for farmers.
00:12:34
Speaker
For that what you love to do, you must have a very good procurement system. You have a very good pricing system in India. 23 crops covers almost 80% of the production of India. But where we do our procurement, we procure only paddy and wheat. We don't procure any other crops.
00:12:56
Speaker
So, I have mentioned in different chapters, in one chapter specifically I mentioned, you know, improve the procurement system. We are not procuring much from pulses, we don't procure much from aisle seats, we don't, you know, these are, you know, we procure only paddy and wheat.
00:13:15
Speaker
And within the paddy, within the cereal crops also, we have bhajra, we have jovar, your maka, all these are there. They are all very important crops. In fact, the infant areas, farmers cultivate these marginal crops only, pulses, oil seeds, your jovar, your bhajra, your maka, procurement is not there. And therefore, I am saying, I have mentioned also in my book in detail, that you must have a protection link
00:13:43
Speaker
Procurement. For instance, if Karnata is producing more ragi, we must procure ragi also there. What's happening today? We don't procure everywhere. If you look at the procurement data, we procure mostly in Punjab and Haryana and to some extent in Madhya Pradesh, particularly wheat crop. We don't procure in other replaces. Similarly, I can tell you one good example. Bengal is the largest. Many may not be knowing this. Bengal is the largest producer of paddy.
00:14:13
Speaker
But you look at the procurement there, not even 1% in the total procurement of India. We procure only from specific states. But if you procure only from specific states, your price policy is good. But if you procure only in specific states, it will not help everyone. That is the reason why
00:14:31
Speaker
you look at in some cases you know I have analyzed in my book paddy is profitable in Punjab but the same paddy is not profitable in in Andhra Pradesh the same paddy is not profitable in in West Bengal because you don't have procurement and therefore I have underlined in different chapters it also it also has come out from the analysis that unless
00:14:56
Speaker
you have a good infrastructure that procurement infrastructure managed by the government agencies, you cannot increase profitability, you cannot increase income that I have maintained in different places.
00:15:08
Speaker
Yes, Professor, another thing which really struck me, right, was that you also, it's actually, it's in the foreword, really, the point that Mr.
Agriculture and Non-Farm Enterprise Relationship
00:15:19
Speaker
Radhakrishnan makes about the virtuous cycle between agricultural and non-farm enterprises, right? And how they strategically provide employment opportunities in rural areas, right? And as a Korea or a Taiwan or a China, they experience this transfer of labour from agriculture to manufacturing.
00:15:37
Speaker
Where are these structural reforms in India never really confirmed, right? Because we went from being an agrarian economy to agrarian service economy, right? And how do you think of this cycle between agricultural and non-farm enterprises? What do you think is still missing? What do you think will happen to the share of agricultural and GDP continuing to fall at non-farm enterprises?
00:16:05
Speaker
even play a priority in government's role on uplifting agriculture in India today. Without developing agriculture, you cannot increase the non-farm activities. You can see in many places where agriculture is good, your non-farm activity is also good.
00:16:24
Speaker
I can tell you, you look at the western Maharashtra, agriculture is good, non-farm activity is good. Pancha, agriculture is good, non-farm activity is also good. Haryana, you look at agriculture is good, non-farm activity is also good. So, without seeing a good growth in
00:16:38
Speaker
Agriculture, increased income in agriculture, you may not be able to see a big revolution in non-farm activities within the rural areas, I am saying. I am not talking about urban areas. Within the rural areas, for instance, when your agriculture is good, your market is coming, you know, the banking service is coming.
00:16:58
Speaker
your construction work is increasing where where from what is it non-farm activities the big boom we have seen in construction work only in India. So, without improving the income in rural areas you will not see much of increase in non-farm activities within rural areas right. So, you take the example of Punjab where agriculture is grown, machineries that their industries are also developing.
00:17:24
Speaker
So, in order to have increased growth in non-farm activities within the rural areas you must have a growth in agriculture otherwise what will happen people will migrate from rural areas to urban areas that will only trouble. So, you must generate better income within the rural areas so that you will have a better growth in non-farm activities that is what some of the literatures are showing.
00:17:49
Speaker
How about the fact that this, you know, what about the introduction of the Madmagadi National Rural Employment Guarantee Scheme and the impact that that has had on farm income?
Impact of MGNREGS on Farm Wages
00:18:02
Speaker
This is what, you know, we have many myths in our understanding. That's the reason why it's titled as, you know, Farm Income in India, Myths and Reality. You know, the MGNRH is a very good scheme for rural poor, particularly for agricultural laborers.
00:18:18
Speaker
But it is in a way is affecting farming activities. What happened? This is an artificial intervention. The government spends about 45,000 crores per annum. So already there is scarcity of labour in rural areas because agriculture is a seasonal work.
00:18:35
Speaker
When you create artificial demand for labor, your wage rate increases suddenly. This is what happened. You can look at Ashokulath's work, which is a very good work on MG NRIs. How MG NRIs is really impacting on wage rate. He found that there is a significant increase in growth in wage rate in Tamil Nadu and Andhra, where MG NRIs is implemented relatively better in India.
00:19:03
Speaker
What happened? You know, the wage cost, the total cost of cultivation, non-agriculture labor cost is almost 35% to 40%. Almost kill. So when your wage rate increases, it pulls down our income. Already there is a problem in profitability. Farmers are not having a big profit in many crops.
00:19:24
Speaker
When your age rate increases, in a way it is impacting on the profitability, it is impacting on the farm income. I have used data from mid-90s to till 2014-15 to study the impact of MGNREGS on farm profitability in different crops.
00:19:46
Speaker
that wherever the wage rate is higher there the income of farm income has decelerated or farm income has not increased much compared to other states. It is very clear there. I have used classical to survey data again temporal and then special data. That is so fascinating and you know while
Myths Surrounding MSP
00:20:09
Speaker
the larger piece of course is that when researchers or policy makers and common readers right when when we read about Indian agriculture it is so dominated by the whole MSP narrative right especially today because obviously
00:20:24
Speaker
due to the current climate and the protests from farmers right now is so centered around MSP. And of course, you alluded to that in your book as well, Professor. You know, the MSP is good. I have no doubt in it. But MSP is in paper only. I worked there in the Commission also. Except in PADI and VIT, you will not see MSP anywhere.
00:20:49
Speaker
You look at the data of procurement. Procurement data you will get from the food corporation of India website. You see procurement of PADI and wheat except that too only in few states only. So absolutely there is no procurement. MSP is good. If you remove MSP, your market prices will crash. So in a way, the minimum support prices are protecting the market price. Otherwise it will fall down. So this scheme is very good.
00:21:18
Speaker
But it is not benefiting everybody. You look at the SAS data, Situation Assessment Survey data for toll 13 and also toll 23 provided data about awareness on minimum support prices. Awareness only, whether they are benefiting or not is a different issue.
00:21:34
Speaker
Even awareness less than 30% of the farmers only knew about MSP scheme and you know only 6% of paddy sold through MSP scheme as per the latest data and only 19% of wheat production is sold through MSP.
00:21:52
Speaker
So it is not benefiting but if you remove MSP it will have impact on market prices. You can see from CACP reports also whenever the increased price of the minimum support prices of different commodities there is an increase in the market price also open market price also which means when you increase MSP higher the private traders are paying more for farmers.
Minimum Support Prices and Market Stability
00:22:18
Speaker
I am not seeing any you know direct correlation but we see there is some kind of relationship between minimum support price and market price and therefore minimum support price is very very important. More than minimum support price procurement is very very important. I have mentioned that unless you strengthen your procurement system in all crops
00:22:42
Speaker
all important commodities you cannot increase farm income because you can also see in government data you can also see in CSEP publications that market prices despite announcing higher MSP in many places market prices are ruling much below the MSP in different commodities except the PADI and VIT. So your MSP is working on PADI and VIT
00:23:06
Speaker
more or less if not in Bengal or Tamil Nadu or Orissa it's not working there seriously because you don't have any procurement but it works seriously in Mempi it works seriously in Rajasthan it works seriously in Haryana and in Upi some part not in Magarastra not in Gujarat it works reasonably well for groundnut in Gujarat because Gujarat is a dominant groundnut producer this is actually so fascinating to me professor right because
00:23:36
Speaker
The way you explained this right on how economists actually argue that increasing party prices dirty economics and dirty of politics.
Enlightening Aspects of Farm Income
00:23:44
Speaker
But it definitely is actually the book was so eye opening in so many regards right.
00:23:51
Speaker
because for me I read it as a layperson but I'm sure that it is eye-opening whether you are a layperson, whether you're a researcher, a student, a scholar, somebody involved in public policy, you know, as a practitioner, as somebody who works at a think tank. There are so many sets of information that really make this an enriching read and your book has such a comprehensive bibliography that
00:24:21
Speaker
that you know anybody who is specifically interested right for instance if one wants to really understand farmer suicide in Karnataka right one can go and read something specific so it's such a good entry point as a book as an introduction to farm income of course to the myths that you know that lay people like us think is the reality versus the actual reality and
00:24:47
Speaker
And all of these other inputs and recommendations really from the book. Why I say many in India think that the farm income is very high. You know that argument is also coming now you know because of this farm loss. But I can tell you one data based on the situation assessment survey data published by the government of India.
00:25:11
Speaker
as per the data of 2023 per day income per household per household per day income is only 70 rupees right in 2023 now in 2013 for which we have the latest data we don't have any other data that is recently NAPART has published a data but is that is NAPART data this one is a government data SAS data is association assessment survey data is a government data it is published by NSSO
00:25:34
Speaker
national sample survey organization. As per the 2013 data, the farm income is just per household income, I'm telling. It's only 2,212 rupees. 200 rupees per household income per day, which is less than the income of agricultural laborers in South India. You look at, you go to any state in South India, Kerala, B.D. Kerala, Tamil Nadu, B.D. Andhra or Telangana.
00:26:02
Speaker
Your wage rate is more than 250 rupees per day for agricultural laborers. But household income as per the 2012-2013 data, it's only 212 rupees per household, which means you divide by five because normally our family size is five in rural areas, five to six, and then you'll see very pathetically low income. So this is a myth actually that the income is relatively higher in agriculture.
00:26:29
Speaker
And another big myth is that commercial crops are generating more income. I've also mentioned earlier
Correlation Between Productivity and Profitability
00:26:36
Speaker
sugarcane. I've analyzed in detail taking different states. You know, I did a very interesting analysis. People say that some have argued, I don't know who that very great economists have argued, that the your income, your profitability is also related with the productivity, productivity of the state.
00:26:57
Speaker
So they were suggesting some a great scholar suggested that you must focus on increasing productivity of crops. So I have taken that hypothesis whether productivity and then profitability as any relationship.
00:27:13
Speaker
particularly in sewer can crop. So, I selected those states where productivity is very high and then states which are having low productivity and I compare. In fact, I see no big differences between high productivity state and low productivity states in terms of profitability in sewer can. Similar is the case of the irrigation. People say that irrigated areas are generating more output, more income, more profitability
00:27:37
Speaker
It is not true. In fact, I did an analysis taking irrigated states, irrigated crops and then less irrigated states, less irrigated rain fed crops compared to the thing. In fact, in some cases I can tell you rain fed crops are providing more profitability, more income for farmers because
00:27:56
Speaker
The cost of cultivation is relatively less in rain fat area. They don't spend much on fertilizer. They don't spend much on pesticides. They don't spend much on laborers. And therefore, the profitability is particularly for oil season pulses. So the myth that irrigated crops are generating more income is not correct. I am not saying this. This is what the cost of cultivation survey data tells.
00:28:21
Speaker
So these are the issues I have covered. In fact, as I mentioned to you, I'm not boosting about my book because really if you look into the literature, you will not see a comprehensive analysis focusing on different issues like market, minimum support price policies, production, productivity, cropping pattern, your rural infrastructure, and then market and relating them with the income. Really you will not see many books in India.
Conclusion and Book Recommendation
00:28:50
Speaker
that's absolutely true and it's so surprising right in a country which is predominantly agrarian right um that it's not something which is researched more deeply or widely or more you know across cross sections right um so so i think and that is why you know your book uh professor was such a great
00:29:12
Speaker
reading and learning experience really. Once again thank you so much for writing this book, being on this podcast and taking us through this
00:29:22
Speaker
interesting world of myths and realities. To everyone listening to this podcast, I urge you to go and buy the book from Amazon Flipkart. The book is published by Oxford University Press. You can read more about it. It truly is both a macro and a micro view into farm income across all of these aspects that we discussed today. And I hope you enjoyed learning from it and reading it as much as we did.
00:29:52
Speaker
Thank you very much. Thank you professor. Thank you once again.