Wrong approach

Farm incomes will not double by productivity increases alone

The government’s much-hyped seven-point plan to double farmers’ incomes by 2022 is essentially no more than a repackaging of the ongoing agricultural development schemes. As a whole, the package suffers from some fundamental flaws and glaring deficiencies. For one, it is focused more on raising farm productivity than on improving the profitability of farming. The fact it disregards is that higher output does not necessarily lead to higher income. In fact, bumper harvests often cause a slide in prices, denying growers the anticipated economic gains. The recent slump in the prices of most crops in the wake of the last year’s monsoon-induced record agricultural production is a case in point. Far from bolstering farmers’ earnings, it worsened their economic plight, accentuated rural unrest and triggered stirs in several states to demand higher prices, loan waivers and reservation quotas. Even if prices do not plummet to unreasonable depths, the additional income from incremental output can, at best, be marginal because the operational holdings of most farmers are too small (less than 1.5 hectares) to produce sizeable marketable surpluses.

Besides, doubling of income by 2022, from a 2015-16 base, would require an estimated income growth of over 10 per cent a year. Such an acceleration is hard to come by through the productivity route alone. Past experience bears this out. A substantial step-up in farm output in the past few decades, which has made the country self-sufficient or surplus in most crops, has failed to bring about a proportionate rise in farm incomes. The need, therefore, is to lay equal, if not more, emphasis on various lucrative farm and not-farm economic activities. These can include, among others, high-value farming involving horticulture, floriculture, herbal farming and farm forestry; agriculture’s ancillary and allied activities, including novel ventures such as rabbit and quail rearing; waste reduction and value-addition of farm produce; and effective market support. Though some of these aspects find a mention in the income-doubling strategy, yet the weight given to them is grossly inadequate.

The two critical elements sorely missing in the seven-point agenda and which are absolutely imperative to raise farmers’ earnings are a stable policy regime governing agricultural pricing and trade and the creation of employment opportunities in the off-farm rural sector. The current pricing policies seem to have a pro-consumer bias, dictated chiefly by the need to keep inflation down. This spurs uncalled for interventions such as frequent opening and shutting of imports and exports of farm goods, changes in import and export levies, and imposition of stockholding and other curbs on trade. Unless the interests of the consumers and producers are evenly balanced, farmers’ incomes are unlikely to swell. The minimum support price (MSP) mechanism, which has failed to show results except in a handful of crops and in some areas, needs to be supplemented with other measures to ensure remunerative crop prices. The new price deficit reimbursement scheme of Madhya Pradesh could be one of them. It seeks to compensate farmers for any shortfall in realising the MSP. Also, the creation of supplementary sources of income in and around rural areas is essential. Unless such aspects are taken care of, the goal of doubling farmers’ incomes may remain elusive.