india

Updated: Jun 21, 2020 22:31 IST

The Narendra Modi government will count on a much wider measure of earnings of a farming household than is captured by agricultural gross domestic product (GDP) while calculating the income of cultivators in 2022-23, the year by which the government has promised to double farmers’ incomes, according to a draft proposal reviewed by HT.

In 2016, Prime Minister Modi first declared his government would double farm incomes — in other words, raise them by 100% — in six years by 2022-23, a politically significant goal in a country where nearly half the population depends on a farm-based livelihood.

The target took economists by surprise, given that increasing farm GDP twice over would require an unprecedented rate of farm growth, expressed as “gross value added”, which is, quite simply, GDP minus taxes. GDP, the most widely used measure of income, represents the value of all goods and services produced by an economy.

The target then found a mention in the budget presented that year by the then finance minister Arun Jaitley, which stated: “Government will, therefore, reorient its interventions in the farm and non-farm sectors to double the income of the farmers by 2022.”

Not only have farm incomes remained subdued in the past four-five years, the sector’s growth is currently way below what is required to achieve a potential doubling of incomes coming out of agricultural activities.

With the target year just three years away, the government has begun crunching the numbers, policy measures and of course finalising a methodology to assess the change in farmers’ income.

The government will calculate gross total earnings of a farm household on a base year of 2016-17, and a third of a farm household’s income is targeted as coming from non-farm sources, such as rural enterprises, an official familiar with the matter said.

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Income transfers, such as the one under the PM-KISAN scheme, which hands out Rs 6,000 annually to landed farming households, will also be included in the income calculation.

Even if non-farm sources of income are taken into account, raising an agricultural household’s income twice over in the period from 2016 to 2022 will still need a substantial increase in agricultural productivity.

The government’s proposal itself aims to raise the share of farm to non-farm income to 70:30 from 60:40, according to the draft proposal being steered by an interministerial team of bureaucrats.

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It is common for farmers to have some form of non-farm income, although agriculture GDP roughly calculates value of output from four core sectors: agriculture (crops), agro-forestry, fishing and livestock.

For its target of doubling farm incomes, the government will go by income figures generated by the first “NABARD All India Financial Inclusion Survey” or NAFIS, conducted in August 2018. NABARD is short for National Bank for Agriculture and Rural Development.

According to the survey, which had a reference year of 2015-16, agricultural households, which accounted for 48% of rural households, earned Rs 107,172 during 2015-16 from cultivation, livestock, non-farm sector activities and wages or salaries.

The proposal ambitiously talks of creating huge monolithic farm clusters in various parts of the country. Each cluster will specialise in specific crops, around which a value chain would be created. For instance, each cluster will have markets, warehouses and processing units for value addition. Livestock and rearing of small ruminants as well as scaling up of credit to rural self-help groups are some of the areas the proposal mentions. It also talks of further rationalising interstate farm trade and abolition of mandi fees.

“Taking such a broader measure makes it [doubling farmers’ income] slightly more likely than taking farm GDP alone. But then you should have the same yardstick, before and after. So, you begin with a benchmark and repeat it at the end to see how incomes have grown,” said economist Abhijit Sen. “It still looks a little tough to me.”

The Committee on Doubling Farmers’ Income, set up by the government in 2016, calculated that agriculture GDP needed to grow 10.4% per annum in real terms (that is, adjusted for inflation) from 2016-17 to 2022-23 for incomes to double. In contrast, the agriculture sector roughly grew 2.9% a year during the previous five years of the Modi government. Economist Ashok Gulati has calculated that for the remaining period until 2022-23, the farm sector needs to register 15% growth to make good the shortfall.