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Agricultural Economics Research Review 2020, 33 (2), 177-189
DOI: 10.5958/0974-0279.2020.00030.0

Farmers’ income in India: trends and prospects for future growth

Kamal Vatta1*, and Parisha Budhiraja2

Punjab Agricultural University, Ludhiana 141 004, Punjab
1

Centers for International Projects Trust (CIPT), New Delhi 110 017
2

*Corresponding author: [email protected]

Abstract The Government of India aims to double agricultural income by 2022–23. This paper examines
whether this target can be met—by analysing the trends in farmer income, sources, and factors of
performance by farm class and state—and finds it unlikely. Income growth would be accelerated by
improving resource use efficiency and access to agricultural extension, markets, and credit; and by
diversifying towards high-value, high-growth sectors like animal husbandry and horticulture. To sustain
income growth in the long term, greater resources must be allocated to agricultural research, and gainful
employment opportunities must be created in the rural non-farm sector.

Keywords Farmers’ income, income growth, diversification

JEL codes O47, P25, Q12, Q15, R11

The green revolution, a paradigm shift in the landholding size, were expropriated mainly by
agricultural policy in India in the mid-1960s, relatively large farm households.
emphasized the large-scale diffusion of biochemical
Another dimension of the income distribution is the
technologies, including high yield varieties of seeds
disparity between agricultural and non-agricultural
and chemical fertilizers. Agricultural productivity and
populations. The labour productivity gap between
food supplies increased significantly; the production
agricultural and non-agricultural populations has
of food grains grew from 72.35 million metric tons
widened to the disadvantage of agricultural populations
(MT) in 1965–66 to 176.39 MT in 1990–91, and to
from just 30% in 1970–71 to 75% in 2015–16 (Birthal
285 MT in 2018–19, and milk production, too, rose
2019). Within the rural sector, too, the income gap
from around 20 MT in the 1960s to almost 188 MT in
between cultivators and non-agricultural workers
2018–19. Such phenomenal growth in food production
increased. The farm income per cultivator, 34% of a
made India food-secure, reduced its import
non-agricultural worker’s income in the 1980s, fell to
dependence, improved nutritional outcomes, and
25% after 1993–94 (Chand 2017); at present, a farmer
alleviated poverty (Ravallion and Datt 1996; Datt et
earns only 20% of the national per capita income
al. 2016). However, the distributional benefits of
(Birthal et al. 2017). The income disparity between
technological progress have been asymmetrical across
agricultural and non-agricultural sectors and within the
populations and regions, primarily because agricultural
agricultural sector is growing, and it is a matter of
policy aimed to improve the national food security and
serious policy concern; if not reversed, it may have
initially targeted the regions that had greater potential
serious socio-political and economic consequences.
for producing staple foods (wheat and rice). The
technological revolution bypassed the less endowed At the same time, Indian agriculture has been facing
rain-fed regions, which were diversified towards coarse several challenges, such as diminishing farm size,
cereals, pulses, and oilseeds (Das and Barua 1996; Fan decelerating productivity growth, rising input costs and
et al. 2000), and its benefits, being proportional to price volatility, and climate change. Past policies helped
178 Vatta K, Budhiraja P

to achieve food security, but at the cost of degradation differently (Sarkar 2017): in 2002–03 farm households
of natural resources, especially the groundwater and were classified by land ownership, but in 2012–13 they
soils. The frequency of extreme climatic events has were based on a minimum farming income of INR
increased, and it is predicted to rise further in the 3,000. To ensure that the data is comparable, only the
plausible future climate scenario (Field et al. 2012). farm households possessing land were considered, and
Agrarian distress is growing; a large proportion of the final sample of households numbered 50,522 in
smallholder farmers would like to quit agriculture but 2002–03 and 34,296 in 2012–13.
cannot because the alternative income opportunities
Farm household income has been classified into income
are few (Birthal et al. 2015). Agriculture’s share in the
from crop cultivation, animal husbandry, wages and
gross domestic product (GDP) has fallen significantly,
salaries, and non-farm business enterprises. The income
but it still engages almost half the workforce.
from crops was estimated as the value of main and by-
Improving farmers’ income, and not food production products minus the cost of inputs. The income from
alone, indicates another paradigm shift in agricultural animal husbandry was estimated as the income from
policy. In 2016–17, almost half a century after the green sale of live animals or livestock products minus costs
revolution, the Government of India targeted this goal incurred. The income earned as labourers (outside their
by 2022–23. This commitment has been reiterated households) in agriculture or non-farm enterprises was
several times and widely discussed in the academic classified as income from wages and salaries. The net
and policy debates. The critics argue that doubling income from non-farm business enterprises falls in the
farmers’ income in such a short period is impossible last income category.
(Chand et al. 2015; Satyasai and Bharti 2016). The
counterargument is that if the strategies are Landholding size and income sources
differentiated by region, and appropriately targeted to
Indian agriculture is dominated by small holdings of
the populations and regions that lag behind in
less than 2 hectares (ha); their proportion has risen from
agricultural development in particular and economic
83% in 2002–03 to 87% in 2012–13 (Table 1), and the
development in general, the challenge, though difficult,
proportion of marginal holdings (<1 ha) from 65% to
is not unsurmountable (Birthal et al. 2017).
70%. The average size of marginal and small holdings
This paper explores the challenges to, and prospects remained the same, but the average size of large
of, improving farmers’ incomes along several holdings declined from 7.52 ha to 6.60 ha. On the
dimensions, including landholding size, income whole, the average size of holdings declined by almost
sources, social affiliation, education/skills, and access 15%, from 1.22 ha to 1.03 ha, during this period. The
to technology, information, and credit. The findings declining size of operational holdings, and the rising
are likely to be useful to policymakers in formulating proportion of small landholdings, constitute a cause of
regionally differentiated strategies for enhancing concern for the livelihood of a large rural population.
income and allocating resources optimally.
Table 2 presents the growth in income by source. The
annual household income grew at 3.7% per annum,
Data sources
from INR 53,330 to INR 77,283, from 2002–03 to
In this paper, we have used data from two large-scale 2012–13 (at 2012–13 prices). The growth was not
surveys conducted by the National Sample Survey uniform, however; the income from animal husbandry
Office (NSSO): the Situation Assessment Survey of increased at 13.2% per annum, followed by agricultural
Farmers, 2002–03, which covers 51,770 farm wages (6.4%) and crop husbandry (4.3%). Non-farm
households from 6,638 villages in India, and the wages declined by 2.9% a year, while non-farm
Situation Assessment Survey of Agricultural business income remained almost stagnant. The income
Households, 2012–13, which covers 35,200 farm of marginal farm households increased by 2.9% per
households from 4,529 villages (NSSO 2003, 2013). annum, compared to 6–7% for medium and large farm
These surveys provide information on various socio- households (Table 3). The slow growth in income
economic aspects of farm households, including during this period was accompanied by an increase in
income sources. These surveys define ‘farm household’ inequality. The annual increase in income from crops
 Farmers’ income in India 179

Table 1 Size distribution of land holdings in India

Farm class 2002–03 2012–13

Average size Households Average size Households
(ha) (%) (ha) (%)

Marginal (<1.00 ha) 0.41 65.47 0.42 69.63

Small (1–2 ha) 1.37 18.18 1.39 17.13
Medium (2–4 ha) 2.63 10.63 2.59 9.18
Large (>4 ha) 7.52 5.71 6.60 4.05
Overall 1.22 - 1.03 -

Table 2 Distribution and changes in farm household income in India (at 2012–13 prices, INR/household/annum)

Income source 2002–03 2012–13 Compounded

annual growth
(%)

Crop husbandry 24,135 37,017 4.3

(45.3) (47.9)
Animal husbandry 2,493 9,300 13.2
(4.7) (12.0)
Agricultural wages 8,022 15,269 6.4
(15.0) (19.8)
Non-agricultural wages 12,735 9,489 -2.9
(23.9) (12.3)
Total wages (agricultural and non-agricultural combined) 20,757 24,758 1.8
(38.9) (32.0)
Non-farm business activities 5,944 6,206 0.4
(11.1) (8.0)
Total income 53,329 77,283 3.7
(100.0) (100.0)
Note Figures in parentheses represent the percentage of total income.

and animals, and also wages and salaries, was the Further, in 2002–03, the annual income of a SC
highest for large households and the lowest for marginal household was almost 40% less than that of an upper
households. caste household, and the gap widened slightly in 2012–
13. The income of SC households increased annually
Social status—based on caste, religion, and ethnicity—
at 2.4%, less than the 3–5% annual increase for other
might have significant influence on household income
castes (Table 5). The most striking feature is the decline
because the early adopters of technologies and
in non-farm wages and business activities for SC and
innovations, with better resource endowments and
ST households.
access to extension services, usually belong to the upper
strata of society (Batte and Arnholt 2003; Ali 2012;
Regional variation
Kumar 2013; Birthal et al. 2015). Our findings reveal
that the landholdings of Scheduled Caste (SC) The regional variation in income levels and growth is
households are almost half the size of that of upper huge (Table 6). The household income declined in West
caste households (Table 4). Scheduled Tribe (ST) and Bengal, Bihar, Arunachal Pradesh, Mizoram, and
Other Backward Class (OBC) households, too, have Uttarakhand between 2002–03 and 2012–13, but it was
smaller landholdings. almost stagnant in Assam and Sikkim. Many low-
180 Vatta K, Budhiraja P

Table 4 Average landholding size (ha) across social

(INR/household/annum)

annual growth
Compounded
classes in India

20.7
(%)

6.9

6.9
5.7
0.8
Caste group Year
2002–03 2012–13
Large (≥4 ha)
Compounded 2002–03 2012–13

105,144 204,604

132,495 259,120
13,666 23,714
19,118

11,683
ST 1.19 1.01
SC 0.75 0.65
OBC 1.23 1.04
10,766
2,918

Upper castes 1.55 1.31

annual growth

income states performed better than high-income states,

changing the inter-state dynamics of farm household
21.0
(%)

4.0
1.8
5.5

5.6
Table 3 Distribution and changes in household income across various size categories in India (at 2012–13 prices)

income. Arunachal Pradesh was at the top of the income

hierarchy in 2002–03 and Odisha at the bottom; the
Medium (2–4 ha)

ratio of their incomes was around 5.9. In 2012–13,

2012–13

131,538
14,410
19,905
90,626

6,595

Punjab emerged at the top and Bihar at the bottom; the

ratio of their incomes was nearly 5. The gap between
the poorest and richest states narrowed during this
2002–03

16,657
52,874

76,129
2,133

4,463

period, a welcome development. Between 2002–03 and

2012–13, the income rankings improved for Bihar,
West Bengal, Uttarakhand, Jharkhand, Uttar Pradesh,
annual growth
2012–13 Compounded

Assam, Sikkim, Mizoram, and Arunachal Pradesh,

14.2
(%)

while the rankings of other states fell.

4.5
2.3
5.5

5.2

Note The growth rates represent the compounded annual growth from 2002–03 to 2012–13.

The changes in farm household income across different

Small (1–2 ha)

states in India between 2002–03 and 2012–13 may be

10,015
20,845
50,837

88,906
7,208

explained largely by the changes in income from crop

production and income from animal husbandry. The
annual growth in income from crop production was
2002–03

16,671
29,762

53,735
2,645

4,655

almost 6% or higher in most of the states (14) where

income growth was higher than the all-India average
(Table 7). Such growth was more than 9% per annum
annual growth
Compounded

in Odisha and Chhattisgarh and more than 10% per

12.3

-0.9
(%)

4.5

1.3

1.9

annum in Rajasthan. The growth in household income

was lower than the all-India average but positive in
Marginal (<1 ha)

eight states; in these states, the growth in income from

2002–03 2012–13

crop production was either very low or negative.

16,787

26,422

56,679
7,878

5,589

The annual increase in income from crop production

exceeded 4% in Maharashtra and Uttar Pradesh, but it
10,837

23,176

42,607
2,471

6,121

was negative in most other states (Nagaland, Jammu

and Kashmir, Jharkhand, and Sikkim). The income
from crop production declined considerably in all the
Wages and salaries
Non-farm business
Animal husbandry

states (except Arunachal Pradesh) where the farm

Crop production

Total household
Income source/

household income declined between 2002–03 and

Size category

2012–13. Clearly, increasing the income from crop

activities

income

production is a prerequisite for accelerating growth in

farm household income in India.
 Farmers’ income in India 181

Table 5 Household income across social groups in India

Caste group Average annual income Compounded annual growth

(INR/household/annum) (%, 2002–03 to 2012–13)
2002–03 2012–13

Scheduled tribes 43,793 70,428 4.9

Scheduled castes 43,074 54,824 2.4
Other backward castes 49,428 76,758 4.5
Upper castes 70,684 96,736 3.2

Table 6 Changes in household income across different Indian states

State Annual income Compounded State Annual income Compounded

(INR/household) annual growth (INR/household) annual growth
2002–03 2012–13 (%) 2002–03 2012–13 (%)

Odisha 25,360 (27) 59,624 (22) 8.9 Nagaland 84,388 (8) 120,764 (7) 3.6
Rajasthan 45,552 (21) 88,662 (14) 6.9 Maharashtra 62,849 (16) 88,872 (13) 3.5
Madhya Pradesh 38,203 (24) 74,740 (18) 6.9 Uttar Pradesh 42,256 (22) 59,308 (23) 3.4
Haryana 89,498 (7) 173,219 (2) 6.8 Meghalaya 106,299 (5) 141,961 (5) 2.9
Tripura 35,754 (26) 65,256 (20) 6.2 Jammu & Kashmir 121,369 (4) 152,280 (3) 2.3
Andhra Pradesh 40,565 (23) 73,009 (19) 6.1 Jharkhand 47,881 (19) 58,293 (24) 2.0
Tamil Nadu 48,932 (18) 85,189 (15) 5.7 Assam 73,703 (10) 79,948 (17) 0.8
Chhattisgarh 36,573 (25) 62,224 (21) 5.5 Sikkim 76,874 (9) 81,544 (16) 0.6
Manipur 64,008 (15) 103,667 (11) 4.9 West Bengal 51,281 (17) 47,900 (26) -0.7
Punjab 135,977 (2) 216,459 (1) 4.8 Bihar 46,369 (20) 42,986 (27) -0.8
Karnataka 69,064 (13) 106,248 (9) 4.4 Arunachal Pradesh 148,695 (1) 130,610 (6) -1.3
Himachal Pradesh 69,072 (12) 105,579 (10) 4.3 Mizoram 128,506 (3) 109,369 (8) -1.6
Gujarat 64,033 (14) 95,242 (12) 4.1 Uttarakhand 72,638 (11) 56,140 (25) -2.5
Kerala 96,771 (6) 143,769 (4) 4.0 All India 53,330 77,283 3.7

Note Annual compound growth rate from 2002–03 to 2012–13. Figures in parentheses are income ranks during the year.

Animal husbandry is another significant source of from non-farm business activities are not clearly related
income. The growth in income from animal husbandry with the changes in farm household incomes, but in
was considerably higher in the states where the growth the states where the overall farm household income
in farm household income was high and positive. The declined between 2002–03 and 2012–13 the income
annual growth in income from animal husbandry was from wages and salaries grew at the slowest pace and
as high as 73.5% in Manipur, 41.6% in Odisha, and the income from non-farm business activities declined
22.2% in Rajasthan. The high growth in income from sharply. The analysis of the changes in household
animal husbandry somehow compensated for the income and its components across the various Indian
decline in income from crop production in the states states points to the fact that farming remains the
where the growth in household income was lower and mainstay of the livelihood of farming households and
positive; in most of these states, the growth in income any strategy to enhance farm household income in
from animal husbandry was in double digits. The future will have to focus on agriculture. While there is
growth in income from animal husbandry was negative a need to diversify the income sources in rural India, it
in most of the states where the growth in household requires a comprehensive strategy on generating
income was negative. employment opportunities in the non-farm sector,
The changes in income from wages and salaries and which has not happened at least in the recent past.
 182
Table 7 Income composition and its changes across different states in India (INR/household/annum)

State/Income Crop production Animal husbandry Wages and salaries Non-farm business activities
source 2002–03 2012–13 % growth 2002–03 2012–13 % growth 2002–03 2012–13 % growth 2002–03 2012–13 % growth

Odisha 6,974 16,933 9.3 482 15,621 41.6 14,404 20,570 3.6 3,500 6,499 6.4
Rajasthan 13,848 37,593 10.5 1,640 12,147 22.2 24,416 30,411 2.2 5,648 8,512 4.2
Madhya Pradesh 26,627 48,207 6.1 -6074 8,969 NA 14,976 15,994 0.7 2,674 1,570 -5.2
Haryana 48,776 94,404 6.8 -5012 31,699 NA 36,068 41,919 1.5 9,666 5,197 -6.0
Tripura 16,626 33,281 7.2 1,502 3,785 9.7 15,195 26,233 5.6 2,431 1958 -2.1
Andhra Pradesh 17,240 35,190 7.4 2,515 9,199 13.8 16,875 24,677 3.9 3,935 3,942 0.0
Tamil Nadu 15,316 23,001 4.2 2,593 13,715 18.1 26,325 34,842 2.8 4,697 13,630 11.2
Chhattisgarh 16,641 40,197 9.2 -37 -124 12.9 17,665 22,152 2.3 2,304 0 NA
Manipur 19,394 35,143 6.1 64 15,861 73.5 38,341 45,821 1.8 6,209 6,842 1.0
Punjab 75,059 130,308 5.7 8,431 19,914 9.0 40,249 57,362 3.6 12,238 8,875 -3.2
Karnataka 31,010 59,286 6.7 3,729 7,437 7.1 29,490 32,087 0.8 4,834 7,437 4.4
Himachal Pradesh 16,784 34,524 7.5 5,180 12,881 9.5 33,845 48,355 3.6 13,262 9,819 -3.0
Gujarat 26,125 35,240 3.0 11,398 23,239 7.4 23,116 32,097 3.3 3,394 4,667 3.2
Kerala 27,289 42,268 4.5 3,871 7,188 6.4 48,386 63,115 2.7 17,225 31,198 6.1
Vatta K, Budhiraja P

Nagaland 41,688 38,524 -0.8 -759 16,786 NA 32,405 64,730 7.2 11,055 725 -23.8
Maharashtra 29,916 46,302 4.5 3834 6,665 5.7 21,934 25,862 1.7 7,165 10,043 3.4
Uttar Pradesh 22,396 34,221 4.3 1,521 6,642 15.9 13,818 13,819 0.0 4,521 4,626 0.2
Meghalaya 74,941 77,795 0.4 3,083 8,092 10.1 22,004 45,286 7.5 6,272 10,789 5.6
Jammu & Kashmir 48,790 36,699 -2.8 8,981 9,441 0.5 49,154 88,018 6.0 14,443 18,121 2.3
Jharkhand 17,812 17,430 -0.2 2,059 15,856 22.6 23,174 22,093 -0.5 4,836 2,915 -4.9
Assam 39,579 50,447 2.5 3,611 9,194 9.8 24,469 17,189 -3.5 6,044 3,118 -6.4
Sikkim 22,832 20,386 -1.1 16,528 11,824 -3.3 34,286 37,347 0.9 3,229 11,987 14.0
West Bengal 17,589 11,736 -4.0 1,744 2,635 4.2 22,000 25,531 1.5 9,949 7,999 -2.2
Bihar 21,933 20,633 -0.6 6,816 3,697 -5.9 12,427 15,819 2.4 5,193 2,837 -5.9
Arunachal Pradesh 36,579 79,672 8.1 8,922 15,020 5.3 18,736 24,947 2.9 84,459 10,971 -18.5
Mizoram 67,723 54,685 -2.1 20,818 10,499 -6.6 39,708 43,857 1.0 257 328 2.5
Uttarakhand 40,314 30,428 -2.8 8,208 10,105 2.1 12,784 12,632 -0.1 11,332 2,975 -12.5
Note % growth means compound annual growth during 2002–03 and 2012–13 for a particular income source.
 Farmers’ income in India 183

Correlates of farmers’ income Indebtedness is claimed to be an important indicator

of farmers’ distress as the incidence of debt may be a
The income of a farm household, and its growth over
direct outcome of the lack of viability of farming. Table
time, are determined by many factors, such as farm
9 shows the extent of debt among agricultural
size, resource use efficiency, access to institutional
households, and changes in the extent, between 2002–
credit, technical information, and human capital. The
03 and 2012–13. At the all-India level, the extent of
analysis of changes in farm size did not show any effect
debt of agricultural households increased at the
on the extent of growth in farm household income in
compound annual growth rate (CAGR) of 7.1%, and it
the states. Thus, the analysis was extended to changes
increased more in the states where the growth in
in crop profits (Table 8).
household income was higher between 2002–03 and
At the all-India level, the crop profits increased 2012–13—evident in the positive correlation
annually at 4.2%, from INR 20,574 per ha in 2002–03 coefficient (0.58) between the change in debt and
to INR 31,015 per ha in 2012–13 (at constant prices), change in household income for each state.
but the growth varied considerably by state—from less
Educational attainment has the potential to improve
than 1% per annum in Punjab to more than 10% per
farmers’ income (Lanjouw and Lanjouw 2001; Foster
annum in Himachal Pradesh. Profits declined 0.1–5.6%
and Rosenzweig 2004). Education improves human
per annum in five states—Jharkhand, West Bengal,
capital and positively influences farm and non-farm
Bihar, Arunachal Pradesh, and Mizoram. Profits grew
income. In 2002–03, almost 75% of the household
at a much higher rate in states where the household
heads were illiterate, an additional 20% were merely
income increased at a faster pace. The profitability of
literate, and only 6% had higher education (Figure 1).
farming declined in the states where household income
The percentage of illiterates declined to less than 50%
fell. The changes in crop profitability appear to be an
in 2012–13 and 8.6% of the farmers had higher
important factor in enhancing farm household income.
education. The percentage of household heads with
The correlation coefficient between the growth rate of
higher secondary education increased from 20% in
profits and household income is positive and high, at
2002–03 to 36% in 2012–13. The percentage of
0.6.
household heads educated up to secondary level

Table 8 Profits from crop farming and its growth in different states of India

State Net profits (INR/ha) % annual State Net profits (INR/ha) % annual
2002–03 2012–13 growth 2002–03 2012–13 growth
(compo- (compo-
unded) unded)

Odisha 9,214 22,271 9.2 Nagaland 96,994 464,285 17.0

Rajasthan 7,402 18,143 9.4 Maharashtra 18,776 34,084 6.1
Madhya Pradesh 13,087 20,901 4.8 Uttar Pradesh 18,279 31,282 5.5
Haryana 26,112 35,387 3.1 Meghalaya 54,105 80,271 4.0
Tripura 31,252 36,646 1.6 Jammu & Kashmir 52,209 62,720 1.9
Andhra Pradesh 12,818 22,384 5.7 Jharkhand 30,104 29,832 -0.1
Tamil Nadu 20,696 26,619 2.5 Assam 42,465 49,244 1.5
Chhattisgarh 12,876 32,871 9.8 Sikkim 21,815 27,515 2.3
Manipur 35,309 45,122 2.5 West Bengal 24,739 24,103 -0.3
Punjab 48,936 52,912 0.8 Bihar 24,294 19,107 -2.4
Karnataka 16,824 33,121 7.0 Arunachal Pradesh 316,389 177,591 -5.6
Himachal Pradesh 18,709 51,589 10.7 Mizoram 44,197 39,678 -1.1
Gujarat 15,219 26,258 5.6 Uttarakhand 35,825 39,596 1.0
Kerala 42,263 54,674 2.6 All India 20,574 31,015 4.2
184 Vatta K, Budhiraja P

Table 9 Indebtedness among agricultural households in states in India (INR/household at 2012–13 prices)

State Household debt % annual State Household debt % annual

2002–03 2012–13 growth 2002–03 2012–13 growth
(compounded) (compounded)

Odisha 20,247 42,689 7.7 Nagaland 5,750 24,214 15.5

Rajasthan 48,879 89,630 6.3 Maharashtra 47,785 79,816 5.3
Madhya Pradesh 35,850 59,707 5.2 Uttar Pradesh 26,371 53,695 7.4
Haryana 70,669 154,868 8.2 Meghalaya 3,645 58,194 31.9
Tripura 12076 20,924 5.7 Jammu & Kashmir 12,029 36,339 11.7
Andhra Pradesh 32,630 87,915 10.4 Jharkhand 20,544 17,963 -1.3
Tamil Nadu 39,503 106,695 10.4 Assam 8,765 18,581 7.8
Chhattisgarh 15,850 26,016 5.1 Sikkim 11,440 67,796 19.5
Manipur 16,889 24,628 3.8 West Bengal 15,099 26,863 5.9
Punjab 89,887 175,183 6.9 Bihar 23,123 34,773 4.2
Karnataka 50,170 96,685 6.8 Arunachal Pradesh 14,396 20,172 3.4
Himachal Pradesh 41,487 83,244 7.2 Mizoram 14,653 46,270 12.2
Gujarat 51,640 83,106 4.9 Uttarakhand 27,660 59,294 7.9
Kerala 60,904 185,827 11.8 Overall 36,672 73,020 7.1

Table 10 Crop profitability across various levels of educational attainment in India

Education level Profit (INR/ha) % annual growth

2002–03 2012–13 (compounded)

Illiterate 19,107 26,591 3.4

Literate 25,309 36,378 3.7
Higher education 23,070 35,829 4.5

Illiterates Literates Higher education levels of household heads (Table 10). If the household
74 head is educated, a household’s profits average 1.3
80 55 times that of households headed by illiterate farmers;
60 36.4 in addition, educated farmers realize higher growth in
40 20 profits. Higher education makes access to non-farm
6 8.6 sector employment and income easier. Table 11
20
provides information on the education level and
0
2002-03 2012-13
Table 11Proportion of income from non-farm business
Figure 1 Distribution of farmers according to their activities across education levels
educational attainment (%ages)
Education level Income share from non-farm
business activities (%)
increased from 6% in 2002–03 to 9% in 2012–13. The 2002–03 2012–13
literacy levels have improved over time and across all
farm categories, but the percentage of household heads Illiterate 8.2 6.0
who had higher education is larger among larger farm Primary 13.3 8.6
households, and illiteracy is still high. Middle 12.6 9.9
Secondary 13.6 9.0
To examine the effect of education on household
Graduate and above 10.3 12.8
income, we estimate crop profits across the education
 Farmers’ income in India 185

Table 12 Use of technical information and returns and The farmers who had access to formal sources of
returns from farming in India technical information in agriculture realized higher net
returns than farmers that did not have such access
Information sources Net returns (INR/ha)
(Table 12). The information from informal sources did
2002–03 2012–13
not have any significant effect on income.
Formal sources 23,255 34,810 The variation in the proportion of households accessing
Informal sources 19,412 29,997 technical information across states is considerable
No information source 20,510 31,438 (Table 13), but the relationship between the changes
in the extent of formal sources of information and
proportion of income from non-farm business activities. income growth does not appear significant. While there
It appears that higher education results in a more is no denying the fact that technical information leads
diversified income portfolio. The non-farm sector, to higher income, there is a need to focus on the quality
despite being heterogeneous, has the potential to of information being made available through these
engage workers with varying skills and education levels sources.
in a more productive manner (Birthal et al. 2014).
Access to markets is important for realizing
Access to technical information, in addition to remunerative prices. The agricultural markets in India
education, can also influence farm income. In 2002– are dominated by informal traders through whom
03 as well as in 2012–13 around 40% of the households almost 60% of paddy and around 36% of wheat is sold
had access to technical information on agriculture from (Negi et al. 2018). These traders are also an important
formal sources (the public extension system, research source of credit for farmers, who commit the sale of
institutes, Krishi Vigyan Kendras, cooperatives, radio, their produce as collateral. Smallholders have greater
television) or informal sources (fellow farmers, input dependence on informal traders. While farmers realize
dealers, traders, processors). About 10–11% of farmers higher prices for their produce by selling to government
had access to both formal and informal sources. The agencies, they end up selling their produce at
profits of farmers who use technical information for significantly lower prices through informal channels.
decision-making are usually 12% higher than those The marginal farmers are even more disadvantaged and
who do not use such information (Birthal et al. 2015). realize significantly lower prices when compared to

Table 13 Access of agricultural households to formal sources of technical information across different Indian states

State Access to formal sources Change State Access to formal sources Change
(% households) in %age (% households) in %age
2002–03 2012–13 2002–03 2012–13

Odisha 16.8 23.2 6.4 Nagaland 36.0 10.1 -25.9

Rajasthan 7.6 15.2 7.6 Maharashtra 33.4 28.6 -4.8
Madhya Pradesh 27.1 22.7 -4.4 Uttar Pradesh 19.6 14.0 -5.6
Haryana 25.3 30.3 5.0 Meghalaya 32.6 16.4 -16.2
Tripura 16.4 30.6 14.2 Jammu & Kashmir 47.1 51.3 4.2
Andhra Pradesh 27.0 29.8 2.8 Jharkhand 18.7 23.5 4.8
Tamil Nadu 39.4 34.3 -5.1 Assam 35.0 50.6 15.6
Chhattisgarh 24.1 32.9 8.8 Sikkim 53.1 20.1 -33.0
Manipur 45.2 21.0 -24.2 West Bengal 29.5 25.3 -4.2
Punjab 22.5 31.0 8.5 Bihar 18.8 19.9 1.1
Karnataka 35.1 59.0 23.9 Arunachal Pradesh 20.8 14.6 -6.2
Himachal Pradesh 32.8 39.3 6.5 Mizoram 20.7 28.8 8.1
Gujarat 37.6 30.9 -6.7 Uttarakhand 8.0 23.8 15.8
Kerala 52.9 64.4 11.5 All India 25.9 26.1 0.2
186 Vatta K, Budhiraja P

large holders. Further, the average sales price in had better access to infrastructure were more diversified
regulated markets is also lower than the minimum and their profits were higher, suggesting that the link
support price. This is in line with Meenakshi and between infrastructure and farmers’ income is crucial.
Banerji (2005), which estimate a structural model of Rural roads and communication networks are
collusion in these markets to show price discounting. reasonably good in most states, but the complementary
Access to infrastructure also affects incomes. Farmers infrastructure in the east and north-east is poor, and
located near the roadside and urban centres engage that may limit the benefits of investments in roads and
more in the cultivation of high-value crops and the communication to farmers (Birthal et al. 2017). In terms
rearing of livestock because their access to markets is of boosting agricultural growth and reducing poverty,
better and transaction costs lower (Rao et al. 2006; investment in agricultural research is a high pay-off
Birthal et al. 2005). Rural roads incentivize farmers to activity (Fan et al. 2014; Birthal et al. 2014), but
expand the area where high-value crops are cultivated, agricultural research and education spending is low in
use improved technologies and modern inputs, and several states, and the investments in supporting
diversify out of agriculture (Shamdasani 2016). Birthal infrastructures and institutions are low in the states
et al. (2017) examine the proportion of farm households where agricultural research investment is
in an income class in a district and the proportion of comparatively high.
villages in the district having different types of
infrastructure. The study reveals a negative and Possibilities of doubling household income
significant association between the incidence of low- We attempt to project the income of agricultural
income farmers and infrastructural variables, such as households in India and its states by 2022–23 and
electricity, telephone lines, mobile connectivity, pucca examine if household income might double. We use
roads, all-weather roads, commercial banks, and the household income estimates of the NABARD All-
cooperative banks. The correlation coefficients were India Rural Financial Inclusion Survey for the year
positive and significant for higher income classes. 2016–17 (at 2012–13 prices). We then project the
Further, the income sources of farm households that income levels of rural households for year 2022–23.

Table 14 Projected levels of income of agricultural households in India and gaps from target of doubling of income

State Income level Gap from State Income level Gap from
(INR/household/annum) target of (INR/household/annum) target of
2016–17 2022–23 doubling 2016–17 2022–23 doubling
(%) (%)

Odisha 68,771 114,702 16.6 Nagaland 88,510 109,434 38.2

Rajasthan 80,175 119,648 25.4 Maharashtra 91,339 112,279 38.5
Madhya Pradesh 70,443 105,125 25.4 Uttar Pradesh 59,315 72,492 38.9
Haryana 182,578 270,942 25.8 Meghalaya 89,302 106,011 40.6
Tripura 67,534 96,889 28.3 Jammu & Kashmir 83,217 95,382 42.7
Andhra Pradesh 66,686 95,133 28.7 Jharkhand 62,188 70,034 43.7
Tamil Nadu 86,953 121,265 30.3 Assam 87,870 101,307 42.4
Chhattisgarh 76,323 105,238 31.1 Sikkim 76,528 79,324 48.2
Manipur 87,718 116,881 33.4 West Bengal 68,993 119,583 13.3
Punjab 205,779 272,627 33.8 Bihar 63,825 115,559 9.5
Karnataka 94,319 122,124 35.3 Arunachal Pradesh 80,700 74,606 53.8
Himachal Pradesh 105,216 135,452 35.6 Mizoram 88,341 80,192 54.6
Gujarat 105,847 134,705 36.4 Uttarakhand 96,560 217,587 -12.7
Kerala 150,574 190524 36.7 All India 86050 107010 37.8
Note All the estimates are at 2012–13 prices. The gaps are estimated w.r.t. 2016.17. Negative gap means that doubling of income can be
achieved by 2022–23.
 Farmers’ income in India 187

We estimate the household income CAGR for the The more vulnerable farm households (marginal and
periods 2002–03 to 2012–13 and 2012–13 to 2016– SC) must be at the forefront of our future income
17. We consider for each state the higher growth rate growth strategy, and the disadvantaged regions (east,
of the two periods because the past debates over the central, and west) should be given priority in resource
feasibility of achieving the target are based on allocation for higher growth.
optimistic assumptions and interventions.
The land resource is limited and shrinking, and there
Table 14 presents the agricultural household income is a need to focus on improving resource use efficiency
by state for 2016–17 and 2022–23 and the difference and diversifying to high-value, high-growth sectors
from the target (doubled income). The estimates show such as horticulture and livestock. However, these
that the target is not likely to be achieved by 2022– sectors have not received policy focus commensurate
23—the shortfall at the all-India level will be around with their economic contribution: the livestock sector’s
37.8%; all the states (except Uttarakhand) will likely share in agricultural GDP exceeds 25%, but its share
miss the target; and that the shortfall in most states in total public sector investment and institutional credit
will be 25–50%. is a mere 5% (Birthal and Negi 2012), and the insurance
and extension support is negligible. To fully harness
Conclusions and implications their growth potential, the horticulture and livestock
sectors need more investment and institutional support.
This study examines the trends in farmers’ income
The policy should focus on allocating greater resources
along several lines between 2002–03 and 2012–13.
to high-value, high-growth sectors; developing efficient
Farmer income grew at 3.7% per annum, but the growth
and inclusive markets and value chains; and investing
was differential by state and farm class. Marginal
in public infrastructure to stimulate private investment
farmers comprise the bulk of the farming population,
in marketing and food processing.
and they are at the bottom of income distribution; their
income grew at a much slower rate than of their larger Access to technical information improves farm
counterparts. Some states (West Bengal, Bihar, productivity and income, and there is a need to improve
Arunachal Pradesh, Mizoram, Uttarakhand, etc.) farmers’ access to formal sources of agricultural
lagged behind in income levels and performed poorly extension. The use of information and communication
over time while Odisha performed extremely well. technologies should be promoted to expand the
outreach of formal sources.
Livestock emerged as an important component of
farmers’ income, but the role of the non-farm sector Most farmers depending on informal traders fail to
was not sizable. This is a matter of concern, because realize the government-administered prices for their
the average landholding size is declining, and non-farm produce, and there is a need to enforce market
earnings must play a bigger role through the regulations. Improving the access of smallholders to
development of rural labour markets and the non-farm institutional credit will reduce their dependence on
sector. The crop profitability improved, due possibly informal traders.
in turn to the improvement in productivity, prices, and The growth in farmers’ incomes in the long run has to
resource use efficiency, and the improved crop come from advancement in agricultural research for
profitability accelerated the pace of income growth and raising yield frontiers, improving resource use
its variation across different states. The acceleration in efficiency, reducing the cost of production, and
the pace of income growth points to the need for improving the resilience of agriculture to climate
targeting investment in agricultural research and change. It implies that the allocation of resources for
development, as it seems unlikely that the target of agricultural research has to be raised from its current
doubling agricultural income by 2022–23 would be level of 0.6% of the agricultural GDP.
achieved.
The rural non-farm sector is concentrated in and around
The study draws the following major implications to large cities. But farm sizes are shrinking, and strategies
ensure that the growth in farmers’ income in India in are needed to develop and promote labour-intensive
the future is higher and more inclusive. non-farm activities in the non-farm sector in rural areas
188 Vatta K, Budhiraja P

by investing in human capital, skills development, and Birthal, P S, and D S Negi. 2012. Livestock for higher,
industrial value chains and, thus, de-stressing sustainable and inclusive agricultural growth. Economic
agriculture from excessive employment pressure. This and Political Weekly, 47 (26 and 27): 89–99. https://
w w w. r e s e a r c h g a t e . n e t / p u b l i c a t i o n / 2 8 5 9 5
is most important to increase farmer income.
1812_Livestock_for_higher_sustainable_and_
Finally, the inter-state disparities in household income inclusive_agricultural_growth
and its sources are significant; therefore, a ‘one size Birthal, P S, D S Negi, and D Roy. 2017. Enhancing farmers’
fits all’ strategy will not improve the economic status. income: who to target and how? Policy Paper, National
The regional characteristics in terms of infrastructure, Centre for Agricultural Economics and Policy Research,
investment, and institutions need to be mapped and New Delhi, India. http://www.ncap.res.in/upload_files/
the growth strategies formulated accordingly. If the policy_paper/Policypaper30.pdf
growth in farmers’ income is to be faster and more Birthal, P S, S Kumar, D S Negi, and D Roy. 2015. The
efficient, complementarities must be created among the impact of information on returns from farming:
different types of infrastructure and institutions. evidence from a nationally representative farm survey
in India. Agricultural Economics 46 (4): 1–13. https://
Acknowledgements The authors are grateful to Prof P doi.org/10.1111/agec.12181
S Birthal for his help in conducting this research and
to the anonymous referee for improving this paper. Chand, R, R Saxena, and S Rana. 2015. Estimates and
analysis of farm income in India, 1983–84 to 2011–12.
However, the authors take full responsibility for the
Economic and Political Weekly, 50 (22): 139–145.
errors that remain, if any.
Chand, R. 2017. Doubling farmers’ income: rationale,
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