Can we allow this inter-sectoral disparity to rise?


It was in December 2014, that for only the second time in independent India, that data on incomes of farm/agricultural households were assessed and put out by NSSO, in its 70th Round survey. The earlier time was in 2003, through the 59th Round. The overall findings are disturbing and not very different between the two rounds.

The 70th Round data revealed that the average monthly income of an agricultural household is just Rs. 6426/- at the national level. This then means about Rs. 107/- daily earnings per adult, assuming two adults per household. In many places, this could be below minimum wages prescribed for unskilled workers (from July 1, 2015 the National Floor Level of Minimum Wage was raised to Rs 160 per day which is lower than most states’ minimum wage rates). Average monthly income from cultivation is reported to be only 47.9%; from livestock: 11.9%; from wage/salary: 32.2% and from non-farm business: 8% of the average income estimated at Rs. 6426/month/household. That’s not the end of the story.

A closer look at the income and expenditure findings across different landholding categories shows that around 6.26 crore agricultural households are running on a debt economy, so to speak. On an average, there is a deficit of Rs. 856/- per month per household in terms of their expenses exceeding receipts, for these households. This is the situation of nearly 70% of agricultural households in India. On an average, the monthly income is Rs. 4653/ for each of these households.

Now, contrast this with the 7th Pay Commission proposals. There has been a 23.5% increase in pay, allowances and pension for 4.8 million government employees and 5.5 million pensioners (ie., 1.03 crore people). Given that this sets a benchmark for employees in the private sector too, indirectly it covers other citizens. The minimum pay has been increased to Rs. 18000/- per month, while the maximum pay has been hiked up to around Rs. 2.5 lakhs per month. While that’s a huge disparity in itself (14 times, between the lowest and highest paid employees), the contrast between the lowest paid in the government sector and the lowest classes of agricultural households, who seem to have negative net returns, is worth noting too: a 4-fold difference. With highest paid government employees, the disparity works out to be 54 times less for agri-households.

Can any society actually allow such disparities to develop, expand and be institutionalised?

Farm suicides related reports are pouring in each day from various states of India, what with such low incomes, and indebtedness on the rise; for the lowest classes, institutional credit has not materialized (in the lowest size class, only 15% of debt is from institutional sources).

It is not out of place to be reminded of the fact that India has a policy for farmers (National Policy For Farmers 2007, Ministry of Agriculture), which created new policy directives for the focus of all interventions to shift to farmer wellbeing and incomes, and not just production and productivity in agriculture. To that extent, the shift is away from a technological approach towards agriculture, to a livelihoods approach. However, in implementation, nothing concrete has materialized to institutionalize the shift in policy directions. For instance, performance management through the results framework document does not show that farm incomes will be measured or made into an indicator of performance.

There is an urgent need to put the focus squarely on farm incomes in India, as inter-sectoral disparities are rising. It is important to remember that farm incomes are not only low, but also unstable (in addition to showing significant intra-sectoral disparity). All state interventions related to agriculture and rural development should be geared towards delivering minimum living incomes to farm households and departments have to be made accountable for the same.

This then requires a periodic income assessment survey, for more focused interventions for different sizes of cultivators (the emphasis should be on cultivators and not land owners), different regions and crops, using the findings. Focus on increasing net incomes will necessarily force the government to shift towards low-external-input agriculture, better prices as well as market support for farmers, better measures for disaster relief and compensation as well as their implementation, and also achieving some economies of scale or additional benefits through collectivization of our vast majority of smallholders. Part of the solution should be farm income insurance products in addition to new measures like price deficiency payments vis-à-vis Minimum Support Prices announced. There is also a need to revise the formula used for fixing MSP, along the lines recommended by the Ramesh Chand Committee, of which the author was a part, apart from improving procurement itself.

There should be minimum living incomes fixed for farm households, using formulae similar to what Pay Commissions base their recommendations on. A Farm Income Commission would be required for this.

Looking at how Minimum Wages are fixed under the Minimum Wages Act is important in this discussion. Despite lofty definitions of Minimum Wages, the capacity of an industry to pay is also an important factor considered, despite repeated Supreme Court Orders to the contrary. Further, Agriculture in most states is not linked to Variable Dearness Allowance (VDA) linked to a Cost of Living Index, though VDA is supposed to be used apart from basic wages while fixing and revising minimum wages. It is important that inflation as measured with Wholesale Price Index (WPI) computed using the wholesale price of a basket of goods that has very little to do with daily needs of a worker. Inflation and hence dearness allowance therefore should be calculated on consumer prices that determine the cost of living, as recommended by some analysts.

There is the other problem of classifying some work as Skilled and some as Unskilled (or Semi-Skilled). This classification is questionable on two grounds at least: (i) lack of recognition of skill that goes into so-called ‘unskilled’ work, and the fact that even skill acquisition is a socio-political consequence; (ii) minimum wages (which are not only guarantee for bare subsistence but also provides for education, medical requirements and some level of comfort) cannot be contingent on skills that a person has, to ensure at least subsistence. To that extent, the minimum wages of skilled and unskilled workers cannot be different.

If we do not address these issues as a nation, the inter-sectoral disparity will be too stark, leaving behind too many people, without any dignified alternatives being provided elsewhere for them. The country cannot afford this, and we need to provide hope and a dignified future for the millions who continue to toil to feed us all. India needs to set up a Farm Income Commission without losing more time.

  • Kavitha Kuruganti was a member of the GoI Committee on Fixing of Minimum Support Prices and is a National Convenor of Alliance for Sustainable & Holistic Agriculture (ASHA)

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