Farm Income and the welfare paradox

Farm income has grown over several decades in India, but the farmer has remained poor; when we look at per capita income, we see the lowest growth rate among all categories and here the problem lies.

While the numerator, which is income, has grown, the denominator has grown substantially as well. The denominator will continue to grow if people engaged in farming, the families included, do not get an alternate employment option.

Most developed nations solved this problem by working on the denominator simultaneously. They created avenues of employment so that the farm community kept shrinking as people left farming to other greener pastures. Urbanization and diversification, making the rural poor engaged in infrastructure projects and finally through skill development their ultimate deployment in manufacturing and services is where the salvation was sought. India has been attempting to do this for long.

You will notice that countries like China had the highest increase in agricultural per capita income because large hordes of people could be engaged in other areas of the economy outside of farming. The migration of farm labor in China was one single biggest source of income improvement.

Does this mean supporting the farmer in farming is not the principal area of concern? Well no, it is very important that the basic needs of the farmer is firstly taken care of like farm credit disbursement, irrigation, availability of fertilizer, and the list could be long.

A narrow focus on farmer welfare is also important, which is very basic and is relevant in the primary cycle of development. It is not a good news that we remain entrenched in that cycle still today.

The other focus area is to look at where the value is getting eroded where the farmer is not able to either transfer its produce at the right price or where the costs are becoming exorbitant for him. The first problem is about discovering the right crop to make at the right time and it is about hedging the price risks. The second is about arresting the cost leakages and which can be only dealt with a higher productivity.

Alternate employment from farming allows less people to be connected to farming, this is a great tail wind to productivity. Diversification and animal husbandry helps to do this as well.

But what is the biggest hurdle to this? It is the absence of right skill development avenues in the vicinity.

India needs enormous strides on the right skill development programs, without this alternate deployment in other areas outside farming gets a lukewarm response.

If we have to solve the farm income problem, two things will be very important, one that we continue to create income generation programs outside farming and the second is we facilitate the requisite skill development programs.

Farm productivity is a subject of its own, but the first step is to have less farmers.

Think of any productivity improvement program, it cannot succeed if all measures are taken to improve the numerator, whereas the denominator equally increases.

Why would the entire family be engaged in farming? It is because every marginal farmer is less costly to engage than investing in productive equipment. This is the typical problem of diminishing wage.

The farmer in Australia would never dream of having his next generation engaged in farming, although he may very well like to. This raises the marginal wage of farming.

Marginal wage in farming in India faces this challenge and it is only in very specific pockets or in specific seasons where the wage rises steeply.

Price on the other hand must be able to absorb these vagaries of costs, where the input costs take these excursions. Unfortunately price is neither dictated by the market, nor is it administered in a manner that absorbs the miseries.

This is an experiment which has been pushed back so far as scepters of inflation always came as a stumbling block. There is no reason why we should not seriously attempt it again and again.