COMMENTARY

Doubling Farmers Incomes

by 2022

the 2013 survey, NSSO defined an agricultural household as

a household receiving some value of produce
more than `3,000 from agricultural activities
(e g, cultivation of field crops, horticultural
crops, fodder crops, plantation, animal husbandry, poultry, fishery, piggery, bee-keeping, vermiculture, sericulture, etc) and having at least one member self-employed in
agriculture either in the principal status or
in subsidiary status during last 365 days
(NSSO 2014: 3).

What Would It Take?

S Chandrasekhar, Nirupam Mehrotra

How realistic is the objective

of the Government of India to
double the income of farmers
by 2022? Is there a precedent?
From estimates of change in
income of agricultural households
over the period 200313, this
article suggests what needs to
be done to achieve a doubling
of real incomes. A focus on
income from cultivation alone
will be inadequate. Policy aimed
at increasing net income from
animal farming will be key.

hile presenting Union Budget

201617, the Union Finance
Minister Arun Jaitley mentioned that one of the objectives of the
Government of India is to double the
income of farmers by the year 2022.
This announcement was probably driven
in light of evidence of agrarian distress.
A notable contribution in the recent
literature on farm incomes in India is by
Chand et al (2015: 139), who suggests
that growth in farm income after
201112 has plummeted to around 1%,
and this is an important reason for the
sudden rise in agrarian distress in
recent years.
In light of the objective of the Government of India, the logical question is
whether there have been any earlier instances of doubling of income of farmer
households. In this article we look at the
evidence on incomes of agricultural
households using a different database
than used by Chand et al (2015). Hence,
our estimates are not comparable with
their estimates. We analyse data from
National Sample Survey Offices (NSSO)
Situation Assessment Survey of Farmers
conducted in 2003 (hereafter referred
to as the 2003 survey) and Situation
Assessment Survey of Agricultural Households 2013 (hereafter referred to as the
2013 survey).

The views expressed in this article are

personal and do not represent those of the
organisation to which the authors belong. This
article is also available as part of the IGIDR
working paper series.

Comparability Issues

S Chandrasekhar (chandra@igidr.ac.in) is
with Indira Gandhi Institute of Development
Research, Mumbai. Nirupam Mehrotra
(nirupam.mehrotra@gmail.com) is with
National Bank for Agriculture and Rural
Development, Bhopal.

10

Information on the sampling methodology

used in the above-mentioned surveys is
available in reports published by NSSO
corresponding to the two surveys (NSSO
2005, 2014). Since there are some differences in the way households were
sampled in the 2003 and 2013 surveys,
we first outline how we made the data
from these two surveys comparable. For

Unlike the 2013 survey, there was no

income cut-off specified while defining
an agricultural household in the 2003
survey.
So if we want to compare the averages
across the two surveys we can only
include households in the 2003 survey
with an income corresponding to `3,000
at 2013 prices. We work out that `3,000
at 2013 prices is equal to `1,345 in 2003
prices.1 So for purposes of comparison
we will only include households in the
2003 survey with annual income from
agriculture of at least `1,345.
Second, we restrict the sample in both
the surveys to households whose primary
source of income is cultivation, livestock,
other agricultural activity, non-agricultural enterprises, and wage/salaried
employment. We ignore those households
whose primary source of income is pension, remittances, interest and dividends,
or others. The reason we exclude the
other households is because both data
sets have information on income received
from only four sources: wages, net receipt
from cultivation, net receipt from farming of animal, and net receipt from nonfarm business. We also later discuss
whether the absence of data in remittances could affect our estimates for
those states with a large number of outmigrants from agricultural households.
Having applied these filters we believe
that it is indeed correct to undertake
comparison of estimates based on the
2003 and 2013 surveys. The report corresponding to the 2013 survey states that
comparison of results of these two
rounds is permissible as long as one
takes into account the differences across
the two surveys (NSSO 2014: 4). We would
also like to point out that the tables

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COMMENTARY

reported in this article are consistent

with the way NSSO has presented and
interpreted the data on income in its
reports. The reference period for the
data on income in the 2003 survey was
July 2002June 2003, while in the 2013
survey it was July 2012June 2013. We
divide the yearly income by 12 to arrive
at monthly income.
Change from 2003 to 2013
Needless to say, the average monthly
total income of agricultural households
in the full sample increased in nominal
terms by over three times from `2,115 in
2003 to `6,426 in 2013. But what we are
interested in is the change in real terms.
In order to facilitate a comparison in real
terms, we convert the income of households surveyed in 2003 to 2013 prices
using the Consumer Price Index for Agricultural Labourers (CPIAL). Our interest
is in understanding the factor by which
average real income from various sources
and average total real income changed
between 2003 and 2013 across the major
states, and also at the all-India level.
All India, we do not find any evidence
of doubling of real incomes. The average
monthly income increased by a factor of
1.34 (Table 1a). Only in Odisha do we see
a doubling of income. Of particular concern is the fact that the average monthly
income in real terms has declined in Bihar
and in West Bengal. This justifies the
decision to have agricultural policies and
interventions tailored for eastern India.
We are unsure to what extent the exclusion of remittances in the calculation of
total income of the households could
have contributed to the decline in real
incomes in these two states. We also
want to point out that in other states
with large outmigration, incomes of
agricultural households have not declined
in real terms. So it would be incorrect to
dismiss the decline in Bihar and West
Bengal by attributing it solely to underestimation of income. Among other
states, the average income increased by
1.57 times in Chhattisgarh and by 1.75
times in Madhya Pradesh.
At the all-India level, among the four
components of total income we see that
net income from farming of animals increased by 3.21 times and we do not see a
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april 30, 2016

doubling of average monthly net income

from cultivation. Only in Chhattisgarh
do we see a doubling of income from cultivation. In Bihar, Jharkhand and West
Bengal we see a decline in income from
cultivation in real terms. In contrast to
income from cultivation, in many states
there has been a doubling of net income
from farming of animals. This can be
attributed to growth from a low level of
`109 in 2003. However, such a doubling
is not evident in net income from nonfarm business despite it too starting
from a paltry average of `237 in 2003.
We find evidence of doubling of income
among those households with over 10
hectares of land. In fact, any household
with at least one hectare of land saw their
income from cultivation and total income
increase at least by 1.5 times (Table 1b).
The importance of net income from

farming of animals comes out sharper

in Table 1b as compared to Table 1a
when we look at differences across
Indian states.
What Would It Require?
An occasional paper released by NITI
Aayog identified five issues that need
attention in order to improve the livelihoods of farmer households (Anonymous
2015). The five issues are: increasing
agricultural productivity, remunerative
prices for farmers, focus on land leasing
and land titles, risk adaptation and mitigation, and a geographical focus on the
eastern region (Anonymous 2015). The
decline in real incomes in Bihar and
West Bengal provides justification for
the geographical focus identified in the
occasional paper. In the discussion that
follows we focus on the importance of

Table 1a: Ratio of Average Monthly Income (`) from Different Sources in 2013 to the Average Monthly
Income (`) from Different Sources in 2003
Major States

Punjab
Haryana
Rajasthan
Uttar Pradesh
Bihar
Assam
West Bengal
Jharkhand
Odisha
Chhattisgarh
Madhya Pradesh
Gujarat
Maharashtra
Andhra Pradesh
Karnataka
Kerala
Tamil Nadu
All India

Income from Wages

Net Income from

Cultivation

Net Income from

Farming of Animals

Net Income from

Non-farm Business

Total Income

1.56
1.20
1.36
1.00
1.28
0.69
1.18
1.09
1.41
1.25
1.17
1.34
1.29
1.59
1.27
1.21
1.24
1.22

1.80
1.85
1.60
1.38
0.80
1.15
0.62
0.78
1.79
2.05
1.48
1.18
1.54
1.56
1.66
1.43
1.16
1.32

2.39
--*
3.99
3.76
0.44
2.45
1.44
5.88
33.35
1.58
--*
1.84
1.82
3.61
1.92
1.58
3.93
3.21

0.68
0.57
1.63
0.99
0.55
0.51
0.76
0.56
1.54
0.00
0.59
1.30
1.49
1.07
1.49
1.62
2.43
1.00

1.67
1.93
1.63
1.31
0.83
1.02
0.91
1.13
2.08
1.57
1.75
1.36
1.47
1.64
1.52
1.36
1.48
1.34

For the sake of comparability, the 2003 income was adjusted to 2013 prices using CPIAL. So the comparison is in real terms and
not nominal terms.
*We do not report this ratio since the net income from this source is negative in both the years.
Source: Authors computations from unit-level data.

Table 1b: Ratio of Average Monthly Income (`) from Different Sources in 2013 to the Average Monthly
Income (`) from Different Sources in 2003
Size Class of Land Possessed

<0.01
0.010.40
0.411.00
1.012.00
2.014.00
4.0110.00
>10.00
All classes

Income from Wages

Net Income from

Cultivation

Net Income from

Farming of Animals

Net Income from

Non-farm Business

Total Income

1.01
1.07
1.26
1.23
1.26
1.81
1.23
1.22

0.34
1.09
1.40
1.50
1.54
1.76
2.06
1.32

3.40
2.78
2.61
3.31
5.39
7.88
3.58
3.21

0.63
0.67
1.08
1.61
1.23
1.33
1.32
1.00

1.13
1.10
1.38
1.52
1.59
1.85
2.02
1.34

See Table 1a.

Source: Authors computations from unit-level data.

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COMMENTARY

focusing on the first three issues flagged

in the paper.
But before that, it would be useful to
have a basic understanding of principal
source of income of agricultural households. Data from the 2013 survey reveals
that the distribution of agricultural household by principal source of income is as
follows: cultivation 63.5%, livestock 3.7%,
other agricultural activity 1%, non-agricultural enterprises 4.7%, wage/salaried
employment 22%, pension 1.1%, remittances 3.3%, and others 0.7%. There are
large variations in the distribution of
households by principal source of income
across the states of India (NSSO 2014:
Statement 6, p 15). However, the distribution of households by principal source
of income only reveals a partial story. In
reality, individuals from agricultural
households undertake multiple activities
in addition to cultivation. This is evident
from the fact that among households
whose principal source of income is
cultivation (livestock), only 12% (13%)

do not undertake any additional activity

(Table 2). In households whose primary
source is wage income, we see a combination of activities being undertaken by
their members. A basic point that we
need to recognise is the following: there
are a sizeable proportion of households
who undertake cultivation, livestock activities and also have individuals engaged in wage/salaried employment. The
key takeaway is that in addition to cultivation there are other income sources that
can contribute to doubling of income of
agricultural households.
Total income of agricultural households
varies by amount of land possessed by
them (Table 3). In 2013, in fact among
those with less than one hectare of land
average monthly income is lower than
their monthly consumption expenditure. This pattern is evident in the 2003
survey too (NSSO 2005: Statements 10
and 11). What is also important to note
is that the share of average monthly
income from different sources varies by

Table 2: Additional Activities Undertaken by Agricultural Households in India

Principal Source of Income

Additional Activities

Cultivation

No additional activity (12%), livestock (34%), livestock and wage/salaried

employment (17%), wage/salaried employment (8%), all other combinations (29%).
No additional activity (13%), cultivation (30%), wage/salaried employment (14%),
cultivation and wage/salaried employment (12%), all other combinations (31%).
Cultivation (7%), cultivation and livestock (22%), cultivation and wage/salaried
employment (10%), cultivation. livestock and wage/salaried employment (17%), all
other combinations (34%).
Cultivation (22%), livestock (12%), cultivation and livestock (24%), cultivation,
livestock and wage/salaried employment (10%), all other combinations (32%).
Cultivation (20%), livestock (14%), cultivation and livestock (37%), all other
combinations (29%).
Cultivation (18%), livestock (7%), cultivation and livestock (22%), cultivation,
livestock and wage/salaried employment (8%), cultivation, livestock and
non-agricultural enterprises (6%), all other combinations (39%).
Cultivation (21%), livestock (7%), cultivation and livestock (37%), cultivation and
wage (9%), all other combinations (26%).
Livestock (6%), cultivation and livestock (6%), cultivation and wage (14%), cultivation,
livestock and wage/salaried employment (34%), cultivation, livestock and wage/
salaried employment and remittances (5%), all other combinations (35%).

Livestock
Other agricultural
activity
Non-agricultural
enterprises
Wage/salaried
employment
Pension

Remittances
Others

Source: Calculations from unit-level data of 2013 survey.

Table 3: Average Monthly Income (`) from Different Sources, Monthly Consumption Expenditure (`)
Per Agricultural Household in 2013 for Each SizeClass of Land Possessed
SizeClass of
Land Possessed

Income from
Wages
(A)

<0.01
0.010.40
0.411.00
1.012.00
2.014.00
4.0110.00
>10.00
All classes

3,019
2,557
2,072
1,744
1,681
2,067
1,311
2,146

Net Receipt from

Cultivation
(B)

31
712
2,177
4,237
7,433
15,547
35,713
3,194

Source: Calculations from unit-level data of 2013 survey.

12

Net Receipt from

Farming of Animals
(C)

1,223
645
645
825
1,180
1,501
2,616
784

Net Receipt from

Non-farm Business
(D)

469
482
477
599
556
880
1,771
528

Total Income

Consumption

A+B+C+D

4,742
4,396
5,371
7,405
10,849
19,995
41,412
6,653

5,139
5,402
5,979
6,430
7,798
10,115
14,445
6,229

the amount of land possessed by the

household. In 2013, the share of income
from wages is highest among those with
less than one hectare of land (Table 4a).
We do not find any striking differences
in the share of income from the four
sources within each land-size class when
we compare data from the 2003 survey
with the 2013 survey (Tables 4a, 4b). The
only thing of import is the increase in the
share of income from farming of animals.
Table 4a: Share of Average Monthly Income from
Different Sources for Each SizeClass of Land
Possessed in 2003
SizeClass of
Land Possessed

Income
from
Wages

<0.01
0.010.40
0.411.00
1.012.00
2.014.00
4.0110.00
>10.00
All classes

71
60
42
29
19
11
5
36

Net Receipt Net Receipt Net Receipt

from
from
from
Cultivation Farming of Non-farm
Animals
Business

2
16
40
58
71
82
85
49

9
6
6
5
3
2
4
5

18
18
11
8
7
6
7
11

Source: Calculations from unit-level data of 2003 survey.

Table 4b: Share of Average Monthly Income from

Different Sources for Each SizeClass of Land
Possessed in 2013
SizeClass of
Land Possessed

Income
from
Wages

<0.01
0.010.40
0.411.00
1.012.00
2.014.00
4.0110.00
>10.00
All classes

64
58
39
24
15
10
3
32

Net Receipt Net Receipt Net Receipt

from
from
from
Cultivation Farming of Non-farm
Animals
Business

1
16
41
57
69
78
86
48

26
15
12
11
11
8
6
12

10
11
9
8
5
4
4
8

Source: Calculations from unit-level data of 2013 survey.

It is apparent that the quantum of

land possessed is an important determinant of rural livelihoods. The NITI Aayog
has constituted a committee chaired by
T Haque to look at the issues pertaining
to land leasing. Land titling and leasing
were identified as core areas in the NITI
Aayog occasional paper too. Moving
ahead, it is important to understand the
extent to which legalising and liberalising land leasing can improve agricultural efficiency, equity, occupational
diversification, and rapid rural transformation (Expert Committee 2016: 5), and
thereby increase the income of agricultural households.
With respect to the other issues
flagged in the occasional paper, there

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are some lessons that can be learnt from

the policy stance adopted in the last
decade. Sen (2016: 14) points out that
the Rashtriya Krishi Vikas Yojana (RKVY)
attempted to incentivize agricultural
planning and investment at the state
and district level while decentralising
and untying the fund flow. It has been
argued that the RKVY did contribute to
improving agricultural growth. Simultaneously, there has to be a singular
focus on improving the extent of investments undertaken by agricultural households. In 2013, among households with
less than one hectare of land net investments is in the region of `250 to `540
depending on whether household has
between 0.010.4 hectares and 0.411
hectare of land. The question is how
one can increase net investment in productive assets among the small and
marginal farmers.
To address the constraints emanating
from flow of timely and adequate agriculture credit to the farmers, the Government of India did come out with a policy
of doubling agriculture credit over the
period 200407. The initiative did succeed
in doubling flow of agriculture credit at
the aggregate level (see NABARD 2009
for a discussion). The evidence from
NSSO data does not seem to suggest that
the doubling of aggregate credit flows
had any sizeable impact at the household level in terms of a substantial increase in investments. It is now recognised that the challenge today is twofold: channel funds to the small and
marginal landholders, and rework the
mix of short-term and long-term credit
in order to incentivise flow of long-term
credit relative to short-term credit.
In the last decade, there were other
initiatives aimed at improving agricultural output and hence farm incomes.
First, the minimum support price for paddy
and wheat increased. Second, some states
opted for decentralised procurement.2
Casual empiricism would suggest that
increase in minimum support price and
decentralised procurement would have
contributed to increase in income of
agricultural households. Ideally, one
would need longitudinal data in order to
analyse the impact of these two measures.
In the 201617 budget, the Government
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april 30, 2016

of India has stated that all states will be

encouraged to take up decentralised
procurement. Measures like prior registration of farmers and monitoring actual
procurement using an online procurement system could have a salutary effect.
Third, the idea behind formation of
Farmer Producer Organisations (FPO)
can increase the probability of farmers
getting remunerative prices. In this regard,
National Bank for Agriculture and Rural
Development (NABARD) and other stakeholders have been working towards formation and nurturing of FPOs. Fourth,
state governments did undertake investments in irrigation. They have borrowed
large sums of money under the Rural
Infrastructure Development Fund (RIDF)
administered by NABARD specifically for
irrigation projects. Till date, over 50%
of projects funded under RIDF are for
irrigation and 30% of the funds were for
irrigation (NABARD 2015).
Conclusions
Given the slew of measures and initiatives it would have come as a surprise if
the real incomes of agricultural households had not increased in real terms
over the period 200313. Barring Bihar
and West Bengal, in other states we do
see an increase in average income in real
terms. We believe that focusing only on
income from cultivation for facilitating
doubling of income will prove to be
inadequate. Policy measures aimed at
increasing net income of households
from animal farming will be the key
driver of incomes in agricultural households. We also need to improve our understanding of what constrains income

growth from non-farm business at the

household level.
Notes
1

In the literature it is standard practice to use the

All-India Consumer Price IndexAgricultural
Labourers (CPIAL) as a price deflator. The
CPIAL is also used to update the poverty line.
The CPIAL (198687=100) for July 2003 and
July 2013 was 331 and 740 respectively. Hence
we multiply `3,000, the income cut-off used in
2013, by the following factor (331/740). This is
equal to `1,345, an income level corresponding
to an income of `3,000 for 2013.
Sharma and Wardhan (2015: 22) argue that
after introduction of decentralized procurement policy, Chhattisgarh, Odisha, Andhra
Pradesh and Karnataka have increased their
share in total production due to improvement
in procurement of rice in these states.

REFERENCES
Anonymous (2015): Raising Agricultural Productivity and Making Farming Remunerative for
Farmers, Occasional Paper NITI Aayog,
Government of India.
Chand, Ramesh, R Saxena and S Rana (2015): Estimates and Analysis of Farm Income in India,
198384 to 201112, Economic & Political
Weekly, 30 May, Vol 50, No 22.
Expert Committee (2016): Report of the Expert
Committee on Land Leasing, NITI Aayog,
Government of India, 31 March.
NSSO (2005): Income, Expenditure and Productive
Assets of Farmer Households, Report No
497(59/33/5), National Sample Survey Office,
Ministry of Statistics and Programme Implementation, Government of India.
(2014): Key Indicators of Situation of Agricultural Households in India, Report no NSS KI
(70/33), National Sample Survey Office, Ministry of Statistics and Programme Implementation, Government of India.
NABARD (2009): Report on the Doubling of Agriculture Credit Programme (200405 to 200607)
A Study in Selected States, Department of Economic Analysis and Research, NABARD.
(2015): Annual Report 201415, National Bank for
Agriculture and Rural Development.
Sen, Abhijit (2016): Some Reflections on Agrarian
Prospects, Economic & Political Weekly, Vol 51,
No 8, pp 1215.
Sharma, Vijay Paul and Harsh Wardhan (2015):
Assessment of Marketed and Marketable Surplus
of Major Foodgrains in India, Centre for Management in Agriculture, Indian Institute of
Management Ahmedabad, April.

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