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After about a four-decade spell of good returns the agricultural sector, particularly the small and mid-size farming segments, are facing severe problems. The growth rate of the sector has been more than 3% but quite a huge number of farmers have been suffering from the realisation of favourable income. Many people consider the rural sector and the agricultural sector to be the same. But actually it is not. In the rural sector, a growing number of people have been engaging in non-farm activities like small trading, contract jobs, financial or other agencies and transports. Non-farm activities have not only been a complementary activity of the farm sector – rather it has been a major source of income in the rural areas. Whenever economists discuss the rural sector crisis, they generally point out the crisis of the non-farm activities.

Distress of the farm sector

The first macro criterion in analysing the crisis in agriculture has been the adverse terms of trade against industry as well as services. It is estimated that in FY22 the growth rate of the agriculture sector would be 3.9%, a very commendable performance. But this does not mean that the farmers would be happy with it. This is because the terms of trade of agriculture are adverse against industry.

What is the term of trade? It simply means the gap between input prices of agricultural products and prices received by selling those products. It is known from the national income statistics that Gross Value Added (GVA) is projected to grow by 5.2% in FY22 whereas the non- agricultural GVA is projected to grow as high as 10%. It means that farmers must pay a much higher price for inputs and other consumption items like health and education of their family members compared to what they receive by selling farm outputs.

The Indian agriculture during Five Years Plan period

In the first plan, India emphasised on agriculture and the result was substantial. From the second plan, the industrial sector received prominence. But from the mid 1960s a few provinces, mainly Punjab, experienced a massive productivity increase in the farm sector. This was known as the Green Revolution. It increased the food production of the county to a large amount. But it was confined mainly to wheat. Moreover, only small areas of the country like Punjab, parts of Haryana and western UP were involved. The so-called revolution was possible as it was driven by huge public investment in irrigation and market infrastructure. The introduction of MSP (minimum support prices) to stabilise agricultural income incentivised to increase wheat and rice production to a large extent. That helped India gradually to become self-sufficient in food production, particularly, calorie production. But in due course some adverse impacts like water scarcity emerged. Then the absence of land reform hindered progress.

Rural Income began to fall

The household consumer expenditure survey for 2017-18 shows that inflation adjusted consumption spending in 2017-18 fell for the first time in four decades. India’s monthly per capita income consumption expenditure in FY 2017-18 was `1,446, down by 3.7% from `1,501 in 2011-12, earlier consumption survey of NSO. Jaffrelot and Thakker, Indian Express, March 16, 2021) have shown that the average money spent every month by rural residents in 2017-18 was 8.8% less than the earlier six years.  A notable thing is that in the post reform (after 1991) there has been a rise in average prices of major crops. Price of paddy, wheat, maize, etc. increased considerably. But the volatility of prices affected the sustainability of the farmers. That affected investment and diversification of agriculture.

An RBI study shows (pointed out by Jaffrelot and Thakker) that the public sector investment has been around 0.4% of the GDP in between 2011-12 and 2017-18. This is highly inadequate for a country like India with about 60% population involved directly or indirectly.

Some common factors responsible for weak performance of agriculture

First is the land scarcity. India has been growingly a land scarce country. Dependent people on a unit of land are high. So scope of expansion of cultivation is limited. Secondly, the average size of land holding is as low as about 0.5 acre. Small holdings are generally uneconomic. But in many cases it is found that Indian agriculture is scale neutral. Thirdly, it is heavily dependent on the monsoon. At the same time irrigation facilities are not adequate. So, production fluctuation is a common matter. Fourthly, in most of the cases, farmers are engaged in subsistence farming and hence surplus production is limited and so improvement of productivity by investing in land is limited. Fifthly, soil fertility declines in many cases. This is due to deforestation and unscientific methods of cultivation. At times factors like salinity, alkalinity and aridity decrease land fertility. Sixthly, lack of institutional support for pricing of products, marketing facility, the credit facility may make farming unviable. These have been a matter of great concern for the sustainability of farming.

 Crisis in agriculture creates economic crisis in India

Many recent studies observe that the recent crisis of agriculture is the prime reason behind the economic problem of India. Professor Ratan Khasnobis points out (Deshhitaishee, Sarad Sankhya, 2021) that in the neoliberal era, many farmers had to leave cultivation fully or partially as farming has been more and more unviable. But that vast section of farmers has been joining different unorganised sectors for their livelihood. In this sector the productivity of labour is low. So low earnings of a vast majority of the population cannot create market viability for the economy as whole. The scope for expansion of GDP has been shrinking. The origin of economic weakness can be linked to the weakness of the farming economy.

Conclusion

Government has to intervene directly in the agricultural sector in various ways. Even the developed countries spend largely to make their agricultural sector viable. The sooner our policy makers realize it, the better.