Minimum Support Prices for Agricultural Produce

[op-ed snap] From Plate to Plough: Lean year as a foundationop-ed snap


Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices

From UPSC perspective, the following things are important:

Prelims level: All India Rural Financial Inclusion Survey (NAFIS), NABARD, Situation Assessment Survey (SAS), All India Debt and Investment Survey

Mains level: Contrast between NAFIS & Dalwai Committee report and way forward for Indian agriculture


NABARD survey on farmer’s income

  1. NABARD presented the nation with a gift when it released the results of its All India Rural Financial Inclusion Survey (NAFIS)
  2. The survey estimates 2015-16 farmers’ income levels


  1. NAFIS is based on a sample of 40,327 rural households in 29 states of which 48 per cent are agriculture households (agri-HHs)
  2. 87 per cent are small and marginal farmer households
  3. The survey combines the strengths of the NSSO’s Situation Assessment Survey (SAS) and RBI’s All India Debt and Investment Survey

Findings from NAFIS

  1. Based on household-level data, NAFIS estimates that an average Indian farming household earned Rs 8,931/month (Rs 1,07,172/year) in the agriculture year 2015-16
  2. This is up from Rs 2,115 earned in 2002-03 as per the NSSO’s SAS, implying a compounded annual growth rate (CAGR) of about 12 per cent in nominal terms and 3.7 per cent in real terms (2015-16 base) in 13 years
  3. The survey also estimates the income of non-agri rural HH at Rs 7,269/month, more than half of which comes from working as wage labourers
  4. On the financial aspects of these rural agri-HHS, NAFIS found for the reference year that about 43.5 per cent borrowed money with an average availed loan of Rs 1,07,083
  5. More than 60 per cent of these HHs borrowed from institutional sources, 30.3 per cent from non-institutional and 9.3 per cent from both
  6. More than half (52.5 per cent) of the agri-HHS were found to be indebted, with an average outstanding debt of Rs 1,04,602 for the year
  7. Almost 88 per cent of all rural HHs had bank accounts, and their monthly consumption expenditure on food was 51 per cent of total expenditure

Reasons for rise in estimates

  1. The rise in estimates is because of a wider definition of rural areas the NABARD survey includes areas that are bigger including Tier Three, Four and Five Towns
  2. If NAFIS followed NSSO’s definitions, the 2015-16 estimate of farmers’ income would have been somewhat lower, and so would have been its growth rate

Uses of NAFIS

  1. In terms of sources of income, NAFIS offers interesting insights, particularly for the Dalwai Committee
  2. The Dalwai Committee was set up in April 2016, to advise on the strategy to double farmers’ incomes by 2022

Farmers becoming labourers

  1. NAFIS estimates that in 2015-16, 35 per cent of farmers’ income came from cultivation, 8 per cent from livestock, 50 per cent from wages and salaries and 7 per cent from non-farm sectors
  2. It appears that working as labourers is a fall-back option for average farmers in drought years
  3. The increasing pressure as a result of shrinking average holding size (NAFIS estimates it at 1.1 hectares) is presumably forcing farmers to work as labourers to meet their needs
  4. This is very different from what the Dalwai Committee assumes when it says that by 2022-23, 69 to 80 per cent of farmers’ incomes will accrue from farming and animal rearing

Way Forward

  1. To achieve PM Modi’s dream of doubling farmers’ incomes by 2022-23, the Dalwai Committee points out that farmers’ real incomes need to grow at 10.4 per annum, that is, 2.8 times the growth rate achieved historically (3.7 per cent)
  2. This sounds like a challenge of raising country’s GDP growth from 7.2 per cent to 20 per cent
  3. It can possibly be done by 2030 unless the government undertakes drastic steps to augment farmers’ incomes at a faster pace

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