Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

[op-ed snap] Rural income: looking beyond agriculture


Mains Paper 3: Economy | Development and employment

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The suggestions to increase rural income through non-farm sector.


Ambitious dream of the government

  1. The government has announced its ambitious target of doubling farmers’ income by 2022-23 in 2015-16
  2. Incomes would have to grow annually by 10.4% to double in seven years

Reality: The current situation

  1. The data on growth rates of farm income given by NITI Aayog in its policy paper on doubling farmers’ income shows that:
  2. the real income of farmers has grown at a rate of 3.4% between 1993 and 2016

 Raising of the minimum support prices (MSPs) will not help

  1. Recent efforts to improve farmers’ income have been focused on raising minimum support prices (MSPs)
  2. Historical evidence shows that MSP does not directly translate into higher incomes for farmers due to a deficient ground-implementation framework
  3. Additionally, high MSPs result in market distortions and render Indian exports uncompetitive in world markets

Thus, it does not appear realistic to double the real income of a rural household from agriculture alone. Incomes of rural households need to be augmented from non-farm income sources

What is needed?

  1. A shift of workforce is required from the farm to the non-farm sector, including household and non-household manufacturing, processing, mining and quarrying, repair, construction, trade and commerce, transport, communication and tourism, etc.
  2. More than 45% of the workforce is engaged in a sector(agriculture) which contributes less than 17% to the country’s GDP
  3. This share is poised to further decline; agriculture cannot sustain households dependent on it for long
  4. The sooner we recognize this, the faster we will be able to evaluate policy alternatives

Comparison with China

  1. China, whose farm sector was similar to that of India in the 1960s, now employs only 27.7% of its workforce in agriculture
  2. It has left India far behind in value of agriculture production and rural household incomes
  3. This is because first, it produces much more from each hectare than India does, and second, it rigorously developed non-farm income sources
  4. Labour-intensive “township and village enterprises” (TVEs) were established in rural areas and saw keen participation from the private sector due to low-wage labour
  5. TVEs became engines of growth for Chinese rural non-farm sector
  6. As a result, rural poverty levels are as low as 2.5% now in China while in India, they remain as high as 40% in some states

India should follow the footsteps of China

  1. Taking a cue from its neighbour, India needs to undertake a drive to intensify non-farm employment in its rural areas
  2. Rural households need to be encouraged and enabled to engage household members in non-farm livelihood and contribute to the household income through remittance earning or direct earning

 The manufacturing sector in rural areas needs a great push

  1. The thrust on the manufacturing sector in rural areas has been woefully inadequate. Manufacturing activity, especially employing modern technology, in rural areas has been neglected
  2. Lack of required skills and technical knowledge are the major barriers, apart from good quality infrastructure and power
  3. This has led to minimal private sector investment
  4. Growth of rural manufacturing requires massive investment in skill formation and entrepreneurship development as well as in infrastructure

The way forward

  1. Overreliance on using pricing and MSPs to boost farmer incomes may be short-sighted as Indian agriculture prices need to be aligned with global prices
  2. Focus on non-farm incomes will thus go a long way in raising farm household as well as farmer incomes
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