Agricultural Labourers vs Farmers – A Comparative Analysis

The economic landscape for farmers and agricultural labourers in India has evolved over the past two decades. Recent data indicates a shift in the terms of trade (ToT) favouring agricultural labourers compared to farmers. This analysis explores the factors contributing to this trend, denoting the dynamics of prices received and paid by both groups.

About Terms of Trade (ToT)

Terms of trade represent the ratio of prices received by farmers for their produce to the prices they pay for consumption and production inputs. For agricultural labourers, ToT is based on their wages relative to the prices of goods they purchase. A higher ToT indicates better economic conditions.

Price Indices for Farmers

The index of prices received (IPR) for farmers rose from 2004-05 to 2013-14. This increase was 111.2%, while the index of prices paid (IPP) rose just 88.2%. This resulted in an improved ToT for farmers, peaking above 100% during 2009-10 and 2010-11. However, from 2013-14 to 2022-23, the IPR growth slowed to 56.3%, while IPP increased by 58.4%. Consequently, ToT fell to 97.2%, indicating a cost squeeze for farmers.

Price Indices for Agricultural Labourers

In contrast, agricultural labourers saw their IPR more than triple from 2004-05 to 2013-14, reaching 151.4. Their IPP rose only 1.7 times during the same period. This disparity led to a remarkable improvement in their ToT from 64.2% to 117.1%. The ratio continued to rise until 2018-19, peaking at 134.4% before declining slightly.

Factors Influencing Economic Conditions

Several factors have influenced the economic conditions of both farmers and agricultural labourers. Agricultural labourers have benefitted from new employment opportunities outside agriculture, driven by economic growth and government initiatives like the Mahatma Gandhi National Rural Employment Guarantee Act. These opportunities have tightened the rural labour market, increasing the bargaining power of labourers. Farmers, on the other hand, have faced rising production costs without corresponding increases in crop prices. Although subsidies and minimum support prices have provided some relief, challenges such as land fragmentation and climate uncertainties have hindered improvements in their economic situation.

Socioeconomic Implications

The changing dynamics between farmers and agricultural labourers have broader socioeconomic implications. Agricultural labourers, often from marginalised communities, have gained better economic standing. This shift has led to increased demands for wages and working conditions. Farmers, particularly from agrarian communities, have expressed dissatisfaction, leading to calls for reservations in government jobs and educational institutions.

Government Interventions and Welfare Schemes

Recent government welfare schemes have further impacted the agricultural labour market. Income support initiatives targeting women have made agricultural work less attractive, contributing to labour shortages. Such policies have altered the traditional labour dynamics, enabling labourers to seek better opportunities.

Future Trends

The future economic landscape for farmers and agricultural labourers will depend on various factors. Continued government support, market fluctuations, and climate change will play crucial roles in shaping their economic realities.

Questions for UPSC:

1. Critically analyse the factors affecting the terms of trade for farmers and agricultural labourers in India.
2. Estimate the impact of government welfare schemes on the agricultural labour market in India.
3. Point out the socioeconomic implications of the shift in terms of trade between farmers and agricultural labourers.
4. With suitable examples, explain how climate change affects agricultural productivity and farmer livelihoods in India.

Answer Hints:

1. Critically analyse the factors affecting the terms of trade for farmers and agricultural labourers in India.

1. Terms of trade (ToT) is influenced by the prices received (IPR) for produce and prices paid (IPP) for inputs.
2. Farmers have faced rising production costs outpacing price increases for their produce, leading to declining ToT.
3. Agricultural labourers benefit from rising wages compared to consumer prices, enhancing their ToT over time.
4. Government policies, such as subsidies and minimum support prices, affect farmers’ economic conditions.
5. Economic growth has created alternative employment opportunities for labourers, tightening the rural labour market.

2. Estimate the impact of government welfare schemes on the agricultural labour market in India.

1. Welfare schemes, like income support for women, have increased household incomes and reduced dependency on agricultural work.
2. Such schemes have led to a tightening of the labour market, increasing the bargaining power of agricultural labourers.
3. Labour shortages have emerged as agricultural workers seek better-paying jobs outside farming.
4. Government interventions have improved living standards for many labourers, but created challenges for farmers in hiring labour.
5. Overall, welfare schemes have shifted traditional labour dynamics, impacting agricultural productivity.

3. Point out the socioeconomic implications of the shift in terms of trade between farmers and agricultural labourers.

1. Agricultural labourers have gained improved economic standing, leading to higher wage demands and better working conditions.
2. Farmers, facing stagnant or declining ToT, express dissatisfaction, resulting in social unrest and demands for government job reservations.
3. The disparity in economic conditions has brought into light inequalities within agrarian communities, affecting social cohesion.
4. Increased economic power among labourers has led to shifts in traditional roles and expectations in rural societies.
5. This shift may also impact migration patterns, as labourers seek opportunities in urban areas for better livelihoods.

4. With suitable examples, explain how climate change affects agricultural productivity and farmer livelihoods in India.

1. Climate change impacts rainfall patterns, leading to unpredictable monsoons which affect crop yields adversely.
2. Increased frequency of extreme weather events, such as droughts and floods, devastate agricultural production.
3. Rising temperatures can reduce crop viability and increase pest infestations, further threatening harvests.
4. For example, wheat production in northern India has faced challenges due to heat stress, reducing yields.
5. These impacts lead to financial instability for farmers, increasing debt levels and exacerbating poverty in rural areas.