Crisil, a leading rating agency, has conducted an in-depth analysis of 25 key field and horticultural crops, indicating that the profitability per hectare is expected to increase by 3-5% year-on-year to Rs. 100,000 in the Kharif (Summer Crop) Season of 2020. However, economists suggest that individual farmers may not witness any significant increase in their personal incomes.
Anticipated Profits in the Agriculture Sector
Despite the economic toll of Covid-19, agriculture remains one of the few promising areas of the economy. Favorable weather conditions are predicted to spur production and profits, especially for paddy crops. The government is also investing heavily to support farmers, providing an additional Rs. 30,000 crore in emergency working capital funds through NABARD and Rs. 2 lakh crore of concessional credit. In the last quarter of 2019-2020, the agriculture sector experienced a growth rate of 5.9%.
The Impact on Farmers’ Income
While overall sector profitability is expected to rise, per capita income (income per farmer) may not follow suit. Economists attribute this probability to an increase in agricultural employment due to reverse migration during COVID-19, which has seen a potential rise of up to 16% over 2019’s farm employment. According to data from the Centre for Monitoring Indian Economy (CMIE), the farming sector gained 14.9 million jobs between April-July 2020.
Factors Potentially Reducing Farmers’ Income
The Covid lockdown has prompted a large-scale return to rural areas, leading to an increased reliance on agriculture and MGNREGA for employment. CMIE data showed an increase from 111.3 million people working in agriculture in 2019-20 to 130 million in June 2020. Additionally, while there’s a high demand for farm labor until the end of the sowing season in August, this increased profitability may not stimulate rural demand as a disproportionately high number of people depend on farming income this year. Lastly, a rise in Covid-19 cases in rural areas could adversely affect harvesting and supply chains.
Declining Produce Prices
Farmer income doesn’t just rely on agricultural output but also on the prices received for their produce. While cereal prices continue to show positive inflation, prices for most other food groups (including fruits, vegetables, eggs, poultry, and fish) continue to decline. The rising input prices combined with falling produce prices make it likely that many small and marginal farmers will see a decrease rather than an increase in incomes.
Government Intervention
The government has introduced three ordinances under the Atmanirbhar Bharat scheme in May 2020 to help farmers claim better prices for their produce. Additionally, the government launched the Rs.1 lakh crore Agriculture Infrastructure Fund to establish cold chains and refrigerated transportation, which are anticipated to help farmers secure better prices for their products.
Moving Forward
Initiatives by multinational companies like ‘e-choupal’ by ITC Limited, which gives farmers access to technical knowledge and a transparent pricing system, should be promoted. Consolidating and leveraging the CSC (Common Service Center) network across India could also prove beneficial. Furthermore, the government should focus on improving rural infrastructure including healthcare, education, communication, power, and road networks to improve living conditions and reduce migration to cities.
