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Small farmer zindabad

More than 80% of India’s farmers are small and marginal farmers. It has been empirically established that small farms produce more per hectare than their larger counterparts. It is therefore imperative to protect the interests of small farmers through measures that help promote and stabilise incomes, reduce risks, and increase profitability, and at the same time improve availability and access to inputs, markets and credit. Extract from the report of the National Commission for Enterprises in the Unorganised Sector (NCEUS), ‘The Challenge of Employment in India: An Informal Economy Perspective’ (2009)

This extract is from the report of the National Commission for Enterprises in the Unorganised Sector (NCEUS), ‘The Challenge of Employment in India: An Informal Economy Perspective' (2009). It provides an insight into the character of farming, and reveals the nature and potential of the smallholding character of Indian agriculture, which NCEUS has said is “much more prominent and pertinent today than ever before”. The predominance of marginal farmers is significant because farming then becomes only one of the sources of livelihood for these households, often much more than that of small farmer households. The NCEUS analysis of smallholder agriculture has shown that the per hectare value of output from small farms is, in general, still not less than that from large farms. “With appropriate institutional support including credit, it has been possible for small farms to catch up and in some cases even surpass large farms in use of HYV and other land-augmenting technologies.”

The total number of agricultural workers in India has been estimated at 258 million, as of 2004-05. About 248 million of the total rural workforce of 341 million are in rural areas. Agricultural production takes place largely on individual or joint holdings. Except for the segment of agriculture that comes under plantations and those covered by corporations and large cooperatives in the organised sector, the Commission has categorised the remaining parts as the unorganised agriculture sector.

The share of unorganised sector agricultural workers in total agricultural workers was 98% during 2004-05. Nearly two-thirds of agricultural workers (64%) are self-employed, or ‘farmers’ as we call them, and the remaining, a little over one-third (36%), wage workers. Almost all wage workers (98%) are casual labourers. Farmers are a group which can be differentiated by size of landholding as a good proxy. Given the overwhelming dominance of the unorganised sector in agricultural employment, we have dealt with the sector as a whole.

The overall structural change in employment has occurred as a result of slower growth of employment in the agricultural sector vis-à-vis total employment. Over the last two decades, the agricultural workforce grew at 1.04% per annum while the total workforce grew at 1.94% per annum (Table 1). During 1983-2004/05, female agricultural employment grew at a rate faster than male agricultural employment. A comparison of employment growth rates between 1983/1993-94 and 1993-94/2004-05 shows that the growth rate of agricultural employment decelerated sharply in the last decade, from 1.38% to 0.72%. Although the growth in total employment also declined from 2.03% during 1983/1993-94 to 1.85% during 1993-94/2004-05, the deceleration was clearly not as sharp as in the case of agricultural employment. It is obvious from these results that there is a gradual decline in the potential of the agricultural sector to absorb the incremental workforce. Further, structural constraints appear to be restricting the scope of women’s employment outside agriculture, confining them primarily to this sector.

The fact that agriculture continues to absorb more workers can be of little consolation unless it can also be shown that such increased employment is accompanied by higher incomes and productivity per worker. Since agricultural GDP grew at a rate faster than the growth in employment, agricultural GDP per worker (a measure of labour productivity) also increased at an annual rate of 1.52% for the entire period, and 1.24% and 1.79% in the two sub-periods respectively (Table 2). Thus, agricultural productivity has not remained entirely stagnant but has grown slowly with a decline in growth rate in the second period (1993-94 to 2004-05). These results also hold for the two major sub-sectors, viz crop and livestock. While the livestock sector shows a higher growth rate in labour productivity over the entire period, both the sectors show lower rates of productivity increase in the second period. This rate of improvement is certainly far from adequate to bring about a sustained and rapid improvement in the living conditions of agricultural workers. The result of this has been a steady widening of the disparity in the income generated per worker in agriculture and in the other sectors.

Growth, grain and livelihoods

It is widely recognised that in the past decades (1960s to 1980s), agricultural employment increased primarily as a result of land-augmenting technological changes, propelled by enhanced investments in irrigation and supporting institutions and policies. These changes made possible increases in both sown area, through higher cropping intensity, as well as greater labour use per sown hectare, although this increase took place at different time periods, in different regions and across different size classes of farmers. Simultaneously, there has also been a fairly dramatic growth in employment in non-crop agricultural sub-sectors such as dairy farming and livestock. Recent studies have shown a decline in the public support available to agriculture and a petering out of the impetus of such technological changes. Moreover, agricultural growth has been acquiring a more labour saving character. The relatively fast growth of the (unorganised) non-farm sector has also provided some scope for the limited occupational diversification that has occurred. At the same time, one must recognise that if the non-farm sector does not provide adequate remunerative employment opportunities, and if the agricultural sector does not grow fast enough, parts of this sector may show features of agricultural involution, with the sector retaining a growing part of the workforce through fragmentation and sharing of work, with little improvement in productivity or agricultural incomes. These issues need to be examined in some depth as they determine the contours of an agricultural employment strategy.

There is clear evidence that in recent years, agricultural growth -- particularly in foodgrain -- has declined. This has had an adverse effect on the growth in agricultural wages that have shown signs of deceleration in the 1990s making the situation even more unfavourable for agricultural labourers. On the other hand, farmers, particularly marginal and small farmers, are also facing a crisis due to increasing input costs and uncertain output markets. In these conditions, government support in the form of policy initiatives and schemes to protect the interests of agricultural workers becomes even more pertinent. However, in the post-1990s period, there has been a decline in government support in the form of declining investments in agriculture; subsidies to the sector are also being rationalised.

The withdrawal of the State has led to much greater dependence on private sources for inputs, extension, markets and credit. Farmer suicides have been widespread in the last several years, and the victims have largely been marginal and small farmers. Increasing costs of cultivation, leading to higher indebtedness, crop failures and incapacity to face price shocks with greater liberalisation of the agricultural sector have driven farmers to the extreme. This has prompted the central and state governments to set up several commissions including the National Commission on Farmers and the Committee on Agricultural Indebtedness to suggest remedial steps.

In the liberalised scenario and with increased integration with global markets it has become even more imperative to protect the interests of marginal and small farmers through measures that help promote and stabilise incomes, reduce risks, and increase profitability, and at the same time improve availability and access to inputs, markets and credit. However, we have observed that the dependence on private sources for inputs, irrigation and, most importantly, for credit among small and marginal farmers has increased in recent years reversing earlier trends towards expansion in access.

As pointed out by this Commission, at the all-India level, more than 80% of farmers belong to marginal and small farm size groups, owning or operating less than 2 hectares of land. The percentage of marginal and small farmers in the total, and also the land operated by them, has steadily increased over time. The percentage of marginal farmers has gone up from nearly 38% in 1953-54 to about 70% in 2002-03. The share of marginal and small farmers in owned land went up from 16.3% in 1953-54 to 43.5% in 2002-03. A similar pattern in land distribution is discernible in the case of operational holdings also. By 2002-03, marginal and small farmers accounted for nearly 80% of operational holdings as compared to about 61% in 1960-61. The smallholding character of Indian agriculture is much more prominent and pertinent today than ever before. Nonetheless, we still need to reckon with considerable inequality in land ownership and operation. Medium and large farmers (6% of farmer households) operate more than one-third of total operated area, while large farmers (0.9% of the total) still operate 13.1% of land.

Inter-state analysis indicates that marginal and small farmers as a group outnumber the rest of the farmers in all the states. In 12 out of 27 states, marginal and small farmers constitute the overwhelming majority of farmers, accounting for 90% or above. While marginal and small farmers outnumber medium and large farmers in all states, in 17 out of 27 states they also account for more than 50% of land possessed for cultivation. Within the group of marginal and small farmers, marginal farmers outnumber small farmers, ranging from 2:l in states with low incidence of marginal and small farmers, to as high as 18:l in Tripura, 12:l in Uttarakhand, 10:l in West Bengal and Kerala, and close to 8:l in Bihar. The predominance of marginal farmers is significant because farming then becomes only one of the sources of livelihood for these households, often much more than that of small farmer households. A foothold in land cultivation is seen to be crucial by these households for the security it provides in terms of food, some collateral, and a source of employment when alternative opportunities become far and few. The importance of a livelihood approach to marginal and small farmers can hardly be underrated.

Only 10 states show the contribution of marginal and small farmers at less than 50% of output. It varies widely across states, ranging from about 19% in Punjab to 86% in West Bengal. It is less than half the total output in only a handful of states in the northwest (Punjab, Haryana and Uttarakhand), centre-west (Rajasthan, Gujarat, Maharashtra and Madhya Pradesh) and south (Andhra Pradesh and Karnataka). But their share in production is often higher in proportion to their share in operational crop land.

Approach of the Commission, analysis and recommendations

We have shown that the per hectare value of output from small farms is, in general, still not less than that from large farms. The NSSO 59th round Farmers’ Survey has empirically established that small farms continue to produce more (in value terms) per hectare than their larger counterparts in the country as a whole as well as in most parts of the country. Small farms are characterised by applications of smaller capital but higher labour and other inputs, especially owned ones, and are generally characterised by a higher index of cropping intensity and diversification. With appropriate institutional support, including credit, it has been possible for small farms to catch up and, in some cases, even surpass large farms in use of HYV and other land-augmenting technologies.

Our analysis has also shown that gender issues in farming need to be moved to centrestage in agricultural policies and programmes. Till recently, little attention was paid to the role of women in the farming community. Women’s work in farm households was seen as mainly supplementing the work of males, who also took all the major decisions. This perception has changed principally because it is recognised that due to the movement of men out of agriculture, women farmers are often the principal (and sole) decision-makers in the household. The Situation Assessment Survey of Farmers 2003 shows that nearly 40% of farmers in India are from among the women. This holds for all size categories. In animal husbandry, more than three-fifths of workers are women. In forestry/plantation activities too, a majority of workers are women.

Input use to enhance productivity has greatly increased since the Green Revolution, which is also one of the reasons for increased cost of cultivation. Timely availability of HYV seeds and usage of fertilisers and pesticides is also important to ensure a good crop. Farmers in general, and marginal and small farmers in particular, often face problems regarding easy and timely availability and quality of these inputs, as also costs and knowledge of use of these inputs in the right quantities. Among the various inputs (pesticides, fertilisers, HYV seeds, organic manure and veterinary services), the Situation Assessment of Farmers Survey shows that only organic manure is most readily available within the village. In most cases, inputs are available in the nearest large village which is more than 2-5 km away. Farmer households have to travel more than 10 km for seeds and pesticides. Access to public extension services has become very weak, which often resulted in inappropriate choice of crops and inputs.

Collective organisation for farmers may be said to be a sine qua non for demanding and securing public services and assistance especially in the context of economic reforms that are, by and large, urban-oriented. Farmers groups and cooperatives help to overcome diseconomies of small size and access to credit, inputs and markets. Cooperative forms of organisation have a long history in rural India, especially among farmers. Yet membership of cooperatives, SHGs and other groups is very low among farmers, except in some regions, and is particularly low among marginal and small farmers.

The present constraints on Indian agriculture stem from systemic issues, which include the macro-policy environment. These constraints have seriously affected the degree of public support received by agriculture in investment, credit, extension services, R&D, and so on. This neglect has been most prominent in the case of marginal and small farmers. In the Commission’s view, marginal and small farms are the backbone of Indian agriculture. These farmers face various disadvantages while dealing with the markets. At the same time, the Commission’s analysis clearly brings out that government interventions also tend to be less effective with respect to these categories of farmers. The Commission feels that there is need for a focused strategy with respect to marginal and small farmers.

Organisationally, such a strategy must focus on group approaches so that the required transaction costs can be reduced and farmers can benefit from economies of scale. The Commission has therefore advocated the setting up of a special programme for marginal and small farmers in order to incentivise the formation of farmers groups and apex organisations, and facilitate finding solutions to the problems of irrigation, inputs, markets, procurement and risk. Also, the risk factor has to be mitigated through appropriate farming strategies as well as adequate insurance. There is the need for insurance instruments that cover production and also market risks for all crops, to reduce the financial risks and increase viability.

Infochange News & Features, July 2010