Data Shows Rural India is Growing, So Why Are the Farmers Angry?

Rural growth data has been misleading, because in India a bumper harvest can crash agriculture prices.

The larger point is that the average farmer does see prosperity around her, but the same prosperity eludes her and this makes her angry.

(Photo Modified by Eram Gour/The Quint)

The ten-day farmer strike, called by Rashtriya Kisan Mahasangh, ended on 10 June 2018. The strike was largely limited to northern and western India, and from the looks of it, was not very successful. But I guess that is not the point here. This strike and other protests by farmers that have happened in the recent past tell us very clearly that the Indian farmer is angry.

The question is why?

The answer lies in Figure 1, which basically plots the annual growth in agriculture (a good proxy for growth in income from agriculture), along with the annual growth in the non-agriculture part of the economy.

Source: Author’s calculations based on data from the Ministry of Statistics and Programme Implementation.Figure 1

Is Slow Growth the New Normal?

Lest I get accused of cherry-picking data, I need to state here that India moved to a new GDP series in January 2015. In this series, data is available starting from 2011-2012. Hence, any growth calculation can be carried out from that period.

Figure 1 tells us very clearly that over the last six years, the non-agriculture part of the economy has grown faster than the agricultural part. Further, the difference in four out of the six years has been huge.

This is a fairly simple explanation for why farmers are angry. Their incomes have been growing at a very slow rate.

In fact, the agriculture data used in Figure 1 also includes data for forestry, livestock and fishing (that’s how the ministry of statistics and programme implementation reports data). If we adjust for that, what remains is just agriculture. The results then get even more depressing. Indian agriculture has grown by just 5.2%, over the five-year period between 2011-2012 and 2016-2017. The data for forestry, livestock and fishing for 2017-2018 is currently unavailable.

During the same period, the non-agriculture part of the economy grew by 43.4%. If we look at agriculture, forestry, livestock and fishing, this segment of the economy grew by around 18.2% during the six-year period between 2011-2012 and 2017-2018.

During the same period, the non-agriculture, forestry, livestock and fishing part of the economy grew by 54.5%. This should clearly explain why the Indian farmer is angry. Of course, one doesn’t expect farmers to get around to making these calculations, but the larger point is that the average farmer does see prosperity around him while the same prosperity seems to be eluding him. And that makes him angry. This is a reasonable interpretation of the what the data seems to suggest.

Outdated Agriculture Marketing System

What has also not helped is the fact that every time farmers have produced a bumper crop, prices have crashed. This has happened time and again over the last few years.
This comes from the fact that India’s agriculture marketing system continues to remain antiquated. And despite repeated government assurances, nothing significant has happened to improve things on this front.

As a recent newsreport in The Financial Express points out:

“At around Rs 775 per quintal, onion prices in April were the lowest they have been in this harvest month over the last four years — they were Rs 1,499.1 in April 2014. At Rs 464.7 per quintal, February potato prices were also the lowest in four years, over a third lower than in the same month in 2014.”

Further, India is now producing more agricultural produce than it needs. As Harish Damodaran writes in The Indian Express: “We have, indeed, entered a regime of “permanent surpluses” in most crops — a reality our policymakers are unable to grasp, stuck as they are in the era of the Essential Commodities Act.”

Fact Check: Rural India May Be Doing Well, But Not Farmers

The larger implication of this is that many farmers now need to be moved away from farming into other professions. A NITI Aayog discussion paper published in 2017 suggests that for agriculture to be economically feasible, nearly 8.4 crore individuals need to be moved out of it. This forms nearly 25% of the rural workforce and is of course easier said than done.

In the recent past, some analysts have questioned this anger among farmers. The logic they have offered is, how can farmers be doing badly, when data shows that rural India is doing well.

Two-wheeler sales in 2017-2018 grew by 14.7%, after growing by 6.6% in 2016-2017. Two out of every five two-wheelers sold in India, are sold in rural India. Over and above this, data from Nielsen shows that between January and March 2018, the sales of consumer staples in rural India was 1.4 times that of in urban India. The ratio was 1.1 between January and March 2018.

These economic indicators essentially tell us that rural India is doing well and by that logic farmers are also doing well.

The mistake being made here is to mix rural India with agriculture and farming.

The NITI Aayog discussion referred to earlier suggests that the agriculture sector contributes 39% of rural economic output, while employing 64 % of the workforce. This basically means that the 61% of the rural economic output comes from 36% of its workforce not working in agriculture.

Good economic indicators coming from rural India basically suggest that it is the non-agriculture part of the rural workforce, which seems to be doing well. The farmers are not doing well. And that is a reason to worry.

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek). This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)