46% of Indian farmers contribute mere 18% to GDP

A report from the Foundation for Economic Development indicates that while 46% of India's workforce is engaged in agriculture (all of whom are included loosely in the country's population of farmers in the popular discourse), this sector only accounts for 18% of the nation's GDP. The report says that the manufacturing sector plays a crucial role in absorbing unskilled labour, offering employment opportunities that are 3 to 6 times more productive than those in agriculture, thereby enabling a transition to more efficient job roles.

Moreover, industrial clusters, which are pivotal for manufacturing jobs, require a larger workforce than what is currently available in surrounding areas. A big challenge arises from the lack of adequate housing for workers near these clusters, leading to workforce shortages and diminished productivity. This situation adversely impacts India's competitiveness in manufacturing exports, hindering job creation and economic growth.

The report further notes that the existing worker housing is largely informal, consisting of unauthorised slums or substandard settlements that fail to meet the necessary quantity and quality standards. Such inadequate living conditions deter workers from relocating close to industrial clusters, perpetuating the issue of workforce availability.

Regulatory challenges also hinder private sector efforts to address this problem. Stringent zoning laws restrict the construction of worker housing while complicated building regulations inflate costs and lead to delays, along with high operational expenses, including GST and commercial rates, which dissuade investment.

The report proposes several reforms aimed at bolstering manufacturing capabilities. It recommends adopting more flexible zoning regulations to allow worker housing in all areas, simplifying building regulations to cut costs and reduce delays, and providing GST exemptions along with waivers for other commercial charges related to worker accommodation.

Implementing these recommendations could enhance private sector involvement in the development of housing for workers in the farm and other sectors.

Housing availability versus industrial growth

The report highlights the crucial link between housing availability and industrial growth, proposing that housing for workers be recognised as a fundamental component of infrastructure. It calls for government financial support in the form of construction subsidies and rental assistance programs for workers.

Such initiatives would guarantee access to affordable, quality housing and facilitate the relocation of the workforce to industrial regions, thereby fostering industrial advancement.

India's abject poor and filthy rich farmers

According to the latest data of the UN's Food and Agriculture Organisation and the World Economic Forum, the classification of the workforce in India's agriculture sector, based on their landholding size, shows that 82% of the workers in the sector are small and marginal, owning less than 2 hectares of land. This group represents the majority of the agricultural workforce, which is often associated with lower income and higher vulnerability. Only a small percentage, roughly 4-5%, are considered large or wealthy farmers who own more than 10 hectares of land. These figures highlight significant disparities in land ownership and income levels within the agricultural sector.

The dominance of small and marginal farm workers underscores their economic struggles, with many relying on subsidies or alternative sources of income. Policies aimed at increasing agricultural efficiency and resilience are critical for addressing these inequities and improving the livelihoods of poorer farming households.

Income disparity

Indian farmers' incomes show huge variations, based on their landholding sizes, crop types and access to resources. According to recent data:

1. Average monthly income:

   • The average income per agricultural household in India was ₹10,218 per month in 2019, reflecting a 59% nominal increase from ₹6,426 in 2014. This income includes crop production, livestock, wages, and other sources [Data source: Business Today, Hindustan Times].

2. Disparity between farmers:

   • Small and marginal farmers (less than 2 hectares): These farm workers, constituting over 85% of agricultural households, typically earn less due to limited land. Their earnings largely come from small-scale production and labour work. Many struggle to achieve ₹5,000-₹7,000 per month [Data source: Statista].
   • Medium and large farmers (more than 2 hectares): These households can earn significantly more, often exceeding ₹20,000-₹30,000 per month by diversifying into high-value crops, mechanised farming, and better market access [Data source: Business Today, Statista].

3. Regional differences:

   • States like Punjab and Haryana show higher incomes due to irrigation and mechanisation, while regions in eastern India, such as Bihar and Odisha, report lower earnings due to smaller holdings and limited infrastructure [Data source: Business Today].

Overall, while average incomes have increased, inequality persists, with a large portion of farm workers earning below subsistence levels. Access to institutional credit, better prices through farmer-producer organisations, and diversification are key to narrowing this gap [Data source: Hindustan Times].

Why rich farmers are more demanding while the poor don't diversify

The reluctance of poor workers in the agriculture sector in India to diversify into other professions stems from several structural and socio-economic challenges:

1. Limited education and skills

• A significant portion of India’s farming population lacks the formal education and vocational skills that are necessary to transition into other professions. The rural literacy rate, while improving, still lags behind urban areas, limiting non-agricultural job opportunities [Data source: Statista, Business Today].

2. Dependency on agriculture

• Over 58% of rural households rely on agriculture as their primary source of income, indicating deep-rooted dependence on farming. Generational occupation and lack of exposure to alternative livelihoods perpetuate this reliance [Data source: Hindustan Times].

3. Non-agricultural job scarcity

• Rural areas often lack industries and infrastructure to provide viable employment alternatives. Poor farm workers might migrate to urban areas for unskilled labour jobs, which are usually unstable, poorly paid, and involve harsh working conditions [Data source: Business Today].

4. Fragmented landholdings

• Marginal labourers in farmlands own small plots of land, which are not viable for large-scale farming but are difficult to sell due to sentimental attachment and lack of market demand. They often remain tied to these lands, even when income is insufficient [Data source: Hindustan Times, Business Today].

Case of demanding rich farmers

Rich farmers in Haryana, Punjab and western Uttar Pradesh tend to dominate agricultural policy debates because of:

1. Historical importance: These regions were at the forefront of the Green Revolution, creating a strong farming lobby.
2. Political influence: With better literacy, organised unions, and larger landholdings, rich farmers can exert greater pressure on the government to secure subsidies like Minimum Support Price (MSP), even when their profitability is higher than average farmers elsewhere [Data source: Hindustan Times].
3. Misaligned incentives: Rich farmers, benefiting from assured procurement of wheat and rice, resist diversification into crops or professions that lack government guarantees, such as horticulture or private sector roles [Data source: Statista].

Path forward

Efforts to enable diversification require:

• Skill development programmes: Train farm workers and rural youth in non-agricultural trades.
• Industrial development: Foster rural industries to provide stable jobs.
• Reform in subsidies: Redirect subsidies towards diversification incentives, rather than solely supporting staple crops.
• Education improvements: Ensure better access to education and awareness of alternative livelihood opportunities.

The current system creates dependency among both poor and rich farmers, perpetuating reliance on government support instead of fostering self-reliance or diversification.