Income of farmers growing at slower pace
NEW DELHI: Farm incomes in food-bowl Punjab are growing at a much slower pace than some traditionally poorer states, as new data suggest agriculture in the state has hit an immutable law of economics: diminishing returns.
Punjab propelled India’s Green Revolution five decades ago, rescuing millions from hunger. But the gains are fast eroding. Experts say the income slowdown is linked to an overdependence on big cereals, such as wheat and rice.
A slower pace of farm income growth in Punjab is borne out by the Situation Assessment of Agricultural Households 2018-19 (SAS), a national survey of farm incomes released recently.
Although Punjab’s farmers lead the country in terms of absolute levels of monthly income, farm income not adjusted for inflation in the state annually grew 6.73% in a span of six years between 2013-14 and 2018-19, the survey shows.
In contrast, farm incomes in states such as Bihar and Uttarakhand grew much faster at 13.3% and 19.3% in the corresponding period, albeit over a low base.
Cheap fertilisers, assured minimum support price (MSP) for cereals, free electricity for drawing water and high-yielding seeds have, over the decades, spurred a trend of ‘mono-crop“The ping’, or the practice of growing mainly rice in summer and wheat in winter. This has robbed Punjab’s farmers of potential income that could have come from growing a more diverse set of crops, research shows.
MSP or minimum support price is a floor price set by the government. The government ‘procures’ or buys paddy and wheat at MSP to build stockpiles for redistribution to the poor. This has increased farmers’ dependence on cereals.
A widespread farmers agitation since last year against the Modi government’s three new farm laws and demand by the protesting cultivators for a legal guarantee for MSP has only prompted authorities to step up procurement of cereals even more.
The government bought a record 60.06 million tonne of rice grown in the summer-sown kharif season in 2020, the highest quantity ever.
This procurement policy, which incentivises big cereals, has caused Punjab’s rich landscape of corn, barley, gram, lentils and nutritious coarser cereals to disappear within a decade of big cereals entering the state in the late 1960s.
The number of crops grown by Punjab’s farmers has declined from 21 in the 1960s to just about nine, according to data cited by Prof Surinder S Jodhka of Jawaharlal Nehru University, New Delhi, in a recent paper.
"The Green Revolution was actually a brown revolution. It was limited to rice and wheat,” said Uma Kapila, an economist who formerly taught at Delhi’s Miranda House.
Punjab’s average farm gross domestic product has plateaued around 2%, while it could have been grown over 5% annually if only farmers had not given up cultivating a more diverse set of crops, according to a research by economists Ashok Gulati and Siraj Hussain of the think-tank ICRIER. The state’s agricultural GDP, a broad measure of farm income, grew only 1.61% annually, less than half the all-India average of 3.5% between 2005-06 and 2014-15, Gulati’s research shows. The paddy boom is partly responsible for a severe winter smog across much of northern India, as farmers set fire to paddy crop residue, known as stubble, to clear fields.
Punjab takes about 5,500 litres of water to grow one kg of rice, five times as much China uses, pointing to the state’s low water productivity. Northern and central districts are severely water depleted, while southwestern districts face water logging and soil salinity.
Districts such as Muktsar, Fazilka, Bathinda and Faridkot are notoriously degraded. The Central Ground Water Board put out a dire warning in May last year: at the current rate of water extraction, Punjab would be a desert within the next quarter century. The state has never been able to implement an agenda of crop diversification first chalked out by the so-called S.S. Johl committee in 1986,” said KS Mani, a former faculty at the Tamil Nadu Agricultural University. Paddy has meant a groundwater extraction rate of 165%, a jump of 16 percentage points since 2013. “I have moved from shallow tubewells to six deep tubewells on my 12 acres. My expenses are going up because I have to dig deeper and deeper every year,” says Ravinder Uppal, a paddy grower.
Big cereals have stoked an insidious rise in costs, annually growing by 5-6% and pushing farmers into debt, says Balwinder Singh Sandhu, the state’s agriculture commissioner.
The increase in paddy MSP has barely kept pace with rising costs, if a measure of cultivation known as “C2 cost” is factored in, which includes the imputed rental value of land, depreciation and interests on capital.
Increasing the share of capital, such as mechanised harvesters and investment, is necessary for growth. But pumping more and more capital without technological advancements can lead to what Nobel winning economist Robert Solow demonstrated to be a “steady economic state”, where all new investment goes into replacing exhausted capital without productivity gains. The economy stalls as a result.