Farm Households Earn More from Wages than Crops: What Does This Imply?

The average farm household earns a larger share of its income from wages than from growing crops. This striking finding emerged from the recently published official Situation Assessment Survey of Agricultural Households 2019^[1], attracting the attention of many commentators. But interpretations of this finding differ drastically depending on one’s overall class viewpoint and aims, as we shall see below.

A large section of India’s workforce still depends on agriculture for a living. There is a historical background to this. Under colonial rule, widespread impoverishment took place as surplus was drained from India to Britain, reducing domestic demand; and at the same time, colonial policy ensured that British manufactures flooded in, displacing locally produced goods. For both these reasons, vast numbers of India’s artisans and handicraft workers were rendered unemployed, and had to turn to agriculture for survival. This increased the overall dependence on agriculture for livelihood, and greatly enlarged the pool of unemployed/under-employed workers in the rural areas.

While new, modern factories and other non-traditional forms of employment did arise within the distorted economic structure of colonial rule, they did not grow rapidly enough to reduce this pool of workers. The deindustrialisation brought about by colonial rule was not followed by thoroughgoing, dynamic industrialisation. Even after the transfer of power in 1947, the share of agriculture in employment did not decline for several decades, and even thereafter declined quite slowly.

It was only in the 2000s that the percentage of workers employed in agriculture in India fell sharply, and indeed even the absolute numbers employed in agriculture fell. (The term “workers” here means all employed persons, including not only wage workers, but self-employed persons such as peasants farming their own land or rented land.) This fall was welcomed by many economists as a sign of development, on the assumption that these workers were shifting to other, more productive, employment. Most economists consider that a large proportion of workers employed in agriculture are in ‘disguised unemployment’, i.e., they are hardly adding to production; they can be removed from agriculture without any harm.

However, part of the exit from agriculture in the 2000s may not have been due to the ‘pull’ of better employment elsewhere, as much as it was due to the ‘push’ of the continuing agrarian crisis. Data from an official survey in 2012-13 showed that farm income alone (from cultivation and farming of animals) did not cover even the consumption expenditure of the majority of farm households.^[2]

Farm households, therefore, also turned to wage income and income from non-farm businesses (usually small and micro enterprises). But even when supplemented by these sources, the incomes of over half of farm households did not suffice to meet consumption expenditure, let alone investment expenditure in productive assets.^[3] They tried to juggle multiple employments, including agriculture, to make ends meet, but their non-agricultural earnings did not open up an exit route from agriculture.

For example, around 50 million workers work in rural informal enterprises in manufacturing, trade and other services, according to an official survey of 2015-16.^[4] Out of them, 38 million work in ‘own account enterprises’ (OAEs) – small businesses operating solely on family labour, with no hired workers. In 2015-16, the gross value added per OAE was a little over Rs 5,900 per month. Clearly this was not enough to sustain a family, and most of these workers, or their family members, would have been working elsewhere too.

The situation was not much better for hired workers in such rural informal enterprises. Rural informal enterprises with hired workers paid their workers an average of just Rs 6,200 per month in 2015-16. Thus the hired workers in such enterprises too would be unable to sustain their families solely on their wage earnings here. For the households of both types of rural workers in informal enterprises, therefore, employment in agriculture might have thus played a major role in meeting their subsistence needs.

The sector in which employment grew most rapidly during India’s boom phase, and did draw workforce out of agriculture, was not the formal manufacturing sector, as might be hoped for at India’s stage of development. Rather, it was the construction sector, where employment doubled, from 26 million in 2004-05 to 51 million in 2011-12. Here too incomes did not meet the subsistence needs of a family for the full year. Large numbers of workers continued to shuttle seasonally between agriculture and construction in an effort to make ends meet.

Then, as the construction industry went into a slow decline over the past decade, jobs in construction grew at a crawl. The number of new construction jobs per year during this phase dropped to just one-fifth of the earlier boom phase.^[5] For rural construction workers, real wages did not grow at all between 2016-17 and 2021-22.^[6]

Are marginal farmers “non-serious”?

Thus we have a large army of semi-peasants/semi-proletarians. As we mentioned in an earlier article (“Pushed over the Edge”), the average “agricultural household”, as defined by the National Sample Survey, in fact derives more income from wages than from farming crops.

Source: Situation Assessment of Agricultural Households and Land and Holdings of Households in Rural India 2019, National Sample Survey 77^th Round.

From the above chart, some commentators have concluded that the bulk of farm households – what are termed ‘marginal farmers’ – are not really “serious” farmers, since they derive more of their income from wages than from farming crops. An editorial in the Indian Express bluntly concludes:

The government should stop obsessing over ‘marginal farmers’…. Farming is best left to those who can do it well. Better fewer, but better.^[7]

Scholars of the Centre for Policy Research (CPR) present a marginally more refined version of this view. Examining the data of the latest NSS of farm households, they conclude that only 39 per cent of farm households are actually “serious” farmers, and call for targeting agricultural policy in favour of this section. They assert: “Not everyone can or needs to be a farmer”.^[8] By which they mean, some farmers need to go.

We feel it is useful to look more carefully at this argument, for it is not an isolated one. Indeed, the entire neoliberal programme for agriculture rests on the same premise, namely that ‘unviable’ peasants need to be removed from agriculture on a large scale.

How many farmers qualify as serious farmers? The CPR scholars calculate that only 0.2 per cent (that is not a typo) of farm households in Jharkhand meet their criterion of seriousness. Applying their “better fewer, but better” rule would remove 99.8 of agricultural households in Jharkhand, 99 per cent in West Bengal, 98 per cent in Tamil Nadu, and 94 per cent in Odisha. Indeed this is precisely the thinking that has driven the Government’s agricultural policies, including the recent farm Acts. The process of demand depression, indebtedness and loss of assets we have described in an earlier piece (“Pushed over the Edge”) also drives toward such a ‘logic’.

However, the interpretation of Chart 1 differs radically depending on one’s class standpoint. From the standpoint of the working people, the same data show that even households with wage income have clung on to farming activities, since their income from wage work alone has not sufficed to meet their family’s needs. Table 1 presents data for small and marginal agricultural households – those with .01 to 0.4 hectares, and 0.4 to 1 hectare.

Table 1: Average monthly income (Rs.) from different sources per agricultural

household during July 2018 – June 2019 for marginal and small farmers (hec.)

Source: Situation Assessment Survey of Agricultural Households, 2019.

For example, wage income was no doubt the largest source of income for agricultural households owning just 0.01-.40 hectares (who accounted for about one-third of all such households). But it brought them, on the average, less than Rs 4,500 a month, or less than Rs 30 per day for each member of the household.^[9] If they could have earned more income from wage work alone, they might have done so, but in the absence of decently-paying wage work, they needed farmland for survival. Through farming activities, they eked out another Rs 2,000-odd a month, not a small sum in their conditions, and another Rs 700-odd from non-farm business. And indeed there are many peasant households that pursue multiple activities to stitch together a living; subtract any one of these activities, and their subsistence is threatened.

A definition based not on productive efficiency, but on inequality and depressed prices

Secondly, the CPR scholars’ cut-off level is not based on the productive efficiency of peasant farming, i.e., the amount of output for a given level of inputs. Rather, it is based on the income earned from such farming, as measured with the methodology of this survey. That income, in turn, depends on two things: the level of output and the prices received for crops actually sold.

Output depends to a large extent on the inputs available, such as water. Unsurprisingly, yields rise with the extent of irrigation (see Chart 2). The failure of the Indian State to ensure adequate irrigation to agriculture reduces the output of unirrigated farms. And this in turn is made the basis for labeling them inefficient, unviable, etc.

Source: Agricultural Statistics at a Glance 2021.

Apart from regional disparity, there is a class divide in irrigation. The share of tubewells in irrigation has risen continuously since the 1960s, and now accounts for half of the net irrigated area, even as more equitable systems such as tanks and ponds have gone into decline. Richer farmers are able to dig deeper for water, and their withdrawal of water (which ought to be a common property resource) can even result in the wells of poor peasants drying up. And farmers without access to irrigation water may have to purchase water from other (generally richer) farmers at higher rates.^[10] All this does not mean the richer farmers are more efficient in production, merely that they have greater control of resources through class domination.

The class divide also affects the use of other agricultural inputs. The Economic Survey 2015-16 reported that black market prices of fertiliser were on average 61 per cent higher than the official stipulated prices. On average, small farmers paid 17 per cent more than large farmers for fertiliser, and in some states – Punjab, U.P. and Tamil Nadu – it was between 55 and 70 per cent more. There is also a stark divide in the access of different classes of farmers to bank credit, with smaller and marginal farmers compelled to borrow from informal sources such as moneylenders, at higher interest rates.

All these are the result of the Indian State’s overall class policy with regard to the poor and marginal peasants. They cannot be made the basis for labeling these peasants inefficient or, worse, non-serious.

Further, since the definition of seriousness is based on income, it also depends on the prices received by farmers. It is well established, including by official committees, that peasants receive depressed and unremunerative prices for their produce. The present regime’s Committee on Doubling Farmers’ Income begins by stating in the Foreword to its 2017 report that “despite higher productivity and production… The markets do not assure the farmer of remunerative returns on his produce.” The Committee found, for example, that the per hectare returns on paddy cultivation are low in the case of most states; indeed, taking the broadest measure of cultivation costs, known as the “C 2” measure, the returns were negative in six states (Assam, Bihar, Jharkhand, Maharashtra, Odisha, and West Bengal), which account for well over a third of the country’s output.

The Commission for Agricultural Costs and Prices (CACP) reports that for the last five years (2016-17 to 2020-21), the all-India average market price of paddy has remained below the Minimum Support Price (MSP); this despite the fact that the MSP itself is not based on the broadest (C2) measure of costs. In the case of crops for which there is no Government procurement, the situation is worse.

Here too there is a class divide. Small and marginal farmers have less holding capacity; they are under pressure to sell their crops as soon as they are harvested. Hence they often accept distress prices. Whereas larger farmers may have the capacity to wait for a better price.

Similarly, studies by the Foundation for Agrarian Studies

have consistently shown that prices received by farmers, particularly small farmers, were well below the Minimum Support Prices (MSP) and that MSP of crops often did not cover paid-out input costs incurred by farmers…. The income crises faced by farmers in India has to be addressed on two fronts – by improvement in conditions of agricultural marketing that give farmers better prices for their products on the one hand, and by keeping input prices in check on the other.

In brief, peasant incomes from farming are grossly depressed due to the existing economic and social set-up. This is further compounded by current State policies. Now, if peasants were to (1) get access to adequate irrigation and other inputs, and (2) receive better prices for their produce, the figure of household income from farming crops and animals (col. 6 of Table 1 above) would rise, and so, too, would the share of farm income in their total income. In that case, they would suddenly turn out to be “serious” farmers by the criterion of the scholars mentioned earlier. The very fact that peasants’ output is depressed due to both inequality and State policy, as well as the fact that they are exploited through exchange processes, enable scholars to label them “non-serious” farmers. This shows that the criterion itself is non-serious.

Multiple forms of sustenance

The serious/non-serious dividing line implicitly treats all farmers as surplus farmers, in effect as businesses aiming to maximise their profits. Under capitalism, a business with a low profit rate, or which is even unable to cover its costs, is expected to fold up and leave room for other businesses to grow. However, the bulk of farmers in India are subsistence farmers, whose aim is to survive. For them MSPs are of secondary importance at best. The possession of farmland thus provides multiple forms of sustenance which may not be immediately apparent from such survey data.

For one, farm households, and marginal farm households in particular, keep much of the crop for their own consumption. The NSS survey of agricultural households finds that a considerable proportion of households growing food crops did not make any sales (Chart 3). (In poorer regions such as Jharkhand, the percentage of households selling their crops is even lower.) Secondly, even households who did make sales of food crops retained a sizeable share for their own consumption, particularly in the case of cereals (Chart 4).^[11]

Source for Charts 3 & 4: National Sample Survey, Situation Assessment of Agricultural Households 2019.

The question is: in computing the income from farming, how do we value the share of the crop kept for the household’s own consumption? The NSS values it at the price at which the crop was procured from fthe armer by different private/public agencies.^[12] This has some justification in relation to surplus farmers, farmers who produce largely for the market. When talking of subsistence farmers, though, using such a measure is misleading. These retained foodgrains would have been much more expensive for the household to have purchased from the market for its own consumption, at retail prices. If the share actually retained by agricultural households for their own consumption were to have been valued at retail prices, and shown as part of their income, their income from growing crops would be shown to be higher, and many more peasants would cross the threshold toward “seriousness”. That is, the importance of subsistence farming in the lives of the people of the country would emerge more clearly.

Having a foothold in the village also provides access to village common property resources, including fodder, firewood and uncultivated (wild) plants; we know that such resources supply a large proportion of rural families’ basic needs,^[13] but they are not counted in farm income.

Finally, given the hostile conditions for the labouring poor in urban India, the village offers workers’ families a refuge for rearing children, annual leave and retirement. The importance of having access to village land was further underlined during the Covid-19 lockdown, when millions of workers returned to their villages, and found some shelter and a meagre subsistence there.

Importantly, there is a significant caste dimension, too, brought out by the same survey: 82 per cent of Scheduled Caste agricultural households fall in the ‘marginal holdings’ bracket. If they were to lose their meagre plots, their dependence on upper castes for a livelihood would increase, and correspondingly their social oppression.

And while Scheduled Tribes have larger plots of land than Scheduled Castes, crop yields on their lands are low; moreover, if they sell any part of their crops, the price they receive for it is low, and hence their agricultural output is accorded a low money value by the survey. Thus the survey values the farming income of Scheduled Tribes lower than their wage income. In this fashion Adivasis, the social segment that is most dependent on agriculture (and forestry), wind up failing the CPR scholars’ test, and at least two-thirds of them would be deemed “unserious” farmers. The point is: the seriousness test would provide a useful alibi for ousting them from their land.

In the view of international agencies and the Indian rulers, the poor peasantry are ‘unviable’, indeed they are the cause of the crisis of India’s agriculture. In effect, their solution to the problem of “doubling farmers’ income” is to reduce the number of “farmers” to a third, or less, along the lines of “better fewer, but better”. It is a class war from above.

However, in defiance of the wishes of international agencies and the Indian rulers, these poor peasants (marginal and small farm households, accounting for 70 and 18 per cent, respectively, of the total households covered by the survey) continue to cling to their land, and struggle to make it productive, even under very adverse circumstances. A sizeable number of them lease in land to augment their inadequate plots.^[14] In the period between the 2012-13 and 2018-19 surveys, the number of agricultural households has not fallen – not because agriculture is so profitable, but because there is no alternative for their survival.

Two paths

There has been a 60-year debate on whether small farms in India are more or less productive per hectare than large farms, and numerous economists have tried their best to prove the case against small farms, without much success. The entire discussion is at any rate based on a mistaken analytic framework, and diverts from the real questions of the conditions and relationships within India’s agriculture.^[15] But we wish to point out certain simple truths.

First, a process which effectively ousts marginal farm households, whether by acquiring their meagre plots outright or, as outlined above, by destroying their economy to the point where they themselves relinquish their lands, would impoverish tens if not hundreds of millions, since it is a hard reality that no other sector of the economy is providing them a full-fledged livelihood. This ousting would in turn trigger a further depression in demand.

This leads us to an old and important question. Let us say, in an underdeveloped economy marked by large-scale unemployment/under-employment, we have a choice between two options. Option 1 is to employ 10 persons to produce 100 items; option two is to employ 5 persons with higher technology to produce 90 items, leaving the other 5 persons unemployed. Any ordinary person would prefer the first option, since under the second option fewer people would have jobs, and overall output too would be less. However, the overwhelming majority of present-day economists would prefer the second option, on the argument that it maximises the productivity per worker employed. They might also argue that the other 5 persons will find employment elsewhere, but this argument makes no sense, since in the first place we are talking about a country with large-scale unemployment.

The point is that the latter option – employing a fraction of the workers, with much higher productivity per worker – allows private capital to extract much more surplus. Moreover, supplying the technology for the latter process is a more profitable proposition for giant corporations, foreign and domestic. Thus, even if it makes no sense from the angle of the people of the country, the country’s rulers are driving down the latter path.^[16]

Of course a large share of those at present ‘employed’ or underemployed in agriculture need jobs outside agriculture. But those jobs must be created first through a democratic and national development process, and absorb workers from agriculture. True, creating those jobs requires investment, which has to be paid for out of the surpluses from existing production; but the required surpluses can be generated even while maximising employment. Neoliberal theorists instead demand that those working in agriculture (or in the informal sector in general) be simply ousted, and expect that rendering people unemployed magically leads to the creation of jobs for them. However, this promises nothing but devastation.

The alternative to this devastation is a social, economic and political process to increase the share of the landless and marginal farm households in land, and bring about collective control of common property resources such as water; free them of multiple parasitic extractions; strengthen and enhance their resources (e.g. through provision of inputs) and their capabilities (e.g., through agricultural extension services), thus making their agriculture more productive, remunerative and genuinely resilient; and develop their democratic collectives. This would not be possible through a mere bureaucratic route. It would require a massive movement of the rural oppressed, which would have to overcome fierce opposition from those who control those resources at present.

Such a process would not only lift vast numbers out of poverty, but generate demand for simple goods, the production of which can generate widespread industrial employment. When achieved through a broad social movement for basic social and political transformation, this would lay the base for collective efforts to improve the land’s productivity. It would also enable the spinning-off of village-level industrial enterprises which could employ under-employed workers from agriculture, particularly during the slack agricultural season. And finally, it would provide a critical support to the struggle for social liberation of women and oppressed castes and communities.

In the absence of such a struggle, a part of peasant assets face alienation. Unlike the case of private corporate firms or the State directly acquiring lands, here the mechanism of loss of land would be through various powerful forces operating at the village level, including land brokers, moneylenders, traders and larger landholders, operating in collusion with local officialdom.

The blanket term “farmers” blurs more than it reveals. The official survey of agricultural households – defined by the survey as those who earn at least Rs 4,000 a year from agriculture – finds that 73 per cent of such households own just 31.5 per cent of the land; at the other end, 2.6 per cent of the largest landholders own 20 per cent of the land. In other words, an average household in the richest group owns more than 18 times the amount of land of a household in the poorer group – even going by official data, which generally do not reveal the full extent of land inequalities. Both sections are termed “farmers”; but the process of neoliberal restructuring would strengthen the large landholders while pauperising the small and marginal farm households.

1. National Statistical Office, September 2021. ↑
2. Agricultural households possessing <0.01, 0.01-0.4, 0.41-1.00, and 1.01-2.00 hectares, accounted for 2.6, 31.9, 34.9, and 17.2 per cent, respectively, of total agricultural households. The average of farm income for these groups minus their consumption expenditure was Rs -3897, Rs -4093, Rs -3246, and Rs -1430, respectively. ↑
3. The average incomes of agricultural households in the bottom six deciles were lower than their average consumption expenditures. Aparajita Bakshi, “Situation Assessment Survey of Agricultural Households 2019: A Statistical Note”, Review of Agrarian Studies, July-December 2021. ↑
4. National Sample Survey Organisation (NSSO), Key Indicators of Unincorporated Non-Agricultural Enterprises (Excluding Construction), NSS 73^rd Round, July 2015-July 2016. ↑
5. Sujata Kundu, “Rural Wage Dynamics: What Role Does Inflation Play?”, RBI Occasional Papers, 2019. Construction employment doubled, from 25.6 million in 2004-05, to 50.3 million in 2011-12 – at the rate of 3.5 million additional jobs a year; but thereafter grew much more slowly till 2017-18, to 54.3 million, at the rate of 0.67 million jobs a year. Santosh Mehrotra and Jajati K. Parida, “India’s Employment Crisis: Rising Education Levels and Falling Non-agricultural Job Growth”, Centre for Sustainable Employment, Azim Premji University, October 2019. ↑
6. Between 2016-17 and 2021-22, average real wages (at 2011-12 prices) of rural male construction workers fell from Rs 212.24 to Rs 210.35 per day. For rural female construction workers, they rose from Rs 152.47 to Rs 155.09. Source: Wage Rates in Rural India, Labour Bureau, deflated using Consumer Price Index for Rural Labour. ↑
7. Editorial, “Farmers’ future”, Indian Express, September 21, 2021. https://indianexpress.com/article/opinion/editorials/indian-farmers-monthly-income-agricultural-household-7523346/ ↑
8. Harish Damodaran and Samridhi Agarwal, “Counting the kisan”, Indian Express, October 4, 2021. ↑
9. Situation Assessment of Agricultural Households 2019. ↑
10. “Irrigation Management for Sustainable Agriculture”, RBI Bulletin, May 2022, suggests that one reason for rising irrigation costs in Bihar, Madhya Pradesh, Himachal Pradesh, Jharkhand and Uttar Pradesh could be the fact that farmers without irrigation facilities of their own end up purchasing water from other farmers at higher rates in secondary irrigation markets. ↑
11. Situation Assessment of Agricultural Households 2019. ↑
12. In the case of farmers who did not sell any of their crop, the NSS computes the value of the crop by using the local market price at the time of the harvest. This too is not a retail price, but the price at which other farmers sold their crop in the local market. ↑
13. “Common Property Resources in India”, NSS Report no. 452, January-June 1998. ↑
14. In Assam, Bihar, Chhattisgarh, Himachal Pradesh, Jharkhand, Kerala, Madhya Pradesh, Odisha, Uttarakhand, Uttar Pradesh, and West Bengal, leasing-in is dominated by holdings under 2 hectares. In Haryana, Karnataka and Punjab leasing-in is dominated by holdings over 4 hectares. In Andhra Pradesh, Gujarat, Maharashtra, Rajasthan, Tamil Nadu, and Telangana, the picture is mixed, but the share of small holdings leasing in land is sizeable. ↑
15. Krishna Bharadwaj, “Notes on Farm Size and Productivity”, Economic and Political Weekly, Review of Agriculture, March 1974. ↑
16. In a socially planned economy with full employment, it might make sense to shift to higher-productivity technology, using less workers. The workers released from this production unit could shift to employment elsewhere in a planned way. In this way workers would not suffer unemployment, total output would be maximised, and surpluses could still be increased. The increased surpluses could be invested in further increasing productive capacity, or used for some other social benefit. However, here we are not talking of such an economy, but one such as India’s, with large surplus labour. What was written 40 years ago still applies: “Kalecki, it may be recalled, demonstrated long ago that in an economy characterised by unemployment the rate of output expansion can be stepped up by temporarily lowering the capital-output and capital-labour ratios. The Kalecki argument is at bottom a plea for labour-intensive technologies…. Yet the trend of development in India and most other Third World countries is in the opposite direction. As with the land reforms, it is not difficult to see why. Those who wield power wish to maximise surplus per unit of accumulation, which is often achieved with the most modern technologies, usually subsidised by cheap loans, investment subsidies, etc.; the total subsidies may be as high as two-thirds of the capital needs. At the other end, the likely beneficiaries of labour-intensive technologies have very little control over policy-making. Thus whether in industry or in agriculture economic development is contingent on a democratisation of the polity.” N.K. Chandra, “Long-Term Stagnation in the Indian Economy, 1900-75”, Economic and Political Weekly, Annual Number, April 1982. ↑