Farmers' income drying up

Uncertainty grips India's agriculture-based economy as the India Meteorological Department (IMD) revised its monsoon arrival date to June 7. It is now June 29, and in many districts of Kerala, where it should be raining heavily, there is no rain at all, except for a few scattered showers here and there. Warm to very warm days continue. The IMD has predicted a delayed arrival of the southwest monsoon, which is crucial for the kharif season in India when major food crops like rice are grown. The IMD has also warned that the dreaded El Nino, characterised by extreme sea surface warming and delayed monsoon, is expected to set in, and the second half of the season (August to September) is also expected to experience low rainfall. If El Nino impacts rainfall as per historical trends, India will see a deficit monsoon after four years. However, the IMD maintains that the monsoon will be "normal." El Nino is a climate pattern characterised by unusual warming of surface waters in the eastern Pacific Ocean, leading to an escalation of ambient temperature.

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The assurance of a normal monsoon no longer determines a farmer's agricultural yields. Instead, it is the distribution of rainfall that determines crop yields. As observed in the past decade, erratic monsoons and prolonged dry spells during the crucial second half of the farming cycle have damaged crops and reduced production, resulting in a steep decline in farmers' income. However, this season, farmers are facing additional unfavourable conditions that hint at significant losses in agricultural operations. This will have a significant impact on the Indian economy.

Firstly, farmers and farm workers enter the new season, kharif, which accounts for half of India's food supply, without significant capital. Rural wages in the agriculture sector have not shown any growth when adjusted for retail inflation. Earnings from the previous season have not been profitable. Currently, farmers earn more from their labour than from growing crops, rendering their capacity to invest in the new season negligible. However, farmers will sow, as agriculture is the only dependable occupation available to them, and opportunities in non-farm work are limited. Secondly, in recent years, farmers have been starting the crop cycle in July due to the delayed monsoon and erratic progress of rains in June, which have resulted in significant economic losses. However, the effects of El Nino may be felt from August onward. Erratic and overall deficient rainfall, along with consequent dry spells, are characteristic impacts of El Nino. For farmers who have just started sowing, these adverse effects would mean a total disruption of farm operations, leading to low crop yields. This may also result in a large number of farmers abandoning farming for this season. In recent years, thousands of farmers have simply not undertaken farming due to weather uncertainty.

ICRA, the consulting agency (Investment Information and Credit Rating), predicts that due to the onset of El Nino, agricultural gross value added (GVA) growth will be only 2.5 per cent for 2023-2024. According to provisional data from the Union Ministry of Statistics and Programme Implementation, Agri GVA in 2022-2023 was 4 per cent. Based on this data, the growth of the agriculture sector played a crucial and defining role in India's last financial year.

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Private consumption accounts for nearly 60 per cent of India's GDP, with a significant portion contributed by the rural population, which makes up 65 per cent of the total Indian population. Approximately 47 per cent of the population in India depends on agriculture for their livelihood. Therefore, a dip in the agriculture sector's growth would result in income loss for the majority of the Indian population. This will inevitably have an adverse impact on private consumption, leading to a significant contraction of the overall Indian economy.

What does this uncertainty mean for farmers? According to the National Statistical Office (NSO), the last survey conducted in 2021 indicated that the inflation-adjusted income growth rate of an agricultural household during the last decade was 2.5 per cent. The survey shows that income from cultivated land accounts for only 38 per cent of the income for such households. The remaining income comes from livestock and daily wage labour. Moreover, income from cultivation has been declining over the past decade. This season, if the agriculture sector suffers another blow due to inclement weather factors like El Nino, a farmer's income from cultivation will further decline. This implies that to maintain their overall earnings, farmers will need to seek scarce non-farm jobs. In summary, it suggests that for a poor Indian farmer, there is never a light at the end of the tunnel.

(The writer is a former professor at the National Science Foundation and the Royal Society of Belgium.)