The Hidden Crisis in India's Agricultural Sector
At first glance, India's agricultural sector appears to be performing remarkably well according to national accounts. The Economic Survey reveals that agriculture and allied sectors have grown at an impressive 4.4% annually over the past five years and 3.9% over the last decade. These figures represent significant improvement from historical performance and would suggest a thriving sector that employs nearly half of India's workforce.
The Contradiction Between Aggregate Data and Ground Reality
However, a deeper examination reveals a troubling contradiction. While aggregate numbers paint a positive picture, field data indicates that India's agrarian sector is experiencing its longest and most severe phase of income distress. This discrepancy stems largely from how agricultural data is collected and presented.
Agriculture and allied sectors comprise several sub-sectors: farm crops (54%), livestock (30%), forestry (8%), and fishing and aquaculture (the remainder). The impressive aggregate growth is primarily driven by livestock, which has expanded at more than 7% annually, and fisheries, growing at over 8% in the last decade.
The Stagnant Crops Sub-Sector
The critical crops sub-sector, which includes essential commodities like cereals, edible oils, pulses, cotton, sugarcane, and horticultural crops such as fruits and vegetables, has grown at just 2% annually. This represents a significant slowdown from the 3.3% annual growth recorded between 2004 and 2014. Given that crops constitute the largest agricultural sub-sector and employ the majority of agricultural workers, this stagnation has profound implications.
The livestock growth figures themselves raise questions. While national accounts suggest rapid expansion, the Situation Assessment Survey indicates slower growth. Historically, livestock growth has closely tracked crop growth due to the interconnected nature of these activities in Indian farming.
Declining Farmer Incomes and Structural Reversals
The weakness in the crops sector directly translates to declining farmer incomes. Household survey data confirms a reduction in real cultivation income, forcing agricultural households to supplement earnings through wage work. However, with wages remaining largely stagnant over the past decade, this strategy has proven insufficient to raise household incomes.
More alarmingly, indirect income estimates following the Niti Aayog methodology suggest farmer incomes actually declined by 0.62% annually between 2016-17 and 2023-24. This stands in stark contrast to the 7.5% annual increase recorded between 2004-05 and 2011-12, and raises serious questions about the government's goal of doubling farmer incomes.
This income decline has occurred alongside a significant increase in agricultural workers. Approximately 66 million workers joined the sector in the last six years, reversing the entire decline observed between 2004-05 and 2017-18. This reversal represents not agriculture's improved attractiveness, but rather distress in non-agricultural sectors failing to provide remunerative employment.
Policy Failures and Their Consequences
The agricultural crisis has unfolded despite farmers' efforts to increase productivity, pointing to adverse policy conditions. Government investment in agriculture has weakened in recent years, and the state's price-support mechanisms have failed to stabilize farm output prices. This year has seen declines in farm-gate prices for most crops, meaning farmers receive less for their produce even as food inflation moderates.
The Broader Economic Implications
Revitalizing agriculture is essential not merely because it employs nearly half of India's workforce, but because it represents a crucial driver for long-term economic revival. With private investment remaining sluggish and export growth slow, a domestic demand revival is necessary to sustain economic momentum. The agricultural sector's health directly impacts rural demand, which in turn affects the broader economy.
The structural reversal of workers moving back to agriculture represents a serious economic crisis, particularly for rural India. Policymakers cannot afford to neglect this vast sector, as its revival holds the key to addressing rural income distress and overcoming the demand deficiency that currently constrains India's economic growth.
