Thread by @AnilKSood5

#Agriculture #Earnings in #India
Thread
1. Farming is a fixed cost activity, with uncertainty of output. Cost of living is largely fixed for all of us.

@andymukherjee70 @kikumbhar @sritara @Sabya_K @srinivasanravi @srirags @ieuditmisra @Roshanjnu @HarishRDave

2. Cost of living experiences structural shift as the economy grows.

3. Earnings benchmarked to rural cost of living do not allow us to make investment for building capability to take advantage of urban opportunities. Explained later while building a case for public spend.

4. India has constrained its ability to grow by not pricing agri products to help farmers earn sufficient income that give them a chance to invest in themselves & their family and make a transition to urban jobs or becoming entrepreneur.

5. We, therefore, must invest to create work, else we will condemn millions to poor quality life. If investment is not made now, we can forget about the demographic dividend that is potentially available even now.

6. We must also relook at pricing of agri products & help raise earnings. Current method of MSP calculation lacks economic as well as moral ground, as it does not help people improve their ability to invest in themselves and provide for a better life for their families.

7. Yes, we will experience inflation, urban wages will also have to go up. Current approach of suppressing real wage increases compounds urban problem too, thereby, further constraining India's ability to grow.

8. Solution lies in greater industrial and services productivity and invest to grow through exports - build scale for global market to take advantage of lower cost base. At this stage, we have a structural constraint on growth, as explained above.

9. We have to remember that currently a farmer is the God's mercy, along with that of intermediaries in the farming value chain & the policy makers.

Some data on the size of holdings and why 85% of the farmers would struggle to meet even their basic needs.

10. Avg. Holding Size is 1.15 hectare (ha), down from 2.28 in 1971.

11. 85% of the holdings are marginal & small - Avg Size in Marginal is 0.39 ha & in small 1.42

12. They operate ~45% of the area.

13. Area under cultivation is ~159.59 MM ha, among ~138.35 MM holdings.

14. Maximum a small or marginal farmer can hope to earn is INR ~1.0 lakh that too just in 4 states growing sugarcane.

15. Given the size of holdings 85% of people will have no chance of earning that, as not many states grow sugarcane in any case.

16. Average therefore falls to INR 30K per hectare.

17. Assuming they do 2 crops, the average per hectare will be INR ~60K

18. Earning levels of farming community show up in rural spends, average rural MPCE for latest year for which data is available is INR 1,287.

Building a Case for Public Investment

19. If farmers are to make transition from rural to urban India, they need to educate themselves to acquire skills (technical & social) needed in urban India.

20. Given the price attributed to family labour is referenced to rural cost of living (average of INR ~40 per hour), farmers cannot meet the cost of education that is referenced to urban cost of living.

21. Similarly, given the near complete lack of quality healthcare in rural India, a farmer cannot meet the cost of healthcare service that is available only in urban India.

Let us together identify the ways in which we can remove these structural constraints on our growth. An argument based on a few rich farmers' earnings is a misplaced effort at creating binaries.

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