The development of non-farm sectors alongside infrastructural changes in the agricultural sector could bring reformation of the Indian economy.
On 19 November 2021, the Indian government withdrew the three contentious farm laws which had witnessed more than a year’s worth of protest from farmers, mainly from the states of Punjab and Haryana, on the border of the national capital. While the laws were met with a huge backlash, based on the narrative that their implementation will cause farmers to lose Minimum Support Price (MSP) by the government, and that they will have fend for themselves in the market for adequate prices, it’s important that we also look at the non-farm sector and labour market to understand the failure of the otherwise reformatory laws.
A study by Mahambare et al. of Great Lakes Institute of Management, Chennai, investigated the changes in India’s employment pattern with respect to state, gender, and age, focusing on agriculture. Their methodology included deriving unit-level data of the Employment and Unemployment Survey, 2004-05, and the Periodic Labour Force Survey, 2018-19 to calculate the sector-wise employment-to-population ratio, instead of the employment-to-labour force ratio. The idea behind using the sector-wise employment-to-population ratio was that it shows a clear picture of the overall employment dependency of a particular sector of the economy except for employment-to-labour force ratio which tells people who are employed or looking for work. The analysis was restricted to the age group of 20 to 59 years, or as they call it, the prime working age.
While the laws were met with a huge backlash, based on the narrative that their implementation will cause farmers to lose Minimum Support Price (MSP) by the government, and that they will have fend for themselves in the market for adequate prices, it’s important that we also look at the non-farm sector and labour market to understand the failure of the otherwise reformatory laws.
The study found that, in the states of Punjab and Haryana, where agriculture is more prevalent in comparison with economies of other states, not more than 20 percent of prime-age adults in rural areas were found to be working on farms in 2018-19. Further, since 2004-05, Haryana and Punjab are amongst the few states that witnessed the largest decline in the share of farm employment. It should be noted that lower reliance on agricultural employment in these states indicates higher farm productivity and incomes, which allows women to retreat back home to unpaid care work. However, if the status quo were to change with respect to assured demand and prices for food grains (which are in excess supply even now), equilibrium could be altered, something that happened last year with introduction of the three farm laws.
End of price guarantee for rice and wheat, as a result of the practicing of farm laws, would cause prices of these commodities to inevitably decline due to massive surplus, given that their production, already, is well in excess of demand. In such a case, these ‘rich’ farmers would be unable to finance their present income and lifestyle and will have look for alternate source of income, something that would require the younger generation and women. What’s interesting is that these women had previously retreated to the home as a result of increase in farm income and women resuming paid work would signal a drop in social status, which would be culturally unacceptable.
Data from the Periodic Labour Force Survey 2018-19 suggests a nearly 30 percent fall in the last decade-and-a-half in women employed in the agriculture sector and an increase in percentage of young men (20-29 years) being either unemployed or in education in the states of Punjab and Haryana; both of which is only sustainable if farm income in the given states continues to remain high.
End of price guarantee for rice and wheat, as a result of the practicing of farm laws, would cause prices of these commodities to inevitably decline due to massive surplus, given that their production, already, is well in excess of demand.
What is worrying is that if these people were to go out and look for employment, they will come face-to-face with double digit unemployment numbers.
Hence, growth in the non-farm sector and adoption of an open-minded approach by the society is all the more crucial for the agricultural sector to reform in the Indian economy.
It is also imperative to highlight that the laws didn’t face any resistance from poor farmers or states other than Punjab and Haryana. This could be due to the fact that small farmers have not benefitted as much as rich farmers from the system of MSPs. G V Ramanjaneyulu of the Centre for Sustainable Agriculture (CSA) explains, “In the past two-three years, we have incomes from sources other than crop cultivation falling sharply while in the crop sector mono-cropping has taken over in a big way, which has to give way to integrated farming systems. Therefore, a farmer having 30 acres in Punjab gets the same institutional support as a small agriculturist owning three acres in Anantapur in Andhra Pradesh. This has to end. Big dairies are gobbling up small backyard livestock, which is limiting additional sources of incomes for the rural household.”
A farmer having 30 acres in Punjab gets the same institutional support as a small agriculturist owning three acres in Anantapur in Andhra Pradesh.
According to the former Union agriculture secretary T. Nanda Kumar, an agro-economist, “A sensible way would be to have more federalism built into this, as each state has different problems and different political considerations. For example, agricultural produce market committees (APMCs) are very important in Punjab, but other states prefer a much more hybrid model (where some produce can be sold outside APMCs). Other reforms such as direct benefit transfer might happen in consultation with states.”
Hence, apart from the infrastructural improvement in the agriculture sector, the non-farm sectors needs to generate enough jobs to accommodate young men and women—both resuming careers and fresh graduates entering the job market. It is vital that we recognise the idea of the invisible trade-off between the agricultural and non-farm sector and work on it with lessons drawn from the repealed Farm Bills.
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Ananyashree Gupta was a Research Assistant with the Centre for Economy &: Growth Delhi.
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