Statsguru: Income inequality in India’s farm sector explained in six charts

A recent paper explores the contours of income inequality among farmers in India

The policy intention of doubling of farmers’ incomes in five years is fraught with multiple challenges, including erratic monsoons and market imperfections. But a recent paper brought out by Sanjoy Chakravorty, S Chandrasekhar and Karthikeya Naraparaju of the Indira Gandhi Institute of Development Research goes deeper into the income profile of farmers in India, and explores the contours of income inequality among them. They use the two income surveys carried out by the National Statistics Office (NSO) in 2003 and 2013.

The analysis shows that small landholders are prone to debt traps, as their consumption spend is more than their incomes. The deficit is more for small farmers than those who do not own land (very minute holdings), shows Chart 1.

Chart 2 shows that wages form a substantial part of overall incomes for smaller farmers, while incomes from the cultivation of crops form less than half the income for farmers with less than a hectare. Income from non-farm activities such as food processing is near-negligible across all classes. Three states that need maximum intervention could be Bihar, West Bengal and Uttar Pradesh, as per capita spending is more than per capita income, on average, in those states in 2013, Chart 3 reveals.

For a decade till 2013, income only from animal husbandry grew substantially, while that from other sources grew poorly. Income from wages grew only 22 per cent, while that from cultivation grew 32 per cent in nominal terms in a decade, shows Chart 4. But across land ownership, growth in incomes was starkly unequal. For small and marginal farmers, nominal incomes grew by 50 per cent or less only, shows Chart 5.

Uncertainties in crop income are the biggest cause of overall income inequality among farmers —bigger in 2013 than in 2003— shows Chart 6. Wage inequality contributes less to overall income inequality now, it shows.

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Compiled by BS Research Bureau