(Part 1 of this three part article has been published in the previous issue of Janata blog.)
Rise in Agricultural ‘Employment’, Falling Incomes
On the one hand, the recent period was marked by an unusual development: more persons now found ‘employment’ in agriculture than in the previous year. For decades, every survey of employment has shown a decline in agriculture’s share in total employment, as people hitherto working in agriculture shifted to other sectors. Textbook economics considers this shift out of agriculture a positive development, as agriculture is not able to provide gainful employment to all those who are employed there at present. Many of those employed in agriculture are considered to be in ‘disguised unemployment’, i.e., they are hardly adding to production, but remain in agriculture for lack of any other option.
In the 2000s, the percentage employed in agriculture, and even the absolute numbers employed in agriculture, fell sharply. This was welcomed by many economists as a sign of development (what is termed a ‘Lewisian turning-point’, named after the economist who theorised how rapid industrialisation could take place in developing economies by steadily drawing in, at a subsistence wage, the seemingly unlimited labour surplus found in agriculture and other traditional sectors).
Actually, some of the exit from agriculture in the 2000s may not have been due to the ‘pull’ of better employment elsewhere, so much as it was the ‘push’ of the continuing agrarian crisis. Data from an official survey in 2012-13 showed that, for 87 per cent of farm households, farm income alone (from cultivation and farming of animals) did not even cover their consumption expenditure.[1] So they had to find multiple sources of employment to make ends meet.
Moreover, the one sector that did pull workforce out of agriculture was not the formal manufacturing sector of Lewis’s model, as might be hoped for at India’s stage of development. Rather, it was construction and other informal employment, often at below-subsistence incomes. This made it necessary for worker/peasants to retain one foot in agriculture. Since there were few well-paying jobs, and virtually no permanent jobs, in construction, large numbers of workers continued to shuttle seasonally between agriculture and construction in an effort to make ends meet.
Then, as construction went into a slow decline over the past decade, jobs in construction grew at a crawl. The number of new construction jobs per year during this phase dropped to just one-fifth of the earlier boom phase.[2]
Now the Periodic Labour Force Survey 2019-20 (PLFS) shows a rise in agriculture’s share of the total workforce.[3] This jump is the first time in the history of the Government’s employment surveys that agriculture’s share of the workforce has increased. Meanwhile the share of manufacturing has fallen. (This striking trend is further confirmed by a large private survey.[4])
At the same time, the percentage of the population who were employed in all sectors (measured by ‘usual status’) rose, from 35.3 to 38.2 per cent. That is, in 2019-20,
(1) a larger number of persons, in all, were employed – using the very elastic official definition of employment;
(2) a larger share of those persons were employed in agriculture; and meanwhile
(3) the population of India itself rose a little over 1 per cent between the two years.
Sources: See footnote[5]
Less income per working person
Putting these three facts together, it means that the absolute number of persons ‘employed’ in agriculture in 2019-20 – including cultivators, livestock owners, and agricultural labourers — rose a massive 17.3 per cent over the figure for 2018-19, that is, by about 34 million persons.
How much income did each of these persons earn, on the average? During the period covered by the PLFS 2019-20, the income of the agriculture sector is estimated to have risen in real terms (i.e., after discounting for inflation) by 4.1 per cent.[6] So the number of those employed in agriculture rose steeply, but their combined income rose only moderately. This means that each person working in agriculture, on the average, got less than in the previous year. Indeed, the income per person employed in agriculture in 2019-20 (July-June) was 11.3 per cent less than in the corresponding period of 2018-19.
Who made up the additional workforce in agriculture? The PLFS shows that in 2019-20 a greater share of rural women entered the workforce. The fresh entrants went into agriculture, and became unpaid workers on family farms.[7] Thus the increase of women in the workforce is not a positive development, but a sign of growing distress, a desperate attempt of the household to make ends meet.
Women’s various types of unpaid labour for the household, which are not officially counted as ‘employment’, would not have reduced one bit; but their unpaid work on the family farm, which is officially counted as ‘employment’, would merely have added to their burdens. (According to the Time Use Survey 2019, a rural woman between the age of 15 and 59 spends an average of 5 hours 43 minutes a day on unpaid domestic services and caregiving services for family members – that is, exactly five hours more than the average time a rural man of the same age group spends on such activities. Indeed, the time the rural woman spends on these unpaid household activities is more than the time the rural man spends, on an average, in employment.[8])
Thus the rise in agricultural employment is not a sign of prosperity but hardship. Similarly, the nearly 5 per cent rise in the area cultivated during the kharif season in 2020-21 may have been distress-driven, as households who had lost employment elsewhere were forced to turn to agriculture, and brought more land under cultivation.
Price crash during the lockdown
The situation for the peasantry may be even worse than suggested by the above data. Several surveys have revealed that, as a result of lockdown-related disruptions, cultivators around the country received lower prices in April-May 2020, when the rabi crop was sold. Agricultural supply chains were disrupted; fewer mandis were operational; local markets collapsed; cultivators bore increased costs of transport; and the prices at which they sold their produce crashed.[9]Another survey found that 85 per cent of cultivators were unable to sell their produce at full prices.[10]
One survey found that, even while prices received for the 2020 rabi crop crashed, “there was also a sharp increase in the cost of cultivation of several kharif crops across all States. This was on account of increases in the cost of material inputs (seeds, fertilizers, and pesticides), machine use, and hired labour.”
It found that the price of hired agricultural labour rose particularly in relatively developed regions which normally depended on migrant labour, such as Punjab and coastal Andhra. In such regions migrant labourers departed in large numbers for their native villages. The lockdown was declared just before harvesting operations for the rabi crop. Cultivators whose standing crops needed to be harvested urgently had to pay higher wages, either to migrant or local labourers. In regions to which migrant workers returned, however, wages did not rise as much.[11]
Decline in hours of employment
Did this mean that labourers reaped a bonanza with higher wages? No. Whether or not they earned more per day on the work they got, it is certain that the overall amount of work available declined with the lockdown. Hence their overall income would have declined. As can be seen from Chart 4, the number of hours actually worked in a week was already declining slowly over the last two years. This has affected all categories of workers, rural and urban, male and female, reflecting the downturn in the economy as a whole. However, with the lockdowns from the latter half of March 2020, the hours worked fell much more sharply for all categories of workers.
Source: Periodic Labour Force Survey, 2017-18, 2018-19, and 2019-20. Current weekly status.
Long-term stagnation in rural wages
Rural wages have stagnated abysmally for many years, even as output has grown. As can be seen from Table 1 below, the value added in agriculture in 2020-21 was 26 per cent higher than in 2015-16. By contrast, agricultural wages for different categories grew at a snail’s pace – in July 2021, wages for different types of agricultural labour were just -0.1 per cent to 7.5 per cent higher than in July 2015. Thus wages’ share in the value added in agriculture would have fallen.
Non-agricultural rural labourers have fared even worse: their wages have risen in the range of just -0.4 per cent to 2.9 per cent over the entire six-year period. It is worth noting that unskilled rural labourers get roughly the same wages outside agriculture as they do in agriculture. This belies the hope that employment outside agriculture in the rural areas offers an escape from the low incomes of agriculture.
Table 1: Real Rural Wages Stagnated Over the Last Six Years Even as Value Added Has Risen
| July 2015 (Rs) | July 2021 in July 2015 prices (Rs) | Growth (%) | |
| Agriculture | |||
| Ploughing – men | 270 | 280 | 3.6% |
| Sowing – men | 240 | 256 | 6.7% |
| Sowing – women | 195 | 210 | 7.5% |
| Harvesting – men | 250 | 252 | 0.9% |
| Harvesting – women | 210 | 210 | -0.1% |
| General agricultural labour – men | 234 | 246 | 5.1% |
| General agricultural labour – women | 180 | 193 | 7.2% |
| Non-agriculture | |||
| Rural mason – men | 399 | 411 | 2.9% |
| Rural construction – men | 284 | 286 | 0.6% |
| Rural construction – women | 206 | 211 | 2.1% |
| General rural non-agricultural labour – men | 248 | 249 | 0.4% |
| General rural non-agricultural labour – women | 183 | 182 | -0.4% |
| Growth in Gross Value Added in agriculture 2015-16 to 2020-21, constant prices | 26.2% | ||
| Growth in Gross Value Added (all sectors) 2015-16 to 2020-21, constant prices | 18.7% |
Now, declining real wages
Moreover, once the immediate disruption and dislocation of the lockdown had passed, rural wages for both agricultural labourers and non-agricultural labourers started declining in real terms (i.e., after discounting for inflation). To take just one example, Chart 5 below gives the wages of rural masons in terms of July 2018 prices. Wages of all other categories too have declined during the last year: Charts A1 and A2 (see Annexure: Real Wages in Rural Areas, at the end of this article) show a decline in real wages over different categories of agricultural and non-agricultural workers over the last year.
Source: Calculated from “Wage Rates in Rural India”, Labour Bureau. We have deflated nominal wages with Consumer Price Index-Rural Labour.
This decline is not surprising. The lockdown rendered vast numbers of workers in industry, construction and services unemployed, and hence it was inevitable that the overall level of wages would decline. Data of the latest official sample survey has shown that wage income constituted about half the income of agricultural households; this is particularly so for small and marginal households, whereas the reverse is the case for large landholders, who earn a sizeable income from farm business.[12] Hence a drop in overall wage levels also depresses the income of most agricultural households, and makes it difficult for them to survive.
This process actually began before Covid-19, from about 2018. Over the last three years, real rural wages have not merely stagnated but fallen. The average wages for the years 2018-19, 2019-20, and 2020-21 show an overall decline (see Charts A1-A8, Annexure: Real Wages in Rural Areas, at the end of this article).[13] Although in several cases average wages rose slightly in 2020-21 (due to the brief disruption and shortage mentioned above), they remained below the level of two years ago.
Declining farm incomes
This continuing slump of demand in India’s economy will in turn further depress the incomes of peasants and workers. In the last decade, as the growth of real consumer spending has slowed, the terms of trade have turned against peasants (see Chart 6).
Sources: See footnote.[14]
Now the situation is much worse than in the period covered by Chart 6, since there is an outright fall in demand: According to official estimates, real consumer spending per head fell by 10.1 per cent in 2020-21.[15] This would result in a further worsening of the returns for peasants.
The situation was already precarious before the calamitous developments of 2020, as brought out by the latest Situation Assessment Survey of Agricultural Households (2018-19). Farm households’ average monthly household income from all sources of income was only Rs 10,218 per household, or less than Rs 70 per person per day. Only Rs 5,380 per month came from agriculture (Rs 3,798 from farming of crops, and Rs 1,582 from farming of animals). As Roshan Kishore and Abhishekh Jha point out, the income from farming of crops alone comes to a shockingly low Rs 27 per day per member of an average farm household.[16]
This marks a deterioration since the earlier such survey of farm households, carried out in 2012-13. In the intervening six years, despite tall promises by the Modi regime about “doubling the income of farmers”, the terms of trade for farmers worsened, as can be seen from Chart 6. Partly as a result, between 2012-13 and 2018-19 real income from farming of crops fell by 8.7 per cent for the average farm household.[17]
(to be continued)
Annexure: Real Wages in Rural Areas, Charts A1-A8
The following are calculated from “Wage Rates in Rural India”, Labour Bureau at http://labourbureaunew.gov.in/index.aspx . We have deflated nominal wages with Consumer Price Index-Agricultural Labourers for agricultural labourers, and CPI-Rural Workers for non-agricultural labourers. Charts A3-A8 are for the period July-June of each year.
* Data for 2019-20 are for only 10 months, as data were not collected in April 2020, and data for May 2020 are doubtful.
Notes
[1] https://rupe-india.org/66/partthree.html
[2] Sujata Kundu, “Rural Wage Dynamics: What Role Does Inflation Play?”, RBI Occasional Papers, 2019. Construction employment doubled, from 25.6 million in 2004-05, to 50.3 million in 2011-12 – at the rate of 3.5 million additional jobs a year; but thereafter grew much more slowly till 2017-18, to 54.3 million, at the rate of 0.67 million jobs a year. Santosh Mehrotra and Jajati K. Parida, “India’s Employment Crisis: Rising Education Levels and Falling Non-agricultural Job Growth”, Centre for Sustainable Employment, Azim Premji University, October 2019.
[3] This is by the ‘usual status’ measure of employment – those who were employed for at least 30 days at some time or the other in the year.
[4] The Centre for Monitoring the Indian Economy (CMIE) surveys. See Mahesh Vyas, “Migration from factories to farms”, https://www.cmie.com/kommon/bin/sr.php?kall=warticle&dt=20210809122441&msec=850 Since the definitions and methodology used by the CMIE surveys are different from those of the PLFS, the figures they produce are not directly comparable to official figures. Nevertheless, the CMIE data show agriculture’s share of total employment rising from 35.3 per cent in 2017-18 to 38.0 per cent in 2019-20 – before the Covid-19 lockdown. Moreover, this trend continued into 2020-21, with the share of agriculture in total employment rising to 39.4 per cent.
[5] Usual principal and subsidiary status. Data for 2004-05, 2009-10 and 2011-12 from Santosh Mehrotra, Jajati Parida, Sharmishtha Sinha and Ankita Gandhi, “Explaining Employment Trends in the Indian Economy: 1993-94 to 2011-12”, Economic and Political Weekly, August 9, 2014. Data for 2017-18, 2018-19, and 2019-20 from Periodic Labour Force Survey 2018-19.
[6] Agriculture, forestry and fishing Gross Value Added for quarters 2, 3 and 4 of 2019-20 and quarter 1 of 2020-21, i.e., July 2019-June 2020. RBI Database on Indian Economy, quarterly estimates of gross value added at basic price (at constant prices), new series 2011-12.
[7] The worker-population ratio of rural women rose from 19 per cent in 2018-19 to 24 per cent in 2019-20; the share of rural women employed in agriculture rose from 71.1 per cent to 75.7 per cent; and the percentage of rural women employed as “helpers in household enterprises” rose from 37.9 per cent to 42.3 per cent. In all these cases, these rises were the steepest for any category (rural men, rural women, urban men and urban women). The data are from PLFS 2019-20. See Radhicka Kapoor, “The grim reality hidden by the recent decline in unemployment rates”, Indian Express, August 9, 2021.
[8] Time Use in India 2019, National Statistical Organisation, 2020.
[9] Tapas Singh Modak and Soham Bhattacharya, “The Covid-19 Pandemic and Agriculture in Rural India: Observations from Indian Villages”, Review of Agrarian Studies, vol. 11, no. 1, January-June 2021; this provides summaries of, and links to, several other studies, including R. Ramakumar, “Agriculture and the Covid-19 Pandemic: An Analysis with Special Reference to India,” Review of Agrarian Studies, vol. 10, no. 1, 2020, available at ras.org.in/ccfd3c4b30052ab3be432d1faf5706e1, and Vikas Rawal and Ankur Verma, “Agricultural Supply Chains During the COVID-19 Lockdown: A Study of Market Arrivals of Seven Key Food Commodities in India,” SSER Monograph 20/1, Society for Social and Economic Research, New Delhi, https://www.networkideas.org/featured-themes/2020/04/agricultural-supply-chains-during-the-covid-19-lock-down-a-study-of-market-arrivals-of-seven-key-food-commodities-in-india/.
[10] Azim Premji University Covid-19 Livelihoods Phone Survey (CLIPS), April-May 2020 round. https://datastudio.google.com/embed/reporting/eb7b3ad4-67ec-43c9-9027-1b315ec7af96/page/R4vPB
[11] Tapas Singh Modak and Soham Bhattacharya, op. cit. It should be noted that, to the contrary, the PLFS 2019-20 indicates that real rural wages fell year-on-year in April-June 2020. See Abhishekh Jha and Roshan Kishore, “How the pandemic and lockdown have hit labour markets”, Hindustan Times, July 28, 2021, https://www.hindustantimes.com/india-news/how-the-pandemic-and-lockdown-have-hit-labour-markets-101627421254987.html
[12] Situation Assessment of Agricultural Households and Land and Holdings of Households in Rural India 2019, National Sample Survey 77thRound.
[13] We have taken the agricultural year, July-June, as the basis. The figure for 2019-20 excludes April-May 2020, for which there are either no data or data are not reliable.
[14] Terms of trade (Base: triennium ending 2011-12 = 100) from Pocket Book of Agricultural Statistics 2019, Ministry of Agriculture and Farmers’ Welfare. Growth rates of Private Final Consumption Expenditure (PFCE) for 2011-12 to 2018-19 at Constant Prices from Ministry of Statistics and Plan Implementation, September 1, 2021 release. For 2009-10 and 2010-11, we have not used the official back series, which is controversial, but the back series proposed in the Report of the Committee on Real Sector Statistics, National Statistical Commission, July 2018.
[15] Per capita private final consumption expenditure fell from Rs 62,056 in 2019-20 to Rs 55,783 in 2020-21 at constant (2011-12) prices.
[16] Roshan Kishore, Abhishekh Jha, “Farmers earned Rs 27 a day from cultivation in 2018-19”, Hindustan Times, September 14, 2021.
[17] According to the Situation of Agricultural Households in India 2012-13, National Sample Survey 70th Round, the net receipt from cultivation of the average agricultural household was Rs 3,081 per month. The corresponding figure from the Situation Assessment of Agricultural Households and Land and Holdings of Households in Rural India 2019, National Sample Survey 77th Round is Rs 3,798. While the nominal figure thus rose by 23 per cent, the Consumer Price Index for Agricultural Workers rose 35 per cent in the same period, implying a decline in real terms.
(Research Unit for Political Economy is a Mumbai based trust that analyses economic issues in simple language.)
