Average farm income soars 1.3-1.7 times in FY22 from FY18: SBI Research

The income of farmers has grown in the range of 1.3-1.7 times in FY22 from the FY18 levels on average while grain exports soared to over $50 billion, says an SBI Research report.

For certain crops in some states (like soybean in Maharashtra and cotton in Karnataka) farmers' income more than doubled in FY22 from FY18 levels, while in all other cases it rose in the range of 1.3-1.7 times.

The increase in the income of farmers engaged in cash crops has been more prominent compared to farmers growing non-cash crops, SBI chief economist Soumyakanti Ghosh said in an elaborate report on Sunday.

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This also has led to an increase in the share of agriculture in the GDP to 18.8 per cent from 14.2 per cent, the report said. This rise was also due to the shrinkage of the industrial and services contributing to the economy due to the deadly second wave of the pandemic.

But the report is silent on the massive fall in the prices of spices like black pepper, cardamom, clove, and cinnamon among others as also natural rubber.

Also, the report, based on key farming states like Maharashtra, Rajasthan, MP, UP, Karnataka, and Gujarat among others, notes that allied/non-farm income showed a significant increase of 1.4-1.8 times in the majority of states in tandem with farm income during this period, substantiating the trend in the 77th National Sample Survey that said source of farmers income has become increasingly diverse apart from crops.

Significantly, this also ensured that there have been no yawning gaps in income inequalities in the hinterland during this period.

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The report also urges the government to launch a livelihood credit card by targeting at least 1 million farmers every year and an omnibus credit guarantee fund for a Rs 5 lakh crore agri credit push.

The agrarian economy has undergone some tectonic shifts of late, emerging as the anchor for the broader economy during the tumultuous days of the pandemic, says the report, adding while the economy contracted the highest at 6.7 per cent in FY21, the farm sector grew and the trend continued in FY22 too. This has, in turn, led to a higher share of agriculture in the country's GDP since March 2019.

Similarly, agricultural exports zoomed upwards of $50 billion in FY22.

Apart from enabling policy push, the report also attributes the growth to the changes in the eating habits and nutritional focus buoyed by shifting socioeconomic and cultural patterns, thereby ensuring upgrades/rotation in cropping patterns across the country even as food security becomes central to a growing population imbibing varied demographics.

Another growth driver was the steady increase in the minimum support prices (MSPs), which are increasingly aligned with market-linked prices.

Since, 2014, MSPs have increased by 1.5-2.3 times, playing a pivotal role in ensuring better prices for farmers and leading to optimal price discovery. This has also encouraged farmers to gradually move over to crop varieties that have better yield/value.

However, despite the much hype and political patronage, farm loan waivers by states have failed to bring respite to intended subjects, sabotaging credit discipline in select geographies and making banks/ financial institutions wary of further lending.

Between 2014 and March 2022, of the 3.7 crore eligible farmers, only about 50 per cent of them received the amount of loan waiver though in some states more than 90 per cent of farmers received the debt waiver amount.

The Kisan Credit Card (KCC) scheme has another instrument which helped bring in a large number of farmers under the ambit of a formal credit mechanism at a subsidised interest rate.

There are 7.37 crore active KCCs however, current regulatory norms allow KCC renewal every year with full repayment of principal and interest unlike other loans where interest servicing is sufficient for renewal.

The renewal for KCC loans with repayment of both principal and interest only makes the farmer eligible for interest subvention and an enhancement of 10 per cent in the limit annually.

Given that each review can take up to 45 minutes, juxtaposing it for 7.37 crore KCC implies banks may have to spend a cumulative 23 lakh man days to complete this process every year that otherwise can have been used for fresh lending to agriculture.

So, some radical changes in this are called for like added use of technology say making it app-based through digital channels to ensure speedy review and renewal practices.

Also, the government can think of launching a livelihood credit card encompassing a multi-purpose loan covering a rural household's entire activities for ease of doing KCC, targeting 1 million farmers to start with further reinvigorating rural demand or forming a comprehensive omnibus credit guarantee fund trust for agri & allied sectors can act as a credit accelerator and ensure coverage of all fresh agri loans.

This scheme alone, according to him can usher in an additional Rs 5.25 lakh crore agri credit with only an additional capital requirement of Rs 11,320 crore and minimal fiscal support of Rs 6,450 crore for the 5-year period ending 2027.

According to the National Statistical Office's (NSO) situation assessment of agricultural households and land and livestock holdings in rural areas, agricultural households' average monthly income increased by 59 per cent to Rs 10,218 in the six years to FY19.