Rise in rural distress

The number of workers in agriculture was 188 million, or 42.5% of the total workforce, in 2018–19; it had been dropping regularly since 2004–05 (49%). Thanks to the reverse migration due to the sudden Covid lockdown in March, 2020, that share rose to 45.6% in 2020 and then went up further to 46.5% of the total workforce in 2021.

More importantly, for the first time in India’s post-independence economic history, the absolute number of workers in agriculture was falling, as was anticipated, in the shift from traditional to non-traditional sectors by Nobel economist Arthur Lewis (Lewis, 1954). For 15 years, that process continued, until 2019. However, the absolute number of workers in agriculture rose dramatically—not only in 2020 (a shocking 45 million) but also continued to rise in 2021 (another 7 million).

With such a sharp increase in the burden on agriculture, what are agricultural workers doing? In 2011–12, 34.7% of farm workers were own-account workers; that share jumped to 42.5% by 2020–21. These are probably erstwhile cultivators who owned land and have had to return to farming, even though farming is not their first preference. A majority of them had migrated to other states or to cities to work mainly in construction, where wages are higher. However, the lockdowns and the slow pick-up of construction work thereafter have not brought workers back to cities. This suggests, as we hypothesise, that the farm land that had earlier been lying fallow when the males in the household migrated for non-farm work was brought back into cultivation.

This is also the reason why there has been a very sharp increase in unpaid family labour from 47 million to 68 million between 2018-19 and 2019-20, and a further rise in 2020-21—especially, but not only, among women. This has been more of a rural phenomenon than an urban one. As the economy slowed after 2016, and again due to Covid-19 and lockdown, and barely recovered in FY 2021–22 to a level where per capita income was below the 2019–20 level, rural distress has increased.

Women, who had been leaving agriculture in large numbers prior to 2017 (one of the main reasons why female labour force participation in rural areas was declining), began to join the workforce in 2018—but primarily as unpaid family labor. Thus, at a time of falling GDP growth since 2016, the Periodic Labour Force Survey (PLFS) was showing a rise in the Labour Force Participation Rate (LFPR) and Workforce Participation Rate (WPR) overall and a fall in the unemployment rate. This might seem inexplicable as GDP growth slowed, but the puzzle is resolved by disaggregating the workforce by type of employment.

One discovers that while regular wage work and casual wage work shares are falling, correspondingly, self-employment is increasing. Within self-employment, the highest increase is accounted for by unpaid family labour, considered the worst form of employment. This increase in unpaid family labour gives the impression that employment is increasing, unemployment is falling, and at the same time, LFPR and WPR are increasing. But this conclusion is totally misleading. LFPR and WPR should indeed rise, and unemployment should fall, if the economy is booming and creating jobs, and workers are being pulled into the labour market. But if employment appears to increase at a time when exports are falling, as is the investment-to-GDP ratio, then questions should be raised.

What is important is that the Centre for Monitoring Indian Economy (CMIE), which collects employment data on a regular basis, shows that the LFPR and WPR have been falling since 2016, while the unemployment rate has increased. The explanation for why PLFS claims LFPR and WPR are increasing (and unemployment is decreasing) and CMIE data indicates the exact opposite is fairly straightforward: CMIE does not consider “unpaid family labour” as employment at all.

Can trends in work conditions in agriculture be explained?

Between 2012 and 2018, a falling trend was seen in the number of casual wage workers. Over the same period, the number of own-account workers in agriculture increased, who are obviously cultivators. Several explanations can be offered about this divergence between casual wage work and self-employment.

First, erstwhile wage labour, which was landless, is likely to have leased land to cultivate in situ, becoming self-employed. In other words, given that non-farm work, especially in construction in urban or rural areas, was slowing down due to slowing growth after demonetisation and the hurried introduction of the GST, casual labour would have preferred to stay in rural areas and lease land from middle- or large-scale absentee farmers to cultivate. This may have caused a reduction in casual labour and a simultaneous increase in own-account workers (as cultivators).

Second, self-employment rose as it is likely that young people, who had gotten better educated over the first 15 years of this century, may have been forced to take up agriculture, given that non-farm work was not rising at the pace at which the working-age population rose. Instead of remaining unemployed, they engaged in agriculture, either on the existing family farm or by leasing land from better-endowed farmers

However, we also need to understand why own-account work in agriculture continued to rise in Covid years. When reverse migration began in mid-2020, there was already a large stock of unemployed people in rural areas. We showed elsewhere that the number of unemployed had risen from 10 million in 2011-12 to 30 million by 2019. Again, a majority (perhaps two-thirds, equivalent to the share of rural India’s population) of these 30 million unemployed would be searching for work.

To this stock, was suddenly added the large flow of millions of reverse migrants due to lockdown.While their exact number cannot be assessed accurately, the fact remains that agriculture saw an unprecedented increase in workers of 45 million in 2020, compared to 2019, and another 7 million in 2021.

The result was a dramatic increase in own-account workers and unpaid family workers (working with these own-account cultivators), plus casual wage workers. In other words, rural distress increased sharply as farm wage rates fell.

(The writer is a professorial senior fellow at the Nehru Memorial Museum and Library.)