Just 40% of rural income is from agriculture
While reporting that less than 58% of rural households engage in farming, the results of the latest National Sample Survey Office (NSSO) report on agricultural households hold important policy lessons, including on the land acquisition Act that has emerged as a big bottleneck for industrial and other investments. While rural India is synonymous with lush green fields, thatched huts, bullock carts and the occasional tractor, the NSSO data—based on a nationwide survey for the 2012-13 crop year—proves this is far from the real picture. Of the 58% households (9 crore households) engaged in farming, only 68% report farming as their principal source of income—that is, under 40% of rural households are dependent upon farming as their main income. The number is corroborated by PRICE’s latest ICE 360o survey which says over 60% of rural incomes in 2014 came from industry and services. And within agriculture, more incomes are now coming from areas like floriculture, animal husbandry in comparison with traditional crops like wheat and rice. A similar misconception applies to industry which is seen as synonymous with urban India. As it happens, a Credit Suisse report points out, close to 60% of all industrial production in India takes place in rural areas. According to Credit Suisse, three-fourths of all new factories set up in the country over the last decade were to be found in rural areas; the shift in rural jobs from agriculture to industry in the five years to 2010 was equivalent to that over the previous 27 years. Put another way, around a third of all rural income comes from industry.
Rural families, needless to say, are moving out of agricultural activities since the productivity here is the lowest—Credit Suisse estimates the productivity in industry is over 3.5 times that of agriculture; the earnings from industry and services (where the productivity is 3 times that of agriculture) are correspondingly higher.
Two policy conclusions result from this. Rural voters are unlikely to respond as strongly as they did in the past to policies raising minimum support prices for agricultural produce; indeed, rural voters are more likely to respond to policies that help industry grow faster. Two, with land no longer as vital to rural well-being, the potential furore over selling farm land for industry or other activities is probably overstated by the political class. Our policymakers must realise that rabble-rousers notwithstanding, there’s no real conflict between Bharat and India.