More rural households now ‘agricultural’: what data says, what this means

The survey, commissioned by the National Bank for Agriculture & Rural Development (NABARD), defined an “agricultural household” as one that (i) reported a total value of produce from farming exceeding Rs 6,500 (be it cultivation of field and horticulture crops, livestock and poultry rearing, or aquaculture, sericulture and apiculture); and (ii) had at least one member who was self-employed in such activities during the reference year (July 2021 to June 2022). In the 2016-17 survey, the threshold cut-off value of produce was Rs 5,000.

More krishi in Bharat

The share of rural households identified as agricultural, based on the above definitions, has gone up for nearly all states between 2016-17 and 2021-22. (see Table)

Also, the all-India average monthly income of agricultural households, at Rs 13,661 in 2021-22, was more than the Rs 11,438 for non-agricultural rural households. In the 2016-17 survey, too, agricultural households earned a higher average monthly income (Rs 8,931) compared with their non-agricultural rural counterparts (Rs 7,269).

Percentage share of agricultural to rural households

Within agricultural households, the contribution of cultivation and animal husbandry to total income was over 45% in 2021-22, up from 43.1% in 2016-17. This increased share of income from farming activities was seen for agricultural households across most size classes of land possessed: from 23.5% to 26.8% for those with less than 0.01 hectare, from 38.2% to 42.2% for those with 0.41-1 hectare, from 52.5% to 63.9% for those with 1.01-2 hectares, and from 58.2% to 71.4% for those with more than 2 hectares.

Simply put, the proportion of households in rural India reliant on agriculture as a livelihood source has registered a sharp increase between 2016-17 and 2021-22. Even for agricultural households, the income from farming has gone up as a share of their overall income. There is correspondingly a smaller share of income coming from non-farm sources (such as government/private jobs, self-employment, wage labour, rent, deposits and investments), which applies to all land size categories.

The recent period, in other words, has witnessed more, not less, of krishi (agriculture) in rural India or Bharat. Not only is there a higher share of agricultural households, their incomes are less diversified than before, and they are earning more from farms.

Impact of Covid-19?

The reference year (2021-22) for the latest survey was one that followed the Covid-induced lockdowns. The impact of the restrictions on economic activity, imposed in the wake of the pandemic’s first and second waves, may well have been reflected in the survey’s findings. While the curbs were fully lifted from July 2021, the economic scars took time to heal.

Agriculture-related activities were specifically exempted from the lockdowns. Since the farm sector didn’t suffer the disruptions that the rest of the economy did — and India also had four consecutive good monsoon years from 2019 — the 2021-22 survey findings might overestimate agriculture’s share in rural livelihoods and incomes. Comparisons with the 2016-17 survey should, therefore, be made keeping this in mind.

But there is also an additional data source that points to Indians increasingly returning to, rather than leaving, farms.

According to the National Sample Survey Office’s Periodic Labour Force Surveys (PLFS), agriculture engaged 64.6% of the country’s workforce in 1993-94. That share fell to 58.5% in 2004-05, 48.9% in 2011-12, and a low of 42.5% in 2018-19. Thereafter, a reversal of trend has taken place, with the farm sector’s share of the employed labour force rising to 45.6% and 46.5% in the two pandemic-affected years of 2019-20 and 2020-21 respectively (the PLFS reference year is July-June; Covid first struck in March 2020).

The paradox

The significant point to note is that agriculture’s share has remained elevated even after 2021-22, despite the economy coming out of the pandemic, and recording an average annual GDP growth of 8.3% in the three years ended 2023-24. The latest ratio of 46.1% for 2023-24 is way above the pre-pandemic low of 42.5% in 2018-19. (see Chart)

The above trend reversal is equally visible in rural areas. Agriculture employed 57.8% of the Indian rural workforce in 2018-19, which climbed to 61.5% in 2019-20 and 60.8% in 2020-21. That dropped to 59% in 2021-22 and 58.4% in 2022-23, but only to soar again to 59.8% in 2023-24.

The increased dependence on agriculture for employment and livelihoods — borne out both by the NABARD and PLFS data — in an economy that has expanded over 1.4 times in constant rupees between 2016-17 and 2023-24, is a paradox requiring some explanation. It may partly have to do with the lack of jobs in manufacturing, which employed only 11.4% of India’s workforce in 2023-24, down from 12.6% in 2011-12 and 12.1% in 2018-19.

Manufacturing’s share of employment in 2023-24 was even below that of trade, hotels & restaurants (12.2%) and construction (12%). The movement of surplus labour in agriculture is occurring, if at all, not from farms to factories. Instead, it is to sectors that tend to have quite similar employment characteristics as agriculture — having low marginal productivity (output per worker), paying just above subsistence wages, and largely informal.

As per the PLFS data for 2023-24, the states with the highest share of their labour force employed in agriculture included Chhattisgarh (63.8%), Madhya Pradesh (61.6%), Uttar Pradesh (55.9%), Bihar (54.2%), Himachal Pradesh (54%), Rajasthan (51.1%) and Jharkhand (50%). Among the ones with relatively low shares were Goa (8.1%), Kerala (27%), Punjab (27.2%), Haryana (27.5%), Tamil Nadu (28%) and West Bengal (38.2%).

The reasons for an economy, whose size has grown from $1.82 trillion in 2011 to $2.29 trillion in 2016 and $3.55 trillion in 2023 (World Bank data), having to depend more on agriculture for employment should be a subject of debate among economists.