Can Farmers Afford Cost of Living in India?

72% of Farming Households Earn Less Than 5,298 Rupees a Month

Newsreel Asia Insight #130
Feb. 13, 2024

India’s national average monthly farm income is 5,298 rupees and the average monthly total income is 10,695 rupees, according to data from the latest National Sample Survey. It’s scant, indeed, but more troubling is that this average fails to reflect the circumstances of the majority of farmers, as shown by The India Forum amid an ongoing farmers’ protest around Delhi.

While the earning of 10,695 rupees a month, as per the “Situation Assessment of Agricultural Households,” might technically place a family above the official poverty line, the reality of India’s cost of living, combined with the needs of a typical family, means that this income is often not enough to ensure a comfortable or financially secure existence.

The sum amounts to a daily budget of 356.50 rupees, and here’s a breakdown of how a farmer might allocate their spending.

Considering the basic nutritional requirements of a family, a significant portion of the budget would need to be allocated here. Let’s allocate about 150 rupees per day for food. This would cover basic groceries but might not allow for much variety or meat and dairy products in significant quantities.

Even with public schooling, there are additional costs for books, uniforms, and possibly transportation. Allocating 50 rupees per day could cover these expenses over time, but this would be tight and might not cover all potential educational activities or needs.

Clothing and toiletries are essential but can be managed with minimal spending if purchases are made wisely and infrequently. Allocating 30 rupees per day could cover basic toiletries and gradually save for clothing.

Healthcare expenses are often irregular but can be significant when they do occur. Setting aside 20 rupees per day could help build a small fund for medical needs, though any serious health issue would quickly surpass this amount.

For work, school, or errands, transportation costs can vary widely. Allocating 30 rupees per day could cover minimal public transportation costs in many areas.

Now, electricity, water and other utilities are critical expenses. Let’s allocate 50 rupees per day for utilities in a scenario where the family owns their home or lives in subsidised housing.

What remains is 26.50 rupees, which could be set aside for savings or used for other miscellaneous expenses like mobile phone charges or small household items. However, this amount offers little flexibility for unexpected costs or emergencies.

Now, let’s examine the considerable income disparity among agricultural households.

The latest data, covering January to December 2019, challenges the notion that average incomes can accurately reflect the welfare of farmers. Agricultural households – those earning more than 4,000 rupees from agricultural activities and having at least one member self-employed in agriculture – represent 54% of rural households, whose income is alarmingly uneven.

Examining the details of how monthly farm income is spread out among farmers uncovers a troubling truth. At the lower end, the income for 5% of farming families is zero or even negative, meaning they make no money or lose money from their farming activities. Moving up the scale, we find that 90% of these families make less than 12,017 rupees each month from their farms. This shows that most farmers earn below this figure. The situation is stark: a large number of farming households, about 72%, bring in less than the average farm income of 5,298 rupees a month. This highlights the tough reality that many farmers face, struggling to earn even modest amounts from their work on the land.

The data also highlights the critical role of non-farm activities in supplementing the incomes of agricultural households. Despite this, a substantial number of these households continue to live on the edge of financial viability, with 39% earning less than 5,000 rupees in total monthly income.

Further, the data shows that in some states, over 40% of agricultural households earn less than 1,000 rupees from farming monthly. Yet, when considering total monthly income, a small fraction of households fall below this threshold, underscoring the importance of non-farm income sources.

Despite these additional income streams, the disparity between states is pronounced. For instance, the proportion of agricultural households earning more than 10,000 rupees monthly ranges dramatically, from as low as 10% in Jharkhand to 74% in Punjab.

The situation is particularly dire in states like Jharkhand, Odisha, West Bengal, Bihar, Uttar Pradesh, Chhattisgarh and Madhya Pradesh, where a majority of agricultural households earn less than 10,000 rupees in total monthly income.

The analysis of agricultural incomes indicates that there are deep-rooted challenges within the agricultural sector that hinder farmers from attaining financial stability solely through their agricultural endeavours. There is an urgent requirement for both central and state governments to refine and enhance agricultural policies and support frameworks.