Rising Dependence on Agriculture in India

Recent data from the All India Rural Financial Inclusion Survey (AIRFIS) for 2021-22 indicates a significant rise in dependence on agriculture for livelihoods in India, reversing a trend of declining reliance on the sector. This phenomenon raises important questions about the economic landscape and labor dynamics in rural India, especially in the context of post-COVID recovery.

Key Findings from the AIRFIS 2021-22

• Increase in Agricultural Households: The survey found that 57% of rural households are classified as "agricultural," up from 48% in the 2016-17 survey. This includes households engaged in activities such as cultivation, livestock rearing, and aquaculture.
• Definition of Agricultural Households: An "agricultural household" is defined as one that reports a total agricultural produce value exceeding Rs 6,500, with at least one member self-employed in agricultural activities during the reference year (July 2021 to June 2022).
• Income Trends: The average monthly income of agricultural households rose to Rs 13,661, surpassing the Rs 11,438 average for non-agricultural households. This reflects an increase from Rs 8,931 in 2016-17 for agricultural households.
• Income Contribution from Agriculture: In 2021-22, over 45% of the total income for agricultural households came from farming, up from 43.1% in 2016-17. This trend was consistent across all land size categories, indicating a growing reliance on agriculture.

Reversal of Employment Trends

Data from the National Sample Survey Office's Periodic Labour Force Surveys (PLFS) indicate a reversal in the trend of declining agricultural employment:

• Labor Force Participation: The share of the workforce engaged in agriculture dropped from 64.6% in 1993-94 to a low of 42.5% in 2018-19. However, this trend reversed post-pandemic, with the agricultural share rising to 46.5% in 2020-21.
• Rural Employment Statistics: The proportion of rural workers in agriculture increased from 57.8% in 2018-19 to 61.5% in 2019-20. Although this figure dropped slightly in subsequent years, it rebounded to 59.8% in 2023-24.

The Paradox of Growth and Agriculture

Despite India's economic expansion—growing from USD 1.82 trillion in 2011 to USD 3.55 trillion in 2023—the dependency on agriculture for employment has increased. This paradox can be attributed to several factors:

• Limited Job Opportunities in Manufacturing: Manufacturing employed only 11.4% of the workforce in 2023-24, down from 12.6% in 2011-12. This limited growth in manufacturing jobs has failed to absorb surplus labor from agriculture.
• Informal and Low-Productivity Sectors: Many workers transitioning out of agriculture are moving into sectors that exhibit similar characteristics, such as low marginal productivity and informal employment, rather than into higher-paying manufacturing jobs.
• State-Specific Employment: States like Chhattisgarh (63.8%), Madhya Pradesh (61.6%), and Uttar Pradesh (55.9%) have high shares of their labor force engaged in agriculture, indicating regional disparities in employment dynamics.