Small Farmer Incomes in India

Executive Summary

Agriculture in India…

The history of agriculture in India dates back to Indus Valley civilisation. India ranks second
worldwide in farm outputs. As of 2018, almost 50% of the Indian population depends on
agricultural value chain for livelihood. A subset of this population is the farmer community. Per
the most recent census, there are close to 120 million farmers in India – that’s almost as much
as the population of Japan!

Small and marginal farmers…

A little more than 80% of the 120 millions farmers are ‘small and marginal’ farmers. These farmers
own small pieces of land on which they grow crops using traditional farming techniques. Most of
the small farmers barely make ends meet by selling their produce in a regulated market known
as ‘mandi’. Due to lack of access to customers further ahead in the value chain and low quantities
of produce, these farmers have no choice but to sell in the regulated ‘mandi’ market – which
essentially operates like a ‘buyer’s market’. As a result, the small farmers make only 10% of what
the final consumer ends up paying for the produce. The middlemen, who add little value in the
process gain the most from the whole process. To make things worse, a huge majority of the
small farmer community is stuck in a debt trap. With heavy reliance on traditional farming
methodologies (rain vs. irrigation, poor quality fertilisers like cow dung), productivity is never
consistent. Operating in these conditions, the small farmers face uncertain and poor cash flows
year after year, with little to no improvement in their plight.

Root cause of the problem…

To understand the root cause of the problems faced by small farmers, we conducted the “5
Whys” analysis.