Has MGNREGS affected the Farmers Profitability? An Assessment based on Cost of Cultivation Data. Socioeconomics Discussion Paper Series Number 25

Narayanamoorthy, A and Bhattarai, M and Suresh, R (2014) Has MGNREGS affected the Farmers Profitability? An Assessment based on Cost of Cultivation Data. Socioeconomics Discussion Paper Series Number 25. [Socioeconomics Discussion Paper Series]

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Abstract

It is often argued that the national rural employment guarantee scheme (MGNREGS) introduced during 2006 has increased the farm wage rate substantially that resulted in sharp reduction in farmers’ profitability. Is there any substance in this argument? In this paper, we have done an attempt to specifically study this issue utilizing data series of cost of cultivation survey data available for different crops published by the Commission for Agricultural Costs and Prices. Utilizing these cost of cultivation data from 2000-01 to 2010-11, we have analyzed impacts of MGNREGS on farm profitability. We have included here nine different crops namely paddy, wheat, sorghum, chick pea, pigeon pea, rapeseed and mustard, groundnut, sugarcane and cotton for the analysis. As the productivity of crop often determines its profitability, two states for each crop, one each from the category of high area with high productivity (HAHP) and another one from high area with low productivity (HALP), have been considered for the analysis. The results of the study have not completely supported the argument that the profitability of crops has declined after the introduction of MGNREGS in 2006. This is not only true with HAHP states but also with HALP states. However, this study showed that the real cost incurred on account of human labor has increased considerably in eight out of nine crops in both HAHP and HALP states after the introduction of MGNREGS (2006-07 to 2010-11). But, the increase in labor cost has not made any deleterious impact on the profitability. The profitability calculated by deducting the value of output from cost C2 has increased in eight out of nine crops in HAHP states, whereas the profitability has either increased or the losses reduced in all nine crops in HALP states. Not only the average profit of most crops has increased but the number of years profit realized by the farmers has also increased in most crops during the post-MGNREGS period as compared to pre-MGNREGS period (2000-01 to 2005-06). While there is no distinct pattern emerging in profitability between food grain and non-food grain crops, the level of increase in profitability is found to be relatively better among the non-food grain crops after the introduction of MGNRGES. Increased productivity in most crops considered for the analysis has one way, or the other, helped to negate the increase in human labor cost and facilitated to increase the profitability.

Item Type: Socioeconomics Discussion Paper Series
Divisions: RP-Market Institutions and Policies
CRPS: CGIAR Research Program on Policies, Institutions, and Markets
Series Name: Socioeconomics Discussion Paper Series Number 25
Uncontrolled Keywords: Cost of cultivation, Farm profitability, Indian agriculture, MGNREGS, Productivity of Crops
Subjects: Others > Agriculture-Farming, Production, Technology, Economics
Depositing User: Mr B K Murthy
Date Deposited: 14 Nov 2014 10:50
Last Modified: 04 Dec 2014 10:35
URI: http://oar.icrisat.org/id/eprint/8345
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