The Lift Line
A high farm share can hide low farm profits, and a low one can hide good returns: what matters is who owns the steps between the field and the plate.
Why This Editorial Matters for Your Exam
The claim that “farmers get only a fraction of the consumer’s rupee” appears in countless answers without data. This column, by economists at the International Food Policy Research Institute (IFPRI) and Michigan State University, offers a rare systematic Indian estimate (the authors note there has been “virtually no systematic effort” so far), using the national supply-use tables. More importantly, it explains why the number must be read with care, which is exactly the analytical move examiners reward.
GS Paper 3: Agricultural marketing; food processing and related industries in India (scope, significance, location, upstream and downstream requirements, supply chain management); issues related to farm incomes.
| Concept | Meaning | Why it is testable |
|---|---|---|
| Farm share | Portion of consumer food spending that accrues to the farm | The column’s headline measure |
| Food Dollar series | A method, pioneered by the US Department of Agriculture, that splits the food dollar across the supply chain | The technique adapted here |
| Supply-use tables (SUTs) | National accounts tables linking what each sector produces and what each sector uses | India’s SUTs are compiled by the National Statistics Office |
| Value addition | The increase in value as produce is processed, transported, stored and served | Where the off-farm share goes |
Background and Context
What the authors estimated. Using India’s supply-use tables and the “Food Dollar series” technique, they traced how much of a rupee spent on food reaches the farm, from 2011-12 to 2023-24, separately for food eaten at home and away from home.
| Measure | Earlier | 2023-24 |
|---|---|---|
| Farm share, food at home | 51.8 per cent (2011-12) | 57.8 per cent |
| Farm share, food away from home | About 10 per cent (2010s) | 8.4 per cent |
| International benchmark, food at home | About 27 per cent (61 countries, 2005-15) | Not applicable |
| United States, food away from home | About 4 per cent | Not applicable |
Why India’s share is high. Indian households still buy mostly unprocessed or minimally processed, perishable, high-value foods. The share of households consuming any packaged processed food rose from 82.2 per cent to 96.6 per cent between 2011-12 and 2022-23, but its share of monthly consumption spending barely rose. Food processing is dominated by low-margin, largely unorganised milling. Eating out is about 13 per cent of food consumption, much lower than in the US and China.
The Analysis
1. At home versus away from home is expected. Food eaten away from home passes through longer chains: restaurant preparation, service and trade absorb value that would otherwise reach the farm. That is why 57.8 per cent becomes 8.4 per cent.
2. India is an outlier, for now. India’s farm shares, at home and away, are markedly higher than in most countries. The authors expect the overall share to decline as processed food and eating out grow.
3. Two trends pull in opposite directions. The at-home share has risen (51.8 to 57.8 per cent), but the away-from-home share has fallen (about 10 to 8.4 per cent).
4. The share is not a measure of fairness. The authors caution that a low share is often cited as proof of inefficient or unfair supply chains, and a high share celebrated, but:
- Longer chains can pay more. Farmers earn just 3 to 5 per cent of the retail price of gherkins, a processed export crop, yet make higher returns than from tomatoes, where they may get a higher share.
- A high share can hide low profits. Cooperative dairy farmers such as Amul’s have historically received more than 60 per cent of the retail price, but rising input costs such as feed can still leave them with lower incomes if not passed on.
5. The policy lesson. A low farm share does underline the need for farmers to capture more of the value added after harvest: through farmer ownership of downstream food, beverage and logistics enterprises and through wider participation in post-harvest activities. These mid- and downstream sectors are where future and better-paying jobs are likely to emerge.
The precision that earns marks. Do not write “farmers get only 20 to 30 per cent of the consumer’s rupee” from memory. Cite the estimate: 57.8 per cent at home, 8.4 per cent away from home (2023-24), and then make the authors’ point that a share measures position in the value chain, not profitability.
Data and Institutions Vault
Prelims-grade facts:
The estimates in this column:
- Farm share of food eaten at home: 57.8 per cent in 2023-24, up from 51.8 per cent in 2011-12.
- Farm share of food eaten away from home: 8.4 per cent in 2023-24, down from about 10 per cent in the 2010s.
- International benchmark: about 27 per cent of at-home food spending reaches farms (61 countries, 2005-15).
- Households consuming any packaged processed food: 82.2 per cent (2011-12) to 96.6 per cent (2022-23).
Institutions and schemes:
- Supply-use tables are part of India’s national accounts, compiled by the National Statistics Office under MoSPI.
- Amul grew from the Kaira District Co-operative Milk Producers’ Union, registered in 1946 at Anand, Gujarat.
- Operation Flood, launched in 1970 by the National Dairy Development Board, spread the Anand pattern nationally.
- The Central Sector Scheme for 10,000 Farmer Producer Organisations was launched in February 2020.
- PM Formalisation of Micro Food Processing Enterprises (PMFME) was launched in June 2020 by the Ministry of Food Processing Industries.
- e-NAM, the national electronic agriculture market, was launched on 14 April 2016.
- Agricultural markets fall under Entry 28 (markets and fairs) of the State List.
Prelims, the traps:
- A higher farm share does not mean higher farm income; it can reflect short, unprocessed chains.
- Farm share is lower for food eaten away from home because restaurants and service absorb value.
⚠️ Watch the trap: The authors are with IFPRI (Narayanan and Pal) and Michigan State University (Gautam). IFPRI is an international research centre, a member of the CGIAR system, not a government body.
The Debate
Raise the farmer’s share. Farmers bear weather and price risk yet capture little of the value created after harvest, especially as diets shift to processed food and eating out. Aggregation, cooperatives and direct marketing can move value upstream.
Do not target the share. A falling share as food systems modernise is normal and brings jobs in processing, logistics and food service. Trying to raise the share directly could raise prices or discourage investment. The column itself shows that low-share crops can pay farmers better.
The balanced verdict. Target farm incomes and ownership, not the share. Farmers who own or take part in post-harvest enterprises gain whichever way the share moves.
How to Think About This
Never read a ratio without its denominator and its context. A share can rise because the numerator grew or because the denominator shrank; it can be high because a chain is fair or because it is primitive. Whenever a statistic is offered as proof of fairness or efficiency (farm share, tax-to-GDP, female labour force participation), ask what else moves it. Then turn to the variable that actually matters for welfare, here the farmer’s net income.
Diagram-in-Words
Takeaway Box
- 57.8 per cent of the at-home food rupee reached the farm in 2023-24 (51.8 per cent in 2011-12); 8.4 per cent of the eating-out rupee.
- India’s shares are far above the 27 per cent international benchmark and the US’s 4 per cent for eating out.
- Share is not profit: gherkins (3 to 5 per cent share) pay better than tomatoes; Amul (over 60 per cent share) can still be squeezed by feed costs.
- The share will fall as processed food and eating out grow.
- Way forward: farmer ownership of, and participation in, post-harvest enterprises.
Sources: The Indian Express, MoSPI
Source: The Farmer's Share of the Food Rupee: 57.8 Paise at Home, 8.4 Paise When We Eat Out — Ujiyari.com | Free UPSC & State PCS Editorial Analysis
