Examining Income Sources and Inequality among Agricultural Households in Gujarat

The paper aims to analyse income inequality among agricultural households in Gujarat. As a first step, the study investigates the degree to which agricultural households rely on farming as a source of livelihood. Evidence shows that agriculture constitutes a significant component of household income in the state, contributing nearly 61 per cent of the total income earned by agricultural households. However, a closer look at monthly farm earnings presents a concerning picture. Almost one-third of agricultural households receive less than ₹2,000 per month from farming alone. In addition, the distribution of farm income is highly uneven, with the top 10 per cent of agricultural households accounting for nearly half of the total farm income. Even when income from all possible sources is considered, about 11 per cent of agricultural households continue to earn less than ₹2,000 per month. A decomposition of inequality by income source further indicates that farm income contributes significantly to overall income disparities, whereas wage income tends to reduce inequality. Households with a relatively smaller share of income from farming depend largely on wages and salaries for their livelihood, while earnings from non-farm businesses remain relatively modest. These findings clearly indicate that improving farm income in isolation cannot enhance overall household welfare unless accompanied by the creation of adequate and stable wage employment opportunities in rural areas. Taken together, the results point to the need for an integrated rural policy framework that combines agricultural reform with employment generation and social security to ensure more equitable and sustainable livelihoods. JEL Codes: D31, Q12, O15