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Farmers will need economic incentives to invest, use better inputs and improve the productivity of their land. They also need fairly stable, predictable and remunerative prices. The inexorable trend towards smaller holdings in most regions implies that the ability of small farmers to bear production or price risks is lower now than before. 

It is also clear that they will need greater productivity and higher prices to maintain their income from smaller pieces of land as and when the sub-division of holdings takes place. 

Where the farm holdings are relatively large, the growth of income for the farmers can be significant when there are the usual gains in productivity and prices. In the other cases, farmers rely on fiscal measures such as better prices for produce and lower prices for inputs. 

These changes can only be expected to provide modest gains in income for farmers with small holdings. 

The sudden catastrophe that damages crops and affects output or a collapse of the market would mean a draw-down of assets or debt. A major problem of the farm sector is undoubtedly the small holdings and modest increments to income that accrue to them. Protecting output and price levels is, therefore, important from a policy perspective. 

The recommendations for lower interest rates on farm loans, lower price of diesel and higher mark-up on costs in MSP follow from a realisation that the net income that a small farmer makes is not enough to generate enough surpluses for new investments. 

Intensive commercial farming: This is a system of agriculture in which relatively large amounts of capital or labor are applied to relatively smaller areas of land. It is usually practiced where the population pressure is reducing the size of landholdings. West Bengal practices intensive commercial farming.

Extensive commercial farming: This is a system of agriculture in which relatively small amounts of capital or labor investment are applied to relatively large areas of land. At times, the land is left fallow to regain its fertility. It is mostly mechanized because of the cost and availability of labor. It usually occurs at the margin of the agricultural system, at a great distance from market or on poor land of limited potential and is usually practiced in the tarai regions of southern Nepal. Crops grown are sugarcane, rice and wheat.