Some 25 years after it last focused on agriculture, the World Bank’s annual flagship publication, the World Development Report, for 2008 seeks to bring back the agrarian economy on the top of the development agenda of emerging countries in Asia.
Growth originating in agriculture is four times as effective in reducing poverty and inequality as growth in industry or services, the report argues. Therefore, a much higher public investment in agriculture and rural infrastructure, reversing the neglect of many years by policymakers, is the only way to raise the incomes of the 300 million poor people in India as well as meet the millennium development goals by 2015.
Indian Finance Minister P. Chidambaram has already indicated that the Union Budget 2007-08, to be presented on 29 February, will focus on agriculture and education. This would be in keeping with Prime Minister Manmohan Singh’s announcement last year of a Rs25,000 crore revival plan for the sector.
Releasing the report in India, Alain de Janvry, one of the principal authors of the report, said although income growth has come from technology improvements raising cereals output in what is known as the Green Revolution, “rapidly transforming economies must move from Green Revolution to focus on new high-value agriculture. Fast-growing urban incomes and demand for high-value product in cities are becoming the drivers of agricultural growth and poverty reduction.”
Ashok Gulati, director in Asia for International Food Policy Research Institute, a Washington, DC-based think tank, said at least half of India’s agricultural output growth today was coming from such high-value sectors, such as fisheries, poultry, horticulture and dairy products.
“The need is to overhaul the entire policy incentive system, which currently focuses on cereals and food security, and encourage farmers, especially small holders, to diversify into such high-value products,” he said.
Arguing that subsidies amount to four times the public investment in Indian agriculture, the report calls for an overhaul in the subsidy delivery system. India could learn from successful experiments in direct transfers of subsidy for food and fertilizers, such as the PROCAMPO programme in Mexico and Marketsmart in Brazil.
The overuse and distorted use of fertilizers due to subsidies has meant a fall in yield for 10 major crops, the report said, as well as huge gaps between potential and actual yields over 2003-05.
For instance, in the case of rice, the gaps in potential and actual yield was 100% in Bihar and Uttar Pradesh, meaning that the actual achievement was some 100% less than potential, due to lack of development of research and technology and extension services.
The report says that between 1987-88 and 2004-05, non-cultivator and marginal farmer households were spending 46% more time on non-farm activity, while richer farmers spent more time working on farms. Only farmers owning at least 2 hectares of land received over 50% of their income from agriculture; the rest depended heavily on earnings from non-farm business, livestock, and working as farm-hands.
With some 80% of farmers depending on small fragmented landholdings, labour productivity in India remained the lowest among the bigger emerging economies, including Brazil and China. Agricultural value added per worker over 2003-05 was $219 (Rs 8,694) in India compared to $292 in China and $1,489 in Brazil.