pingali - india agricultural renaissance

Agricultural Renaissance and the Pursuit of Inclusive Development in 21st Century India

Dr. Prabhu Pingali, Deputy Director

& Mumukshu Patel, Program Officer

Agricultural Development

Ajit Kumar Sinha Memorial Lecture to the 94th Annual Conference of the

Indian Economics Association

December 28, 2011

*The views expressed here are personal and do not reflect the official position of the Bill and Melinda Gates Foundation.

Inclusive growth: emphasizes both the pace and pattern of growth

Inclusive growth and development

The role of agriculture: key to

ensure inclusive growth in India in

the 21st Century

− Role in GDP

− Share of employment

− Links with new markets

© 2011 Bill & Melinda Gates Foundation | 2 December 28, 2011

Inclusive growth refers both to the pace and pattern of growth

• Strong focus on economic growth as a necessary condition for poverty reduction

• Long-term perspective, concerned with sustenance of growth

• Broad based, across sectors

• Include a large part of the country’s labor force

• Emphasis on productive employment, not redistribution of income

• Aligned with the absolute definition of pro-poor growth

• Fuelled by market-driven sources with government providing a facilitating function

Source: World Bank (2009), “What is inclusive growth?’; also, Commission on Growth and Development, Strategies for Sustained Growth and Inclusive Development; Thorat (2010) “How Socially Inclusive has growth been?”; Planning Commission (2011), Faster, Sustainable and More Inclusive Growth

The Green Revolution: 20th Century India's inclusive growth experience

Agricultural productivity growth, unleashed by the Green Revolution, brought some of the most dramatic poverty reduction in India resulting in more inclusive development


Source: World Bank (2008), World Development Report; national rural poverty line data

This poverty reduction occurred – principally through Ag GDP growth – since India underwent the ‘Hindu rate of growth’ during those decades

But, we could have done better

Poverty

Indian poverty rates have not fallen as quickly as China: in 1981 China had 835 million people living in extreme poverty (compared to 420 million in India), in 2005 that number was down to 208 million (for India it stood at 456 million - an absolute increase of 36 million).


1211

5450

947

2572

0

1000

2000

3000

4000

5000

6000

1961 1971 1981 1991 2001 2009

kilo

s/h

ecta

re

China India

84

15.9

59.8 41.6

0

20

40

60

80

100

1981 1984 1987 1990 1993 1996 1999 2002 2005

% p

op

ula

tio

n i

n e

xtr

em

e

po

vert

y

Poverty Rate

China India

Cereal Yields

China and India: A comparative perspective ‘on pace’

Source: World Bank, PovCal database; FAO

Productivity

Cereal yield gains are stagnating in India and much lower than in China. Chinese yields are far above the world average and rapidly converging with Western Europe and the US.

Pattern of India’s development

December 28, 2011 © 2011 Bill & Melinda Gates Foundation | 5

Concentration of poverty in states Per capita incomes – a comparative lens on ‘pattern’

Source: Planning Commission, Data Tables; Economist Intelligence Unit; IMF, World Economic Outlook $0 $5,000 $10,000 $15,000

Ethiopia

Bihar

Rwanda

Madhya Pradesh

Uttar Pradesh

Assam

Rajasthan

Orissa

West Bengal

Uttarkhand

Andra Pradesh

India

Karnataka

Kerala

Tamil Nadu

Gujarat

Punjab

Maharashtra

Delhi

China

Chandigarh

Brazil

Pattern of development: an alternative view


Source: NASA, Visible Earth Catalog

Agricultural Renaissance in India: the pursuit of inclusive development

A strong focus on small-holder productivity growth is critical to ensure inclusive development in India

• To achieve this goal, we need a two-pronged agricultural

development strategy that:

1. Links smallholders to supply chains to feed the growing urban

middle class

2. Increases small-holder agricultural productivity in lagging

regions


Linking smallholders to supermarkets to feed the growing Indian middle class

© 2011 Bill & Melinda Gates Foundation | 8

Leveraging the power of markets for inclusive development

Share of Urban and Rural Income (2005)


Source: World Bank, Perspectives on Indian Poverty and ICP

Smallholders are taking advantage of new opportunities


Dairy

Hybrid feed maize

Fruits and vegetables

The Supermarket Reality


86 170

275

513

967

1223

1290

1717

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2003 2004 2005 2006 2007 2008 2009 2010

US

$ m

illi

on

Supermarket Sales- Top 5 Retailers (Account of ¾ share)

Futures Group* Reliance RPG (Spencer's) Vishal (Megamart) Aditya Birla (More)

Source: Reardon and Minten (2011)


FDI in retail: role in inclusive growth What have been the lessons of FDI in other sectors in the Indian economy?

We already have joint multinational investment in the retail sector: has it hurt the prospect of inclusive growth?

Name Sales

Metro Cash&Carry 281 mn

(Germany)

Bharti (Walmart) 116 mn

Tata (Tesco UK) 103 mn

Source: Reardon and Minten (2011)

How can policy facilitate this integration for inclusive growth?

Policies need to overcome the ‘scale mis-match’ by reducing the costs of smallholder participation in markets

• Various contractual and/or out-grower arrangements can help

overcome the ‘scale mismatch’

Policies should make information access cheaper and easier, and rules clearer

Policies should aim to enhance capacity to meet quality and safety standards

Policies should help manage risk and provide credit support


© 2011 Bill & Melinda Gates Foundation | 14

Back to the future: jumpstarting agricultural growth in lagging regions ‘Back to the future’: Increasing Agricultural Productivity in Lagging Regions for Inclusive growth

Emerging opportunities and contexts

Opportunities for jump-starting growth in lagging regions for inclusive development

We see new opportunities in catalyzing agricultural growth in lagging regions

• Private Sector investment in Indian agriculture is increasing

rapidly

• Biotechnology offers exciting opportunities, much like high

yielding varieties during the Green Revolution

• Information revolution: mobile phones and other ICT

developments offer unique advantages for agriculture,

particularly in extension services


Role of the private sector in Ag R&D


The changing locus of Ag R&D in India

54

251.3 271.8

688.3

0

100

200

300

400

500

600

700

800

1994-1995 2008-2009

20

05

US

D m

n

India R&D Ag Investments

Private Public

16.6

83.4

Share of Ag R&D Investments: '94-'95

30.9

69.1

Share of Ag R&D Investments: '08-'09

Private PublicSource: Carl Pray et al, Private R&D in Agriculture in South Asia (forthcoming)

Private sector Ag investment in India: by industry and origin


S No Industry

1984-85# 1994-95#

2008-09*

Total Indian MNCs

USD (2005, mn)

1

Seed and

Biotechnology 1.3 4.9 88.6 49.3 39.3

2 Pesticides 9 17 35.7 24.4 11.3

3 Fertilizers# 6.8 6.7 7.9 4.9 0.0

4

Agricultural

Machinery 3.7 6.5 40.5 20.5 20.0

5

Biofertilizers &

Biopesticides 0 0 1.3 1.3 0.0

6 Poultry and feeds - 3.5 7.8 7.8 0.0

7 Animal Health 0.9 2.7 18.6 3.7 14.9

8 Sugar 0.9 2.5 10.8 10.8 0.0

9 Biofuels 0 0 13.1 13.1 0.0

10

Food, Beverages &

Plantations 1.3 10.3 27 16.2 10.7

Total 23.9 54.1 251.3 155.0 96.2

Private sector is investing in a variety of industry areas

The MNCs are playing a major role

Private sector Ag investments in progressive states needs to be leveraged for lagging regions

Source: Pray (ibid)

Biotechnology: a revolution that’s already begun globally


Will India lead or be left behind


Should policy enable or retard India’s ability to use biotechnology to help lagging regions accelerate their growth?

GMOs can help overcome pressing social challenges: example of Golden Rice

Biotech is not all GMOs—MAB selection

Ex-ante estimates of financial benefits of speeding technology development using MAB in India for rice has an NPV of $447 million

Stress tolerant varieties: Swarna sub-1

Yield advantage of Sub1 version is

typically double, or around 1-2 t/ha

under submergence

The role of public sector in ensuring biotech is leveraged aptly for inclusive growth

Seek collaboration and partnership with the private sector

Concentrate on areas under-researched by the private

sector

Establish IPR and bio-safety regulations

Generate public goods and human resource capacity

Explore new mechanisms for international collaboration


Harnessing the power of information: mobile phones and ICT for agricultural development


Source: TRAI; PWC (2011)

New contexts for Agricultural Development in India

With rapid economic growth and urbanization, largely following

liberalization in the 1990s, we see several different contexts for

agricultural development in India

Two key contexts that need to be understood more are:

• Rising wages

• Feminization of agriculture


Labor wages have increased rapidly


Much of the employment growth is in the non-farm sectors, which is creating a net pull away from agricultural labor and driving up wage rates.

Source: Government of India

Dealing with rising labor scarcity

Short to medium term:

− Small scale mechanization

− Herbicide use & minimum tillage systems

− Labor saving management practices

− Changing contractual arrangements for leasing land

Longer term:

− Changes in the organization of production

− Changes in farming systems – towards lower labor intensity

− Reducing cropping intensities on marginal lands

December 28, 2011 © 2010 Bill & Melinda Gates Foundation |

Increasing feminization of Indian agriculture: ‘50 percent solution’ for inclusive development The symbolic (and real) face of the Indian small-holder has been the face of

a woman farmer


Feminization of Indian agriculture is growing today, albeit in a different

context

• Migration from rural to urban areas is largely a story of men

• Women are increasing their role in farm management, entrepreneurship and have a greater voice

Indian policy needs to leverage this development for inclusion

Key trends relevant to agricultural development in lagging regions

Source: “Food Processing in Bihar,” Government of Bihar; “Orissa Agriculture Statistics 2009.”; Department of Agriculture and

Cooperation, GOI. “Regional disparities in electrification of India – do geographic factors matter?” Center for Energy Policy and

Economics, Swiss Federal Institutes of Technology, Nov 2006. Map created based on 1999-2000 NSS data.

Small and

fragmented

holdings

Infrastructure

Climate-change

Weak extension

services delivery

• Operational land holdings in East Asia are small

and fragmented (Avg. size in Bihar is 0.75 ha)

• Farmers cannot access useful information

about new technologies or markets

• Farmers continue unsustainable and low-

yield farming practices

• A significant amount of cultivated land in East

India is vulnerable to flooding and droughts

• Farmers are exposed to farm losses and

income fluctuations

• Food supply is often at risk

• Extension services offered at the central and

state government levels are ineffective at

informing and training farmers

• Existing technologies are not delivered to

farmers

• Farmers are not utilizing new technologies to

improve crop yield

• Outputs from research and development are

not being adopted

• R&D in agriculture has declined since the Green

Revolution

• SAUs do not have enough funding

• Farmers are unable to utilize new innovative

technologies to improve their crop yields

• Greater number of rural people relying on

agricultural income from smaller plots of land

• High incidences of landlessness (~32% of

landless live in our eastern lagging regions)

26

Water Scarcity

• Lagging regions adopted little of Green

Revolution’s technology advances

• They are behind the rest of India in crop

productivity due to limited usage inputs

Implications for lagging regions’ agriculture Description

Policy agenda for lagging regions and inclusive development


Invest in infrastructure to link lagging regions with the mainstream economy

Encourage smallholders to meet the rising food and feed demand in the rapidly growing regions

Promote crop neutral intensification

Pro-actively connect agriculture and nutrition, using new technologies

Focus on education, health and safety-net programs for the ultra-poor

Emphasize the importance of girls’ education and empower women

Conclusions

The agricultural sector is key for India’s inclusive development – for

better pace and pattern of growth

• Small-holder productivity growth and links to emerging markets –

like organized food retail – will be critical

The private sector and markets can and must play a major role in

catalyzing agricultural productivity

New technologies need to be leveraged, particularly biotech, to better

the prospects of lagging regions

The feminization of Indian agriculture is an immense opportunity

Indian government development strategy should facilitate an

Agricultural Renaissance, this requires:

• Smart investments: particularly in Ag R&D

• Smart policies: to link small-holders to new markets, apt

policies for biotech, streamlined rules and regulations for

private sector in the Ag sector among others



Thank you!

pingali - india agricultural renaissance

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