IFPRI - P K Joshi - Has Indian Agriculture Become Crowded and Risky? Status, Implications and the...

74 Annual ConferenceIndian Society of Agricultural Economics

Dr Babasaheb Ambedkar Marathwada University

Aurangabad

18-20 Dec 2014

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Has Indian Agriculture Become Crowded and Risky? Status, Implications and the Way Forward

P K JoshiInternational Food Policy Research Institute

IFPRI-South Asia Regional Office, NASC Complex, Pusa

New Delhi 110 012 India

E-mail: [email protected]

Web: www.ifpri.org

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International Food Policy Research Institute

Context

Steady transformation from subsistence to semi-

commercial and commercial mode

Threat to Indian agriculture

Indebtedness, climate change, and uncertain global environment

Declining share of agriculture in GDP and high

dependency in agriculture

Concern of growing number of landless laborers and smallholders

Global efforts

“Year of Family Farms”

Provide livelihood to 2.5 billion people (84% smallholders)

87% of world’s smallholders are in Asia and the Pacific

2/3 are in Indian and China and contribute 50% of output

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Small is Beautiful (?) but has become poor

Why “small is Beautiful”

Efficiency, land ownership, family labor

Is “small still beautiful”?

Disadvantage of economies of scale, inadequate access to information, services, markets

Efficiency advantage is evaporating

Rise in per capita income

Migration of workers from agriculture

Rise in rural wages

Cheaper capital compared to land and labor

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Outline

Crowding of Indian agriculture

Risk in Indian agriculture

Tale of two most crowded and risky states

Opportunities and way forward

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I

Crowding of Indian agriculture

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Nature and status of land holdings

0

100

200

Laborers Holdings

5388

144 138

Crowding of Agriculture, m

1980-81 20010-11

0

50

100

Holdings Area

8545

1444

1 11

Holdings & operated area, %

Small Medium large

Doubled the number of landless

laborers and land owners

141 m in 1980/81 to 282 m in 2010/11

Landless: 53 m to 144

Land owners: 88 m to 138 m

Operated area fell by 4 m ha

164 m ha in 1980/81 to 160 m ha in 2010/11

Urbanization, real estate, land degradation

Smallholders increased by 70%

66 m in 1980/81 to 117 m in 2010/11

85% share in 2010/11; 74% in 1980/81

Control 45% area; 22% in 1980/81

63% are marginal farmers; control 22% land

Medium & large farmers

26% in 1980/81 to 15% in 2010/11

Control 55% operated area7


Size of land holdings

Projections for 2020:

155 million smallholdings who will control about 51% operated area

90 million if 40% leave agriculture, especially from smallholding category

Average size of holdings

1.84 ha in 1980/81 to 1.15 ha

Average size of holding of 85% holdings is 0.61 ha

0.39 ha of 63% holdings (marginal, part of smallholding category)

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Smallholder agriculture

Large variation in landholdings and operated

area by smallholders

Smallholders are concentrated in areas with low

urbanization, high poverty and more risky areas

Bihar, Daman & Diu, J&K, Tripura and WB have

95% smallholders

Share in operated area ranged between 76 and 81%

2% of medium & large farmers in Kerala and 3% in Bihar each control 24% operated area

Punjab, Arunachal Pradesh and Nagaland have

<35% smallholdings

Size of smallholders is <0.7 ha in >50% states

Size of smallholders is 0.17 ha in Kerala and 0.31 ha in Bihar

Punjab and Goa: share of smallholders declining9


Smallholders: district-level mapping

Smallholders’ are expanding and

their operated area declining

77% districts have more than 70% smallholders

Only 24% districts have more than 70% operated area

Disparities are widening

India: 0.21 in 1995 and 0.31 in 2010-11

High disparities in smallholder dominated areas

Bihar: 0.53 in 1995 to 0.77 in 2010-11

UP: 0.46 in 2095 to 0.55 in 2010-11

WB: 0.51 in 1995 to 0.62 in 2010-11

These will have socio-economic and political

Calls for differentiated policies10

2001

2001

2011

2011


Implications of crowded agriculture

Soil and water health

Markets and value chains

Access to institutional

finance

Extension services

Food basket

Rural poverty

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1. Soil and water health

Excessive and misuse of soil and water resources adversely affect

agricultural production

Absence of appropriate policies and institutional arrangements

Problem of soil erosion, soil salinity, and waterlogging

Imbalance use of organic and inorganic fertilizers

180 kg/ha and 4.88 t/ha FYM (per fertilized area)

26% fall in FYM during last 15 years

Negligible of micro-nutrients use(deficiency of Zn, Fe, Mn, B)

Partial factor productivity fell: 48 kg food grain/kg NPK in 1970/71 to 10 kg food grains/Kg NPK in 2007/08

Smallholders subsidy: Rs 1260/holding; Rs 17,646/holding to

large farmers

Fall in water table, nitrate, fluoride and arsenic contamination12


2. Markets and value chains

Transforming marketing system Developing rural-urban value chains

Product differentiated at food industry

Organizational changes

Emergence of organized retail

Policy changes to attract private sector

Problems in agri-marketing Relatively lower marketable surplus and

low bargaining power

Higher transactions costs (no means of transport)

Inaccessibility of cold storage facilities (distress sale)

Greater price variability, especially perishable commodities

Underdeveloped markets in smallholder dominated areas

Commodity 1999-00 2011-12

Rice 62 77

Wheat 57 70

Maize 67 83

Tur 64 82

Gram 72 85

Cotton 84 98

Onion 98 75

Potato 48 77

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Marketed surplus, %


Agricultural markets and smallholders

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3. Institutional finance

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

Per holding Per ha

39766572

16718

4776

41838

2450

Institutional Credit

Small Medium Large

Institutional credit increased manifold Rs 53 b in 2000/01

Rs 6074 b in 2012/13

Yet, 40% rural households depend on

informal source Limited access to smallholders

Smallholders received 55% of total credit in 2006/07; 70% short-term credit

Meager credit: Rs 3976/holding

Demand side constraints More labor-intensive activities; financial illiteracy.

Supply side constraints High transaction cost of banks

Procedural hassles.

Role of KCC and RuPay Debit card15


4. Extension services

Effectiveness and efficiency of public sector extension was under

scrutiny

Unable to rise the challenge of organizational goals and objectives

Unequal and unsatisfactory performance in accessing the information

Only very few(28%) used any kind of information; a large

number (72%) left, especially smallholders (Negi et al 2014)

Public sector was the main source (48%)

Better-offs and irrigated farms were most benefitted

Timely and quality service was lacking (49-51%)

High returns from those use got and used the information

12% compared to those did not

Rs 1140/ha additional returns compared to Rs 186/ha investment in R&E

Role of ICT, using mobiles for information delivery

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5. Food basket

Item Unit Small Large

Calories Kcl/capita/

day 2194 2492

Protein g/capita/day 60 70

Fat g/capita/day 45 65

Calcium g/capita/day 625 961

Iron Mg/capita/

day 37 47

β carotene μg/capita/day 1700 2159

Zinc Mg/capita/

day 9.9 10.2

Food basket is influenced by

production, purchasing power

and access to PDS

Smallholders share 50%

expenditure in food

40% large farmers

Smallholders consume less

quantity than large farmers

Consume more of rice, while large farmers consume more of wheat; lead to imbalance diet

Health issues (anemia, stunting, etc.)

Agriculture-nutrition linkages17


Global Hunger Index (2014): Country performance by severity

India ranked 55th out of 76 countries w.r.t GHI

>17% undernourished

>1/3 underweight children

120/128 in underweight children

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Rural poverty

Poverty

Low (<30%) High (>30%)

Sm

all

ho

lders

Lo

w (

<85% Gujarat, Haryana, Karnataka,

Meghalaya, Maharashtra, Nagaland,

Punjab, Rajasthan, Sikkim

(22% smallholders & 21% poverty)

Arunachal Pradesh, Jharkhand, Madhya

Pradesh, Manipur, Chhattisgarh

(10% smallholders and 17% poverty)

Hig

h (

>85%

) Andhra Pradesh, Goa, Himachal

Pradesh, Jammu & Kashmir,

Mizoram, Tamil Nadu, Tripura and

Uttaranchal


Assam, Bihar, Odisha, Uttar Pradesh,

West Bengal


• Low income generating opportunities, high dependency in agriculture and low

agricultural productivity

• Poor infrastructure and weak institutional arrangements

• Poor Social development Indicators (Rural literacy, toilets, urbanization, HDI)

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II

Climate risk to Indian agriculture

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Risk in agriculture: climate risk?

Four popular risks in agriculture

Production risks

Markets and price risks

Government policies risks

Climatic risks

Climate risk is becoming a major challenge in agriculture and the

smallholders have least capacity to overcome consequences

Frequent droughts, floods, shift in rainfall patterns, rise/fall in temperature, frosts

Pose a serious threat to food & nutritional security

Impact of climate change

Vulnerability

Agricultural production

Water resources and health

Food prices and poverty

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1. Impact on vulnerability

Vulnerable to climate change

Very high and high category of vulnerability

Rajasthan, Uttar Pradesh, Madhya Pradesh, Bihar, Gujarat, Karnataka, Maharashtra

Rise in temperature, decrease in July rainfall, increase in drought years

Madhya Pradesh, Karnataka

Decrease in July rainfall and rise in minimum temperature and drought year

Bihar and Maharashtra

Vulnerability compounded by poverty in Bihar

Vulnerability increases and adaptation capacity decreases from

west to east

Highest adaptive capacity in Punjab and Haryana

High adaptation due to irrigation, ability to use inputs,

electrification and better road network22


2. Impact on agricultural production

10-40 percent loss in crop production due to rise in

temperature (Aggarwal et al 2009; Nelson et al 2010; Knox et al 2012)

4-20 percent yield loss of rice under irrigated condition

35-50 percent yield loss under rainfed condition by 2030

30-40 percent loss in agricultural production in 2020 (Cline

2007)

Global warming will affect milk production by 1.6 mt by

2020 and more than 15 mt by 2050 (Upaddhyaya et al 2009)

Capture and inland fisheries may be adversely affected (INCCA 2010 and Easterling et al 2007)

Food security in smallholder dominated areas will be much

more that other areas. 23


3. Impact on prices and poverty

0

5

10

15

20

25

Ric

e

Maiz

e

So

rgh

um

Mil

let

Pig

eo

n p

ea

Gro

un

dn

ut

Co

tto

n

23

1613 13

10

5 5

Rise in prices due to 10% drought

Rise in prices

Climate change affects food production and raise

their prices and make people more poor.

Recent price spikes negatively affected about 77% in

the world

Prices of major rainy season crops will increase due

to drought

Demand will go down due to rise in prices

Rice by 5.5%; and 2-4% for other commodities

India might import 15 million tons of rice due to 20%

drought in 2020

Affect global prices significantly

Adverse effects on poverty

Globally, 600 million smallholders would face acute

malnourishment by 2080 due to climate change

Adversely affect government efforts to increase agricultural production and ensure food security

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Source: Kumar, et al 2013

III

A tale of two most crowded and risky states

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Crowded and risky states: Bihar and Odisha

Most backward states with high poverty (43% Bihar and 46% in Odisha)

Low urbanization (11% in Bihar and 17% in Odisha)

97% holdings in Bihar and 92% holdings in Odisha are smallholders

Occupy 76% area in Bihar and 70% in Odisha

Average size of smallholders is 0.3 ha in Bihar and 0.8 ha in Odisha

Agriculture is subsistence, laggard and highly risky Concurrent floods, droughts and numerous pests and diseases

Crop sector contributes 58% in Bihar and 70% in Odisha Yield gaps are very high (131 to 300% of rice in Bihar)

Low cropping intensity with large rice-fallow lands

1/3 of total 13 million ha rice-fallow lands

Meager investment in agricultural research and extension

< Rs 10 per thousand population

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Two crowded and risky states ……

Weak financing and marketing institutions Markets are unregulated

Low electrification 52% villages electrified in Bihar and 60% in Odisha (81% national average)

HVCs are important source of value of agricultural output 60% in Bihar and 50% in Odisha

Opportunities in developing value chains and agro-processing Sudha dairy in Bihar; and Udyan fresh fruits & vegetables in Odisha

Kaushalandra Foundation in Bihar and e-Kuteer in Odisha

Need for reform agriculture sector Invest in agriculture, bridge yield gaps, promote diversification, strengthen

agricultural markets,

Improve infrastructure and

Create huge employment opportunities outside agriculture sector27

IV

Opportunities for smallholders and

the way forward

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Opportunities (move-up or move-out concept)

Increase production and

reduce yield gaps

Promote high-value agriculture

Strengthen agro-processing

Pro-smallholder institutions

Huge job opportunities outside agriculture

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The way forward

Land and labor reform

Change ceiling laws; land lease system; and simple labor laws

Market reforms

Develop markets and institutions; adopt cluster approach; minimize risks

Reform agricultural extension system

New cadre of agri-professionals

Minimize agricultural risks

Climate smart agriculture, agriculture insurance

Pro-smallholder agricultural research agenda

Farm mechanization, energy, and climate smart agriculture

Convergent innovation

Converse policies, programs, technologies, markets, social mobilization

Non-farm employment opportunities

Reduce dependency in agriculture by generating off-farm employment opportunities

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Thank you

Small is beautiful but has become poor and vulnerableTune technologies, policies, and institutions to reducing

crowding and risk in agriculture

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