Emerging Trends in Indian Agriculture: What Can We Learn from these?

Agricultural and Food Policy,

The dragon and the elephant: Learning from agricultural and rural reforms in China and India

"During the past two-and-a-half decades, China and India have implemented a series of economic reforms that have led to recent growth rates of 9-11 percent per year in China and 8-9 percent per year in India. The rapid economic growth of the two countries has not only captured the attention of the world but has also set into motion a rethinking of the very paradigm of economic development because, despite similar trends in growth rates, the two countries have taken different reform paths, which have led to different rates of poverty reduction. Thus far, agriculture-led growth in China has reduced poverty much faster than has India's experience of liberalizing and reforming the manufacturing sector. With public investments in rural roads and agricultural research and development (R&D) playing critical roles, China has been able to not only feed its population but also raise rural incomes despite having much smaller average landholding size than in India. Nonetheless, there are also lessons to be learned from India's experience. This brief is based on a book, The Dragon and the Elephant: Agricultural and Rural Reforms in China and India (published for IFPRI by Johns Hopkins University Press and, in South Asia, by Oxford University Press-India), which compares the rural development and agricultural reform experiences of China and India and examines the lessons that can be learned from both." from Text

Liberalizing Indian agriculture : an agenda for reform

In July 1991, India embarked on a program of economic decontrol that greatly speeded the previously slow process of liberalizing trade and domestic regulatory controls begun in 1978. But the focus of reform has been on manufacturing. Reform has barely touched agriculture, which accounts for two-thirds of employment in India and about 30 percent of India's GDP. Although some crops (notably oilseeds) receive heavy protection, the net effect of interventions to date is to heavily favor manufacturing over agriculture. In this agenda for reform, the authors offer recommendations: Remove all quantitative export and import controls on agriculture, except for special treatment (such as export taxes) when Indian exports would be substantial enough to depress world prices (most likely with rice). Further reduce protection on manufacturing, rather than bring protection for agriculture up to the same level. As a transitional measure, consider the use of variable tariffs based on weighted averages of past international prices as a way to partly insulate domestic prices from extreme fluctuations in world prices. Initially allow the export only of high quality high priced varieties of such commodities as cotton and rice, to limit upward pressures on domestic prices of lower quality varieties, which are important to consumption in low income Indian households. Liberalizing fertilizingr imports and deregulating domestic manufacturing and the distribution of fertilizingrs. Remove subsidies on irrigations, electricity, and credit (and create conditions to facilitate the trading of canal irrigation water rights). Deregulate the wheat, rice, oil and oilseed industries, and abolish compulsory government acquisition at below market prices of sugar, molasses, and milled rice. Reform the food security system to protect low income groups from the increase in the general level of food prices required by the liberalization of agriculture. This would involve better targeting of food subsidies and associated reforms of the public distribution system, or even its eventual replacement by a food stamp system.Economic Theory&Research,Environmental Economics&Policies,Crops&Crop Management Systems,Agricultural Research,Markets and Market Access

WTO negotiations on agriculture and developing countries:

"For more than six years the trade talks of the World Trade Organization (WTO) have been stalled, mainly on account of differences in countries' levels of ambition for reducing support to and protection of agriculture. The expiration of the U.S. president's trade negotiating authority on June 30, 2007, raised the prospect of longer delay. More recently, however, the unprecedented food crisis may have created an environment for reducing the divergences in countries' negotiating positions, and efforts for agreement have intensified at Geneva. To aid developing-country negotiators, the book WTO Negotiations on Agriculture and Developing Countries (published for IFPRI by the Johns Hopkins University Press and Oxford University Press—India) offers the first authoritative analysis of the rules and modalities on which governments of developing countries can rely and suggests a negotiating strategy for developing countries." from TextInternational trade, Developing countries, Policies, Markets, World Trade Organization, High-value agriculture,

The supermarket revolution in developing countries: Policies for "competitiveness with inclusiveness"

"A “supermarket revolution” has been underway in developing countries since the early 1990s. Supermarkets (here referring to all modern retail, which includes chain stores of various formats such as supermarkets, hypermarkets, and convenience and neighborhood stores) have now gone well beyond the initial upper- and middle-class clientele in many countries to reach the mass market. Within the food system, the effects of this trend touch not only traditional retailers, but also the wholesale, processing, and farm sectors. The supermarket revolution is a “two-edged sword.” On the one hand, it can lower food prices for consumers and create opportunities for farmers and processors to gain access to quality-differentiated food markets and raise incomes. On the other hand, it can create challenges for small retailers, farmers, and processors who are not equipped to meet the new competition and requirements from supermarkets. Developing-country governments can put in place a number of policies to help both traditional retailers and small farmers pursue “competitiveness with inclusiveness” in the era of the supermarket revolution. Some countries are already taking such steps, and their experiences offer lessons for others." from Author's textSupermarkets, Wholesalers, Modern retail, Small farmers, Traditional retail, Supply chains, Competitiveness, Inclusiveness,

Globalization and the smallholders

A major question that has surfaced in the changing context of world agriculture is whether the smallholders would ride the wave of globalization or be swept away. This paper addresses the debate with a four-fold objective: (1) it maps different factors that are likely to impinge on developing country smallholders as a result of globalization in general and of agriculture in particular (2) it briefly reviews literature and summarizes different approaches and methodology used to study this question (3) it identifies areas which have been the focus of attention so far and those that are relatively under-researched (4) it attempts to draw some conclusions regarding the impact of globalization on the smallholders from the literature review, and then suggests some policy implications if globalization is to benefit the smallholders. The paper finds, among others, that studies that focus on trade liberalization alone (operating through price changes) and those that address broader issues of globalization (such as changing structure of food industry and new relationships in the interface of farm and firm, SPS issues, etc.) have run somewhat parallel to each other where a greater integration of the two would be more valuable. Methodological approaches may have something to do with this apparent dichotomy. An important part of this study is to find out from the existing literature whether smallholders have benefited or adversely affected by from the globalization process. There appears to be no clear evidence that smallholders in one region may have done better than those in another. However, even while acknowledging the significant differences within regions themselves, it is evident that whether smallholders have benefited or have been hurt is determined by a fairly narrow range of issues – vertical coordination with processors or exporters, access to infrastructure and finance (credit), role of public sector and international involvement in capacity building, alternatives available in non-farm sector, etc. Based on this, the paper concludes that policy interventions vis-à-vis smallholders should essentially have a twin focus (1) removing the shackles that currently constrain smallholders from exploiting opportunities that globalization presents and (2) ensuring minimum adverse impact, both being two sides of the same coin. While the former can be accomplished through enabling policies, the latter would have to be tackled through coping policies. Particular areas identified as critical enabling factors are greater vertical coordination, removing credit constraints, reducing transactions costs, building social capital, greater role for public sector in providing infrastructure and facilitating institutions and also greater initiatives for international capacity building. On the other hand, coping strategies would include provision of credible safety nets and risk coping instruments, promoting exit options particularly through promotion of opportunities in the rural non-farm sector, guarding against harmful monopolistic competition, and focused research on technologies for small farmers. Needless to say, the relative importance of these factors would vary across regions. It is thus important to identify which battery of policies is appropriate depending on the unique circumstances of each region. It is equally important to draw lessons from the several success stories to be able to replicate these successes on a larger scale in a meaningful way. Only then can small farmers make big gains from globalization.Globalization ,

Rice trade liberalization and poverty

Rice is the lifeline of almost 70% of the world's poor residing in Asia, where more than 90% of world rice production and consumption takes place. Rice trade liberalization therefore has tremendous implications for poverty. The world rice market is highly distorted, partly because of the high degree of intervention in rice markets across the world. While poor countries such as Thailand, Vietnam, and India tend to “disprotect” rice sectors, the rich countries of East Asia (Japan and Korea), Europe, and the United States heavily support their rice producers. As a result, there is great diversity in domestic rice price levels, with very high prices in the latter countries and very low prices in the former. Trade liberalization would thus result in flows from these poorer Asian countries to East Asia and Europe. This is predicted to have beneficial effects for poverty, through producer price increases and second-round effects (wages, employment, and investment) in exporting countries, and to augment short-term food security in poor importing countries. However, if rice trade liberalization is to contribute to poverty alleviation in developing countries, there is a need to streamline distortionary agricultural policies, particularly in developed countries. Also important are “behind the border” reforms in developing countries aimed at reducing transactions costs for farmers, rationalizing input pricing policies, ensuring access to risk management institutions and safety nets, improving access to food, and combating adverse environmental conditions. In the long run, rice trade liberalization might have to be coupled with initiatives to enhance agricultural productivity and rural economic growth to be able to make a dent in poverty.

Distortions to Agricultural Incentives in India and Other South Asia

Distorted incentives, agricultural and trade policy reforms, national agricultural development, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18,

Trade liberalization, market reforms and competitiveness of Indian dairy sector

From chronic shortages of milk, India has emerged today as the largest producer of milk in the world crossing 80 million tonnes. This has been achieved largely through a smallholder economy in which "Operation Flood", one of the world's largest dairy development programmes, played an important role. All this happened largely under autarkic framework and regulated public policy dictated by import-substitution strategy. Until 1991, the Indian dairy industry was highly regulated and protected through quantitative restrictions (QRs) and stringent licensing provisions. Since early 1990s, India embarked upon liberal policy framework, which got reinforced with the signing of Uruguay Round Agreement on Agriculture (URAA) in 1994. This opening-up increasingly exposed the Indian dairy sector to the global markets, which in-turn are distorted by export subsidies, domestic support and prohibitive tariffs in developed countries. This raises several issues: Will the Indian dairy sector survive in the new brave world of liberalization? What are the options for India in the coming rounds of multilateral trade negotiations, given scores of distortions that plague the world dairy markets? What sort of domestic reforms are required in the Indian dairy sector that could promote its competitiveness in a fast globalizing world? This study responds to these issues by empirically mapping the competitiveness of Indian dairy sector over the period 1975-2000 and delineating policy options for international negotiations and more importantly, domestic policy reforms, given India's commitments to the WTO.World Trade Organization ,trade liberalization ,Dairy products industry ,livestock ,

Investment, subsidies, and pro-poor growth in rural India:

"This paper reviews the trends in government subsidies and investments in and for Indian agriculture; develops a conceptual framework and model to assess the impact of various subsidies and investments on agricultural growth and poverty reduction; and, presents several reform options with regard to re-prioritizing government spending and improving institutions and governance. There are three major findings. First, initial subsidies in credit, fertilizer, and irrigation have been crucial for small farmers to adopt new technologies. Small farms are often losers in the initial adoption stage of a new technology since prices of the agricultural products are typically being pushed down by greater supply of products from large farms, which adopted the new technology. But as more and more farmers have adopted HYV, continued subsidies have led to inefficiency of the overall economy. Second, agricultural research, education, and rural roads are the three most effective public spending items in promoting agricultural growth and poverty reduction during all periods. Finally, the trade-off between agricultural growth and poverty reduction is generally small among different types of investments. As for agricultural research, education, and infrastructure development, they have large growth impact and a large poverty reduction impact. Several policy lessons can be drawn. Agricultural input and output subsidies have proved to be unproductive, financially unsustainable, environmentally unfriendly in recent years, and contributed to increased inequality among rural Indian states. To sustain long-term growth in agricultural production, and therefore provide a long-term solution to poverty reduction, the government should cut subsidies of fertilizer, irrigation, power, and credit and increase investments in agricultural research and development, rural infrastructure, and education. Promoting nonfarm opportunities is also important. However, simply reallocating public resources is not the full solution. Reforming institutions can have an equal, if not larger, impact on future agricultural and rural growth and rural poverty reduction." from Authors' AbstractRural poverty, Agricultural growth, Public investments, subsidies, Pro-poor growth,