Publications – Page 6 – IFPRI South Asia Office

Who Wants To Quit Agriculture And Why?

Posted on November 4, 2015 by vdassani

Farmer in Nalanda District, Bihar. Source: Divya Pandey, IFPRI

Agriculture the backbone of Indian economy that engages more than 50 percent of the country’s workforce, is losing its preference as the most desired profession. Research shows that more than 40 percent of farmers dislike farming as a profession because of low profits, high risk, and lack of social status, yet they continue with it owing to a lack of opportunities outside agriculture.

A recent study on “Farmers' Preference for Farming: Evidence from a Nationally Representative Farm Survey in India” identifies factors that underlie farmer’s reasons to move out of agriculture.

Farmers who express a preference for moving out of agriculture are mostly those with small landholdings, poor irrigation facilities, fewer productive assets including livestock, and follow a cereal-centric cropping pattern. They also have relatively lower access to credit, insurance, and information, and are weakly integrated with social networks such as self-help groups and farmers’ organizations. Within caste group, the dislike for farming moderates with larger landholdings.

If look in the past, over the year’s Indian agriculture faced the challenge of stagnation in arable land, rise in population with increase in demand, changing consumer preference and growing small land holder with an average size of 0.38 ha. According to the latest decennial population census 2011, for the first time in the last four decades, the absolute number of farmers in India fell by 9 million, from 127 million in 2001 to 119 million in 2011. However, a commensurate decline in the agricultural workforce did not occur. The share of agricultural workforce in the total employment declined extremely slowly from 74 percent in 1972-73 to 60 percent in 1993-94 and further to 52 percent in 2009-10.

The author’s highlights that lack of profitability, high risk, and lack of social status in farming and others in that order are few of reasons for moving out. About 67 percent disliked farming due to low profits, 18 percent due to high risk factors and remaining 15 percent based it on the low social status attached to the profession and other factors. Across the different farm land classes, low profitability remained the prominent denominator but it is relatively more pronounced among smaller farmers. Risk was directly in proportion with landholding sizes.

Study reveals that by comparing the net returns on the farms of potential quitters (those who don’t like farming as a profession) and willing stayers (those who like farming as a profession). It is as high as 25 percent in the medium (2.0-4.0 ha) farm class and 18 percent in small (1.0-2.0 ha) farm class. Importantly, the probability of quitting does not seem to be much influenced by social identity as the proportion of farmers disliking agriculture as a profession is almost similar across social classes.

The authors identifies number of pull and push factors underlying farmers’ decisions on agriculture. Pull factors mostly relate to the income opportunities outside agriculture for eg. access to non-farm business activities, higher education, income from labour/salaried jobs, while push factors are a reflection of the constrained livelihood opportunities in agriculture, forcing farmers to seek avenues outside agriculture for eg. lack of access to irrigation, farm credit, crop insurance, information on crop agronomy and modern technology. On the other way around access to irrigation and diversification of production structure towards high-value crops and livestock production make farming attractive to stay in agriculture.

These findings have two types of implications; one for the farm sector and the other for the nonfarm sector. The results point toward a tendency of possible decline in viability of agriculture as a profession. It was noted that farmers who practice integrated farming can be a signal for a greater policy emphasis for diversification toward these activities. Farmers need an improved availability of finances, inputs, information, and markets to benefit maximum from technological change and diversification. Since risk was identified as important reason for disliking farming, insurance agencies can target efforts to improve their outreach among smallholders.

Authors conclude that to improve viability of small-scale agriculture, investments and prioritization on climate smart agriculture interventions by the policymakers can be an important step towards improving the food security and rural livelihoods in addition to mitigating the climate impacts.

Highlights of Recent IFPRI Food Policy Research in India

Posted on November 2, 2015November 2, 2015 by vdassani

Source: (Flickr): Pallavi Rajkhowa, IFPRI

IFPRI began its enduring partnership with India nearly 40 years ago. In fact, IFPRI’s first Board of Trustees in 1975 included Vijay S. Vyas, Director of the Indian Institute of Management in Ahmedabad, India. IFPRI and India’s partnership played a particularly important role following the Green Revolution when that partnership analyzed the necessary policies to both promote domestic food production and to encourage farmers to adopt new rice and wheat varieties. IFPRI’s studies on the Green Revolution in India showed that agricultural growth had a strong impact on poverty alleviation and that further attention to agricultural growth was necessary to reduce poverty. In the late 1970s, amid stagnant food production, weather-related crop losses, and an ever-growing population, the Indian government sought food security solutions that extended beyond food aid; technology and rural development played leading roles in the IFPRI-India working relationship during that period.

During the 1980s, IFPRI’s research focused on India’s agricultural sector, particularly on agricultural growth linkages to the nonagricultural economy; the impact of high-yielding rice varieties in South India; and instability in foodgrains production, food subsidies, dairy development, and livestock demand. Research conducted during the 1990s included studies on topics such as public expenditure and poverty in rural India, incentives and constraints in the transformation of Indian agriculture, and high-value agriculture. Research topics since the 2000s have expanded to include malnutrition, public investment, climate change, value chains, capacity strengthening, and biofortification. As of 2015, the Institute has produced more than 450 publications on India’s food security and collaborates with dozens of Indian institutions.

IFPRI receives continuous financial and logistical support from the Indian Council of Agricultural Research and the Department of Agricultural Research and Education within the government of India and works alongside dozens of research collaborators in the country. This brochure highlights some of the key collaborations between IFPRI and its Indian partners, describing recent and ongoing work.

Fighting Droughts in Bihar

Posted on October 7, 2015April 11, 2016 by vdassani

Solar Panels in Nalanda District, Bihar. Source: (flickr): Divya Pandey, IFPRI

Bihar recorded only 122 mm of rain in the month of June this year against the normal 169 mm—a deficit of 28 percent. IMD reported deficient or scant rains in 23 of the 38 districts and it had ruled out the possibility of good rainfalls till July 17^th. This is the sixth year of irregular monsoon and drought-like conditions in Bihar in the last seven years.

What can government of Bihar do to deal with frequent droughts?

High cost of irrigation is a big reason why agriculture in Bihar is so vulnerable to droughts. If irrigation becomes more affordable, droughts would have much less impact on farm economy and the farmers.

At present, Government of Bihar provides cash subsidy of Rs. 25/liter on diesel to farmers in drought affected blocks to make irrigation more affordable for them. It is perhaps the largest conditional cash transfer scheme in agriculture sector in the developing world. Between 2008 and 2014, the state government allocated 17.6 billion rupees this scheme—to little effect. The scheme, though well intended, is poorly implemented.

The diesel subsidy scheme has some nice features. One, it does not distort prices. Farmers get cash subsidy. Two, opponents of cash transfers often worry that the value of the subsidy may not keep up with the price of the subsidized commodity. Not in this case. Government of Bihar promptly raised the subsidy from Rs. 10/liter to Rs. 25/liter as diesel prices increased. Three, there is much less paperwork involved in this scheme. Farmers do not have to submit proof of land ownership, and so, even a tenant can claim the subsidy if his neighboring farmer attests that he has irrigated his land.

The diesel subsidy scheme has been ineffective in spite of all these good features. We talked to 240 farmers in 16 villages of Nalanda to understand why. We found three major problems with the way the subsidy scheme works.

One, the subsidy money reaches farmers too late in the season. Only farmers in drought affected blocks qualify for subsidy. By the time a block is declared drought affected, it is often too late in the crop season. It make take much longer for the money to reach farmers.

The delay would matter less if farmers could count upon eventually getting the subsidy. But they cannot. What qualifies a block to be drought affected is not clear, transparent and automatic. This trigger needs to become automatic and transparent. Government of Bihar should outsource this decision to a technology institution like IIT-Patna or the state agriculture universities. They would track rainfall in all blocks of Bihar and declare a block drought affected in real time. Once a block is declared drought affected, all farmers there should automatically become eligible for subsidy and they should be able to collect it from their nearest bank or post-office.

Late and uncertain payments make the diesel subsidy more like a compensation for crop losses and not a conditional cash transfer, it is meant to be, to induce farmers to irrigate more to reduce the crop loss from drought.

Three, smallholders rarely get the subsidy. The transaction costs are too high for them. A farmer who cultivates 0.5 acre land is entitled to Rs. 375 in subsidy—in 3 installments of Rs. 125 each. He may have to spend up to Rs. 60-80 in transport costs and lost wages just to collect the subsidy from his block office. Government of Bihar should build a system of cell-phone based cash transfers system if it wants to reach all farmers.

Subsidizing diesel is an ad hoc measure to make irrigation affordable. Even if implemented well, it can only mitigate the impact of drought. With droughts becoming so frequent, Bihar needs programs for drought-proofing the agriculture. Economic gains from rapid GDP growth will come to a naught if agriculture remains vulnerable to droughts in Bihar. We saw this in 2009 when one big drought wiped out gains in poverty reduction from five years of double digit growth in state’s economy. The number of poor people living below poverty line (BPL) increased by 4.7 million between 2004-05 and 2009-10 even as the per capita GSDP grew at 6-8% per year. This misery is avoidable. Farm economy in Bihar can become more resilient to droughts.

The drought in 2009 was much more severe in Punjab, Haryana and Western Uttar Pradesh. Still, there was much more crop loss in Bihar mainly because farmers in Bihar pay 25-30 times more for a cubic meter of water than his counterparts in north-western India. Improving rural power supply can make groundwater irrigation affordable in Bihar too. It can be the best possible investment for drought-proofing agriculture and the most effective poverty reduction strategy for the state.

Rapidly falling price of solar panels offers another opportunity to make irrigation affordable. In 2012, the minor irrigation department of Bihar revived 34 public tubewells in Nalanda by connecting them to solar panels. Our research shows that farmers have benefited a lot from the solar powered tubewells. There are more than 5000 defunct public tubewells in Bihar. The defunct tubewells can be revived to provide affordable irrigation and drought proofing in 50 thousand to one lakh hectares of land if they are solarized and their management is turned over to farmers.

Can Diversification Towards High Value Commodities Strike Gold For Farmers?

Posted on September 10, 2015November 4, 2015 by vdassani

Farmer at Malda, West Bengal. Source: (Flickr): Divya Pandey, IFPRI

Konark Sikka former intern with IFPRI-South Asia office

Despite small land holding, agriculture’s falling share in national income, and limited scope of transfer of labor to non-farm sectors, agriculture still plays a significant role towards food security and poverty reduction. A recent IFPRI discussion paper on Agricultural Diversification and Poverty in India looks into hypothesis and assesses options for improving the outcomes of the farmers through crop diversification into high-value crops (HVCs) that boost incomes, generates employment, and reduce poverty. The estimates in the paper show that over 5 percent reduction in farm poverty in India can be achieved through crop diversification.

Overall, about 22 percent of farm households in India grow at least one HVC crop. In this study, the authors use Generalized Propensity Score Matching and Dose Response Functions to establish ranges within which crop diversification would effectively reduce poverty. The authors suggest that for marginal farmers, the allocation of land towards cultivation of HVCs needs to rise from the current rate of 39 to around 50 percent, in order to pull such farmers out of poverty. Expectedly, larger the land size, a smaller proportion of land allocated to high value crops is needed for this purpose. However, increasing area need not be the only option with marginal farmers, since there often is an inverse relationship between farm size and productivity.

In moving towards HVCs, small and marginal farmers face several constraints such as lack of access to credit, input, seeds, high yielding varieties, technology and information, and limited markets in rural areas. For marketing their produce in urban areas they have to bear additional costs for transporting.

Studies reveal that, with rise in income, urbanization, consumers preferences are shifting from cereals towards high value produce. With a rise in demand of HVC there is potentially a transformational shift of the agri-food marketing system that would involve movement towards vertical coordination away from spot markets. Vertical coordination would be needed to improve access to inputs, services, and output markets, and a reduction in marketing and transaction costs.

The authors conclude that diversifying crops with the cultivation of more high value commodities, which have a growing market in the urban areas of the country, could provide farmers with the much needed extra income. Contract farming will help in connecting small holder farmers in the supply chains that would enhance their livelihood. Further they add, with better infrastructure and improved supply chain coordination, the same increase in income could also be achieved with lower levels of diversification.

Multiple Factors Hamper CCT Scheme

Posted on September 7, 2015November 2, 2015 by vdassani

Cross-posted from the FSP India website written by Rachel Kohn

Women Farmers, Nalanda District, Bihar: Source (flickr) Divya Pandey, IFPRI

The increasing frequency of altered rainfall patterns in India has heightened the vulnerability of the agricultural sector, already susceptible to rainfall-related volatility. The impact extends beyond macroeconomics and into the households and lives of hundreds of millions of people. In Bihar, for instance, the poorest and third-largest state in India, 24 of its 38 districts are considered extremely vulnerable to climate change and a large portion of the state experienced droughts in four out of five years between 2009 and 2013.

In 2008, the government of Bihar launched one of the largest conditional cash transfer schemes (CCT) in the world in an effort to mitigate the effect of drought on crop area and farming. The CCT scheme uses a non-distortionary subsidy of diesel in drought-affected to encourage farmers to use groundwater for irrigation of their kharif crops. Paddy is Bihar’s staple crop and is primarily vulnerable to drought because of the high cost of irrigation.

Given the state’s great needs, limited resources, and the large-- and growing—investment in this program, it is important to have a clear impression its effectiveness. It is also a prime case study to research the impact and functioning of cash transfer programs in the agricultural sector and adaptation policies to mitigate the impact of climate shocks on crop production. IFPRI researchers Avinash Kishore, P.K. Joshi and Divya Pandey present the first evaluation of this CCT scheme in their paper “Drought, distress, and a conditional cash transfer programme to mitigate the impact of drought in Bihar, India.”

The authors use several sources of data to conduct their evaluation including district-level rainfall during monsoon months combined with crop area and yield to measure the impact of drought on area and yield of paddy. Relying upon the standards of the Indian Meteorological Department, they classify a district as drought-affected if the total rainfall from June–September is 80 percent or less of its long-term mean. The authors also use unpublished district-level data on allocation and uptake of the diesel subsidy from the state government’s records, published data from the minor irrigation census of India on the number of pumping sets in each district, and agricultural data (e.g. net sown area, crop yields total value of crop output) to identify factors that drive the large inter-district variation in use of the diesel subsidy. Last but not least, they survey 240 real and potential beneficiaries of the scheme in 16 villages of the Nalanda District, as well as block and panchayat-level government officials responsible for grass-roots monitoring and implementation.

The authors that between 2001 and 2012, drought reduced paddy yield by an average of 450 kilograms per hectare and the cropped area of paddy was reduced by 4750 hectares. The authors note however, that although the diesel subsidy scheme launched in 2008 has steadily increased in value over time, has not had the intended effects. They note an uptake ranging from 2% to 100% and from the primary survey, they note limited awareness of the scheme, high transaction costs, and poor targeting. As a result, they find that the scheme has not been effective in mitigating the impact of drought on paddy production. The authors note “at present, it works more like a drought-relief programme where some farmers, especially the better-off ones, get some cash from the state in a poor monsoon season, and not like a CCT or a drought-mitigation programme that would encourage farmers to do something they would not otherwise do – maintain their cropped area and crop yields by using more groundwater to make up for the shortfall in rains.” The authors recommend changes in the subsidy transfer including doing away with the requirement to produce diesel purchase receipts, transparent mechanisms for declaring a block drought-affected, and information-sharing through mobile networks. The authors also recommend creating permanent irrigation infrastructure as an affordable and sustainable way to provide assured irrigation to all farmers.

A fuel subsidy to lower the cost of irrigation is a popular policy for drought-proofing in South Asia, and the lessons learned in their study can be applied not only in the region but in other drought-prone parts of the world vulnerable to rainfall shocks.

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