Mudasir Hassan Bhat* & Prof. Md Abdus Salam**

Transcription

1 Diversification as a Strategy for Sustainable Agriculture Development in India: Issues and Concerns Mudasir Hassan Bhat* & Prof. Md Abdus Salam** Abstract: Agriculture development policies in India have undergone several changes with Green Revolution and economic reforms being most significant. Although the development policies have transformed the economy from a food deficient and import dependent to food self sufficient and exporting economy to a large extent but these policies have simultaneously raised the question of exploitation and degradation of natural resources, sustainability of agriculture and regional disparity that triggered debate for redefining the agricultural policies. Diversification of agriculture has been suggested as remedial measure, but India being highly diverse in climatic conditions, where such diversification should be induced is a question of greater importance? Also the food self sufficiency projections being viewed by many as lack of purchasing power and yield stagnation in food grain production may have serious consequences for food security in India. This paper attempts to examine various issues arising out of diversification and suggest the appropriate approach, considering the various pre-requisite for diversification as a strategy for sustainable agriculture development in India. Key words: Diversification, Resource Utilization, Sustainability, Policies Corresponding Author* *Mudasir Hassan Bhat; Research Scholar, Dept of Economics, Aligarh Muslim University, Aligarh mudasirbhat85@gmail.com **Prof. Md Abdus Salam; Professor, Dept of Economics, Aligarh Muslim University, Aligarh. 1 P a g e ISSN:

2 Introduction: Post Green Revolution; there has been strong pitch for diversification of agriculture world over owing to rising per capita income, self sufficiency in food grain production and changing food demand and consumption pattern etc. It is argued that in the era of globalization and liberalization country should not be obsessed with the food security concerns as any eventual shortfall in food grain production can be met with the imports. Instead countries should diversify their agriculture to High value commodities whose demand is ever increasing at the global level. The diversification strategy is based on sound rationale and there are many countries that have successfully diversified their agriculture. However the nature of diversification has varied over time and among countries. For a country like India, with diverse climatic conditions, less developed infrastructure and markets, mass poverty and low income in rural areas, identifying proper strategy for agriculture diversification concerning food security is very important. This paper attempts to highlight various issues and concerns in diversification of Indian agriculture. The first section outlines the concept and rationale for diversification as presented in literature. The second section discuses the appropriate strategy for diversification considering the food security scenario, productivity and agriculture development policies in India. Concept of diversification: At micro level the concept of Agriculture diversification from a narrow view point is the response of the subsistence farmers to the growing demand of certain commodities, by producing varieties of such commodities at the farm level. The increasing varieties produced at the farm level may also be the response to reduce risks arising from climatic, seasonal and market factors (Hayami, 1992). In initial phase the diversification is the addition of other crops and enterprise at the farm level. The households shift away from traditional food self sufficiency goals to a more profit and income oriented production where farm output responds to market signals. The process leads to replacement of subsistence system with more specialized commercialized unit. The farms specialize to cereal crops, horticultural crops, poultry, fisheries, livestock etc. due to product specific requirements of technical knowledge and infrastructure investment. The 2 P a g e ISSN:

3 integrated farming system of producing more than one product generally becomes infeasible. As the level of commercialization increases the process develops into a mixed farming system with increased specialization. The farm level production at this stage rapidly responds to inputs and market prices. The specialization at the farm and regional level governed by the market forces and relative comparative advantage is consistent with diversification at the sectoral level. (Pingali et. al. 1995) Agriculture diversification at the macro level is the structural transformation of the economy. Apart from the farm diversification, the process involves developing agro-based industries, infrastructure and institutions to transform the rural economy. The process broadens the income sources of rural households and leads to significant reduction of workforce dependent on agriculture (Gulati and Rich, Otsuka K. 1998). The diversification at macro level should not be misinterpreted as necessarily diversification at farm or regional level. The diversification at household and farm level may involve horizontal diversification towards new agricultural commodities or vertical diversification into non-farm activities such as marketing, storage, processing etc. At regional level diversification may involve specialization of regions into agricultural activities of their relative comparative advantage. The specialization at regional level is not inconsistent with the diversification at the macro-level. A country can diversify even if regions specialize, but the specialization should be governed by the comparative advantage, not by government policy interventions or market distortion. In a well diversified agricultural system producers, households and regions gain sufficient flexibility to pursue their various objectives in response to changing market and technological conditions (Taylor, 1992). Diversification does not necessarily require individual farms or regions to diversify in all enterprises. The individual farms or regions may specialize and yet be a part of a diversified regional or national economy. The rationale underlying the diversification is that producers and regions should pursue those enterprises for which they have greatest comparative advantage relative to other producers and regions. 3 P a g e ISSN:

4 Rationale for Diversification: The literature on agriculture diversification has highlighted the following reasons for a case towards agriculture diversification. The following section presents the analysis of these reasons in context of agriculture development policy, food security and rural development in India. Over the past few decades the high yielding varieties of food grains have increased the food self sufficiency. At global level the productivity growth has resulted in decline of real prices and income incentives for farmers to cultivate these crops (Pingali et.al. 2003). With increased production and declining world pries the crops are just food security and income maintenance crops than being income augmenting. The policy option arising out of this scenario is either to subsidize the farmers for less income due to declining world prices, letting the farmer s income decline or farm diversification into agro-based and non-farm activities. Most of the countries in these have chosen the farm diversification as a strategy for dealing with the situation (Taylor, 1992). The economic growth and development is accompanied by a declining share of agriculture sector in the economy. The declining share of agriculture to national income is to be accompanied by a corresponding decline in share of agriculture labour force (Rosegrant et.al.1998). with the economy being unable to absorb the labour force, resulting in widening gap between agriculture and non agriculture income. Diversifying the agriculture and developing the agro based industries and non-farm enterprises can help in smooth transition of the economy. The successful rural transformation in china by developing rural enterprises and agro industries is given as an example of rural development (Huang, 1997). The rapid growth of income, urbanization and liberalization has changed the consumption demand pattern resulting in a shift away from staple food towards high value commodities, fruits and animal products etc. having higher income elasticity of demand. With globalization and liberalization there has been increased demand for varied range of agriculture commodities providing new opportunities for farmers producing and exporting to international markets. 4 P a g e ISSN:

5 In a globalized trading system, excessive dependence on a few tradable commodities can pose serious challenges in terms of price shocks, changes in international demand and advancements in technology. The exporting country should have a strong comparative advantage or should rapidly adapt to various changes in international demand which otherwise will put their economic survival in danger. Diversification of economy and a broad export base will reduce the vulnerability to such risks arising out of this changing international scenario. The monoculture cultivating systems are perceived as threat to environment through excessive use of chemical fertilizers, pesticides, loss of diversity and pressure on scarce resources. Agriculture diversification through a sound multi-commodity system, crop rotation and inter-cropping can reduce the environmental degradation. The diversification into live stock, forestry and agro allied activities can help in soil organic matter and soil fertility (Taylor, 1992). Diversification in context of agriculture development in India The agriculture sector in India has undergone significant structural changes in past few decades. The share of agriculture in GDP has decreased from 30 percent in to 14.5 percent in indicating a shift from the traditional agrarian economy towards a service dominated one (Fig 1.1). The Green Revolution transformed the economy from a chronic food deficient to a self sufficient economy. By the year 2000 there were mounting surplus of food grains. The per capita availability of foodgrains increased as shown in fig1.2 Fig 1.1: Sectoral Composition of GDP Fig 1.2 Per Capita Availability of Cereals and Pulses Source: DES, DAC. 5 P a g e ISSN:

6 Whereas the decrease in contribution of agriculture sector in Gross Domestic Product is indicative of structural transformation of the economy, moving away from agriculture sector. There has not been a corresponding decline in labour force dependence on agriculture sector. Still about 52% of the total workforce is still dependent on the farm sector for sustenance (NSS 66th Round). The declining share of agriculture to GDP and the continuing high pressure of population has increased fragmentation of land holdings and decreasing availability of cultivated land area per household. Further the growth in the agriculture sector has been widely fluctuating. During the Eighth plan period ( ) there was remarkable growth rate of 4.8 per cent (Fig 1.3). However, the growth momentum was not sustained. In the Ninth plan period ( ) and the Tenth plan period ( ) the agricultural growth rate came down to 2.5 percent and 2.4 percent respectively. In contrast to a slow growth rate of 2.4 percent in agriculture the annual average growth rate of economy as a whole was 7.6 percent during the tenth plan period. Given that more than half of work force is dependent on agriculture, the stagnation in this sector is a matter of great concern. The slowdown in agriculture is currently threatening to stall poverty reduction in India. Fig. 1.3: Growth Rates: GDP (overall) and GDP (Agriculture & Allied Sectors) Source: CSO. Under the scenario of poor and unsatisfactory performance and slowdown in agriculture sector, the fundamental question is how to accelerate the growth in agriculture. 6 P a g e ISSN:

7 Given the declining area and stagnation in yield and demand, the potential to increase growth through staples appears limited. It is argued that country should diversify agriculture to High value commodities. The sustained growth in income and urbanization has resulted in a shift in demand towards high-value agricultural commodities (HVA) (Ravi and Roy 2006). Moreover, with globalization and liberalization there are new opportunities for the export of high-value products whose demand is ever increasing at the global level. There has been increasing flow of exports of high value food commodities such as fruits, vegetables, dairy, poultry, fish, and processed food from developing to developed countries ( Diaz-Bonilla and Recca, 2000). The high value food commodities are are labor-intensive and generate quick returns, the farmers can utilize their surplus in production of these commodities and augment their incomes (Joshi et al. 2002; Barghouti et al. 2005; Weinberger and Lumpkin, 2005) However, there are several challenges in the process of diversification towards high-value agriculture. In diversifying towards the high-value that farmers have not grown before, the farmers may lack necessary information and infrastructure, marketing opportunities, and the technical knowhow and skills. There are specific input, quality requirements and standards in exports of these commodities. There are risks associated with producing and marketing of these commodities. Being perishable in nature the production of these commodities requires investments in infrastructure, access to credit and developing of marketing facilities. Of course, the large farmers may be in a better position to take such risks, the diversification by small farmers by allocation land to commercial crops will increase the risk in terms of dependence on market for food requirements. (Minot and Roy, 2006). However, the high-value commodities being labour intensive, the smallholders generally having large family size, may be in a better position in cultivating these crops. In light of the given constraints and prospects, the section below analyzes the diversification of Indian agriculture considering the food self sufficiency, international competitiveness, investment and infrastructure in Indian agriculture. 7 P a g e ISSN:

8 With the green revolution India became self sufficient in food production but the success of modern technology based on high yielding varieties is limited to the irrigated areas of northern India. viz-a-viz Punjab, Haryana and Western Uttar Pradesh. Given the nature of food grain production and buffer stocks the food self sufficiency in India is vitally dependent on surplus food production in Punjab- Haryana regions where green revolution was successful. These regions contributed nearly fifty percent to buffer stocks. The contribution in case of wheat is as high as 70% and 30% for rice. A large part of the country is still chronically deficient in food grain production and yet to see the adoption of high yielding varieties. With diverse agroclimatic conditions the country has immense potential for producing variety of commodities. Table1: Contribution of Punjab-Haryana region to central pool of food grains (Average. For T.E Ending ) Region Wheat Rice Wheat and Rice Punjab-Haryan (72.56) Rest of India (27.44) Total (100.0) S Source: GOI, Economic Survey The productivity comparisons of Punjab-Haryana regions in rice and wheat with others shows that the regions productivity is nearly 200% more than others. Given this huge yield gap and regions contribution to Nations food pool, it is clear that the region has huge relative comparative advantage in production of rice and wheat. Comparing the yield of rice and wheat in Punjab Haryana region and world yields, there is huge scope of increasing the yield of foodgrains through research and extension on developing new high yielding varieties suitable for Indian climatic conditions. Therefore diversification through diversion of land may prove disastrous for nation food self-sufficiency (66.70) (100.0) (50.83) (100.00) 8 P a g e ISSN:

9 Table 2: Yield Gap between Haryana- Punjab and Other States States Rice yield kg/hect. Maharashtra Source: GOI, Economic Survey Maintaining food self-sufficiency is necessary for food security. More important is the fact that given the huge size of India s food requirements, its dependence on imports will push up the global prices and cost of imported food. The domestic producers and consumers will be exposed to world market prices that fluctuate widely and regular imports will have depressing effect on domestic producers (Institute for development, 2011). Wheat yield kg/hect. Punjab- Haryana Uttar Pradesh M.P & Chattisgrah Bihar & Jharkahnd Given the diverse agro-climatic conditions, India has huge potential for diversification. But potential has been constrained by the lack of infrastructure and appropriate policy. The excessive reliance on green revolution areas resulted in the neglect of other regions and their potential could not be realized. Post reforms, the growth in the agriculture has been mainly dependent on support prices and input subsidies. The support price led growth policy option has not only increased the subsidy burden on government but also is not sustainable and exaggerated figures of value of agriculture output. The research shows that the impact of investments in rural infrastructure and agriculture R&D on poverty reduction is much more than that of input subsidies (Sheggen Fan et al., 2008). The investments can accelerate and sustain a long term growth in agriculture than subsidies. The diversification has been constrained by the lack of investment in both public and private sector. The success of diversification depends on availability and access of enterprise specific technology, investment in infrastructure, development of markets and competitive advantage in terms of productivity, costs and international quality standards and investment in research and development. The investment in 9 P a g e ISSN:

10 agriculture has been the single most important factor in reducing poverty and attaining food selfsufficiency. The declining trend in investment on research and development need to be reversed. There is need for development of HYV and necessary infrastructure to meet the challenges of liberalization in terms of cheap imports. These are the prerequisite for successful commercialization and diversification as the failure of institutions and markets could be more damaging and adjustment process more painful for the poor farmers. Given the nature of these investments and private sector not coming forward, state has to take active role in investments for successful transformation of economy. The comparative advantage of the country in diverse agro-climatic conditions could be harnessed through development of rural infrastructure institutions, markets, credit and fiscal setup that encourage diversification. The diversification towards HVC has potential for income augmentation, employment generation, poverty alleviation and export promotion (Braun, 1995 Pingali and Rosegrant 1995, Vyas 1996). However, the export led growth of farm income is based on international competitiveness of products. International competitiveness requires investment in infrastructure, development of markets and institutions, improved technology and human resources. All these are considered as a part of diversification policy. Therefore government should play active role in developing rural infrastructure, markets and institutions. The nature of such goods being public, the private sector is not induced to invest in it. The development of rural infrastructure can effectively reduce the cost of production and marketing and make exports more competitive in international markets. The future course would be the policy to diversify towards agricultural non-farm activities to enhance income. With the development of non-farm activities, much of the labour force could be moved from agriculture to agro based industries leading to successful rural development, as has been the case of successful rural transformation in china (Huang, 1997). With diversification into live stock the farmers can make efficient use of forages, crop residues, manure for improving soil organic matter and fertility The diversification strategy based on above principles will broaden the export base and can reduce the vulnerability of price shocks, rapid changes in demand and supply at international level. 10 P a g e ISSN:

11 Conclusion: The food self sufficiency and hence the food security in India is essentially dependent on the surplus food grain production in areas of successful Green Revolution. The productivity comparison shows that these areas have the relative comparative advantage in production of foodgrains especially wheat and rice. Diversification by reallocation of land away from food crops would have serious consequences for food self-sufficiency in India. Therefore Diversification in these areas would be more propounded in non-farm activities. Given the diverse agro-climatic conditions, there is immense potential for diversification in India. The government should devise a region based strategy for diversification especially in rain-fed areas. Diversification is seriously constrained by lack of development in rural infrastructure, markets and institutions. The development of rural infrastructure can effectively reduce the cost of production and marketing and make exports more competitive in international markets. References: Brau. J. (1995). Agriculture Commercilization: impacts on income and nutrition and implications for policy. Food Policy 20, Vol 20, No. 3,pp Elsevier Science Ltd. Donald, C. (1992) Agricultural Diversification: An Overview and Challenges in ASEAN in the 1990s: ASEAN Economic Bulletin, Vol. 10, No. 3, pp Goletti, F., & Rich, K. (1988). Policy simulations for agricultural diversification. Final Report submitted to UNDP under project VIE/96/008/A/01/99, Strengthening Capacity Building for the Renewal of Rural Development in Viet Nam, International Food Policy Research Institute, Washington, D.C. Hayami, Y. (1992). Condition of agricultural diversification: a historical perspective in Agricultural diversification. Report of a study meeting, Tokyo, Japan: Asian Productivity Association, 1991 Huang, J., & Bouis, H.( 1995). Structural changes in the demand for food in Asia: Food, Agriculture, and the Environment. Discussion Paper 11.Washington, D.C. International Food Policy Research Institute. 11 P a g e ISSN:

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