A STUDY OF CROP DIVERSIFICATION AS A STRATEGY FOR REDUCING RURAL POVERTY IN INDIA

Submitted to PEG Net Conference 2010 (Under the Sub theme: Income Diversification) A STUDY OF CROP DIVERSIFICATION AS A STRATEGY FOR REDUCING RURAL POVERTY IN INDIA Dr. Aparajita Mukherjee Professor of Economics Department of Economics and Politics Visva-Bharati University Santiniketan-731235, India Email: apmuk_2001@yahoo.com 1. INTRODUCTION While one third of the world poor live in India, poverty is much more severe in rural India compared to the rest of the country. The severity of food deprivation and malnutrition among people drawing their livelihood from agriculture and unorganized non farm activities in rural India may be considered in conjunction with the current phenomena of stagnation in agricultural production and productivity, reduced viability of traditional crop based agriculture and increased vulnerability of Indian farmers to weather and market related risk and uncertainty. Farmers inability to bear such risk becomes evident from the thousands of cases of suicides committed by Indian farmers in recent years. Present paper is an attempt to examine the variation in extent and severity of poverty and food deprivation among very marginal, marginal and small farmers vis-à-vis their larger counterparts, practicing crop diversification in different degrees, across areas with varying conditions with regard to extent and pattern of irrigation and level of development of infrastructure: our objective is to examine the validity of the hypothesis that diversification towards high value cropping system, by reducing the dependence on one or two water intensive traditional crops would increase the viability of marginal and small farm based agriculture and reduce vulnerability of marginal and small farmers to weather and market related shocks by enhancing their risk taking capacity. The study is based on an empirical investigation with the help of primary data collected through field survey from six administrative blocks under three 1

districts of West Bengal (an Indian province), on different aspects of farming conducted by farmers falling under different size classes of operational holdings and operating under varying conditions with regard to irrigation and infrastructure. Net income from cultivation as well as per capita consumption of different food items are estimated for farming households practicing crop diversification in different degrees to examine how far diversification of cropping system enables the most vulnerable section of the farmers to get minimum level of nutrition and avoid extreme poverty. Both profitability and efficiency in use of inputs per unit of output (using both parametric and non parametric method) for production of high value new crops vis-àvis traditional crops are estimated with a view to arriving at conclusions with regard to the effectiveness of alternative cropping systems in enhancing viability of farming. By and large our test results show that in places endowed with relatively advanced infrastructure and assured supply of water at cheap rates, concentrating on traditional mono cropping system leads to highest profitability and lower potential risk relating to weather uncertainty; in places where increased access to irrigation can be ensured only through substantial private investment ( in the absence of assured supply of cheap water), farmers find it necessary to diversify towards high value cropping system to maintain some reasonable level of positive net income; on the other hand in those areas which are suffering from adverse natural characteristics such as high salinity of soil and water and absence of any kind of surface irrigation, small and marginal farmers find it hard to meet bare subsistence depending on one or two traditional crops and diversify towards less water intensive cropping system to meet their bare subsistence. Our investigation further suggests that while less water intensive and more labour absorbing high value diversified cropping system acts as insurance against weather related risk and uncertainty in the case of subsistence agriculture, diversification necessitates huge investment in material inputs and unless the farmers have easy access to sources of credit they can not undertake diversification to the desired extent. While the study points to the need for intensifying Research and Development in the area of soil science and irrigation technology as a long term policy measure for improving condition of agricultural production in backward areas, the immediate policy direction following from the study points to the need to ensure continuous supply of easy credit to the small and marginal farmers as crucial for supporting the strategy of crop diversification for reducing poverty in rural India. The paper is organised under five broad sections: Section 2 gives a brief over view of the controversies on the question of measurement and extent of poverty in India and in this context briefly review some of the ongoing studies on the question of transformation of Indian agriculture from traditional crop based system towards diversified high value crop system as a strategy for solving the current agrarian impasse. Section 3 presents the proposed frame work of analysis and the methodology followed along with the tools used in the analysis carried out in the paper. Section 4 presents the results of empirical analysis carried out, under five sub sections namely, 2

i) the nature and extent of crop diversification ii) determinants of temporal and spatial variation in the degree of crop diversification, iii) pattern of consumption, poverty and malnutrition among farmers belonging to different size classes practicing crop diversification iv) impact of crop diversification on production, productivity and relative farm level efficiency(measured in terms of input or cost per unit of output, 5 with the use of Data Envelopment Analysis ), v) relative profitability of traditional and high value crops and per capita income from cultivation in areas under different levels of diversification. Section 5 sum up the observations emerged out of the analysis and derives the policy prescriptions following from the study. 2. POVERTY IN INDIA AND TRANSFORMATION OF INDIAN AGRICULTURE: SOME OBSERVATIONS OBTAINED FROM EXISTING LITERATURE India is the country with the largest number of poor in the world in 2005, representing one third of the total world poor. However, the method of estimating poverty in India is fraught with confusion and controversies. The usual procedure followed in official estimation of poverty is to use the poverty line estimated by the Indian Planning Commission in the late 1970s on the basis of some calorie norms and suitably updating it for inflation on the basis of rate of increase in the consumer price index. According to this procedure the Head Count Poverty Ratio was 26.30 percent for rural India and 12.00 percent for urban India in 1999-2000. The main objection raised by economists and policy makers against this official procedure is that it is based on the implicit assumption that poverty line remains essentially unchanged in real terms over more than last four decades and would remain so for ever. The question that is asked is whether India s poverty line for the late 70s is still relevant today, given the changes that have occurred in consumption pattern, activity levels and levels of living in last 35 years. However there are other methods of poverty estimation which are generally used to have more accurate estimates of magnitude and depth of poverty in rural and urban areas of the country. The World Bank s revised estimate of International Poverty Line of $1.25 per day per capita at 2005 purchasing power parity prices (based on price data from the 2005 International Comparison Programme) put total number of poor in the world at 1.4 billion in 2005 which is 25.7 percent of the population. According to this estimate India s poverty ratio comes at 41.6 percent which is much higher than the estimate given by the Indian Planning Commission. Further it is seen that absolute poverty had been rising and the rate of reduction in poverty ratio had been falling over the period from 1980 to 2005. Against the World bank estimates of Indian poverty the Asian Development Bank gives an alternative estimate of Indian poverty based on a higher Asian Poverty Line of $1.35 per day per person and attempts to improve upon the World Bank methodology by using price data that relates more directly to those paid by the poor. The method 3

followed by the ADB put the figure of poverty ratio in India at 54.8 percent which places India at the second highest position with regard to poverty ratio among the Asian countries. Indian researchers studying poverty and nutritional status of Indian population observe divergence between poverty measures that are based on real expenditure and those that are based on direct calorie requirement. Indian official poverty lines were originally based on average per capita calorie consumption of 2400 calories for rural house holds and 2100 calories for urban house holds. On the basis of data provided by National Sample Survey Organisation of India (NSSO) on quantity of different food items consumed by rural and urban house holds it is estimated that in rural areas percentage of population living in house holds with per capita calorie consumption of less than 2400 was 79.8 in 2004-05 and in urban areas percentage of people living in house holds with per capita calorie consumption of less than 2100 was 63.9 in the same year. While this estimation prompted Indian scholars to provide different explanations for such big figure of calorie short fall in terms of change in food habits and reduction of calorie requirement due to reduced volume of physical work with technological development, the World Bank s revised estimation and the ADB s estimation of poverty in India lead us to accept the fact that a large majority of Indian population suffer from abject poverty, hunger and malnutrition. Again several researchers have shown that there has indeed been substantial change in the composition of food taken by people both in rural and urban areas. There has been substantial shift from consumption of food grains, particularly cereals to high value items like fruits, vegetables, meat, sugar etc but the additional intake of high value food items is hardly enough to compensate for the fall in calorie intake due to decline in cereal consumption. In fact the per capita availability of food grains remain very low and almost stagnant for last two decades. This may be considered in conjunction with the fact that yield rates of food grains and rate of growth of production of food grains in India remain almost stagnant during the 90s onwards, which explain the vulnerable living condition of rural poor, particularly the farmers. The decadal average growth per annum of area under cultivation which was 1.07 percent during 1950s came down to.70 percent during the 90s and was negative during 2001-2004. There was also drastic fall in rate of growth of yield and production of rice in the same period. Wheat and coarse cereals also experienced same trend. All these led to absolute decline in per capita availability of cereals and food grains in the 90s. Agricultural sector in India being dominated by very marginal, marginal and small farmers face the problem of low productivity and low income leading to high level of poverty, particularly in areas of extremely backward infrastructure and irrigation systems. After the opening up of the economy the traditional crop based sectors face unequal competition from cheap imports and even the relatively rich farmers find it 4

difficult to cope with the situation in some of the advanced provinces. The situation gets worse with fall in public expenditure in irrigation and infrastructure and enormous rise in the price of inputs due to reduced role of the government in seed development and increased role of domestic and international private enterprises in the Indian markets for agricultural inputs. Indebtedness and suicides becomes almost regular feature of the state of Indian farmers. As is claimed in current literature the opening up of the agrarian economy should lead to transformation of the economy from traditional grain based production system to one based on production of high value export oriented crops, particularly fruits and vegetables. It is also claimed that this transformation in production would follow not only increasing opportunity for exporting these crops but also the changing pattern of domestic consumption of food which shows a shift from food grains to non food grains. Based on the observations of alleged failure of the traditional crop based agriculture to face competition in the global market, diversification of cropping pattern from traditional crop based system to one based on high value crops is suggested as the major way out from the situation of agrarian impasse faced by the country. Our major objective is to analyze situations under which such transformation can be viable and serve as a strategy for reenergizing Indian agriculture, providing the farmers a way out from extreme vulnerability and remove poverty and malnutrition among very marginal and marginal farmers who find it extremely difficult to earn minimum level of income depending upon one or two traditional water intensive crops in the face of acute problem with regard to availability of irrigation. There are some studies examining the actual condition with regard to growth of high value crops vis-à-vis traditional crops in India. While investigations have been made into the factors influencing the farmers decisions in favour of crop diversification in stead of depending upon one or two crops, crop diversification strategy has been examined more from the point of view of its role in enhancing profitability of farming rather than its role in ensuring minimum subsistence to the marginal and small farmers. However most of the studies come to the finding that diversification and production of high value crops, instead of or side by side with production of traditional crops, are taken up more by the small and marginal farmers to ensure bare subsistence by minimizing the risk of loss of livelihood associated with production of highly water intensive traditional crops, than by the large farmers. It has been observed by Gulati and Batila (2001) that pattern of private sector investment has influenced composition of agricultural production by inducing a strong trend towards diversification away from food grain crops and a significant jump towards fruits, vegetables, floriculture, kitchen gardens activities and to some extent to oilseeds and extent of diversification has increased overtime with increased share of capital formation at the private and farm level in the face of declining trend in public investment. It is also observed that there is indication of falling private investment in the field of cultivation of cereals as a lagged reaction to falling public 5

investment in irrigation projects during 1980s and early 1990s. While this study examines overall trends in Indian agriculture with regard to changing cropping pattern along with increasing private investment and falling public investment in development of irrigation projects, it does not take up the issue of increased diversification of Indian agriculture in the context of reduced viability of marginal and small farms practicing traditional water intensive mono cropping system of production and increased vulnerability of the farmers due to decline in assured supply of water at cheap rates. Joshi, Gulati, Birthal, and Tewari (2004) in their study on agricultural diversification in South Asia observed that South Asian countries are gradually diversifying, with some inter country variation, in favour of high value commodities, namely, fruits, vegetables, livestock and fisheries. They computed Simpson Index of Diversity for South Asian countries for the crop sector and particularly for India for entire agricultural sector comprising crop, livestock and fisheries. They observed that in most of the South Asian countries crop diversification derives from area expansion, with some exception of crop substitution in India and Sri Lanka. On regional pattern of agricultural diversification in India it is observed that both southern and western regions were highly diversified with shift from cereal to non-cereal crops. As these regions are relatively less developed in irrigation and largely rely on rainfall, they have shifted to low water requirement crops like pulses, oilseeds, fruits and vegetables. The northern regions were specializing in favour of traditional rice and wheat crops: Favourable government pricing policies, assured procurement, high yielding technologies, and irrigation development have encouraged farmers to allocate more area in favour of these crops. The eastern region, being most backward region with respect to per capita income, growth in agriculture and development of infrastructure, has experienced diversification in relatively lower extent compared to other regions. But as they observed, though this region is mainly concentrating in rice production, this is an important vegetables growing area in the country with a share of about 44 percent in the total vegetables growing area. On the issue of finding the determinants of regional variation in the degree of crop diversification in favour of horticultural commodities they carried out Generalised Least Square Regression analysis with Index of Gross Value of Horticultural Commodities as dependent variable and Irrigation, Roads, Markets, Relative Profitability of Horticultural Crops, Rural literacy, Proportion of Small Land Holders, Urbanization, Income and Rainfall as independent variables. The results of the regression analysis point to positive and significant role of Roads, Markets, Relative profitability, Proportion of small holders, Income and Urbanization on the Gross Value of Horticultural Commodities and negative and significant role of Rural Literacy, Irrigation and Rainfall. All these indicate crop diversification is more concentrated in areas with better demand conditions and better road linkages with the markets; the supply side factors influencing positively the extent of diversification are better prospect of profit as well as lack of adequate irrigation facilities and greater concentration of small farmers. 6

Such inter regional analysis however fail to explain the motivation of the small farmers for diversifying cropping pattern. The observation that horticultural crops are produced in those places where high value crops enjoy relatively high profitability, raises the question that if high profitability induces the farmers to cultivate horticultural crops, why then diversification in favour of horticultural commodities is more confined to small holders? Why not big farmers in greater proportion participate in the production of these crops? On the question of relative profitability however the authors hold: Although high profits of horticultural crops encourage their cultivation uncertain prices and high yield instability limit their widespread cultivation. The price instability is more in case of fruits and vegetables. The high price variability of fruits and vegetables is due to poor vertical linkage between production, marketing and processing. The question which still remains is, if production of the commodities are subject to comparatively more risk and uncertainty why small farmers who are expected to be more risk averse are found to undertake their cultivation in larger proportion. The authors explain: Such a move of small farm holders in favour of high value commodities is expected to enhance their income. Cultivation of horticultural crops suits the small farm holders. The advantage is that these are labourintensive and generate regular flow of income. The caution is that absence of appropriate markets and rising supply may adversely affect the prices and opportunities of higher income. This leads us to question whether in fact it is the consideration of higher profitability which induces mainly the small farmers to undertake cultivation of horticultural crops; it appears to us, it maybe the need to maintain a minimum level of income in the face of high level of uncertainty, rather than profit consideration that induces the small farmers in areas less endowed with irrigation facilities to undertake cultivation of horticultural crops side by side with cereals. Authors themselves observe: Obviously high rain fall areas specialized towards rice, while farmers go for diversification in medium and low rain fall areas to increase income and minimize risk. In fact more disaggregated studies at district and farm levels may be more useful for approaching actual behaviour of farmers with regard to cropping patterns. Rao, Birthal and Joshi (2006) took up a more disaggregated study of agricultural diversification. Using district level data they undertook a detailed empirical exploration of the role of different factors in the growth of high value agriculture and concluded that while existence of demand is a necessary but not a sufficient condition for growth of high value crops, high value crops are more concentrated in districts with higher concentration of small farmers. Even in the presence of demand and adequate infrastructure, it is the small farmers rather than the large farmers who appear to be more inclined to diversify agriculture. In investigating the factors behind declining crop diversification in Punjab Singh and Sidhu (2004) observed that availability of greater irrigation facilities at cheap rates leads to specialization to one or two traditional crops and the regions which are less endowed with such facilities experience slower rate of decline in the degree of 7

diversification. It is observed that the sharp decline in the diversification index for the state as a whole from.71 in 1970-71 to.59 in 2001-02 and continuous fall in out put mix accompanied with continuous rise in degree of specialization based on wheat-rice system all over the state has to be explained in terms of, better returns from ricewheat rotation resulting from increase in irrigation facilities at subsidized rates and market support for these crops. While diversification declined in all districts, the central districts moved towards specialization at a much faster rate compared to other districts since This region, having sweet under ground water, had a much higher potential for the wheat-rice crop system, which there fore replaced all other crop systems. Only nine percent area of the state experienced slower rate of decline in crop diversification because this area of the state is un irrigated where ground water table is very deep and topography of the land is undulating, making the cultivation of rice difficult resulting in a diverse crop system. Thus as it emerges from the study it is availability or scarcity of water, suitable in quality for cultivation, which determines the relative rate of increase in the degree of specialization towards traditional crops vis-à-vis high value crops. Diversification is adopted as a coping strategy in the face of acute shortage of water and absence of other required conditions of farming with traditional cropping system. A study on Indian agriculture conducted by World Bank (2005) however arrives at a different view. It is observed that increased diversification in the crop sector came primarily as a result of crop substitution rather than increased cropping intensity. The primary incentive for crop diversification has been to increase income rather than as a coping strategy to manage farm level risk and uncertainty. According to this study the factors that appear to be driving agricultural diversification trends in India are: rising income, changing relative prices between cereals and high value agriculture, increasing urbanization, access to infrastructure and more open trade policy. Thus diversification is observed to be the result of expansion of market for high value crops, greater access to markets and higher prospect of increased profitability in an open economy. Increased production of high value crops is observed to be related with change in the composition of consumption: Rao (2000) observed that there has been fall in demand for food grains and significant shift in the pattern of consumption away from food grains; Gulati and Batila(2001) observed that this serves as a factor which induces private investors to shift their investment initiative towards non food grains. Study of consumption pattern of 200 landless rural households in Tamil Nadu made by Rajuladevi (2001) however indicates abject poverty and extreme dependence on cereals as the main item of consumption. Study on NSSO 59th round data also reveals changes in consumption pattern except for the lowest stratum. A more intensive and detailed farm level investigation is required to examine the conditions inducing farmers under different size classes and under varied conditions with regard to irrigation and infrastructure to adopt the strategy of crop diversification; investigation is required to bring out the fact about demands for food 8

grains among small and marginal farmers. In so far as share of landless labourers, marginal and small farmers in total rural population is very high, the pattern of consumption of these groups of farmers would definitely influence the pattern of overall demand. It appears when this section of rural population turn to diversification of cropping pattern it may not be the change in composition of demand but the inability to meet bare subsistence depending on a mono crop system in the face of acute problem due to lack of irrigation and suitable soil quality, which motivate the farmers to adopt diversification as a strategy for avoiding abject poverty, hunger and destitution. 3. THE FRAMEWORK OF OUR ANALYSIS AND THE METHODOLOGY The forgoing review brings out some important observations following from existing work on the subject. In the present section we shall analyze some of these observations with a view to arriving at our own framework of analysis of the conditions and determinants of crop diversification, the viability and efficiency of the strategy and its role in reducing poverty and vulnerability of the small and marginal farmers. As we have seen in the last section, the important observations that emerge from the existing literature are that: a) Predominance of small farmers is associated with higher degree of diversification across states and districts of India b) Lack of irrigation appear to act as the most important factor inducing diversification to high value crops c) Relatively developed infrastructure and relatively high profitability of high value crops vis-a-vis traditional crops lead to higher incidence of crop diversification. While it follows from the existing studies that small farmers in larger proportion take up production of high value crops, particularly in the absence of assured irrigation at cheap rates, in order to protect their income from fluctuations and maintain regular flow of income, some of the studies also indicate that the prospect of high profitability under the condition of higher market demand and improved market network may also act as a positive factor in inducing the farmers to take up crop diversification. All these enable us to formulate the hypotheses that motivation of the farmers in adopting crop diversification as a strategy differ primarily according to nature and extent of the problem of irrigation they face : we hold the view that areas facing irrigation problems can be divided up in to two categories on the basis of nature and extent of irrigation problem; in areas where lack of irrigation poses a critical problem so that it is hard to develop any kind of irrigation because of very deep water level or presence of high salinity in water and soil, making it unsuitable for cultivation, it becomes almost impossible for marginal and small farmers to meet bare subsistence depending on traditional crop and they under take diversification of cropping pattern by shifting 9

from high water intensive traditional cereals to less water intensive and more labour intensive high value crops irrespective of level of development of marketing network; under such situation farmers depend on cultivation of high value crops for maintaining subsistence and above poverty line condition. In such cases diversification takes place through substitution of crops even in the absence of adequate market demand and good marketing network. The need to maintain a regular flow of minimum level of income rather than profitability acts as the inducing force in this case. On the other hand in areas where due to lack of assured supply of cheap water farmers depend on private sources of costly irrigation they are induced to undertake heavy investment for cultivation of high value crops side by side with traditional crops only in the presence of high demand and good marketing network which generate good prospect of higher prices and profits. Under such situation diversification takes place through expansion of gross cultivated area. We agree with the view expressed in literature that an advantage of the small farmer in undertaking high value crop production is that it is labour-intensive 3 and ourselves hold the view that very marginal and marginal farmers of an eastern state of India like West Bengal take up cultivation of high value crops, depending to a large extent on family labour either being induced by the need to maintain minimum level of required income for subsistence or by the motive of increasing income, depending upon the nature and extent of irrigation problem; In this study we propose to test validity of these hypotheses with regional, district-level, and farm-level information. In order to carry out the test we take up five important aspects of crop diversification for detailed investigation, namely: i) the nature and extent of crop diversification ii) determinants of temporal and spatial variation in the degree of crop diversification, iii) pattern of consumption, poverty and malnutrition among farmers belonging to different size classes under varying condition with regard to irrigation and infrastructure and practicing crop diversification in different degrees iv) impact of crop diversification on production, productivity and relative farm level efficiency(measured in terms of input or cost per unit of output, with the use of Data Envelopment Analysis 5 ), v) relative profitability of traditional and high value crops and per capita income from cultivation in areas under different levels of diversification.. Apart from state and district level data obtained from official sources, farm level data are collected on the basis of carefully designed samples of farming households through field survey of six villages from three districts of West Bengal, an Indian province, representing varying conditions with regard to irrigation and infrastructure, and used to carry out investigation into different aspects of crop diversification. The three districts we select from West Bengal, are Hooghly, Burdwan and North 24 Parganas. Burdwan, one of the most prosperous agricultural districts, well endowed with public irrigation facilities, with almost 90 per cent of its irrigated area being under government canal and with high soil fertility, concentrates mainly on the production of paddy. Hooghly, which is also a very prosperous district is also 10

endowed with government canal irrigation facilities, though in a lesser extent (less than 30 per cent of irrigated area under canal) and deep tube well irrigation, depends also on shallow tube-well and various other combination of public and private sources of irrigation. The district is famous for potato production along with paddy. The district of North 24 Parganas is not only not endowed with any public irrigation and infrastructure facilities in most part, but also suffer from high salinity of the soil, particularly in the southern part of the district. The district is famous as traditional producer and supplier of fruits and vegetables to urban areas surrounding the provincial capital Kolkata, which also serves as an outlet to the overseas market. Two separate administrative blocks are selected in each of these districts, one relatively more endowed with public irrigation and infrastructure facilities and the other, either less endowed with these facilities or having none of these facilities. Before going to undertake analysis of field data we start the analysis on the basis of secondary block level information from the office of the Block Development Officer, Agriculture Development Officer and Block Land and Land Revenue Officer. One Gram Panchayat area (local self-government unit) in each block is selected as the universe of study and all farming households in each Gram Panchayat are considered as the population from which a sample of 60 households are selected following Stratified Random Sampling procedure, after stratifying the population in different size of operational land holdings. We thus get a sample of 60 x 6 = 360 households divided into six sub-samples, each from one gram panchayat in a block. Data on following broad aspects of farming are collected on the basis of structured questionnaires: a) pattern of land ownership, number of family members, size of operational holdings, main and subsidiary occupation of the household; b) allocation of land under different crops; c) production, consumption, sale and other uses of each of the crops and time profile of marketing of different crops along with prices; d) allocation of family and hired labour in different agricultural operations along with wage rates of hired labour e) cost of production of each crop along with use of family labour, hired labour and different material inputs with wage rate and prices of each input; f) type and cost of irrigation; g) rate of profit and net income from cultivation of different crops; h)income, consumption pattern standard of living and nutritional status of the households. Detailed information on all these aspects for 360 households belonging to different size classes of operational holdings are collected. We use Simpson s Crop Diversification index (SCDI or CDI) to measure degree of crop diversification: CDI =1 - Σ(p i / Σ p i ) 2,where p i is the area under i th crop and i = 1,2,3,.n. is the number of crops. Input use efficiency under different crop production is estimated both on the basis of Production Function Analysis and Data Envelopment Analysis, which is a non parametric technique. We estimate over all technical efficiency score of all the farms following this method. 11

Data Envelopment Analysis 7 is a Linear Programming technique for constructing a non parametric piece wise linear envelop to a set of observed output and input data. Efficiency is defined as a measure of how efficiently inputs are employed to produce a given level of output. Producing same level of output with lower level of inputs or more output with same level of inputs means higher level of efficiency. The Technique of Data Envelopment Analysis (DEA) has been used to find the relative efficiency score of each farm in relation to the farms with minimum input output ratio for all inputs. For both traditional and high value crops we estimate the efficiency score of each farm in an area in relation to the farms getting the highest score 1 because of having the minimum input output ratios among all farms in that area. The score of the most efficient farms being one, the score of each farm will lie between zero and one. Optimum Technical Efficiency (OTE) of the i-th farm can be obtained from following input-oriented DEA model. Let r number of farmers use inputs x=( x x,..., ), and produce output CRS y=( y 1, y2,..., y m ) with x 0, y 0. the methods of measuring efficiency( ) from the envelope is CRS min θ Where CRS θi CRS i θ, λ, i 1, 2 yi + Yλ 0, CRS Subject to θi xi Xλ 0, λ 0 is a TE measure of the i-th farm under CRS and X is a x n n r θ i input matrix with columns xi, Y is m r output matrix with columns yi, λ is a r 1 vector and r is the number of farms in a particular set of observations. The problem has to be solved r times to get r farmers efficiency score, which is evaluated under different sets of observations as envelope. The imposition of constraint on the intensity vector CRS CRS λ guarantees that θ i lies between zero and one. The efficiency score θ i is over all technical efficiency and is calculated on the assumption of constant returns to scale. A separate linear programming (LP) problem is solved to obtain the TE score for each of the r farms sample. If = 1, the farm is on the frontier and is technically CRS θ CRS efficient under CRS. If θ < 1, then the farm lies below the frontier and is technically inefficient. The CRS linear programming problem can be easily modified to account for Variable Returns to Scale (VRS) by adding the convexity constraint: R 1 λ = 1 to provide min θ, i VRS i, θ λ subject to VRS yi + Yλ 0, VRS θi xi Xλ 0, R1 λ = 1, λ 0 12

where VRS θ i is a efficiency measure (popularly known as pure technical efficiency (PTE) of the i-th farm under VRS and R1 is an r 1 vector of ones) Following this DEA framework we estimate technical efficiency of all farms with different inputs and out put of each of the three crops, namely Aus and Aman, Boro(summer rice) and Vegetables separately, instead of following a multicrop model, because of wide variations among farms regarding crop mix and that we are interested in comparison of farm efficiency under traditional crop production and vegetables production which are pursued by relatively small number of farms. We take up the analysis on the basis of field data on farm behavior at the micro level collected from different areas of West Bengal for examining economics of high value crops production in West Bengal. 4. RESULTS OF EMPIRICAL INVESTIGATIONS: We present below the results of our empirical investigation into five aspects relating to the issue of crop diversification as a strategy for poverty alleviation, namely, i) the nature and extent of crop diversification ii) determinants of temporal and spatial variation in the degree of crop diversification, iii) pattern of consumption, poverty and malnutrition among farmers belonging to different size classes practicing crop diversification iv) impact of crop diversification on production, productivity and relative farm level efficiency(measured in terms of input or cost per unit of output, 5 with the use of Data Envelopment Analysis ), v) relative profitability of traditional and high value crops and per capita income from cultivation in areas under different levels of diversification. i) Nature and extent of crop diversification A) Inter-province variations: Time-series data on production of different crops for selected seven provinces of India representing Eastern, Southern, Western and Northern parts of the country, namely, West Bengal, Orissa, Andhra Pradesh, Gujarat, Tamil Nadu, Punjab and Hariyana and of India as a whole for the period 1986-2002 obtained from Centre For Monitoring Indian Economy (CMIE) have been used to estimate the crop diversification index for all these states and for all the years. We arrive at the following observations: Table-1 Simpson s Index of Crop-diversification* for India and different Provinces: Year 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 West Bengal 0.43 0.40 0.39 0.40 0.41 0.41 0.40 0.40 0.38 0.39 0.38 0.44 0.46 0.47 0.46 0.49 0.45 Gujarat 0.64 0.64 0.63 0.61 0.63 0.61 0.64 0.65 0.65 0.66 0.67 0.68 0.68 0.70 0.70 0.71 -- Tamil Nadu 0.52 0.52 0.55 0.57 0.55 0.57 0.63 0.56 0.58 0.60 0.61 0.60 0.59 0.59 0.58 0.57 0.61 13

Punjab -- -- -- -- -- -- -- 0.29 0.25 0.25 0.31 0.32 0.30 0.25 -- -- -- Orissa 0.41 0.41 0.43 -- 0.43 -- 0.40 0.39 0.39 0.40 0.41 0.42 0.42 0.42 0.39 0.37 -- Haryana -- -- -- -- -- -- 0.50 0.45 0.45 0.44 0.46 0.47 0.44 -- 0.40 -- -- Andhra 0.53 0.51 0.54 0.55 0.56 0.58 0.59 0.61 0.60 0.61 0.62 0.61 0.62 0.62 0.61 0.59 -- Pradesh All India 0.42 0.42 0.44 0.44 0.45 0.47 0.49 0.48 0.49 0.49 0.51 0.51 0.50 0.50 0.51 0.51 0.51 Source: Calculated for food grains, fruit and nuts, fibres, oil seeds, plantations, spices, vegetables etc. from CMIE (2006). * See methodology. There has been a smooth rise over time of the index of crop diversification for India as a whole. Secondly, the sample of provinces we have taken for our investigation comprises of most diversified provinces which have shown continuous rise in the index over the period, the least diversified provinces which show continuous fall in the index, and those showing more or less stagnant situation in this regard. The first group includes Gujarat, Andhra Pradesh and Tamil Nadu, all three show higher level of diversification, compared to other provinces. On the other hand, states like Punjab, Haryana and Orissa having much lower diversification index show declining trends over time. West Bengal is the single state which shows moderate fluctuations in the index and a level of diversification which fall in between the two extremes. It can be seen that traditionally prosperous wheat producing region, Punjab and Haryana have low and falling crop diversification index along with Orissa, a traditionally rice producing relatively backward zone. On the other hand Gujarat, Andhra Pradesh and Tamil Nadu show high and rising levels of diversification, with Gujarat showing as high a figure as 0.71 in 2002 against the figure of 0.25 of Punjab in 1999. West Bengal, though maintains a smooth rising trend, all along remains below the national average level of diversification. B) Variations among the selected districts: As we have mentioned in the methodology, for detailed analysis we have taken up three districts of West Bengal and two blocks in each of the districts. The six blocks are selected to represent variations with regard to infrastructure and irrigation. The analysis of district level secondary data obtained from Bureau of Applied Economics and Statistics serve as necessary background to the analysis of micro data at the farmlevel. Table-2 IRRIGATION IN DIFFERENT DISTRICTS PROPORTION OF IRRIGATED AREA UNDER DIFFERENT SOURCES (%) IRRIGATED AREA AS % OF GROSS CROPPED AREA District Year Govt. Canal Tank Deep Tubewell Shallow Tube- Well River Lift Irrigation Others % 14

Burdwan 2001-2 89.39 NIL 6.55 NIL 4.04 NIL 35.20 2005-6 89.21 NIL 7.05 NIL 3.73 NIL 39.19 Hooghly 2001-2 28.93 11.22 4.44 43.04 12.36 NIL 60.10 2005-6 29.79 11.18 4.60 41.65 12.80 NIL 62.58 North 24 2001-2 NIL 10.58 5.00 69.34 3.84 10.94 28.00 Parganas 2005-6 4.82 9.72 4.86 70.56 7.67 2.37 32.00 Source: Calculated from District Statistical Handbooks of Burdwan, Hooghly and North 24 Parganas; Bureau of Applied Economics and Statistics, Govt. of West Bengal, India. Distribution pattern of types of irrigation show that while Burdwan depends mainly on canal irrigation, district of Hooghly being most irrigated has very low proportion of its irrigated area under canal, and depends on varied sources of irrigation combining both underground and surface water. By contrast, the district of North 24 Parganas with a very low proportion of area under irrigation, mainly depends on underground water from private sources. A comparison between 2001-2 and 2004-5 shows that while there has been fall in net sown area in all the districts, gross cropped area has also fallen in Burdwan and North 24 parganas and there has been perceptible fall in intensity of cropping in North 24 Parganas. But inspite of this North 24 Parganas happens to be the most diverse district which has been able to increase its extent of diversification between the two time points (Table3). This may be taken to indicate that in places where irrigation poses a real problem, diversification takes place through substitution of high value crops in place of traditional crops. Table-3 NET SOWN AREA, GROSS CROPPED AREA (in 000 Hectares), INTENSITY OF CROPPING AND CROP DIVERSIFICATION INDEX FOR THE DISTRICTS District Year Net Sown Gross Cropped Intensity of Simpson s Crop Area (in 000 Area (in 000 Cropping (%) Diversification Hectares) Hectares) Index Burdwan 2001-2 472.96 842.00 178.02 0.3678 2005-6 454.94 811.46 178.37 0.3681 Hooghly 2001-2 225.91 520.60 230.45 0.5960 2005-6 218.82 533.50 243.81 0.6280 North 24 2001-2 277.23 564.13 203.49 0.6070 Parganas 2005-6 260.54 482.38 185.15 0.6220 Source: Calculated from District Statistical Handbooks of Burdwan, Hooghly and North 24 Parganas; Bureau of Applied Economics and Statistics, Govt. of West Bengal, India. By contrast, the district of Hooghly has been able to increase its proportion of gross cropped area under irrigation which was already high at more than 60 per cent in 2001-02 by combining shallow tube-well with publicly provided irrigation facilities. 15

As a consequence the district has been able to increase its gross cropped area (in the face of fall in net sown area) and maintain a very high intensity of cropping which has shown an increase of 5.8 per cent during the reference period. With this, the district also shows increase in crop diversification, evidently through expansion of cultivation. Thus we get two contrasting condition with regard to relationship between extent of irrigation and crop diversification. Hooghly is highly irrigated and diversified where as North 24 pargana is mostly unirrigated and more diversified. It is not the extent of irrigation but the nature of the problem of irrigation which seems to be important; both places suffer from lack of adequate supply of publicly provided cheap sources of water and have to depend on private sources of water. While Hooghly compensate for shortage of canal irrigation through huge investment on shallow tube well which enables it to undertake diversification by increasing cropping intensity, North 24 parganas find it more difficult to increase irrigation and remains in most part rain fed due to high salinity of soil; the difficulty in producing water intensive traditional crops makes it dependent on high value crops as supplementary sources of income. The district of Burdwan on the other hand with its dependence on canal irrigation, does not reveal any perceptible increase either in intensity of cropping or in diversification of cropping pattern. This traditionally prosperous paddy producing district of West Bengal with its less than 40 per cent gross cropped area under irrigation has not increased private investment in irrigation so that it has just maintained the cropping intensity and crop diversification. High dependence on publicly supplied surface water irrigation keeps the district a mainly cereal producing area. Table-4 CROPPING PATTERN IN DIFFERENT DISTRICTS PROPORTION OF GROSS CROPPED AREA UNDER District Year Cereal Potato Vegetables Fruits Oil Seeds Fibre Crops Burdwan 2001-2 78.99 4.82 5.45 0.7 6.88 2.23 2005-6 79.05 5.35 7.02 0.9 5.18 1.91 Hooghly 2001-2 59.97 15.27 9.31 2.25 6.45 6.28 2005-6 58.22 17.28 9.85 2.27 5.85 5.81 North 24 2001-2 61.71 1.26 11.43 2.55 9.20 11.13 Parganas 2005-6 58.98 1.18 13.35 3.73 9.24 10.39 Source: Calculated from District Statistical Handbooks of Burdwan, Hooghly and North 24 Parganas; Bureau of Applied Economics and Statistics, Govt. of West Bengal, India. The district of Hooghly allocates much less land compared to Burdwan under cereal but more land for potato, another water intensive crop; It also allocates substantial proportion of its land to vegetables, fruits, oilseeds and fibres and achieve higher level of crop diversification. With less provision of public irrigation system the farmers have to undertake investment for development of private irrigation and take initiative 16

for greater diversification, motivated by the prospect of good returns on their investment in the presence of good infrastructure condition. The district of North 24 Parganas allocates less land for potato but more land for vegetables, fruits, oil seeds and fibre compared to other two districts. Almost complete absence of publicly provided canal water, very deep underground water table and high salinity of soil leads to less dependence on traditional crop and reallocation of land to the production of high value crops to the largest extent among the three districts. Here extremely adverse condition with regard to irrigation and infrastructure lead the farmers to take up diversification as a strategy for avoiding the condition of extreme poverty and vulnerability. C) Variation in the Nature and Extent of Crop Diversification at the village Level: A Study Based On Primary Data. To examine in more detail how infrastructure and irrigation influence extent of crop diversification in different areas we find it necessary to carry out investigation at the village and farm levels. Selected villages we surveyed falling under each selected block of the districts mentioned, show varied characteristics with regard to infrastructure and irrigation, the two major variables that may affect crop diversification. Before going to analyze the results of our farm level investigation we find it essential to identify the selected blocks with codes in terms of level of infrastructure and irrigation. The survey villages in each block are placed at different distances from cold storage, market, high ways and railway station and are connected through different types of roads with these centers. Accordingly, we have used coding system to rank the survey villages in order of availability of irrigation and infrastructures.(appendix) The ranking of blocks shows that Memari block in the Burdwan district and Pandua block in Hoogly district fall in the same irrigation type with availability of both canal and deep tube-well along with other sources. But the village in Pandua block is placed in the best condition with regard to infrastructure and is least diversified among the survey villages followed by the village in Memary which is placed in second best position with regard to infrastructure and second lowest position with regard to diversification. These two blocks exhibit similar characteristics with regard to crop diversification with higher proportion of land being allocated to Aus and Aman paddy compared to others. In fact, with its best infrastructure and irrigational advantages Pandua allocates much higher proportion of its land under cereal production showing high degree of specialization. Memari, though allocates less land to production of cereals, allocates more land to potato, another traditional water intensive crop. In fact, the two kinds of traditional crops, namely, cereals as a group and potato together occupy more than 88 per cent of gross cropped area of these canal irrigated blocks, which are also endowed with very good infrastructure facilities. Table-5 Ranking of Blocks and Simpson s Crop Diversification Index (CDI) Infrastructure Block Irrigation SDI SDI Rank 17