India: Roles and Challenges of Small Holder Agriculture

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India Roles and Challenges of Small Holder
Agriculture

• S.Mahendra Dev
• Director and Vice Chancellor, IGIDR, Mumbai, India

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Contents of the presentation

• Introduction and background
• Role of small holding agriculture for food
  security and livelihoods
• Small holders and livelihoods
• Issues and challenges for small holders
• Opportunities for small holding agriculture
• --Technological innovations
• --institutional innovations
• Policies to support small holders
• Lessons from Indian experience

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Introduction and background onIndian Agriculture

• India s population is 1.21 billion in 2011. 67
  are rural. Majority are in agriculture.
• Importance of agriculture in Indian economy.
  Although it contributes only 15 of GDP, the
  share of workers is about 55.
• Marginal and small farmers dominate
• Major crops are rice, wheat, maize, coarse
  cereals, groundnut, cotton, sugarcane, fruits and
  vegetables
• 60 of cultivated area is rainfed as only 40 of
  area is under irrigation.
• Rural poverty is 41in 2004-05.
• Agriculture is a State Subject. In other words,
  the policies of provinces are also important

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Performance of Agriculture

• Growth performance in agriculture)
• 1950-1 to 1964-5 2.51 (area gro. yield gro)
• 1967-8 to 1980-1 2.20 (yield gr. green
  revol)
• 1980-1 to 1990-1 3.07 (spread of green rev)
• 1992-3 to 2004-5 2.76 (reform period)
• 1997-8 to 2004-5 1.60 (neglect of agri.)
• 2004-5 to 2010-1 3.47 (revival of growth)
• The policy, institutional and investment focus
  during green revolution time helped India achieve
  its food self sufficiency goals.
• However, now different policies are needed to
  focus on small holdings, rainfed areas, women,
  lagging regions, rural non-farm for sustainable
  agricultural transformation

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Agriculture GDP growth
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Challenges in Agriculture including small farmers

• Concerns and challenges in Agriculture
• --Green Revolution technology mainly benefited
  the high potential and irrigated areas. They have
  less impact on dry land and rainfed areas. Also,
  yield growth plateaued in the irrigated areas.
  Technology fatigue.
• ---With urbanization and income growth,
  consumption patterns have shifted from cereals to
  non-cereal food (pulses, edible oils, fruits,
  vegetables, dairy and other livestock, fisheries)
• -- Supply of these commodities are in short
  supply compared to demand. As a result food
  inflation increased in recent years
• -- Deceleration in growth from 3.5 during
  1981-97 to 2 during 1997-2005. Decline in yield
  growth.

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Challenges in Indian agriculture

• --This led to rising rural distress and also
  farmers suicides.
• -- Land and water problems, vulnerability to
  world commodity prices,
• ----Disparities in growth across regions and
  crops growth rate declined more in rainfed
  areas.
• Long term factors Steeper decline in per capita
  land availability. Shrinking of farm size
• Slow reduction in share of employment (still 55)
  
• Main problem is low land and labour productivity
  in agriculture. Gap between agri. and non-agri.
  is widening.
• We should blame non-agriculture (industry and
  services) for not absorbing workers from
  agriculture.

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Sources of growth in agriculture

• What are the reasons for slow growth in agri.
  during mid-1990s to mid-2000s
• Steering Group for 11th Plan has estimated
  sources of growth
• Sources of growth Five factors (a) Public
  invest. (b) private invest. (c) Technology (d)
  diversification (e) fertilizer
• There has been slowdown in all these factors
• Terms of trade also declined
• Higher growth in the post-reform period only in
  the case of agricultural credit

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Decline in growth ()
1980-81 to 1990-91 1990-91 to 1996-97 1996-97 to 2005-06
Technology 3.3 2.8 0.0
Public Inve. 3.9 1.9 1.4
Private Inv. 0.6 2.2 1.2
Irriga.area 2.3 2.6 0.6
Area under Fruitsveg 5.6 5.6 2.7
NPK use 8.2 2.5 2.3
Credit 3.7 7.5 14.4
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Some Dynamism in Recent Years

• 4 growth in agri. During 2004-08. Record
  foodgrain production during 2008-09 (241 m.t.).
  Exports in cotton, rice and sugar till 2008.
• Revolution in cotton. Cotton prod. doubled in six
  years. Some positive signs on bio technology (BT
  cotton). Success in hybrid maize.
• Some increase in high value agriculture
• Some rainfed regions showing high growth in
  agri Bihar. Gujarat showed 9 growth in
  agri.2001-09
• Comfortable buffer stocks 60 million tonnes
• Terms of trade in agri. improved

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Three Goals of Agricultural Development

• 1.Achieve 4 growth in agriculture and raise
  incomes. Increasing productivity (land, labor),
  total factor productivity, diversification to
  high value agri. and rural non-farm by
  maintaining food security.
• 2.Second goal is sharing growth (equity) focus
  on small and marginal farmers, lagging regions,
  women etc. Share of women is increasing in agri.
  On lagging regions, focus on Eastern India and
  other rainfed areas.
• 3. Third is to maintain sustainability of
  agriculture

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Role of Small Farmers

• Indian agri. is the home of small farmers (80).
• Therefore, the future of sustainable agriculture
  growth, food security and livelihoods in India
  depends on the performance of small and marginal
  farmers
• Marginal (0.01 to 1.00 ha) small (1.01 to 2.00),
  semi-medium (2.0 to 4.00),medium (4 to 10), large
  (above 10)
• Agricultural Census data shows that there were
  about 121 million agricultural holdings in India
  in 2000-01. Around 99 million were small and
  marginal farmers.
• Average size has declined from 2.3 ha. In 1970-71
  to 1.37 ha. In 2000-01. Average size of marginal
  0.24 ha
• Small and marginal farmers account for more than
  80 of total farm hhs. But their share in area is
  around 44.

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Distribution of small holdings Distribution of small holdings Distribution of small holdings Distribution of operated area Distribution of operated area Distribution of operated area
Land Class 1960-61 1991-92 2002-03 1960-61 1991-92 2002-03
Margina 39.1 56.0 62.8 6.9 15.6 22.6
Small 22.6 19.3 17.8 12.3 18.7 20.9
Small marginal 61.7 75.3 80.6 19.2 34.3 43.5
Semi-medium 19.8 14.2 12.0 20.7 24.1 22.5
Medium 1.4 8.6 6.1 31.2 26.4 22.2
Large 4.5 1.9 1.3 29.0 15.2 11.8
Total 100.0 100.0 100.0 100.0 100.0 100.0
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Role of Small Holders

• Access to irrigation irrigation for small
  holdings 51 compared to 31 for large farmers
• Access to fertilizers, area under HYV and
  cropping intensity It is inversely related to
  farm size.
• Cropping patterns Do small and marginal farmers
  grow high value crops? They allocate large
  proportion of land to high value crops like
  fruits and vegetables and also to rice and wheat
  than other farmers. Thus they contribute to food
  security and diversification. But less on pulses
  and oilseeds
• Farm size, output and productivity Productivity
  is inversely related to farm size. Small holdings
  continue to produce more in value terms per
  hectare than medium and large farmers

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Small holders and livelihoods

• Around 98 million out of 120 million farm
  holdings are small and marginal farmers.
  Therefore, their performance is crucial for
  livelihoods.
• It is true that small holders have higher
  productivity than large holders.
• But it is sustainable because consumption
  expenditure of small and marginal farmers exceeds
  their estimated income from agri non-agri by a
  substantial margins and the deficits
  (dis-savings) have to be plugged by borrowings.
• According to 2003 NSS data,
• -Marginal farmers monthly consumption Rs.2482 and
  monthly incomeRs.1659
• -Large farmers consumption Rs.6418 income
  Rs.9667

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Issues and Challenges for Small farmers

• The 11th Five Year Plan says The agricultural
  strategy must focus on the 85 of farmers who are
  small marginal, increasingly female, and who
  find it difficult to access inputs, credit and
  extension or to market their output.
• While some of these farmers may ultimately exit
  from farming, the overwhelming majority will
  continue to remain in the sector and the
  objective of inclusiveness requires that their
  needs are attended to
• Inherent disadvantages faced by the small farmers
  would be larger with increasing market
  integration and globalization.

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Issues and Challenges for Small Holders

• Some of the general issues that confront small
  holders are imperfect markets for
  inputs/products leading to smaller value
  realizations,
• absence of access to credit markets or imperfect
  credit markets leading to sub-optimal investment
  decisions or input applications poor human
  resource base smaller access to extension
  services and technology
• Poor access to public goods such as public
  irrigation, command area development, electricity
  grids.
• Key issues and challenges are the following
• Role of women

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Challenges of Small Holders

• Social groups Scheduled Castes and Scheduled
  Tribes
• Land issues land and tenancy security
• Low level of formal education and skills
• Credit and indebtedness
• Globalization challenges Volatility in
  international prices challenges of integration
  of value chains, super markets.
• Impact of climate change
• Water problems
• Diversification challenges
• Risk and vulnerability

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Opportunities for Small holding agriculture

• Research and extension
• Technological innovations
• --zero tillage
• --Public sector led improved technologies
• --Nutrient management
• --Bio-technology
• --Information technology
• Institutional Innovations
• --land and water management institutions like
  water user associations for water management of
  canal irrigation

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Institutional Innovations

• Womens collectives Womens cooperatives,
  producer womens groups and other forms of group
  efforts (e.g. Deccan Development Society in
  Andhra Pradesh).
• Gujarat put in place institutional environment
  for development of agriculture (e.g. Krishi
  Mohatsav). This Mohatsava serves as an
  institutional platform at the village level and
  proved to be an important support for farmers.
• Similarly Andhra Pradesh The Community Managed
  Sustainable Agriculture (CMSA) programme. It
  addresses the major causes of agricultural
  distress and help farmers in adopting sustainable
  agricultural practices. It covers 2.7 million
  acres and benefit 1.05 million farmers

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Institutional Innovations

• Institutions for Marketing of Small holders
• --There are several models Contract farming,
  self help group model, co-operative model and
  producer co-operatives
• --One of the most successful producer
  organization is dairy cooperative with 12.3
  million members.
• --Contract farming is also successful in some
  cases
• --Some examples of group approach are Apni Mandi
  in Punjab and Rytu Bazar in Andhra Pradesh

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Small farmers, value chains and Supermarkets

• Wholesale, processing and retail segments are
  growing in India.
• In India, super market revolution is also
  catching up. Average annual growth rate of top 10
  retailers during 2000-06 in India was 50.
• Linking small farmers to super markets. Linking
  farmers with input suppliers, logistic suppliers,
  agro-processors and retailers
• In those cases where small producers have been
  able to integrate into the supplying chains,
  supermarkets have offered enhanced security and
  considerably higher margins than the traditional
  clients, such as wholesales and groceries

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Challengeing the conventional view on value
chains IFPRI study

• 1. Conventional view Food supply chains are
  dominated by long chain of many hands. Findings
  supply chains can be short
• 2. Earlier view Staples value chains are
  dominated by small traditional processors and
  retails. Findings Things are changing. Role of
  large cold storages, modernizing rice mills,
  small but rapidly increasing super markets in
  retail chain
• 3. Earlier view Little change in technology
  since green revolution. Findings there are
  substantial changes in technological and factor
  markets
• 4. earlier view little role for quality. Now the
  role of quality is important

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Challenging the Conventional View

• 5. conventional view traditional supply
  chainssay high rates of wastage and
  transportation costs. Findings Both are only 10
  of final consumer price
• 6. Conventional view Govts. Play a major direct
  role in value chains. Findings It is true in
  India in the case of foodgrains but not in
  non-cereals
• 7. Conventional view food security debatemainly
  on farm sector. Findings traders and retailers
  play big role.
• 8. Earlier view Retail margins are increasing
  over time and cause for inflation. Findings
  Retail margins have not increased

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Institutions

• New institutional approaches are needed to help
  the farmers e.g. formation of producer groups.
• One of the important policy issue is how to link
  small farmers to high value agriculture.
• There has been diversification of Indian
  agriculture away from foodgrains to pulses,
  edible oils and to high value products like
  vegetables, fruits, milk, eggs, fish and meat
  products.
• Although foodgrains are important, future sources
  of growth and incomes are going to come from high
  value agriculture.
• Being perishable, it needs fast moving
  infrastructure and institutions.

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Targeted Growth Rates for 11th Plan
GDP Share Growth Rate
Foodgrains 26 2.3
Oilseeds 7 4.0
Other crops 15 3.0
Crop Sector 48 2.7
Horticulture 19 5.0
Livestock 25 6.0
Fisheries 4 6.0
Forestry 4 0.0
Total Sector 100.0 4.1
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Small Farmers and Information

• Indian private companies and NGOs are global
  leaders in providing information to farmers, as a
  spinoff from Indias meteoric rise as a world
  leader in ICTs.
• E-Choupal (Internet Kiosks) has expanded access
  to internet in rural areas. Up to 6,400 internet
  kiosks were set up between 2000 and 2007 by ITC
  Limited, one of the largest agricultural
  exporters.
• It reaches about 4 million farmers growing a
  range of crops - soybean, coffee, wheat, rice,
  pulses or shrimp - in over 40,000 villages.
• They get free information in their language about
  local and global market prices, weather
  forecasts, farming practices and crop insurance.
• It serves as a purchase centre, cutting marketing
  costs and allowing farmers to obtain a bigger
  farm price.

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Small Farmers and Information

• The M. S. Swaminathan Research Foundation
  established Knowledge Centers in Pondicherry.
• The women self-help groups use the centers
  computers to manage their business accounts and
  coordinate their activities, using video links
  with the other villages.
• Mobile phone coverage in India is expanding at
  breakneck speed.
• By linking communication technologies to market
  exchanges in commercial centers, even small
  farmers can overcome the enormous informational
  asymmetries that limit their bargaining power in
  traditional supply chains.
• The revolution in mobile phones is helping the
  small farmers to get information about crop
  prices and input prices and other related
  information on agriculture.

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Special Programmes for Small and Farmers

• National Commission for Enterprises in the
  Unorganized sector (NCEUS) has advocated a
  special programme for marginal and small farmers.
• Objectives are (1) to improve income prospects
  (2) to improve the skill base (3) provide income
  earning opportunities in the non-farm sector (4)
  to ensure the needs of small farmers and
  adequately reflected in other agricultural and
  development programmes for livelihood security
• Principal activities proposed under the special
  programme are
• (a) Promotion of group approach to small farmers
  It proposes setting up of Marginal and Small
  farmers development society (MSFDS) for the
  promotion, capacity building and coordination of
  development of

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Special programme for small farmers

• Marginal and small farmrers groupsI
• (b) Enabling gender access to institutional
  credit
• (c) Training and capacity building
• (d) Support for strengthening and creation of
  non-farm activities
• (e) Gender focused activities
• (f) Planning for development of marginal and
  small farmers
• It also advocates implementation mechanism and
  financial resources, ME
• Basically, the commission advocates that there is
  a need to special focus on small and marginal
  farmers for growth and equity in Indian
  agriculture

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Rural non-farm sector

• Poverty can not be removed with 55 of workers in
  agri. Need to promote rural non-farm sector.
• India currently produces about 50 million tonnes
  of fruits and 90 million tonnes of vegetables.
  Only 2 of these fruits and vegetables are
  processed as against 23 in China, 78 in
  Phillippines, 83 in Malaysia.
• Half of those engaged in agriculture are still
  illiterate and just 5 have completed higher
  secondary educ.
• Even in 2004-05, around 60 of rural male workers
  and 85 of rural female workers are either
  illiterate or have been educated upto primary
  level.
• In other words, education and skills are
  constraints
• India can learn from China on rural
  transformation.

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India and China Manufacturing

• India leap frogged from agriculture to services
  without focusing on manufacturing sector.
• The share of employment in manufacturing in
  Malaysia is 50, in Korea 62, in China 31. On
  the other hand, the share of employment in
  manufacturing in India is only 12
• Diversification towards rural non-form sector in
  China is one of the important factors
  responsible for rural poverty reduction
  (poverty 3). This was partly due to
  agricultural productivity.

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Lessons from Indian Experience

• Green Revolution and Small Farms
• Food Grain Management
• Dairy Cooperatives
• Water management in Gujarat
• Self Help groups and group approach
• Rights based approach
• Learning from others India can also learn from
  countries like China, Brazil. India can learn
  from China on rural transformation and
  infrastructure.
• It can also learn from Brazil on agricultual
  research (like EMBRAPA) and zero hunger program

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Conclusions

• This paper examines the role and challenges of
  small holding agriculture.
• India has done well in attainting food grains
  self sufficiency since the days of green
  revolution.
• Difference between green revolution period and
  the expected second green revolution is that
  (a) globalization challenges, volatility in
  prices (b) shrinking farm size (c) rain fed
  farming challenges (d) environmental stress and
  climate change
• Small farmers are certainly going to remain in
  India the next decade or more.
• Way ahead Main goals are (a) raising agri.
  growth productivity rise, move towards high value
  agri. and rural non-farm and maintain food
  security (b) shared growth (small farmers,
  lagging regions, women etc. (c) sustainable
  growth

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Conclusions

• There are six deficits in agriculture. These are
  (a) investment, credit, infrastructure (b)
  research, extension (technology) (c) Market (d)
  diversification (e) institutions (f)
  education/skill
• Food security has been an overriding priority in
  India since the 1960s. The focus paid off with
  attaining food grain security and poverty
  reduction.
• The strategy concentrated on rice and wheat in
  irrigated areas.
• The future growth will need to rely on a dual
  strategy of diversification into non-cereal high
  value crops and rainfed areas with focus on small
  farms.
• Basically investment and institution strategies
  have to focus on small and marginal farmers,
  women farmers, rainfed areas, environmental
  stress, rural non-farm sector for sustainable
  agri-transformation.

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Conclusions

• Small farmers have difficulties to access inputs,
  credit and extension or to market their output.
• Investment in infrastructure like roads,
  irrigation, communications etc. can benefit small
  farmers
• Many institutional innovations are coming up to
  link small farmers to high value agriculture and
  help increasing their productivity and marketing
  (contracting farming, dairy sector, cooperative
  marketing).
• ICT revolution in India is also helping small
  farmers with information, input supplies and
  marketing
• Risk mitigation strategies are needed for small
  farms.
• There is a recognition now that small farmers
  need a special focus in order to have growth and
  equity in agriculture and food security.

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Conclusion

• Elephant (India) can learn from Dragon (China) on
  rural transformation particularly rural
  industrialization.
• Small farmers need agri. Diversification and
  income from rural non-farm sector.
• Need for massive increase in investments for
  agriculture and rural infrastructure by
  simultaneously improving the institutions for
  better delivery systems
• Govt. is thinking of big push to health and
  education in 12th Plan
• Such a big push is needed for agriculture sector
  for food security, livelihoods, sustainability
  and transformation.

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• THANK YOU