Agricultural Diversification in India and Role of Urbanisation

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Agricultural Diversification in India Regional
Analysis
P. Parthasarathy Rao Dharmendra Kar
Workshop cum Training on Agriculture and Rural
Indebtedness Jointly sponsored by the Project for
economic Education, Press Institute of India and
the Indian Liberal Group Oct 30, 2005 - New Delhi
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Diversification of agricultureSchematic
Diversification
Resource endowments
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Facets of Agricultural Diversification
Macro level

• Shift from farm to non-farm activities
• Shift to high value commodities/enterprises
• Use of resources in diverse and complementary
  activities

Micro level

• To meet household food security
• Minimizing production and marketing risks
• Generating additional income

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Definition of Diversification for this study
Diversification towards High Value Commodities
(HVCs) HVCs for this study include Fruits,
Vegetables, Milk and Meat
Objectives

• Spatial sub-division of districts based on
  diversification towards HVCs
• Nature and speed of diversification
• Role of urbanization determining nature and speed
  of diversification
• Andhra Pradesh Case study
• Implications for policy and regional planning

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Determinants of diversification

• Demand side factors
• Population growth
• Income growth
• Urbanization
• Change in taste and preferences
• Export potential

Supply side factors Technology Infrastructure Mark
et linkages Resource endowments Socio-economic
factors
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Agricultural diversification (High Value
Commodities)
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Relative importance by level of diversification
1998
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Selected indicators by level of diversification
1998
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Diversification and Urbanisation
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Diversification and urbanisation
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Relative importance of urban and other
district groups 1998
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Selected indicators of urban and other
districts 1998
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Nature of diversification in urban surrounded
district groups and highway passes
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Spatial Analysis HVCs
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Area under fruits
( NCA)
(000s ha)
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Area under vegetables
( NCA)
(000s ha)
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Share of livestock value to total agricultural
value 1998
Milk
Meat
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Concluding remarks

• HVCs account for gt 50 of agricultural
  production in 56 districts and lt 25 in 86
  districts
• Milk and poultry meat had the fastest growth rate
  among HVCs
• Urbanisation has a significant influence on
  diversification towards HVCs , particularly
  poultry meat and fruits
• Other factors
• road density, small farms, improved technology,
  fodder availability and rainfall positively
  influenced diversification
• Tractor density, HYV area and irrigation
  negatively influenced
• diversification

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Andhra Pradesh Case study
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Andhra Pradesh farming sector Facets of the
crisis

• Rising rural unemployment
• Decline in rural per capita incomes
• Inadequate access to formal credit
• Poor rural and marketing infrastructure
• Profound disquiet in rural areas
• AP has dubious distinction of highest farmer
  suicides
• High levels of out-migration to urban areas
• Highest incidence of child labor

• Yield stagnation in traditional crops
• Food self-sufficiency achieved
• Accounts for 35 of rice procurement in India
• Relentless pressure on natural resources
• Declining water tables
• Unsustainable rice cropping
• Excessive use of inputs
• Fertilizers, pesticides, water, electricity
• Newer pressures from trade liberalization
• Prices, quality, sanitary and phytosanitary (SPS)
  measures

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Annual compound growth rates of agriculture
sub-sectors and GDP, Andhra Pradesh (1993-94
prices)
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Diets trending away from basic cereals
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Composition of the value of agricultural
production by level of diversification Andhra
Pradesh, 1999-2001 (1980-82 prices)
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Districtwise HVC share in total value Andhra
Pradesh,
Change in share, 1982 to 2001
Distribution by HVC share
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Selected indicators by level of diversification
Andhra Pradesh, 2001.
Indicators High (Zone 1) Medium (Zone 2) Low (Zone 3)
Population density (No./KM2) 319 291 236
Urban population () 37 22 22
No. of small land holders () 82 84 78
Irrigated area ( to GCA) 34 59 36
Feed availability (t/livestock unit) 1.3 2.0 1.6
Rainfall (mm) 793 1031 847
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Income from HVCs - Kurnool, AP 2002-03
(household survey)
Irrigated
Rainfed
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Employment effects of HVCs, AP, 2002-03
household survey (average)
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HVCs Challenging policy terrain

• Marketing
• Domestic
• Export
• Processing
• Contract farming
• Case study Gherkins
• Credit
• Infrastructure

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Share of food processing industry by type Andhra
Pradesh
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Contract farming a new frontier
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Agri-Export Zones (AEZ) in Andhra Pradesh
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Distribution of priority sector credit Andhra
Pradesh 2003-04
Priority sector
Crop sector
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Distribution of credit by diversification zones,
Andhra Pradesh, 2003-04
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Pro-HVC policy interventions

• Pricing water
• Building efficient marketing networks
• Implement Model Marketing Act
• Dismantling government monopoly
• Increasing investments in infrastructure
• Roads, cold storage, bulk coolers
• Foster improved linkages between rural-urban
  markets

• Emphasizing vertical integration thru contract
  farming
• Increase enforceability
• Harness private sector innovations in food
  processing and marketing
• Adding value thru processing
• Simplify procedures for setting up food
  processing industries
• Enhancing access to formal credit
• Expand crop/rainfall insurance schemes
• Enabling public-private partnerships
• Extension

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