Farm-led growth strongest weapon against poverty

from Yahoo News India

GDP growth originating in agriculture is at least twice as effective in reducing poverty as GDP growth originating outside agriculture, according to the World Development Report 2008, which focuses on 'Agriculture for Development'. It suggests that South Asian countries, with about 60 per cent of their labour force employed in agriculture, should place importance on agricultural growth to reduce poverty as "the transition of people out of agriculture and rural areas is not keeping pace with the restructuring of economies away from agriculture". It cites the example of Ghana, where agricultural output growth in recent years has reduced rural poverty by 24 percentage points and China, where liberalisation of agricultural markets and technological change have reduced rural poverty from 53 per cent in 1981 to 8 per cent in 2001.

India is classified as a 'transforming' economy in the report and the measures recommended by it for such economies are generating rural jobs by diversifying into the 'new agriculture' of high-value products such as fruits, vegetable, dairy and meat products (for which there is increasing demand as urban incomes rise), investing heavily in human capital to prepare the rural population for better jobs and migration, and reducing the environmental footprint of intensive agriculture.

In India, agriculture's contribution to GDP growth has varied among states, with contributions being negative or near zero in states like Tamil Nadu, Kerala, Maharashtra, Arunachal Pradesh, Puducherry, Goa and Chandigarh. The contribution was higher at between 10 and 20 per cent in Andhra Pradesh, Haryana, Rajasthan and West Bengal, and between 20 and 30 per cent in Bihar, Punjab, Jammu and Kashmir and Uttar Pradesh. The report recommends targeting of areas that are lagging on this front to reduce poverty. Growth in rural non-farm employment in many cases remains closely linked to growth in agriculture, as agriculture becomes a larger supplier of intermediate inputs to sectors like processed foods. "Industries and services linked to agriculture in value chains often account for 30 per cent of GDP in transforming countries. Rural trading and transport, often of food, make up about 30 percent of rural non-farm employment."

But India lags here, with the ratio of food processing value added to total value added to agricultural commodities being less than 0.1, above Uganda and on par with Nepal. Argentina, Brazil and Mexico have a ratio of about 0.4. In Chile, every percentage rise in agricultural and agro-processing output reduced poverty by 0.6-1.2 per cent, despite heavy corporatisation of agriculture. The report also warns about socially regressive subsidies to agriculture, especially in India where farm subsidies for private goods such as fertilisers and credit have risen from 40 per cent of agricultural public expenditures in 1975 to 75 per cent in 2002. Targeting core public goods, with subsidies and transfers, such as agricultural research, rural infrastructure, education and health are recommended.