Investment in agri vital to India: World Bank

from the Economic Times

NEW DELHI: Greater investment in agriculture in transforming economies like India is vital to the welfare of 600 million rural poor, mostly in Asia, says the latest World Development Report (WDR) of the World Bank.

Presenting the India highlights of the report here on Friday, WDR co-author Alain de Janvry said there was "much mis-spending on agriculture" in India, with investments accounting for only 25 percent of public expenditure, while subsidies took up 75 percent.

"The return on investment is 5-10 times more than the return on subsidies," said Ashok Gulati of the International Food Policy Research Institute (Ifpri). "But it's a political question."

"We suggested to Finance Minister P Chidambaram recently that the method of delivering fertiliser subsidies should be changed to coupons to be given to small farmers, so that the subsidies reached those they were meant for. It was going to be done in this year's budget. But then 16 MPs wrote to the finance minister against it. There you are," he said.

WDR 2008 looks at agriculture after a gap of 25 years. The report, titled Agriculture for Development, warns: "The international goal of halving extreme poverty and hunger by 2015 will not be reached unless neglect and under-investment in the agricultural and rural sectors over the past 20 years is reversed."

Talking about the large number of farmer suicides in India, de Janvry said the way out was crop insurance. Gulati said the recent cold wave in north India had ruined up to half the vegetable crop in Punjab, "but hardly any of the farmers have insurance".

De Janvry, who teaches agricultural and resource economics at the University of California at Berkeley, said, "In transforming economies such as India and China, agriculture contributed an average seven percent to growth in GDP between 1995 and 2003, though the sector accounts for about 13 percent of the economy and employs just over half the labour force."

The productivity of farm labour in India was a major area of concern, de Janvry said, pointing out that it was lower than in China or Bangladesh.

"There is growth in agriculture in India. But with it there is a growth in the labour force engaged in agriculture. So the per capita productivity is not going up as much as it should. China and Bangladesh have done better in moving farm labour to the non-farm rural economy, and India should do the same."

Ruing the neglect of agriculture by policymakers around the world, de Janvry said, "Growth originating in agriculture is two-three times more effective for the poor than growth originating in non-agriculture."

One of the big changes in Indian agriculture, de Janvry pointed out, was the rise in the number of small farmers as landholdings were being fragmented all the time. "Rural households are being squeezed out of land."

What are the ways out? De Janvry had an eight-point agenda for India:
▪ Focus on taking farm labour out of agriculture and use agriculture for environmental conservation.
▪ Concentrate on food security; reduce subsidies and redirect public expenditure towards investments and "protection of net-food consumers"; make sure the trade policies help reduce price instability.
▪ Improve efficiency of value chains and increase value addition in agribusinesses.
▪ Improve competitiveness of smallholders by giving them access to productive assets.
▪ Address productivity constraints of subsistence farmers and assist them so that they can take risks.
▪ Move excess farm labour to the rural non-farm economy while improving the quality of employment of farm labour through regulation.
▪ Involve the private sector in the rural non-farm economy.
▪ Make a massive investment in improving human capital of farm labour so that excess labour can move to other jobs.