Report No. 9412-IN India 1991 Country Economic tAemorandum (In Two Volumes) Volume II: Agriculture--Challenges and Opportunities August 23, 1991 Agriculture Operations lDivision India Country Department Asia Region FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY AND OTHER EQUIVALENTS Average Exchange Rates The currency is the Indian rupee. Average exchange rates per US$1: 1985/86 Rs.12.237 1986/87 Rs. 12.787 1987/88 Rs. 12.968 1988/89 Rs. 14.476 1989/90 Rs. 16.663 1990/91 Rs. 17.949 End March 1991 Rs. 19.620 End June 1991 Rs. 21.142 End July 1991 Rs. 25.773 In this report, a rate of Rs 17.90/US$1.00 was used for 1990/91. The Indian fiscal year runs from April 1 through March 31. The Indian agricultural year runs from July to June. Kharif is the wet season that runs from June to mid October. Rabi is the dry season that runs between mid October and mid February. Weights and Measures 1 hectare (ha) 2.47 acres 1 kilometer (km) = 0.62 miles 1 metric tonne (mt) = 1.1 short ton 1 kilogram (kg) = 2.2 lbs 1 quintal = 100 kilograms =220.5 lbs 1 lakh - 100,000 I crore = 10 million FOR OFFICIAL USE ONLY AckuQ4g MCnts This volume was written by Pamela Cox, based on contributions by Deepak Ahluwalia, Sajitha Bashir, Lynn Bennett, Kanchan Chopra (consultant), A. Desai (consultant), Robert Evanson (consultant), Mario Fischel, David Greene, Stephen Haggbladde (consultant), Peter Hazell, Kundhavi Kaderisan (consultant), Cheik Kane, Richard Lacroix (consultant), Samuel Lieberman, Manoshi Mitra, Keith Oblitas, Kirit Parikh (consultant), Carl Pray (consultant), R. Radhakrishna (consultant), V.J. Ravishankar, H.L.S. Tandon (consultant) and Ravi Venkataraman. Kundhavi Kaderisan provided support for research and statistical analysis. Suggestions and helpful comments from David Greene, Oktay Yenal, Jan Wijnand, John Joyce and Hans Binswanger, as well as many staff of the India Department, are gratefully ack-awledged. The team is also grateful for the comments provided by GOI and state government officials, and participants in a series of seminars held on the report in India. The analytical work for this report has been undertaken over a period of eighteen months. The most up-to-date statistics available were used. But in many instances, lags in statistical reporting in India, especially collection of disaggregated data, has meant that the report has had to rely or, data three or four years old. The report was completed and discussed with the Government prior to the recent budget presentation. The Government of India has made several important policy changes in the last few months. To the extent possible, these have been reflected. I This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. DMIA COLIRY ECONOMIC MEMORANDUM TakLe of Contents ExecutiveSummary .............. i-vi I. AGRICULTURE'S PERFORMANCE AND POTENTLAL 1. A. Agriculture's Role in the Economy . Poverty and Employment ........................., 3 Ruml - Urban Growth Linkages .9 EnvironmentalIssues .10 B. Perfonnance and Sources of Growh.. 14 Aggregate Production Growth .14 Performance of Principal Crops .18 Sources of Growth .21 C. Future Growth Oppounities and Chalenges ...................... 22 Constrants ........................................... 22 Govemnment Development Strategy ........................... 22 OpporAnitiesandAdjustments .............................. 23 II. KEY ISSUES FOR GROMTH .................................... 26 A. Pricing and Trade Policies .................................. 26 Price and Market Intervention Progmms ........................ 26 Input Subsidies ........................................ 27 Agriculturl Trade ....................................... 32 Inpact and Policy Issues .................................. 33 B. Investent .49 Public Investment .49 Private Investment and the Role of Agricultural Credit .55 C. Technology . ........................................... 62 Fertizer ............................................. 64 Iinproved Seeds ............. ........................... 66 Looking to the Future: The Avaiiability of New Technologies ..... ..... 69 India's Research System and the Generation of New Technologies .... .. 70 Extension . ........................................... 73 Land Issues and Technology Adoption ......................... 73 D. Infrastrture ............................................ 74 Irrigation ............................................. 74 Rura Infrastructure ...................................... 83 III. STRATEGIC CHOICES FOR LONGTERM AGRICULTURAL DEVELOPNEW1T ............................................ 86 A. StategicFramework ....................................... 86 B. An Adjustment Program for Agriculture ........ ................. 88 Pricing and Trde Policy . .................................. 88 Investment ............................................ 95 Technology Adoption and Innovation .98 Irrigation .99 Timeframe for Adjustnent .101 MATRDI ................................................... 102 ANNEXES: I. Issues in Input Supply and Distribution .110 II. Land Issues and Technology Adoption .115 List of Background Papers ................. .8 Bibliography ................ 119 Stitistical Appendix ................ 126 List of Tables in the Main Text Table 1.1 Growth Rates of Output, Inputs and Total Factor Productivity, 1956-1983 Table 1.2 Labor Use for Major Crops Table 1.3 National Agricultural Output and Income Multipliers for Irrigated versus Rainfed Agriculture Table 1.4 Trend Growth Rates of GDP Originating in Agriculture Table 1.5 Relative Importance of the Main States in India Agriculture and the Relative Importance of Agriculture within Each State Table 1.6 Trend Growth Rates of Production of Principal Crop Groups at the All-India Level Table 1.7 Trend Growth Rates in Area, Production and Yields at the All-India Level Table 1.8 Sources of Growth of Principal Crops Table 1.9 Demand Projections for Food Items Table 2.1 Agricultural and Food Subsidies, 1989-90 Table 2.2 Average Economic Subsidy on Fertilizers Table 2.3 Real Economic Cost of Input Subsidies in India Agriculture, 1980/81-1986-87 Table 2.4 Irrigation Charges, Gross Return and Net Return for Canal Irrigation Table 2.5 Barter and Income of Trade for Agriculture Table 2.6 Impact on Cereals Prices of Uncovered Shortfalls in Requirements Table 2.7 All India Consumer and Food Subsidy Table 2.8 Access to PDS by Income rGroup Table 2.9 Distribution of Subsidies by States, 1980-81 to 1986-87 Table 2.10 Protection Coefficients of Selected Commodities Table 2.11 Distribution of Foreign Exchange Loss Implied by NPCs, 1980/81 - 1985/86 Table 2.12 Divergence between Domestic and Effectist Incentives (AU India) Table 2.13 Agriculture's Share in Total Plan Outlays Table 2.14 Central and State Spending for Agriculture in 1988/89 Table 2.15 Grm -*h of Real Expenditure in Agriculture, 1974/78 to 1987/88 Table 2.16 Cost Recovery Rates in Four States Table 2.17 Estimates of Components of Private Fixed Capital Formation in Agriculture Table 2.18 Composition of Term Loans for Agriculture Table 2.19 Relative Shares of Different Regic;as in Direct Finance of Commercial Banks and Co-operative Societies, 1982-83 Table 2.20 Distribution of Credit by Commercial Banks and Co-operatives According to Size of Holdings by States, 1985 Table 2.21 Real Investment Credit Per Thousand Hectares of Net Sown Area Table 2.22 Interest Rate Structure for Loan Advances of Commercial Banks Effective September 1990 Table 2.23 Indicators of the Spread of Improved Agricultural Technology for India, 1960 to Present Table 2.24 Level of Yields Obtained by Paddy and Wheat Farmers Table 2.25 Reported Fertilizer Production, Imports, Movements and Stock Levels: 19.0- 1986 Table 2.26 Coverage of HYVs by Region 1987/88 Table 2.27 Seed Requirements and Commercial Supply for Major Field Crops, 1985 Table 2.28 Real Growth in Agricultural GDP and TFP of Crops and Allocation of Research Expenditure Table 2.29 Development of Irrigation: 1950-1985 Table 2.30 Changes in IrTigated Area and Cropping Intensity During 1960-63/1980-83 in Major States Table 2.31 Road Length by Road Category and Surface Type, 1988 (kan) Table 2.32 Roads by Region in India Table 3.1 Input Subsidies and Farmer Incentives Table 3.2 Estimated Fertilizer Price Increwae to Reduce Sul List of Fig=es in the Main Text Figure 1.1 Weights of Major Crops in Agricultural Production in India Figure 1.2 Land Use in India, 1950/51 - 1986/87 Figure 1.3 GDP from Agriculture and Rainfall Figure 1.4 Sectoral Shares in GDP, All India Figure 1.5 Growth of Area, Production and Yields of Foodgrains, 1950/88 Figure 2.1 Real Economic Cost of Input Subsidies (at 1980-81 Prices) Figure 2.2 Change in Real Wheat and Rice Prices Figure 2.3 Comparison of Domestic & International Rice and Wheat Prices Figure 2.4 Central and State Spending for Agricultre in 1988/89 Figure 2.5 Growth of Real Spending on Agriculture, 1975/76 to 1987/88 Lst of es in the Main Tx Box 1.1 The Experience of Punjab Box 1.2 Problems of LIgging Growth in Eastern India Box 1.3 Women and Agricultural Employment Box 1.4 What is the Growth Rate of Agriculture in India Box 2.1 Agricultural Subsidies Box 2.2 Gross Domestic Capital Formation in Agriculture Box 2.3 Rural Roads and Agricultaual Development CONR EOO MEMORAb0DUM Abbreviations ACRC Agricultural Cedit Review Committee CACP Commission on Agricultural Costs and Prices CAD Commz-- Area Development CAN Calcium Ammonium Nitrate CCI Cotton Corporation of India CSO Centra Statistical Organizaiion EPC Effective Protection Coefficient ESC Effective Subsidy Coefficient ERR Economic Rate of Return FCI Food Corporation of India FAI Ferdlizer Association of India GDP Gross Domestic Product GDCF Gross Domestic Capital Formation GOI Govemment of Tndia HYV High Yielding Variety ICAR Indian Council of Agricultural Research IRDP Integrated Rual Develo-pmnt Pogamme IRRI International Rice Research Insitutute ISMA Indian Sugar Mills Association K Potash MOP Murate of Potash N Nitrogen NABARD National Bank for Agricultume and Rural Development NCAER Nadonal Council of Applied Economic Research NPC Nominal Protecdon Coefficient NSS National Sample Survey OGL Open General License O&M Operadons & Maintenance P Phosphorus PAC Primazy Agriculture Cooperative PDS Public Distribudon System R&D Research & Development RBI Reserve Bank of India SSC State Seed Corporadon TFP Total Factor Producdvity CUTIE UK, AgSdbuMftd=ance and Problems 1. Indian agriculture has achieved impressive success in raising foodgrain output. The introduction of high-yielding seed varieties (HYVs) for major foodgrains, expanded use of ferilizer and extensive investment in irrigadon (the "Green Revolution') has made India largely food self-sufficient. This grawth has been achieved despite :onsiderable discrimination of the uhde and price regime against agriculture. Yet overall, agricultural GDP growth, 2.6% p.a. since 1965, has been modest, compared both to performance in other Asian countries and to India's population growth rate of 2.1% p.a. in the same period. Despite major technological breakthroughs, the all-India agricultural growth rate has not accelerated in the past two decades. Growth remains concentrated in a few major crops (mainly rice, wheat, sugarcane and rapeseed/mustard), in a handful of regions (mainly in the north), and in irrigated areas. There is incrasing concern that without shifting Indian agriculture to a higher growth path, India will not be able to meet many of its development objectives. 2. For many reasons, agriculture policy and strategy need revision. The current macroeconomic situation has heightened awareness of the verv significant subsidies to agriculture, but even in the absence of fiscal constraints, it is evident that agricultural policies need adjustment. Even moderate growth in the sector has come at a high cost, both to the budget and to the economy. As the limits to growth from Green Revolution technologies are approached, there are no new technologies on the horizon. The scope for relying on expansion of irrigation is smaller than in the past: much of the high potential and easily irrigable land has been developed, and new schemes are cosdier and more difficult to implement. The gains from growth have not been spread evenly, and there has been a relative neglect of rainfed agriculture, diversificadon and trade opportunities. These will be especially important, as rising incomes and rapid modernizadon in India are shifting the structure of demand toward a wider array of commodities. Serious physical resource constraints dictate that future growth will come from intensifying producdon, increasing efficiency and shifting to higher-value crops. Government's development strategy, which has been heavily dependent on extensive public direction and involvement in the sector and concentration of resources on selected crops and regions, provided a weak foundation for growth. 3. The choices India makes in revising agricultural strategy and policy in response to the current crisis have long-term implications for the pace and patterns of future development. Cutting subsidies and restraining public investment at the margin will not address the underlying and fundamental problems constraining growth. These center on the nature and extent of Govemment's role in the sector, on increasing efficiency in India's resource-poor environment, and on improving equity and distribution of the benefits of growth. A framework for sectoral policy reform will include four main elements: (i) improving the structure of incentives; (ii) mcreasing the efficiency of public investment and promodng greater private investment; (iii) encouraging technology adoption and generation; and (iv) improving the performance of irrigation. Issuesand OpQns 4. Structure of Incendves. The strategy of agricultural development in India and the related policies which have evolved over the past decades have reached a stage which necessitate a fundamental review. This necessity is underlined by the clear realizadon that the heavy fiscal subsidies to agriculture are not sustainable. Seemingly less urgent but more important for long- tm growth is the viability of the sector as an efficient and dynamic engine of growth in the India economy. Analytically, the pattern of incentives and their impact on resource allocation ;ie at the heart of both questdons. Reducing agricultural incentives through general policies and trying to compensate through fiscal transfers is both ineffective and excessively costly. 5. The existing incentive structure has had both positive and negative effects on producers, but overall the impact has been negative. Heavy protection of industry and trade controls have led to considerable discrimination in the trade and price regime against agriculture in India. Agriculture has an effective protection coefficient of 0.87, compared to 1.4 for industry. Industrial protection has kept the costs of manufactured inputs and consumer goods high, and discriminates against agricultural exports. Export restrictions have prevented producers from benefitting from higher international prices. World prices for rice and cotton have consistently been higher than domestic prices, while domestic prices for oilseeds and sugar have tended to exceed international prices. On the other hand, farners who use improved inputs have benefitted from fiscal subsidies and producers of oilseeds and sugar have benefitted from import icstrictions and closed domestic markets. Protection and subsidies have had high fiscal and economic costs (misallocation of resources, losses of efficiency and foreign exchange, and foregone trade opportunities). Protection is high for some crops in which India has limited comparative advantage (oilseeds and sugarcane), while crops India can produce competitively (rice, wheat and cotton) are disprotected. Estimates of the net foreign exchange loss from import substitution for oilseeds and agricultural trade controls range up to US$3.4 billion per year. Government involvement in output marketing and trade controls has also absorbed large financial and administrative resources, and proved a disincentive to producers and exporters. Agricultural trade has declined sharply in the last decade, and now accounts for only 18% of exports. 6. Subsidies for food and agricultural inputs totaled Rs. 135 billion annually in 1989/90 (US$ 7.6 billion or 3.1% of GDP) and exceeded public investments in the sector (Rs. 110 billion). High input subsidies to agriculture - for irrigation, electricity, fertilizer and credit - have had little impact on protection, primarily because they are concentrated in certain regions, go mainly to wealthier farmers, and include transfer payments outside agriculture (half the fertilizer subsidy goes to the inefficient domestic fertilizer industry). Subsidies are crowding out productive investments in irrigation and power infrastructure essential for future growth. Electicity subsidies total Rs. 41 billion alone, and, since they are generally not covered by the budget, are a major factor in the poor financial performance of most state electricity boards. Food subsidies (through the Public Distribution system, PDS, and state programs) are also increasing rapidly. Although counted as agriculture subsidies, food subsidies are essentially consumer subsidies (about 20% goes towanrs FCI's stocking and procurement program). PJ'S neverthelcs3 L= aq important indirect influence on procurement programs: many of the more resjrictive marketing measures (levies and monopoly procurement) have been instituted in order to supply PDS. Most existing food distribution programs are not well targeted to the needy, as PDS is concentrated in urban areas and an estimated 40Wo of offtake goes to the richer 40% of the population. 7. Adjusting the structure of agricultural incentives requires both short and medium term actions. In the shor term, the fiscal crisis dictates immediate reduction in subsidies. Recommended actions include phased increases in electricity tariffs and fertilizer prices over three to four years. Food subsidies can be restrained through better targeting to the rural and urban poor, particularly through elimination of sugar and more distribution of coarse grains, but it is important that an adequate safety net be retained. Adjustments in industrial protection and trade policy, which have already begun, will also improve agricultural incentives to the extent that imbalances in protection are conrected and agriculture trade (both imports and exports) liberalized. 8. Reordering incentives also involves review and restructuring of the entire complex policy edifice of Government programs and interventions in the medium txjm. High levels of protection for oilseeds and sugarcane need to be reduced, and incentives increased for rice, cotton and wheat production. This will require in the first instance reorientation of public procurement and price support programs, to define objectives better, reduce coercive market and trade controls, improve tthe nutritional impact of PDS (while reducing administrative costs), and redefine the role of the Food Corporation of India (FCI). Second, restructuring of the fertilizer industry is vital, as it is unrealistic to expect Indian farmers to pay for high protection and inefficiency. Recommended changes include linking fertilizer prices to long-run international marginal production costs, liii gradually opening the fertilizer industry to competition frem trade, closing inefficient plants, and reducing Government's role in fertilizer production and distribution. Third, removal of credit and irrigation subsides will require longer term programs to address the underlying causes of low cost recovery and poor financial performance (paras. 10 and 18 below). Finally, there are clear opportunities to expand agricultural trade in India (cotton and rice are two possibilities), but this will depend on immediate measures to reduce both trade and domestic market controls (quotas, trade bans and monopoly procurement). 9. Investment. The rate of capital fornation in the agricultural scctor has been falling, a worrisome trend for future growth. Much of this decline has been due to declining real public investment, which fell by 18% in the 1980s. Private investmnent, which accounts for two-thitds of capital formation in agriculture, has also stagnated in recent years, even in the face of growing credit subsidies. Pattems in public investment at both the central and state level (states account for over two-thirds of agricultural investnent) show falling overall allocadons to agriculture, growing recurrent expenditures, a crowding out of productive investment by subsidies and transfer payments, and falling real investment. In the 1980s, recurrent expenditures in the states grew 3% p.a. in real terms, while capital expenditures f=l by 1.8% p.a. Declining cost recovery and burgeoning personnel expenses have led to runaway rect;._ .t expenditures. Private investment, concentrated in groundwater development and machinery, complements public investment, and thus slowdowns in public capital formation are contributing to stagnating real private investment. 10. Problems in the agricultural credit system may also be constraining investmnent. Policies designed to expand the coverage and disbursement of agricultural credit are now beginning to undermine the agricultural credit system, causing very real concerns about its future viability. Large loan write-offs, mandatory lending, inadequate interest rates and margins and the unviable spread of bank branches have strained the system to the point of near collapse. Despite Government policies, credit use remains concentrated in certain groups of farmers and in certain regions. Most farners use no formal credit at all: only 27% of India's fanners use cooperative credit, and a mere 4% use commercial bank credit (although indications are that informal credit flows remain substantial). Credit subsidies, stemming both from low controlled interest rates and from high loan default rates, have primarily gone to larger and wealthier farmers. Performance of credit institutions is weak: overdues are high (over 40% of debt service), loan recovery is poor, many institutions are financially unviable, and there is a high level of political interference. 11. Arresting the decline of investmnent in agriculture requires broad changes in patterns of public investment, and resolution of the agricultural credit crisis. In the shAr term, the most urgent need is to reduce subsidies and increase cost recovery, although total elimination of subsidies will require adjustments in related programs (para 8). Review of the composition of agricultural investment at both the central and state levels is also needed as part of the process of rationalizing public expenditures, eliminating the spreading of scarce resources over myriad small programs, and targeting priority activities. Areas in which Government has a clear role and which merit priority attention include research, irrigation (consistent with a shifting of priorities within the subsector, para 18), resource management (forestry, land reclamation and management, drainage, etc), rural infrastructure, and training and education. The third short-term priority is to start to resolve the agricultural credit crisis, within the context of general reforms to the financial system. This will involve consolidation of rural banking, reducing interference, changes in interest rates to eliminate subsidies and make credit more viable, reduction in targeted lending, and institutional rehabilitation (which will be a long-term process). In the miium tenrn, recurrent expenditures must be controlled both through improvements in cost recovery and through devolving activities to the private sector (seed supply, animal health, tubewells are examples). Changes in the structure of incentives coupled with on-going programs to strengthen the rural financial system will help promote private investment. iv 12. IechnogI . India's Green Revolution is eloquent testimony to the impact of technology on agricultural growth and development. There remains scope for gains from currently available technologies. Although fertilizer use has increased rapidly since 1970, per hectare consumption (55 kg/ha) remains low by regional standards, and fertilizer use is heavily concentrated in irrigated areas and on four crops (rice, wheat, sugarcane and cotton). Government policies to encourage fertilizer use (high subsidies and extensive involvement in production and distribution) have had less impact than investment in irrigation, and in the case of marketing, may actually be restricdng distribution and supply of appropriate fertilizer types. The Government has also been extensively involved in the production and promotion of improved seeds, although there is no evidence to confirm that this has led to wider adoption. Improved seeds now cover over 90% of wheat area, 50% of rice area and one-third of coarse grains area. Lack of H YVs tailored to India's vastly different agroclimatic and production conditioii- is constraining adoption of rice and coarse grains varieties, underscoring problems in the research system in vnendting suitable varieties. 13. It is not evident that Indch? s research system is gearing up for the technical challenges of the coming decade. The,re is a growing pcrception, shared by many scientists in India. that the agricultural research system is lagging and in particular not responding to the increasinglv varied and complex needs of the agricultural economy. Returns to research remain high (although there have been some declines in research productivity). Problems relate to the content of the research system, primarily its excessive focus on plant breeding for foodgrains and relative neglect of other crops and farm management; its quality; imbalances in allocation of funds (eastern India in particular has received very low allocations) and failure to set priorities; and poor organization and management. There is a dearth of good and relevant messages coming from the research system, as evidenced in lagging adoption rates for new seeds. There is, however, considerable scope for private research to expand and fll gaps in the research system, not the least in high technology and basic science. 14. Adjustments needed to encourage technology adoption and innovation focus largely on medium term programs to revitalize the research system, exploit the unrealized returns from existing technologies through wider adoption, increase attention to resource and environmental issues, improve extension and address land issues in eastern India. The first priority is to implement far-reaching changes in the research system. Resources need to be reallocated away from a concentration on foodgrains and plant breeding, and towards a wider range of commod;ties and issues (particularly land management, farming systems and agroforestry, among others). The scope of research must be broadened to include more basic resexrch on one har,. and more on-farm research on the other, and to shift resources toward programs relevant for neglected regions. Changes must be made in the organization and management of the research system to increase quality and incentives. One of the most important needs is to open up the research system to international exchanges and technologies, and to encourage technology imports, particularly in basic science. Policy changes are also needed to encourage more private research, for example through protecdon of intellectual property rights and immediate relaxation of controls on technology imports. More attention must be paid to ensuring sustainable use of India's physical resources, through changes in the structure of incentives (to prevent overexploitation), introduction of techniques to reduce land degradation, increased investment in forestry, and attention to social issues contributing to environmental problems. Here more work needs to be done (and is already und.rway in forestry) on devising clear strategies and action plans. Land issues (tenure status, land fragmentation) are constraining investment and innovation in eastern India, and steps should be taken to increase access to land, consolidate holdings and improve security of tenure. 15. Further adopdon of existing technologies will depend on several factors, most importandy expanded investment in inrigation and development of seed varieties and recommendations tailored to agroecological conditions. Govemment's extensive role in input production and marketing also needs to be considerably reduced to promote long term development of efficient input supply channels and encourage private sector involvement in research and marketing. Consistent with programs to restructure the fertilizer industry, Goveriment control of distribution should be eliminated, particularly fertilizer allocations, licensing and price controls. The recent reduction in v subsidy and removal of piice and movement controls on low analysis ferdlizer is a first step in this direction. In seed supply, involvement of state seed companies in commercial seed production should end, and they should concentrate on producing foundation and breeder seed, and on building up seed supply where technologies are new and market imperfections exist (pasture and fodder seed is one example). AU seed subsidies should be eliminated. 16. Ijrigation. The future of Indian agriculture is inextricably linked with the development of irrigation, but in many ways the sector is a paradox. On the one hand, irrigation development has been the major determinant and source of past agricultural growth, and future growth and diversification will depend on existing and expanded irrigation infrastructure. Irrigation development has had important secondary effects on protecting the environment and increasing rural incomes and development. On the other hand, the subsector has severe problems in almost every aspect of implementation and performance: resource planning is weak, design is often poor, construction quality is a major problem in most states; operation and maintenance are below acceptable standards; and cost recovery is virtually non-existent. Potential for new irrigation is dwindling (India has developed nearly two-thirds of estimated potential), costs are escalating, and rates of return on projects have been below expectations. There is considerable scope for further exploitation of groundwater, however, and private tubewells have high rates of return, even without the large electricity subsidies. 17. Major efforts are needed in four key areas: (i) forging a coherent water policy; (ii) setting investment priorities and regaining control of public expenditures; (iii) improving system productivity and assuring sustainability; and (iv) building institutional capacity within both the public and private sectors to manage irrigation more efficiendy and effectively. 18. First, planning and coordination of water use must be done on the basis of the natural hydrological unit, the river basin. As river basins cut across states in nearly every instance, this will require resolution of difficult interstate issues, as well as conflicting demands for water use. The existing National Water Policy needs to be applied widely, complementary state water policies drafted, and river basin commissions formed. Second, the investment focus for irrigation should concentrate on, in order of priority, improving the performance of existing systems, finishing the large backlog of uncompleted projects, and investing cautiously in new construction (including flood control, drainage, storage, reclamation and rehabilitation). Runaway public expenditures need to be reined in, especially for recurrent costs, together with measures to fund operations and maintenance (O & M) fully, increase water rates, and improve cost recovery. Third, improving water management should be the principal technical goal for irrigation managers, focusing on low- cost, command-specific actions. Construction quality also needs improvement, particularly through much dghter supervision and reducdon in corruption. Greater attention must also be given to environmental and resettlement and rehabilitation issues in planning and implementing irrigation investments. Finally, there is scope for harnessing the tremendous energies and capital - both human and investment - of the private sector, through devolvement of activides to farmer groups, nongovernmental organizations and contractors. At the same time, the Government will stll play an important role in guiding and often implementing irrigation, and thus irrigation institutions must be strengthened, and their accountability to their clients - farmers - increased. 19. Conclusion. Our dialogue with Government about constraints to the accelerated development of India's agricultural sector has identified a significant number of desirable policy adjustments. Given the importance of agricultural sector development for the adequacy, equity and sustainability of the Government's overall development effort, adjustments in agricultural sector policy deserve to be pursued with priority in the context of the Government's broader program of stabilization and reform. 20. Postscrip This report was completed and discussed with the Government of India prior to its presentation of the 91/92 budget to Parliament. The following are the main policy changes arising vi frm the budget and from associated policy statements which are likely to have a significant impact on agriculture. They are expected to have positive net effects on agricultural incentives and also to be significant in correcting skewed intersectoml incentive patterns: Fertilizer prices will be raised by an average of 30%, except for poor and marginal farmers. Price and movement controls are to be abolished for low analysis fertilizer. Farmers are to be compensated by higher procurement prices, which presumably would be passed on to consumers. This goes some way towards reducing the very large subsidy bill. * The new industrial policy, which has gone a long way towards deregulating entry and opening the economy to compedtion, will benefit agricultural industries over the medium to long term. * The new trade policy which, alongside the changes in exchange rate, includes abolishing export subsidies, and expanding and simplifying of the replenishment license scheme, should also benefit agriculture over the medium to long term and will significandy improve the incentive for agricultural exports. e The subsidy on sugar has been eliminated thereby correcting some of the distordons oudined in paragraph 3.24 of the main reporL * The establishment of a high level coanmittee with the mandate to review all relevant aspects of structure, organization, functions and procedures of the financial system bodes well for the strengthening of the agricultural credit system recommended by the Agricultural Credit Review Commission. CHAPTER I. AGRICULTURE'S PERFORMANCE AND POTENTIAL 1.1 For the majority of people in India, what happens in agriculture directly shapes their daily lives, and their hopes and prospects for a better life. This has been true for centuries, and is likely to remain so well into the next decades, even with India's notable progress in industrialization. What happens in agriculture also influences how India will tackle the problems of poverty, employment and environment which dominate the development agenda. Faster economic growth presents new opportunities and new challenges for Indian agriculture. Rising incomes and rapid modemization are shifting the structure of demand for agricultural commodities and opening up new possibilities for domestic and international trade and linkages to the rural non- farm economy. Yet at the very time when agriculture is called upon to make a greater contribution to economic growth, there is growing concem that this challenge cannot be met. What is the scope for future rapid growth of the economy if agriculture continues to grow only moderately? And even if India could raise its GDP without accelerating agricultural growth, what would the impact be on the distribution of the benefits of growth? 1.2 Agricultural policy is in crisis. The current macroeconomic crisis has heightened awareness of the very high and unsustainable levels of subsidies to the agricultural sector, but even without the short-term immediacy of restraining Government spending, it is evident that agricultural policies need adjustment. Overall agricultural growth has remained moderate, and India has yet to witness the accelerating agricultural growth rates that accompany structural transformation, despite major technological breakthroughs in the Green Revolution. Past sources of growth are petering out. Moreover, the gains from growth have not been spread evenly, but have been concentrated in certain regions and certain crops. Thus, although famines have largely been eliminated, hunger remains a persistent problem for nearly 20% of Indian households. There has been a reladve neglect of rainfed agriculture, diversification and trade opportunities. Official development strategy has been based on heavy and extensive Government involvement. The legacy of this is now haunting the sector, as evidenced in the high and unsustainable subsidies, significant resource misallocations, and declining agricultural trade. At the same time, as populatdon continues to grow at 2% a year, agriculture faces formidable resource constraints: land and water supplies are limited and environmental pressures are increasing on both marginal and cropped lands. 1.3 There is an urgent need for a fundamental review of agriculture strategy, to address both the short-term exigencies, and the medium-term issues of growth and efficiency. This report examines the potential of agriculture to make a larger contribudon to India's development, and the factors currently constraining sectoral performance. It is not a comprehensive overview of the agriculture sector in India, and thus does not cover every subsector and issue. Rather, the report focuses on four areas where adjustments are critical for growth: pricing and trade policies, investment (public and private), technology, and infrastructure. This chapter looks at agriculture's contribution to solutions of selected development problems, and draws lessons from past performance for future strategy. The second chapter reviews key issues, and the final chapter articulates a strategy and oudines the adjustments needed for accelerated agricultural growth. A. Agriculture's Role in the Economy 1.4 India's agricultural sector is as rich and diverse as any continent's. Its climatic zones vary from the humid subtropical in the south to the semi-arid in the north. Production systems span a condnuum from tradidonal peasant agriculture to intensive drip irrigadon of high- value fruits. Average technical levels are low by intemational standards, although use of modern 2 inputs is growing rapidly. Although less than one-third of the cropped land is irrigated (about two- thirds of the estimated potential), irrigation development has made a major contribution to growth. Small farms predominate and fann sizes are declining (average farm size was 1.84 ha in 1980). There is a growing number of landless workers. Foodgrains dominate production, accounting for 63% (Figure 1.1); India also produces a wide range of nonfood commodities. The take-off of the Green Revolution after the mid- 1960s has allowed India to become self-sufficient in foodgrains in normal years and recently to accumulate sizeable grain stocks. Agricultural imports are now marginal, and thus the sector feeds and clothes over 800 million people. Growth patterns have differed sharply among states and regions, in particular the booming northwest in contrast to the lagging east. The sheer diversity of producdon systems, technical levels, agroclimatic conditions and infrastructure throughout the country make it difficult to generalize, and mean that the national picture of what is happening in agriculture often obscures much of the story at the farn level. Figure 1.1: Weights of Major Crojs in Agrcultural Production in India Oilseeds 12.64% Rice 29.74% Others 11.27% Pulses 7.94% Cotton 4.37% Sugarcane 8.11% Wheat 14.45% Coarse Cereals 10.79% Jute & Mesta 0.69% 1.5 Agriculture's share of GDP (33%) masks the extent to which India's people depend on the sector. India remains a primarily rural society: about 75% of the population live in rural areas. Two-thirds of all Indians depend directly on agriculture for their livelihoods, and many others indirectly due to strong rural-urban linkages and agriculture-based industries. Workers employed in agriculture are the poorest (80% of India's poor live in rural areas) and a high proportion are female (one-third of the agricultural labor force are women, and agricultue remains by far the major employer of rural women). Agriculture has an important impact on present macroeconomic problems: subsidies for agricultural inputs amount to 2.5% of GDP, while declines in already modest agricultural exports (agriculture now accounts for less than 18% of exports) in the last decade have exacerbated the tade deficit 3 1.6 There are growing concerns that agriculture will not be able to increase its contribudon to overall GDP growth, nor sustain its centWal mle in resolving several problems high on the agenda of social development. Although the share of agriculture in employment and output has been falling, consistent with expected patterns of development, India has yet to experience the surge of agriculturl growth rates that accompany and support faster industrial development. There has been no statistically significant change in the all-India trend rate of agricultural growth even after the Green Revolution two decades ago (para. 1.31). Yet agriculture's impact on overall growth and development patterns can be powerful, either posiively, as evidenced in India's Punjab (Box 1.1) and/or negatively, as in the impact of lagging agriculture in the very poor states of eastem India (Box 1.2). In India, agriculture's role is also prominent in addressing several key development issues: poverty and employment, women in development, rural non-agricultural growth and the environment. Povery and Em2loymentI 1 1.7 India has made progress iti reducing the level of poverty. In the 1970s and early 1980s both real wages and real expenditures by the poorest groups increased and the percentage of the population below the poverty line fell. Yet poverty remains a very real and pressing social problem in India: even though the percentage of poor has fallen, the absolute numbers of those living in poverty have risen, and poverty has increasingly become concentrated in regions (eastem and central India) with serious development and financial constraints, and in rural areas (80% of the poor are agricultural workers). Two-thirds of India's poor (and nearly 70% of the ultra poor) in 1983 lived in states with low or moderate rates of agricultural growth combined with medium or high levels of production instability. Government strategies for labor absorption and poverty alleviation have thus concentrated in large part on expanding rural - and especially agricultural - employment opportunities, and in contending with lagging economic and agricultural growth in the eastern and central states. 1.8 That agriculture can play an important role in poverty reduction is clear, yet agriculture by itself cannot carry the burden of coping with India's poverty problem. Modelling of the agriculture sector shows that no agricultural development measures can affect rural labor demand or wages as much as changes in population growth or growth in demand for non- agricultural labor (Quizon and Binswanger, 1986). Measures to create jobs in other sectors of the economy are vital. The need is all the more pressing because despite slowing population growth rates, the sheer numbers of new labor force entrants will remain high for the next 20 years. These people already exist in India, and plans must be made to increase employment generation radically to cope with this problem. 1.9 At the same time, agriculture will remain the major source of new jobs for at least the next decade, even at high industrial growth rates, due to the relatively small industrial base and currently high capital:labor ratios. What is the prognosis for increased labor absorption by agriculture? In the short-term, the number of jobs in agriculture is likely to grow, although agriculture as a proportion of total employment will fall. The most recent rounds of National Sample Survey (NSS) data show that between 1977,78 and 1983, about 15 million agricultural jobs were created, more than in any other sector. In the same period, however, agricultural employment fell from 68% to 64% of total employment, and agriculture accounted for less than half the total growth of 31 million new jobs. This indicates that labor is moving out of agriculture, consistent with its falling share in GDP and the process of structurl transformation. llssues of poverty and employment were discussed in detail in the 1989 India Countr Economic MemdWL (World Bank, 1989), from which this review draws information. 4 BOX 1.1I The_ E re ou A particularly interesting model of the potential of agriculture in the process of structural transformation is the Punjab (G.S. Bhalla et.al. 1990). Punjab is one of the fastest growing and richest states in India. In the period 1960/61 to 1983/84, the primary sector in Punjab grew at an annual rate of 4.1%, while the secondary sector grew at 5.6% and the tertiary sector, 6.8%, compared to all-India annual growth rates of 2.2%, 4.2% and 5% respectively. Although agriculture in Punjab had been growing rapidly since Independence (largely due to the spread of surface and tubewell irrigation and bringing new land into production), production took off after the Green Revolution in the mid-1960s, with unparalleled increases in both output and productivity (which both grew at nearly twice the all-India average rate). Although Punjab (together with Haryana) quickly became the breadbasket of India, due to large yield increases and expansion of area under wheat and rice, it also diversified the agricultural economy as incomes rose and demand patterns shifted. One prominent success was the rapid take-off in milk production, encouraged both by higher incomes and increasing mechanization (which allowed fodder lands p eviously used to support draught animals to be diverted to feeding milk cattle); the livestock sector grew at a rate of 6.9%, and doubled its contrbution to agricultural income, from i4% in 1960 to nearly 30% by 1983. Factors contributing to rapid agricultural growth included attractive new technologies (HYVs and fertilizer), consolidated land holdings, public and private investment in infrastructure (especially irrigation) and rural services (including education and health), and attractive agricultural price policies. The introduction of new rice and wheat technologies quickly led to a predominance of these foodgrains in state production: their shares increased from 30 to over 60% between 1950 and 1984. Fertilizer use increased by a factor of 17, from 9 kg/ha in 1965 to 150 kg/ha in 1984. This led to rapid yield increases of 2.6% a year for wheat and 5.7% a year for rice. Favorable land legislation resulted in the predominance of self-cultivation (74% of land was owner- operated by 1970). The state devoted significant public resources to investrnent in irrigation, power, agriculture and community development, which accounted for nearly 70% of public expenditures on average; public investment was also high in per capita terms. This was complemented by private investment in groundwater development. By the early 198( , over 80% of net area was irrigated, compared to only 27% in India as a whole. Punjab also undertook massive programs of infrastructural development in roads, extension services, agricultural research and education. By 1985 nearly every village was linked by a paved road. The state, as the major surplus producing area of India, benefited significantly from Government price supports. Booming agricultural growth in tum promoted growth in other sectors of the state economy. The increasing use of intermediate inputs in agriculture, coupled with agricultural and income growth, resulted in significant linkages to manufacturing and services. The pattern of these linkages also changed over time: while in 1969170 only agriculture and agroprocessing were generating high forward and backward linkages, a decade later many new sectors joined this group, including some machine-based and metal- based industries, trade, transport, banking, real estate and other services. Due to high growth in all sectors, Punjab today is one of the richest states in India, with the lowest rural poverty ratio (10.87 in 1983/84) and highest per capita income. The structural transfornation of the Punjab economy largely resulted from technological breakthroughs in agriculure and demonstrates the powerful potential of agricultural growth in an agriculture- dominated, labor-surplus economy. 5 BOX 1.2 Prbems of Ictra Growh in ASt India In direct contrast to the successful experience of agriculture in the Punjab is eastem India (the states of Bihar, West Bengal and Orissa). In 1988, eastem India had the largest number of rural people in poverty and the largest proportion of the rural population below the poverty line of any region in India. As in the case of the Punjab, agriculture is the predominant activity in the region - agriculture accounted for 42% of state domestic product in eastem India, compared to an all-India average of 35% in 1985-87. Yet while agriculture has flourished in Punjab and has made major contributions to rural and urban development, the Green Revolution has been slow to take off in eastern India, and lagging agriculture growth has directly contributed to high poverty rates. Growth rates of output and input use have been significantly below those of the rest of India (Table 1.1), although there is evidence that growth in several eastern states is now accelerating (Ahluwalia, 1990). Eastem India has become the focus of numerous studies seeking both explanations and solutions for faster growth and development, in part because these states are the poorest in India and in part because of the significant untapped productive potential. Table 1.1 Growth Rates of Ou!ut, Inputs & Total Factor Productivity, 1956-1983 Output 3.1 2.1 2.6 2.2 Inputs 1.8 1.1 1.1 1.0 Total Factor Productivity (TFP) 1.4 0.8 1.5 1.2 a] Haiyana, Punjab, Rajasthan, Gujaat Mauarashr Madhya Prdesh, Uttar Pradesh, Andhra Radesh, Kamataka and Tamit Nadu. Source: Pray, 1991. The roots of slow growth in eastern India lie in the relative neglect of the factors which promoted higher growth in the Punjab and elsewhere: technologies, infrastructure, institutional arrangements, investments, and price policies. First, suitable technologies for the region's major crop, rice, have not been developed. Existing rice varieties are not suited to conditions of flooding and deep water which characterize nearly 50% of ricelands in the area. Nor have significant resources been devoted to resolving this problem: research expenditures in eastem India have been the lowest of all regions (Table 2.28). Thus, yield per hectare of rice has grown much more slowly than in the rest of India (0.8% vs. 1.7%). Second, eastern India is relatively deficient in basic infrastrcture - roads, irrigation, markets, communications and power infrastructure are the least developed in India. Eastern India's agiculture is predominately mainfed and as such, subject to greater variation and risk. Fewer investments have been made in water management (irigation, drainage and flood control) that would help temper these problems. Development of irrigation has been proportionately less: only 60% of eastern India's irrigation potential has been developed, compared to 82% of the Punjab's, and only 29% of the land is irigated, compared to 91% in the Punjab. Even where irrigation exists, there are fundamental problems in water management and control due to the inherently more complex problems of managing surface iurigation in high rainfall areas (Berkoff, 1990). The combination of lack of suitable HYVs and limited and poorly performing irrigation explain much of the stagnation of productivity growth in the region in the first post-Green Revolution decade. Lack of good infrastructure has hindered the development of extension, input supply and maketing networks. 6 BO|. (continued Third, levels of public investment per capita of the rural population in eastern India have been less than half those in wealthier states: public expenditure in 1980/81 prices in the 1980s averaged Rs. 50 to 75 per capita in eastern India, compared to Rs. 144 per capita in Punjab and Rs. 195 per capita in Maharashtra. Partly this is due to the fact that these are poorer states. But the eastern Indian states also tend to spend relatively less on irrigationi as a proportion of public expenditures (Ravishankar, 1990) Private investment has also lagged: the eastern states have throughout the 1980s accounted for the smallest percentage of term credit (a proxy for investment). Private investment is discouraged by lack of complementary public infrastructure (surface irrigation, roads, power), the low investment capacity of the region's small farmners, and higher risks due to lack of water control. Fourth, institutional factors figure predominantly in lagging investment rates. Eastern India has a much higher percentage of small farmns, tenant farmers and fragmented landholdings which discourage investment. Sociocultural factors, primarily the conception of agriculture as the residual sector, have worked against improving the basis for growth in the sector. Finally, institutions in the public sector in eastern India are among the weakest and most politicized in India. Eastern India needs more investment in research, human capital and infrastructure to increase agricultural productivity and reduce rural poverty. There is at least implicit concern that such investments would not have the high payoffs that they did elsewhere in India because of the daunting physical, institutional and socioeconomic conditions. However, analysis of productivity indicates that government investments in research, extension and infrastructure have been as productive or more productive in eastern India than in the rest of India despite the floods, droughts and institutional constraints. Slow growth rates in eastern India have been caused by slow growth of these inputs, rather than slow growth of productivity (although this varies by state) (Pray 1991). This is in contrast to the common perception of eastern India as a technically backward and inherently low productivity region. In particular, irrigation has a larger impact on total factor productivity in eastern India than in the rest of India; together with the higher untapped potential in the region, this argues for more investment in irrigation in eastern India particularly in groundwater development. The large impact of low growth in cultivated land (and the high amount of apparently fallow but productive land in Bihar) suggests that investments in land reform, despite their political difficulty, would have high payoffs. Agricultural productivity has begun to grow in West Bengal and Orissa, due in part to more Govemment investment in recent years, and supports the analysis that eastern India can be a region of growth in the 1990s. There is a strong case to be made to reorient investment resources from the rest of India to increase investment in eastern India, both to improve efficiency (due to higher levels of productivity) and to increase national agricultural growth as a whole. This will, however, require attention to problems of weak institutions and administration. 7 1.10 In the longer temi, agriculture's ability to continue absorbing significant amounts of labor will depend on a number of factors. First, growth rates of agricultural employment are slowin- compared to the last two decades, as the underlying factors responsible for employment growth tiave run their course. In particular, growth in irrigation, rapid yield increases and subdivision of land - all of which contributed to employment growth in the 1970s and early 1980s - have slowed, and are unlikely to be as rapid or as far-reaching in the futre. Second. employment elasicities are falling. The overall employment elasticity for Indian agricultue was estimated to be 0.71 in 1962-65, 0.59 in 1970-73, and 0.51 in 1980-83 (Gulati, 1991). These are averages, and crop and regional estimates of employment elasticities vary considerably (Table 8.5, Statistical Appendix). In general, cereal production (except rice) has lower employment elasticities, especially in the northwest, than crops such as oilseeds, sugarcane and cotton. Despite the decline in agricultual employment elasticities, these are still greater than those in industry. 1.11 Third, given wide variations in labor use by crop and region, employment growth will doubtless vary across the country (Table 1.2). In the rapidly growing states in the northwest, there has been a drop in employment creation and the increasing use of mechanization. Despite considerable debate on this issue in India, use of mechanization may have had a net employment creating effect, through expanding gross cropped area.2 Although labor absorption has dropped in these states, worker productivity has increased. Patterns of labor absorption in other areas of India show high agricultural growth, high labor absorption and increasing worker productivity in three states (Andhra Pradesh, Gujarat and Maharashtra), and low employment absorption and growth in per hectare employment in seven states (Karnataka, West Bengal, Rajasthan, Orissa, Bihar, Madhya Pradesh and Tamil Nadu). These trends are especially worrisome as the central and eastem states will account for a growing share of future labor force age increments (65% in 1980- 2000, compared to 51% in 1960-80). Although these areas tend to have higher employment input per hectare, stagnating productivity suggests low quality of employment (e.g. underemployment) and the inability of labor to transfer to other sectors. Table 1.2: Laebr Use fr Maior Cr-i (mandays/ha) Weighted M Averame Range Paddy 101.84 72.26 - 15936 Wheat 66.03 43.36 - 92.03 Maize 83.45 60.34 - 115.71 Jowar 61.63 50.09- 72.03 Bara 45.46 29S55 - 85.62 Gramn 41.71 24.9: - 64.87 Mustard 55.85 34.47 - 71.88 Groundnut 80.16 63.84 - 136.01 Soybeam 'O.6 46.10 - 51.92 Sunflower 41.73 38.62 - 45.16 Coton 99.76 66.89 - 129.17 Jute 179.25 102.00 - 197.77 Sugarcane 191.76 122.41 - 376.49 Sow= Gulad ad Shame. 1991. 21ntduction of mechanizadon has resulted in more land under producdon, in part because tactors can prepame land more quickly, enabling double cropping in irrigated areas (a wator, for example, can prepare land for wheat a few days after sugan:ane is harvested, compared to nearly two months for bullocks, thereby enabling another cop), and thus may have a net labo absorbing effect. In addidon, switches from bullocks to tmctors has freed up land used for fodder prduction, enabling cropping or switches to milk production (S. Bhalla, 1987). 8 BOX 1.3 W Employment opportunities in agriculture are especially important for women. Agricultural labor is the major source of paid employment for women, and there has been rapid growth in women's labor force participation. There is some debate as to whether rising female participation in paid outside labor is a result of increasing opportunities for women to transcend the invisible bamers that restrict women to "inside" (domestic and family) activities as opposed to "outside" (in the fields and marketplaces) work in India, or whether it is an indication of growing pauperization. Micro studies and national data suggest that both factors are at work, especially as the economic and cultural factors affecting female labor force participation differ radically among regions in India. In northem and eastern states, where women's role is strictly limited by cultural norms, female labor force participation is inversely related to farm size, land ownership, and income. The poorest groups - landless families, scheduled castes and scheduled tribes - have the highest percentage of females working (although scheduled tribes and castes are also less affected by the cultural restrictions on women accepting outside work). However in the southern and central states, cultural norms are less restrictive, there is a high participation of women in the paid labor force, and many workers are drawn from small farm cultivators. Studies of wage trends and labor use patterns suggest that there are increasing opportunities for female workers, especially in rice-growing areas, as women's real wages are rising (and the gap is narrowing with men's) and as HYV varieties of rice and cotton in particular have increased demand for female agricultural tasks (Bennett, 1990). Women's participation in the paid labor force has benefits for family health and nutrition as well, as nearly all women's wages are spent on the family (although for the poorest families, which make up the bulk of farm laborers, this does not substantially alter the fact that they are on the margin of survival). Overall, however, the labor picture for women in other sectors of the economy remains sobering - women account for only 6.6% of the jobs in manufacturing, and clearly have fewer opportunities to obtain the minimum education and technical training needed for such jobs. Choices in the pattern of agricultural development provide an excellent opportunity to improve women's lives and their gains from development. Efforts to improve the position of Indian women need to focus on women as critical economic actors rather than as target groups for poverty alleviation (World Bank,1989) - and agriculture is the sector where women are overwhelmingly concentrated. While there is no single strategy which will work in all regions or with all types of women, a consensus is emerging that it is only through better access to key inputs (such as education, land and credit) that real changes will occur in cultural ideology, in gender-based distribution patterns and in women's opportunities. Support for _cultu intensification and infastrt develoment can increase the demand for female labor, especially in certain crops (cotton, rice, vegetables, fruits) and animal husbandry. Efforts at redirecting txLsn to the needs of female cultivators (who provide much of the labor on small and marginal farms) are especially important in encouraging the adoption of new agricultural practices. Ample evidence from Africa, Asia and elsewhere in the developing world indicates that women can block agricultural modernization if they are only expected to provide additional labor without seeing clear advantages. Creative efforts can be made to increase women's access to crdit and other serices through demand groups, which assist women in dealing with public systems and the marketplace. Finally, there is little to rival female educafion as a means of weakening the inside/outside dichotomy and expanding women's stock of human capital - especially important to ensure that women can move out of agriculture into higher paying industrial and service jobs as structural transfonnation progresses. Incentives to educate girls include providing day care facilities (to relieve female children of childcare responsibilities), improvements in the quality and coverage of basic education, and strengthening nonformal education to reach older girls. 9 1.12 Future scope for employment increases in agriculture will depend on the choices made in investments, cropping patterns and intensification of irrigation, as well as on demand for agricultural products and the relative price of labor. Intensifying production through irrigation investments has a significant impact on labor absorption. However, indications are that employment creation stagnates once irrigadon potential is reached, so that a strategy based on increasing irrigation alone will be insufficient (Singh, 1988). High employment absorbing commodities, such as rice and cotton, have been relatively discriminated against in the structure of incentives (para 2.23); shifts into these commodities (and out of low-labor absorbing oilseeds) would increase employment. Crop diversification and animal husbandry, both of which are labor- intensive, also have the potential to increase labor absorpdon, and consumer demand for these products is inceasing rapidly (Table 1.9). Increased adoption of HYVs in rice growing areas will encourage greater labor absorption as well. Green Revolution technologies have generally maximized retums to land (through increasing yields and allowing double cropping), but havc not always maximized employment. This does not mean they are inappropriate technologies, for they have enabled higher returns to scarce land resources. The more practical and longer term solution to the problem of falling labor use in agriculture, in any event, is expanding employment opportunities in other sectors. Rural-Urban 0rowth Lnkaes 1.13 Development of the nual non-farm economy will be especially important to the rural poor, and consequently, merits close attention in India's rural development strategy. The rural nonfarm economy, dominated by commerce, service and small-scale manufacturing activities that cater mainly to agricultural and ural consumer demands, now accounts for 20%o of employment in rural areas and 30% of rural income. Nonfarm activities are especially important to the poor. Landless laborers and small farmers typically obtain half or more of their income from nonagricultural activities, and women are active especially in food processing and household manufacturing. Estimates of the multipliers for the impact of agricultural growth on the nonfarm sector are Rs. 0.64 based on econometic analysis (this is a national multiplier, state multipliers range as from Rs. 93 in Punjab and Haryana to Rs. 0.46 in low productivity states such as Madhya Pradesh and Bihar) and Rs. 1.35 based on input-output analysis (this multiplier is higher because it pertains to the national economy, not just the rural section).3 The income multiplier is Rs 1.56 fcr irrigated agriculture and Rs 1.23 for rainfed agriculture (Table 1.3). 1.14 Projections through the year 2040 of the volume of nonfarm income, employment, K and rural demand for manufactured goods that will result from agriculture indicate several important conclusions for growth and employment policy. First, because of strong agricultural growth linkages, rural nonfarm income and employment will both grow faster than their agricultural counterparts. A sustained agricultural growth rate of 2.4% (equal to past trend) will lead to 3% growth in nonfann income in rural areas and towns, and 2.8% growth in nonfarm employment. These growth rates increase to 5.8% and 4% respectively if agriculture grows at an accelerated rate of 4%. Second, continued trend growth in agricultural output by itself is unlikely to provide the growth in employment required to absorb the ruml labor force increases, although secondary rounds of growdt induced in the rural nonfarn economy could bridge this employment gap given even moderate rates of agricultural growth. Third, despite the strength of the rural-urban linkages, agricultural growth alone cannot provide the necessary market to sustain rapid growth in India's manufacturing sector (notwithstanding recent public rhetoric on emphasizing basic goods in industrial production and against "VCR - led growth"). An agricultural growth rate of 2.4% p.a. will generate 1.8 to 1.9% growth in national manufacturing output (based on rainfed or irrigated 3The first approach is an econometric analysis of cross-secdonal ste- and district-level &d.% Thc second is based on a semi-input - output model fitted to the nadonal input-output table for 1979/80. Both approches prov.-e esfimates of the agricultural income multiplier, defined as the increase in value added in the nonfarn sector atbutable to a one mpee incre in agricultual value added. See Hazel and Haggbladde (1990). 10 agricultue, respectively). Even a 6% agricultural growth rate will sustain only about 5.5% growth in manufacturing output. Table 1.3 National Aricutur Ouu adL1oe MuliliryarIj a me er RaLufe Agriculture Jirigated RaLnfed Tolal ONE RUPEE INCREASE IN CROP OUTPUT (Resulting lncrase in Sector Gross Output) Manufacting 1.05 (77) 0.94 (92) 0.98 Tertiary 1.14 (87) 1.11 (95) 1.12 Nontadable Agriculture 0.45 (94) 050 (90) 0.48 Toml. Nonfarm 2.19 (82) 2.05 (94) 2.11 Total 2.64 (84) 2.55 (93) 259 ONE RUPEE INCREASE IN CROP INCOME (Resulting Increase in Sector Income) Manufactuning 0.47 0.35 0.39 Terary 1.09 0.88 0.96 Nontradable Agriculture 0.51 0.47 0.48 Total Nonfarm 1.56 1.23 1.35 Total 2.07 1.70 1.83 Notes: al Weighted average using base-year gross output (income) weights of 0.4 (0.36) for irrigated crops and 0.6 (0.64) for rainfed crops. Figures in parentheses are the percentages of the increases in total sectoral outputs that are attributable to consumption linkages. Source: Hazell and Haggbladde, 1990. 1.15 Finally, although the size of the agricultural income multpliers depends primarily on the level of per capita agricultural income, public policy can influence their magnitude. The multipliers are positively rm.ated to the development of rural infrastructure (roads, electrification, banking services, etc). They are stronger under irrigated rather than rainfed agricultural growth, and larger for small to medium-sized fanns than for very large farms. Hence appropriate regional and farm targeting of agricultural technology, supported by adequate infrastructural investrnents, will be especially important for improving the nonfarm response to growing demand from agriculture. Moreover, well-developed rural towns foster stronger rural-urban growth linkages, and government policies towards small nonfarn businesses are important It is particularly important to avoid tax, regulatory or licensing policies that discriminate against small, labor- intensive businesses in favor of their larger, more capital-intensive cousins. Envdirnmealssues 1.16 Any attempt to increase agricultural productivity cannot overlook the serious environmental problems confronting India. India is already at the margin of its cultivable land (totalling some 140 million ha) and environmental pressures (erosion, overgrazing, expansion into wastelands and salinity problems) are increasing on both marginal and cropped lands (Figure 1.2). Official statisdcs on land degradation and deforestation are weak and often conflicting, so the extent of the problem is not known precisely. Between a third to a half of India's total land area of 304 milion ha is estimated to suffer from problems of degradztion, and the speed with which land degradaton is occurring is alanning: up to 2.5 million ha (or 0.76% of India's land area) turns 11 into wasteland every year by some estimates. Another one million odd ha degrade every year because of mining, waterlogging, soil salinization, creation of artificial reservoirs, expansion of settloments and industries, cultivation of marginal land and overgrazing. According to satellite data, India lost forests at the annual rate of 130,000 ha in the period 1972-75 and 1980-82. These data were acknowledged to have problems, and a more careful assessment done in 1989 estimated actual forest cover at 64.01 million ha (19.5% of land area) against an officially recorded area of 75.1 million ha (22.8% of land area) (GOI, 1989). Most observors believe deforestation rates are understated, and closer to 1.3 to 1.5 million ha per year. (World Resources Institute, 1990). These figures include both closed and open forest area. Nearly three-quarters of forest cover was concentrated in two major tracts - the Himalayan range and the states of the northeast, and the central and eastern Indian states of Madhya Pradesh, Maharashtra, Orissa, and Andhra Pradesh. Most other areas now have a minuscule forest area and almost all ecologically sensitive areas like hill, mountain and plateau regions are devoid of almost any tree cover. Figure 1.2: Land Use in India, 1950/51 - 1986/87 M.ha 2 Area for which no return exists 250 - _l Net area sown 200 - ~ ~~~~~~~~~~~~~~~*Fallow lands O - - ;. lOther uncultivated land 1 5 - -.:.----: 1 .50 ; ;..-.'..'. Area not available for cultivation 1 .0.-.. ..... ........ ...... : ::::.:::: . ... U ; Area under forest 50- 50 - - . - . .~~~~ -' .' - 1950/51 1960/61 1970/71 1980/81 1986/87 1.17 India's water resources can be characterized by first, their enornous size and variety (4,000 billion cubic meters annually in torrential Himalayan rivers, in deep Gangetic alluviums, in seasonal deccan streams and in coastal swamps) and second by their fundamental irregularity and imbalance. In most of India, over 75% of precipitation is within a three month monsoon period and that with a mean variability of about 30%o. This requires major water resource planning, development and management efforts to ensure adequate supplies for agriculture, industry, energy, human and animal consumption. Theoretically, India has substantial water resources to draw upon (it has been estimated that the country today uses only about a tenth of the precipitation that it receives annually). However, poor management of the resource is causing problems. At present, an estimated 80% or more of India's villages are without a safe and clean water supply, and only about 50% of the urban population is said to have access to safe and clean water, causing significant human health problems. Pollution of water resources is growing: most of India's rivers are polluted by sewerage, industrial and agricultural wastes. 12 1.18 The major environmental issues now facing Indian agriculture are (a) the impact of irigation and groundwater development, including the impact from resettlement of displaced populations; (b) land management issues, including forestry; and (c) incentives to overuse fertilizers and pesticides, and overexploit groundwater. 1.19 Env.nmental Imoact o fio. Irrigation has probably had, on balance, a positive environmental impact, largely because it has reduced pressures on land where rainfed agricultural practices predominate by permitting increased production of biomass for food, fodder and fuel. The problems of erosion from cultivation of marginal soils, overgrazing and deforestation would have been far more acute without rapid development of irrigation. 1.20 Yet there are negative environmental repercussions of irrigation development. Loss of land for reservoirs, canals, and other infrastructure is inevitable, but relatively small. River diversion schemes usually take 2-5% of the potential command. Storage schemes take another 3- 8%, depending in the dam site. Larger reservoirs tend to involve relatively smaller land loss. Sardar Sarovar, for example, results in a 2% land loss. Some of the land lost may be designated forest area.4 In view of the rapid rate of deforestation in India, this is a serious matter. Although losses due to irrigation probably account for less than 3% of this and may be compensated by production of other biomass, the extent of land loss and the possible effects on biodiversity should be systematically taken into account in the evaluation of iigation investment. 1.21 The loss of land brings with it displacement of families: on average 6 families per 100 ha provided with irrigation. Displaced families, or "oustees", must be provided with the means of at least sustaining and preferably improving their standards of living, ideally through sharing in project benefits. Indian policies for dealing with oustees are not yet satisfactory. State policies are deficient, funds are inadequate and implementation capacity is low. Govemment land on which oustees were to be resettled has either been unavailable or of inadequate quality, and cash compensation has been insufficient to purchase equivalent land. 1.22 Some progress is, however, being made. In 1989 a draft National Policy on Development Resettlement was prepared jointly by the Govemment's Commission on Scheduled Castes and Tribes and nongovernmental organizations. The states of Maharashtra, Madhya Pradesh and Kamataka have passed legisladon defining resettlement policies; Gujarat, Bihar and Orissa have issued Government orders which effectively provide a legal and policy framework. However, in the rest of the country the policy, legal and institutional framework remains inadequate. The revision and issuance of a national resetdement policy paper is an essential first step. This should be followed by enactment of similar legislation by the states. At the project level, land acquisition, resettlement and rehabilitation plans have to be worked out in detail with local authorities, community leaders and nongovemmental organizations. Displaced people should be incorporated into the irrigation commands of projects (thereby sharing in benefits) through land purchase - this approach has been successful in Gujarat. Agreed actions, organizational procedures and expenditures should be included in the project 1.23 While a number of other environmental problems are associated with irrigation, waterlogging and salinization, siltation of reservoirs, reduced river flows in dry season and dangers of increases in waterborne diseases, these are not inevitable. Waterlogging and salinization, which may affect as much as 13-20 million ha of land, is not entirely or even mainly the result of irrigation. Nevertheless, it can be exacerbated by poor maintenance, inadequate investment in drainage and weaknesses in water management systems. Low river flow can reflect inadequate river basin water resource use planning. These problems indicate the need for a more comprehensive and better planned irrigation strategy giving higher priority to imnproved efficiency of existing systems, river basin plannig, and a shifting of expenditure priorities away from new systems to reconstruction, maintenance, drainage and modemization. 4Meas designated as fawest ieives in India are not infiequently severely degrded. 13 1.24 Resoutce Management. India's rapid depletion of forests and vegetative cover is of particulr concrn in raind areas, which stil account for nearly 700o of total croplands. Depletion IS due to rapid population growth and density, lack of alternative sources of fuel for domestic cookng needs, extensive cate gzing in forests, and commercial demand. The impact of human activity on the forests has been characterized as an ecological disaster, resulting not only in loss of wildlife habitat, but also in soil erosion, siltation, floods and droughts. Catle production is a particular pmblem. The low productivity of the current cattle population is reflected in the dispani't between available feed fodder and the level needed for maintenance and production. In 1985/86, for example, a total of some 460 million mt was produced against a national requirement of about 750 million mt, leaving a deficit of some 290 million mt. The problem is compounded by the role of cattle in Indian society, notably the status that cattle ownership conveys, despite their lack of productivity and their preservation, at almost any cost, until natal death. 1.25 Incentives. The current structure of incentive policies has environmental effects as well. Low prices for water (through both surface irrigation and subsidized electricity for groundwater pumping) results in mismanagement and overuse of scarce water resources. Water- intensive crops such as rice and sugarcane are grown in areas with limited water resources. Overexploitation of groundwater, due to very low power rates, has reduced water tables and caused concems over depletion in some areas. Low power rates discourage energy conservation as well. Although fertilizer use remains at relatively low levels in India, field reports from the Punjab and Haryana region (where use is highest) suggest that indiscriminate fertilizer use is adversely affecting soil conditions as well as posing ecological hazards such as groundwater pollution (Chopra, 1990). These problems could all be checked by pricing inputs correctly. At the same time, susiainability of production systems could be ensured. 1.26 Actions Neede Addressing environmental issues requires tackling a range of problems (economic, technical and sociocultunil) that contribute to incentives for misuse of physical resources. In some cases, needed adjus-vrents are evident; in others, more work needs to be done on identifying priorities and remedihA a tions. There are already technical solutions to control arable land degradation, dtrough intvILu.:Con of appropriate soil and moisture conservadon measures in conjunction with improved fanning systems. Better management of irrigation schemes and removal of disincentives to overuse water are also necessary. To make best use of water resources, river basin planning, incorporating multiple demands for water, is essential. Adjustments in subsidies for inputs, particularly 1 nidlizer, will reduce incentives for overuse. To control degradation on nonarable lands, efforts si o- ld be made to maintain existing vegetative cover, encourage revegetation of degraded areas, wvitl an emphasis on meeting the needs of local peoples for fuel, fodder, timber and non-forest prodb is; improve better conrrol and managgement of livestock and animal grazing. While technolo-,ic-d solutions for non-arable lands will be important, these are only sustainable if the long-te; :n socioeconomic problems of these areas - which are common property resources - are also tackled. 1.27 While these are broad indications of what can, and in many cases already is being done, it is also evident that the more guidance on practical and long-tenn solutions is needed. Although the broad ramifications of environmental issues for agriculture is klown, serious gaps remain in data, analysis of secondary impacts, and setting priorities. This will partially be addressed in the forestry subsector, where Govemment is preparing to carry out a national forestry action plan exercise, to set priorities for aresting deforestation and encouraging afforestation. This exercise is being complemented by World Bank work on forestry issues, and preparation of assistance to the forestry sector at the state level. A more detailed study on sustainability issues in agriculture with analysis of issues, priorities and actions is needed. India is also poised to develop an environmental action plan to translate these recommendati^ns into practice. 14 B. Prformance and Sources of Growth 1.28 India's agricultural performnance isliproved after Independence, but growth has remained moderate despite impressive successcs in raising foodgrain output. The virtual stagnation in agricultural production since the beginning of the century (output grew at 0.4% p.a. between 1891 and 1946) gave way to steady growth in the post-independence era. Most notable has been the sustained growth in foodgrain production brought about by the introduction of high- yielding varieties of rice and wheat in 1965 - the renowned Green Revolution. The yield and output growth attained in the last two decades for these crops have been impressive, and have allowed India to become food self-sufficient. The Green Revolution marked a turning point in the modernization of Indian agriculture. However, by many standards, sector performance has fallen short: overall growth rates failed to accelerate after the Green Revolution, growth remains highly concentrated in certain crops and regions, rairded agriculture is lagging, and yields and input levels remain low compared to other Asian countries. BOX 1.4 Wat is the Growth Rate of Agrcultum in India? Discussion of agricultural growth rates in India is often confused by different definitions of what should be measured. Growth of GDP in agriculture is the normal indicator from an economic standpoint, as it measures value added; it is the indicator used here. However, in India, growth of output is commonly used (in part because disaggregated statistics on value added at the crop and regional level are lacking). Using this measure, agriculture grew at a trend rate of 2.5% in the period 1950/51 to 1988/89. Another commonly used indicator is growth of foodgrain production in physical terms, although foodgrains account for less than 65% of output; by this indicator, the trend rate of growth was 2.6% p.a. There is also some discussion of what constitutes a "dynamic" versus a "moderate" growth rate for agriculture. Growth rates over 3% for agriculture are usually considered dynamic, although for foodgrains, growth rates 0.5% ahead of population growth are considered rapid (Mellor, 1990). By these standards, India's overall growth has been moderate, but foodgrain production has been dynamic. Aggregate Producdon Growth 1.29 Overall growth rates in Indian agriculture, even after the Green Revolution, have been moderate. In the period 1967/68 to 1988/89, GDP originating in agriculture (proper) increased at a trend rate of 2.6% p.a (Figure 1.3). In comparison, GDP originating in the industrial sector grew 5.2% p.a. and in services 4.6% p.a. in the same period. Agriculture as a share of GDP declined from 56% in 1950/51 to 33% in 1988/89, consistent with growing industrialization (Figure 1.4). Agriculture's share of state GDP, although varying from only 17% to over 55%, also shows a declining trend (Table 1.5). 1.30 India's agriculturl growth has been modest from several perspectives. First, many other developing nations in Asia have performed better. Comparing data from the major countries in the region for the period 1968-88 (the Green Revolution period) (Table 1.4), most of the other countries in the sample have growth rates well ahead of 3%, with only Bangladesh and Nepal growing more slowly than India. Comparing regional growth rates to those of neighboring countries (which might provide a better international comparator because of geographic and in some instances cultural, proximity) between 1976/77 and 1986/87 shows that none of the regions in India except the east did as well. The 4.3% p.a. trend growth in north India is less than the 4.6% p.a. achieved in Pakistan (as a whole); growth in the south (1.1%) is much less than in Sri Lanka (2.9%); the east (2.7%) did somewhat better than Bangladesh (2.0%); and the central states, which have no intemational borders, lagged behind all neighboring countries, with only 1.3% growth. 15 Figure 1.3: GDP frm Agiiculture and Rainfall RA. billion (1880/81 pricea) Rain indlootor 700 200 600 500 - -- - - ---- 5 400 - 2.0% per annum 1 00 300 200 o0 100 0 0 68 69 70 71 72 73 74 7676 77 78 79 80 81 82 83 84 86 86 87 88 89 Indian Fiscal Years GDP agricultuare = Rain indicator Mean Rain -+ GDP trend Figure 1.4: Sectoral Shares in GDP - All India 100 .,......,..,- ..., ..- :,-,.:-- -'-' 80 60 40- __ 40- 20 1951 1955 1959 1963 1967 1971 1975 1979 1983 1987 Indian Fiscal Years | Agnculture & allied 0l dstry U Services Note: Data are from the GDP series (at factor cost) at current prices. Source: Ahluwalia (1990). 16 Table 1.4: t R f (% per annum) Staiscally Significant Break between 1978-88 and 1968-88 1268-22 192us 198- 77 atA5% Lvl Bangladesh 2.0 0.5 2.0 Yes at 6% Burma 4.8 2.8 5.6 Yes China 4.3 3.1 6.2 Yes Nepal 1.9 1.4 3.8 Yes Pakistan 3.6 2.4 4.6 Yes SriLanka 3.0 1.6 2.9 Yes India 2.3 2.3 2.5 No Indonesia 3.9 4.0 3.5 No Malaysia 4.0 5.7 3.5 Yes Philppines 3.7 4.4 2.3 Yes Mhailand 4.0 4.1 3.4 Yes at 6% Notes: For Burma data until 1986: for Malaysia data from 1970. Soure: Ahuwalia (1990). 1.31 Second - and this is important for understanding the dynamics of growth - in six of the eleven comparators, there is evidence of a significant upward break. with trend in the decade 1978-88 compared with the previous decade. In India, there is no significant upward shift in the growth trend in agriculture in recent years, unlike industry. Overall, growth in the post-Green Revolution period is not significantly different than in the pre-Green Revolution period. Third, the rapid increase in population in India (about 2.1% p.a. over the last four decades) has meant that the modest aggregate growth rates of production have translated into even more modest increases in per capita agricultural production. Given the virtually closed nature of the Indian agricultural economy, this has led to very small increases in per capita availability of food as compared to other countries in the region (Pakistan, China and Sri Lanka, for example). It has also resulted in per capita rural income growth rates of less than half those in the urban sector. 1.32 Growth has been concentrated in a small number of states and regions. India is a vast and hete-ogenous country, and thus aggregate figures obscure highly varying stories at the state and regional levels.5 A handful of dynamic states - mainly in the north - have had robust growth rates (3.5 - 4% p.a), compared with rates of 2% p.a. or less in nearly half the states (Table 1.5). The brighter spots in the picture include evidence of accelerating growth in Uttar Pradesh and Assam from the mid-1970s, and higher overall growth rates in the east in the last decade (although the initial base was much smaller than in other states) as well as in the central states - welcome tends because these states have been the laggards and contain the highest proportion of poor people. The bleaker aspects are evidence of significant declines in growth in Kerala and Tamil Nadu, and stalled growth in the south and west 5Fiftee. main states account for about 85% of all-India domestic product originawg in agriculture. These sttes au Haryana and Punjab in the Northern Region; Uttr Pradesh; Assam, Bihar, Orissa and West Bengal in the East; Madhya Pradesh and Rajasthan in the Center, Gujamat and Maharshra in the West; and Andhra Pradesh, Karuazka, Kemala and Tamil Nadu in the South. Uttar Pradesh is considered separtely (it is normally classified with the North) becs of its dominant size, and the wide variation of production patems from west to east within the Sa. 17 Table 1.5: _nAgigM u.nt. aid the Ralrnv Imete fAvadz iti b Stat (Oa Shaes n Shareof Gwowthof AB-India Domatc Agrkui in Stat Dmatec Pduct Origing Ste Dndic Produ Originag i Apiam Prd=t in Agluixa (average _954d (averag 1984154617 (l960161-1?g817)_ Ngh A8. 43. 4.0 Haryana 3.3 433 3.7 Punjab 5.1 43.8 42 Uw Emdo 12.8 38.0 23 FM 23.0 41.9 2.2 Assasn 2.8 41.9 1.3 Bihar 8.0 453 1.4 Orissa 4.2 55.2 4.2 WestBengal 7.9 34.8 2.5 113 42.9 2.5 Madhya PRndh 6.2 40.1 1.7 Rajasdtm 5.2 46.7 3.6 9ba 11.5 22.8 2.0 Gujarat 4.2 25.0 2.2 Maharaahtra 73 21.7 2.0 ZIwh 17.6 30.6 1.5 Andhra Pradesh 6.6 36.9 1.8 Kamatka 5.0 36.9 2.7 Kerala 3.1 35.4 0.9 Tamil Naed 3.0 16.9 .0.03 lou 84.6 35.0 AD h& 100.0 34.5 2.3 Sa4m GOL CO,. Badrz of Stae D Ne&wm vas Isma AhIuValb(1990) 1.33 These variable growth rates among states reflect -)me extent resource endowment and infiasu ue development, but they also indicate a growinm regional speadion along lines of compaive advantage. Indeed, this specilizion has already begun t occur in the postGreen Revolution era, with the bredbasket of India shifng fom the eastern Gangedfc Plain to the nthwest. Other shifts are be g. n ses such as Kead and Tamil Nadu, agriculte is increasingly constrained by waterresources. I other states with low growth rates, es y in the west, comparative advantage would appe to lie outside agriculture, as the sector's m nce in their economies (20-25%) is much lower than the all-India average (34.5%). In the north, there are indicadons dtat productivity may be plateauing in traditional foodgrains. Future growth here will depend on increased diversification and specialization in high-value crops (horticulture, livestock products) with veical integradon and processing links. Future growth prospects center on Uttar Pradesh and the eastern and cental states, which together account for nearly half of agricultual GDP. These stmes came late to the Green Revolution and many constraints remain (Box 1.2). But these regions are endowed with a number of factors - relatively high irrigation 18 potential, good rainfall and a large rural population - which suggest they can reclaim the prominent position in agriculture which they once held. The potential for faster growth in these regions is more than a promise - it is alrady underway in several crops, productivity is improving and growth is accelerating (para. 1.36). EoWrh *ni*Cxgp 1.34 Although the Green Revolution led to large output increases for some crops, it has not led to any acceleradon in the growth of production at the all-India level. Indeed, there has been slower trend growth in most of the crop groups after the Green Revolution as compared to the pre- Green Revolution period (Table 1.6). The only exceptions are the relatively minor groups of condiments and spices, and plantation crops (which account for less than 4% of production). In fact, there has been a (statistically) significant downward trend for coarse cereals, sugarcane, and fruits and vegetables in this period. Nor has there been much significant change in trend between the first and second decades of the Green Revolution, except for oilseeds, condiments/spices, and plantation crops. Table 1.6: Trd (art Rates of Pmduces of Prncin CMp Ugm Al t AM-In l (% per nnn) Significant Signifin dtn Post-Gre PostGret (ahge Entie Pie-Green Post-Gen between Revoln. Revoln. betwee Weig tn pliod Revohnion Revoluoion pee and psaecsde I Dlede I Decade I Index of 1949/50- 1949150- 1967.68- Green Revhn. (1967/68- (1978-79- & Dec. 11 Qn (ip A&n~d& 12I8912ili64 I988M2 at I 119771781 12AM2X at 5Lh:vIe All Qm 100.00 2.5 3.1 2.5 No 2.3 2.8 No Eg2ftmim 62.92 2.4 2.8 2.5 No 2.2 2.8 No AllCeeals 54.98 2.8 3.2 2.8 No 2.6 2.9 No CoarseCaeals 10.79 1.2 2.2 0.5 0 Yes 0.7 * -0.3 0 No All Pulses 7.94 0.4 1.4 0.7 No 0.3 e 2.1 0 No Non-Foodgmlns 37.08 2.6 3.7 2.6 Yes 2.6 3 No All Oilseeds 12.64 2.1 3.2 2.2 No 1.3 ° 4.1 Yes at6I Sugarcne e811 2.9 4.2 2.7 Yes 4 3.1 No All Fibres 5.09 2.1 4.5 1.8 Yes 1.9 *0 0.01 * No All fiuis &vegetables 4.90 5.4 7.3 3.8 Yes 3.9 3.2 No AlCondiments&Spices 2.59 1.8 1.2 3.0 Yes 1.0 o 3.4 Yes All Planatin Crps 2.29 3.4 2.9 3.5 Yes 4.6 3.3 Yes at 6% e bWndate id,flcmas d10 level. *odeiadtes gnifi btbwe 5% mand 10? AD odws am ulgnlfcm ias dp hann 51 Notem Datee refa the rnrtes of AU-Ini ladm b of agrianul podunoc (bswr tienniun ending 1981/82-100). 1965i66 and 1966f7 have boe dI wen cmneun p m reoluion and pou.een rvohludn perie on acca of tes two yen being usese drau yo. Sotrce Ahawe, 1990 1.35 Growth has been highly concentrated in a small number of crops, primarily rice, wheat, sugarcane and rapeseed/mustard (which accoun for about 55% of total output) (Table 1.8). Growth in other crops in the first post-Green Revolution decade (1967/68 - 1977n8) was not statistically differentiable from zero. This acted as a drag on growth. Rice, wheat, sugarcane and rapeseed/mustard have all benefited from Green Revoludon technology, investments in irrigation, and aractive price policies. This is evident from regional growth patterns as well: for crops such 19 as rice and sugarcane which are grown throughout India, growth has been highest where these conditions have prevailed (mainly the northern region and, for sugarcane, Maharashtra). In the second post-Green Revolution decade (1978f79 - 1989/90), performance of other crops improved, especially rapeseed/mustard, maize, and tur. But performance of other important crops, such as groundnut, gram, and other coarse grains, continmied to be disappointing. Table 1.7: Trnd Grwth Raes in Aa Pmduction and Yields at the Al-Iia tevel (qo per annwn) Entire Pro-Geen Post-CGeen Sigfficant Post- Green Post- Green Significant period Revolution Revolutionchange Revolution Revolution change Crop 1949/50- 1949/50- 1967/68- between DecadeI Decade U between Group 1988/89 1964/65 1988/89 pie and post 1967/6S- 1978(79- Dec1d e Gren Revolution 1977/78 1988189 & Decudeil All Cropo P 2.5 3.1 2.5 No 2.3 2.8 No A 0.7 1.6 0.4 Yes 0.5 0.0 e No Y 1.4 1.2 1.7 No 1.4 2.4 No Pood4gns P 2.4 2.8 2.5 No 2.2 2.7 No A 0.6 1.3 0.2 Yes 0.4 40.2 e Yes at 8% Y 1.5 1.4 0.9 No 1.3 2.6 No Non- P 2.6 3.7 2.6 Yes 2.6 3.0 No foodgrains A 1.1 2.4 0.9 Yes 0.9 0.6 No Y 1.1 0.9 1.4 Yes 1.4 1.8 No is not significant at 5% AU others ame sgnifica at less than 5% Notes: P = Production Y = Yields A= Amea Sowee: Ablhwalia (1990) 1.36 Regional production pattems by crop have varied significantly, providing evidence of increasing regional specialization in production. Ric production has grown the most rapidly in the north and in Uttar Pradesh in the last two decades. In the last ten years, there has been a significant acceleration of rice production in the east (from 0.7% p.a. in 1967-1977 to 4% in 1978- 1989) and center (1.3% p.a. to 4.6% p.a.), as the Green Revolution technologies have been extended to these regions. The continued improvement in the productivity of rice production in the east has contributed to the trend of increasing yields. In contrast, rice production has stagnated in the west and south since 1978. Wheat production has also been concentrated in the north and Uttar Pradesh, although it is expanding into the center and east. Early intmduction of HYVs for wheat and dependence on irrigation have led to higher growth rates for wheat than for rice production (4.9% p.a. in the last two decades compared to 2.7% p.a. for rice). Sugarcane production is located mainly in Uttar Pradesh, the west and the south. Although the west experienced high growth in sugarcane production between 1967 and 1978 (6.6% p.a.), largely due to cheap water and attractive procurement prices, growth has slowed significantly in the last decade. Groundnut production grew only modestly in the last two decades (1.4% p.a.), but production has accelerated in the south (a major producer) to 4.6% p.a. and in the east (a minor producer) to 11.3% p.a., due to supportive price policies and improved technology. In contrast, s m production has grown very rapidly, accelerating to 8.1% in the last decade. Viable HYVs, high support rinces, and rotation with wheat production have all contributed to spur production. Production of ja (sorghum) and gm virtually stagnated, although Maharashtra has shown an acceleration in jowar production in the last decade. 20 Figure IJ: Growth of Area, Production and Yields of FoodgrafnL, 1950488 Area & Pzvduction of Foodgmains 10, MS40- 120 1 400 1200 100 50 53 56 59 62 65 68 71 74 77 80 83 86 YEARS Actuwand Trends Foogmb)-~in Yields, (kg0/ha)8 21 1.37 "Tus, every region except the west has shown a significant shift in the trend rate of growth of some crop between the first and second decades of the post-Green Revolution period. Rape/mustard has accelerated in the north, east and center; rice in the east; groundnut in the south; and jowar in the center. Only two crops have shown a significant downward shift: rice in the norti (possibly due to its rapid expansion in the first period) and sugarcane in the west. Tlese are patts that are suppressed at the aggregate level, and their importance lies in the indications they provide of emerging trends in comparative advantage across crops. It is also noteworthy that the center and east have each shown accelerating growth in two crops. So:rces of Growth 1.38 Crop growth in India is increasingly dependent on rising yields rather than expanding aea. Although overall growth did not accelerate in the post-Green Revolution period, there has been a large and significant shift in the source of growth. Area expansion accounted for half the growth prior to 1965, but less than 18% in the post-Green Revolution period, and essentially 0% in the last decade. This confirms the general observation that the extensive margin of cultivation in Indian agriculure was reached in the mid-1970s. Between 1966 and 1987, yields for wheat grew 3.6% p.a. and for rice, 2.2% p.a. (Statistical Appendix, Figure 2.1). Few countries have been able to sustain such yield increases for wheat and rice as long as India has. However, decomposition of growth trends shows that for the best-performing crops (rice, wheat, sugarcane and oilseeds), both yield and area increases contributed to high growth rates (Table 1.8). This emphasizes the pull that incentives and availability of high-return technologies exerted on farmer cropping decisions. The contributions of irrigation, HYVs, research and extension is confirmed by analysis of total factor productivity (Evenson and McKinsey, 1989; Pray, 1991). Overall area has actually fallen for foodgrains, because of declines in ara under coarse cereals and pulses, largely due to shifts to iigated production, shifts to other crops (particularly oilseeds) and falling profits. Table 1.8: _ (% per aum) Weight in Post-green Decade L Decade II Index of AgrL Revoludon 1967168 1978179- Sources of Growth Prduction 1967/68- 1977178 1989/90 (%) 2u 1989/90 Area Yield Mix Rice 29.74 2.7 2.1 35 17 76 7 Wheat 14.45 4.9 SA 4 26 60 14 Sug 8.11 2.8 4.1 3A 50 38 12 Groundn 5.6 IA 1.1 e 2.5e 7 92 2 lower 4.43 13 1.6 e -0.02 ° -14 121 -7 Conom 4.37 2.2 2.1 *0 1.6 * -40 156 16 Gram 3.07 -0.6 0 0.1* .03 0 -126 30 -4 RapeMustard 2.41 4.2 1.7 e 8.1 29 56 16 Maize 2.41 1A 0.4O 2.7 3 97 0 BDajm 1.87 0.2 * 0.04 0.8e -126 30 -4 Tur L18 2.0 OA ° 3A 111 -8 -3 Tobacco 1.12 1.5 2.1 ° -0.9 0 -137 296 -59 Jute 0.55 2.2 0.7 1.1 -12 115 -4 * hdict gmaca at 105i. 00 Iaes o m ad beiwem, 59 and 10$ evelk AlU es at m sl9flcma& . h du 5e. Sow= Ahuwd 1990 22 1.39 Yields continue to increase for rice, wheat, oilseeds and cotton, although there is evidence of slowing yield increases in some regions. In the north, for example, which has experienced significant growth in yields for rice and wheat in the last two decades and which already uses high inputs of fertilizer and irrigation, there is evidence of slowdowns in further growth. In other regions (Madhya Pradesh and Bihar for wheat, and the eastern states for rice), production and yields are growing more rapidly, as HYVs spread into these regions and input use increases. For many crops, particularly coarse grains, yields are peaking. How long India can sustain sizeable yield increases on the order of the past two decades is not clear. On the one hand, there is scope for increasing production and yields through wider application of existing technologies, particularly fertilizer and improved water management. On the other hand, there are clear problems in the ability of the research system to develop high-yielding seed varieties for some crops (particularly coarse grains and pulses) and regions (rice in eastern India). These issues are discussed in Chapter H, Section C. 1.40 What does this portend for future growth? For one thing, the engines of growth are now slowing down, at least in the traditional areas. Yield improvements will have to continue to account for a large part of any future production increases, given that little unused area is available for agricultural purposes. Within crops, area shifts are still possible sources of growth in response to incentives or to removals of subsidies and other economic distortions (it is likely for example that growth of water intensive crops such as sugarcane would be discouraged through more rational water and electricity pricing). But growth will also depend on increasing value added in agriculture, through shifts to higher value products. C. Future Growth Opportunities and Challenges Constraints 1.41 India faces important constraints in expanding production, constraints that shape the patterns and options for development strategy. India is already at the margin of its cultivable land, and environmental pressures are increasingly threatening the sustainability of agricultural production. Population continues to grow at about 2.0% per annum, and recent decreases in fertility will not have an impact on the total population for some years. Population growth combined with limited land supplies means that future growth in agriculture will have to come in large part from intensifying production on both irrigated and rainfed land. Yet the scope for relying on expansion of irrigation alone is smaller than in the past: much of the high potential and easily irrigable land has been developed, and new schemes are costlier and harder to implement. In several states, the frontier of water resources has been reached, and more attention must be given to increasing efficiency of water use and preventing overexploitation. As the limits to growth from the Green Revolution technologies are approached, it is not evident that there are new technical breakthroughs on the horizon to shift India to a higher growth path. At the same time, the current fiscal crisis signals a tightening of financial resources, closer scrutiny of development trade- offs and increased cost-effectiveness. Government Develomen LSta 1.42 Past Governmental strategy in agriculture has been based on extensive Government intervention and investment to propel agricultural, and especially foodgrain, production (the "big push" approach to development). Driven by fears of dependency and famine (which were not unjustified), the Government has carried out a campaign to increase foodgrain production since Independence, in the first phase (1950-1965) through extensive investments in irrigation and research, and in the second (1965 to the present) through production and promotion of HYVs, extensive market interventions, active Govemment participation in input supply and substantial 23 subsidies on credit, irrigation, electricity and fertilizer. At the start of the Green Revolution, policymakers opted for a strategy which concentrated technology development, expanded input availability and price incentives in a few basic foodcrops (essentially rice and wheat at fist) and infrastructure development (mainly irrigation) in a few high-potential regions. This strategy paid off: production of wheat and rice accelerated, India became self-sufficient in foodgrains, and food consumption for most (but not all) of the population increased. The strategy was appropriate for its time and the conditions: it targeted the most obvious and pressing needs of feeding the nation, and it opted for concentrating scarce resources where returns would be highest. 1.43 This strategy has had its costs, however. It has left a legacy of concentrated growth, high Government involvement throughout the sector, and resource misallocations that now are constraining rather than stimulating growth and development. Technology development remains focused on a few key crops, mainly for irrigated regions. Rainfed agriculture, diversification and trade have been virtually neglected. Irrigation infrastructure is regionally concentrated, by-passing some areas with significant water resources (eastern India). Incentives in the forn of price supports and subsidies (for fertilizer, water and electricity) are mainly targeted to the larger and more advanced farmers who use these inputs. Infrastructure development (roads, banks, markets) has responded to the magnet of higher-return irrigated areas. Sector development policies have become extremely costly, and burgeoning input subsidies are crowding out productive investments. Moreover, these policies have been highly inequitable: most benefits, from subsidies to public investnents in research and infrastructure have gone to a number of high- growth states. Poverty and hunger are increasingly concentrated in areas with low agricultural growth. The success of agriculture in Punjab provides a model of agriculture-led development that is the envy of other regions, but it is a model which few of them have yet been able to emulate. 1.44 Thus, past development strategy has achieved modest success, but it is increasingly obvious that the present policy mix is fiscally unsustainable, inequitable, and incapable of stimulating higher agricultural growth. There is growing recognition in India of the inequities that such a strategy has produced, and the need to broaden the productive base. There is also a growing recognition of the high costs that current agricultural policies entail. But the changes required to address these problems have yet to be made, and current strategies for growth do not address the fundamental problems. Opportunities and Adjustrnents 1.45 For all these reasons, it is time for adjustments in India's agricultural development strategy. Even while current policies have become unsustainable, faster growth and rising incomes in the economy are creating new demands from agriculture and agriculture's role in the economy is changing. Choices in the policy mix and in patterns of growth will open up new options for addressing problems of regional imbalances, rural poverty, employment and sustainable development. 1.46 Future growth will depend on intensifying production on both irrigated and rainfed land, diversifying into new commodities and regions (especially the relatively underdeveloped but richly endowed eastern and central regions), and increasing efficiency. As India is reaching the frontier of its land and water resources, growth will also depend on ensuring optimal use of these scarce resources: more output per unit of land (through shifts to double cropping) as well as per unit of water (through improved water management and shifts to crops with higher productivity ratios per unit of water). Growth is even now dependent on sustaining yield increases, and thus there will be a premium to generating and importing yield-enhancing technologies. 1.47 The limits to a strategy based on foodgrains alone are being reached, and there is a need to broaden the crop base of agriculture. Much of past growth in rice and wheat (which in turn have driven overall growth) was predicated on import substitution, which enabled the economy to absorb rice and wheat production growing at 3.5% and 4% p.a. respectively in the last decade. 24 India has now achieved self-sufficiency for basic foodgrains. Farmers have largely maintained profits in the face of falling real grai prices through technology improvements and large subsidies - neither of which could be continued indefinitely. While India will continue to need to ensure domestic supplies, projections of domestic demand for the next two decades indicate that growth rates for grains will be only somewhat ahead of population growth (2.5 to 2.7% for rice and wheat) (Table 1.9), even with real incomne growth and higher per capita consumption in the poorest segments.6 Increasing international trade in rice and wheat are possible, but would not likely be a major source of growth, at least for some time. Thus, with international trade opportunities limited, returns from produc-don declining and domestic demand stabilizing, rice and wheat cannot be the sole engines of growth in the future. Table 1.9: Dem d roectrins for Eood Ite-ms Demand Projections Growth Rate from Base Year to: Commodity Act 1w i.lw 19i l1En ---- (Million Tons) ---- ------ ---% --- --------- Rice 65.22 79.19 88.42 107.29 2.46 2.37 2.19 Wheat 45.08 55.9 63.36 79.57 2.73 2.65 2.5 OdherCerals 26.64 29.92 31.8 34.89 1.46 1.37 1.18 Total Cereas 136.94 165.01 183.58 221.75 2.36 2.28 2.12 Pulses 14.54 18.7 21.68 28.46 3.2 3.12 2.96 Total food gains 151.48 183.71 205.26 250.21 2.44 2.36 2.21 Milk equivaent 42.6 59.69 73.07 107.21 4.31 4.24 4.09 Edible Oils 5.49 7.27 8.62 11.83 3.6 3.5 3.4 Sugar 9.16 12.12 14.32 19.67 3.6 3.5 3.4 Note: Assuming a 4% per annmn growth in total expendinue, with population projections from the World Bank Source: Radhakishna & Ravi (1990). 1.48 There are promising opportunities for diversifying agricultural production into commodities with mo-re favorable income demand elasticities, as accelerating income growth is changing the structure of demand for agricultural products (Table 1.9). India's consumers are increasingly demanding a more varied diet as per capita incomes grow. Projections of future consumption indicate that demand will rise most rapidly for non-foodgrains, especially for dairy products, protein foods, fruits and vegetables, sugar and oils. These products tend to have higher value added than staple foodgrains, and thus contribute to raising rural incomes. Many are suitable for rainfed areas, expanding possibilities for development without irrigation. They also tend to be labor intensive, not only in production, but also in handling and processing (thereby strengthening linkages to the rural nonfann sector). Opening up international trade will also encourage diversification. 1.49 Increasing crop diversification does not mean neglect of the staple foodcrops sector. There is a need to acknowledge the government's deepseated concern for food security. It is critical for a stable agricultural sector that the gains achieved under the Green Revolution are maintained and that production of foodgrains keep abreast with new technologies to increase 6The demand projecdons included scenarios assuming a reduction in the poverty ratio to 19% in rura: areas and 4.8% in urban areas by the year 2000 (compared to 32% and 16% used in the base case scenario) and a more aggressive redistrbution of incomes. Foodgrain demand would increase by only 3.3% or 6.8 miDion mt in the year 2000 under this scenario. (Radhakrsa and Ravi, 1990). Thus, even assuming higher per capita grain consumption in India would not significantly increase growth rates of demand. 25 efficiency and ensure supplies. Indeed, it is the achievement of food selfsufficiency that allows India the flexibility to diversify the agricultural economy, now that pressing food needs are met Increasing diversification does not necessarily mean shifts out of staple crop production, for improvements in yields and water management can allow India to meet future foodgrain needs on the same or less land area. If India can maintain the same rate of growth in yield increases in rice and wheat that it achieved in the last decade, it can meet future domestic demand for these crops without increasing area more than marginally. With a proper incentive framework, most shifts in production at the margin would doubtless be out of crops (such as oilseeds) in which India does not have a strong comparative advantage. 1.50 Adjustments Strtgy. This vision of the agriculture sectors fute growth path will require adjustments to current sector strategy. Most importantly, there needs to be a fundamental rethinking of Government's role. Creating an enabling environment for growth requires a completely different approach - one that is based not on an input-output model that targets certain inputs, crops and investmnents, but one involved iq shaping the framework of infrastructure, policies and services that allows producers to respond to market signals and new opportunities. It is difficult enough for govenmments to "pick the winners" among an array of crop possibilities and nearly impossible for them to project future market shifts and prices, technical changes and dynamic comparative advantage. Agricultural innovation and growth will not depend on Government's brute force in the sector, but rather will depend on the daily decisions of tens of millions of small farners. There is nevertheless a vital role for the public sector in shaping these decisions, through developing new technologies, investing in research, infrastructure and other public goods, and framing incentive policies that reward investment and innovation. 1.51 There is also an overwhelming need to tackle serious problems in pricing and trade policy, in patterns of public investment, in technology generation and in networks of services and infirastructure which are presently constraining growth. Although agriculture has grown despite a skewing of incentives toward industry, India can no longer afford the costs of these policies. There is a need to increase the scope and efficiency of the networks of services and infrastructure which expand sector flexibility and allow agriculture to respond to changing needs, while reducing risks. As modern agricultural technology is increasingly embodied in inputs and infornation that must reach millions of small farmers spread out over millions of hectares of land, improvements in infrastructure and services are essential for increasing efficiency and promoting technical change. Improvements must be made in the research system to ensure that it is developing the technologies that farmers need and can use. Finally, public invesunents must be targeted to these priority areas, and efficiency improved, especially in light of constrained resources. 26 CHAPER II. KEY ISSIJES FQR GROWTH A. Pricing and Trade Policies 2.1 The Government's strategy for stimulating agricultural growth has depended heavily on price support and procurement programs, subsidized production inputs, trade controls and extensive public investment in irnigation infrastructure and agriculture support services. These elements played a deternining role in the success of the Green Revolution. For many reasons, it is time to re-examine the mix of incentive policies, their objectives, costs and impact, to ensure an appropriate and effective framework for future growth. First, the cost of these programs is escalating, and it is not clear that they can be sustained in the face of the current fiscal problems. In 1989/90, the central government spent Rs. 24.8 billion (0.6% of GDP) to subsidize its wheat and rice procurement and distribution programs; several states incurred an additional outlay of about Rs. 5 billion to fund their own schemes. Direct input subsidies to the agriculture sector - for irrigation operations, fertilizers, procurement and power - totalled another Rs. 110 billion (9% of agricultural GDP and 2.8% of total GDP), nearly twice expenditures on major irrigation investmnents. Second, while costs of incentive programs have burgeoned, it is not clear that benefits have been as great as expected nor that these expenditures have had the desired impact on growth. Agriculture remains disprotected relative to industry, and there is evidence that distortions in the incentive structure are leading to efficiency losses, suboptimal growth patterns and resource misallocations. Finally, concerns are emerging about the regional and inter-farm equity of these programs, due to high open market prices, and the concentration of benefits in certain states, regions and urban areas, and to middle and higher income consumers and wealthy farmers. 2.2 This section reviews pricing and trade policies and assesses their impact. The main elements of these policies are: (a) price support and market intervention programs; (b) input subsidies; and (c) agriculture trade policies. In addition, other macroeconomic policies, primarily the exchange ate and high levels of industrial protection, have also had an impact on the structure of incentives in agriculture. Price and Market Intervention Programs 2.3 Indian Government interventions in farm product markets in the last two decades have been pervasive, and have absorbed significant financial and administrative resources. The wheat and rice programs are the largest and most far-reaching, handling 15-20% of wheat production (or half the marketed surplus) and 10-15% of paddy production (or less than half the marketed surplus) (Tables 4.2 and 4.3, Statistical Appendix). Total wheat and rice handled in the system was 16.5 million mt in 1989. Programs in support of sugar and cotton prices are also large, accounting for about half of sugar output, not including the informal gur and khandsari markets, and nearly 28% of cotton production. Smaller amounts of coarse grains, oilseeds and other commodities are also procured by Government. All together, some 20 different commodities are covered by price support programsl Although these commodities account for 88% of production, in fact procurement operations are concentrated primarily on four major commodities (wheat, rice, sugar and cotton), and then only largely in surplus states. Price support operations are almost nonexistent in deficit states, where market prices are usually higher than procurement prices. 1These include paddy, wheat, jowar (sorghum), bajra and ragi (milets), maize, barley, gram, arhar, moong, urad, sugarne, cotton. jute, tobacco, groundnut, sunflower, soybean, rapeseed/mustard and copra. 27 2.4 The scale and complexity of India's commodity procurement and price support opertions reflect the important and often contadictory goals assigned to them. Objectives include self-sufficiency in the production of key commodities; providing remunerative prices to farmers; sa!eguarding against famine and reducing malnutrition; and stabilizing consumer prices and restraining inflation. In particular, the wheat and rice procurement programs have evolved from essentially price support programs to supplying the Public Distribution System (PDS), one of the Government's major instruments for poverty alleviation (para 2.6). In practice, it has often been difficult to reconcile all these goals simultaneously or even to set priorities. 2.5 The Government has used multiple institutions, instruments and tactics to try to achieve these objectives, including support prices, monopoly procurement, free market purchases, compulsory levies, maintenance of buffer stocks, restrictions on product movements, and control of external trade. A summary of the major market and price interventions is in Table 4.17, Statistical Appendix. Several states (Andhr Pradesh, Tamil Nadu, and Maharashtra et alia' have their own procurement and distribution schemes which complement or supplement central government programs, as well as their own market restrictions. The Food Corporation of India (FCI) is the main insdtution at the central level, but often depends on state level authorities to carry out the schemes. For wheat, farmers sell to FCI agents in open markets at a preannounced procurement (support) price. As 99%o of wheat procurement comes from only three states (Punjab, Haryana and Uttar Pradesh), the wheat program has been the most staightfoward and easiest to administer. In contrast, the most complicated and changeable crop procurement arrangements are for rice, where the central and state governments have depended much more on coercive afrangements, including millers' levies, interdistrict and interstate movement restrictions (for example, in Andhra Pradesh), and monopoly procurement in a few districts (for example, in the Thanjavur district in Tamil Nadu). The fact that rice is processed in large mills provides a convenient intervention point for official procurement. Mills are assessed levies ranging from 0 to 75% at present, and are paid prices close to or below average production costs. Sugar is also procured through a levy system on sugar mills in the formal market, although about half of India's sugarcane is processed in the informal market into gur or khandsari (forms of brown sugar). 2.6 The other side of price support and procurement progamms is the Public Distribution System LPD, which now accounts for 13.5% of the marketed distribution of foodgrains, over double the 6% that public distribution handled in 1961. Consumers receive rice, wheat and sugar through a network of "fair price" shops. The need for commodities for the public distribution side of the program has often shaped the rules and regulations governing crop procurement, including levies and other restrictions. The scale and commodity composition of foodgrain distribudon in different states depends, in part, on the type of distribution and rationing system that has been established. FCI distributes grain to state agencies from the central pool. Prices for PDS grains depend on the sales price from FCI to state agencies, plus a margin for state costs, although some states have charged less than this price (for example, Andhra Pradesh under the "Two Rupee" Rice Scheme). lnput Subsidies 2.7 The second prominent feature of agriculture pricing policy is the heavy and growing reliance on input subsidies, primarily for fertilizer, irrigation, electricity and credit, to compensate fanmefs for declining profitability and high levels of disprotection in agriculture. Input subsidies to agiriculture totalled Rs. 110 billion (US$ 6 billion) in 1989/90 (Table 2.1), and have been growing at the rate of 6.2% p.a. in real terns throughout the 1980s (Box 2.1). Food subsidies primarily accrue to consumers, but an estimated 20% on average (about Rs. 5 billion in 1989/90) is attributable to the costs of procurement, price support and stocking programs (Table 2.7). Agricultural and food subsidies are the largest single group of subsidies in the central budget and have been a major contributor to India's current severe fiscal crisis. 28 BOX 2 .1 o Budgetary subsidies related to agriculture totalled nearly Rs. 135 billion (IJS$ 7.3 billion) in 1989/90, or 11.4% of agricultural GDP (Table 2.1). In contrast, total public investment in agriculte net of subsidies was Rs. 102 billion in that year. Of the total amount, Rs. 110 billion were for input subsidies and Rs. 25 billion for food subsidies (of which only 20% accrues to fanners through the procurement system, and the remainder goes to consumers). Economic subsidies were less: Rs. 85.5 billion, indicating that farmers have not received the level of benefits indicated by budgetary expenditures on agriculture-related subsidies (for example, an estimated 40% of the fertilizer subsidy accrues to the fertilizer industry). Total input subsidies have grown at a real rate of 6.2% p.a. from 1980 to 1987. Food subsidies grew at the rate of 8.2% p.a. Table 2.1: Agrcultural and Food Subsidies, 1989-90 (Rs billion) Ferdlizer 27.23 46.01 Food - 24.76 rrigaion (recument) 23.5 23.5 Electricity 34.75 41 Total, Rs. billion 85.48 135.27 Total, US$ billion 4.62 7.31 Both equity and growth considerations call for an adjustment of agricultural subsidy policies. Those regions and farmers who receive the greatest benefits from subsidies are the richest and most technologically advanced in India. Subsidies are no longer needed to encourage farmers to adopt new inputs, nor to incrase incomes. Shifting funds from subsidies to investment (even at reduced rates because of the fiscal crisis) would have a much greater impact on production. To the extent that regions with high potential but low productivity are targeted (especially eastem India) such a poLicy would have high payoffs in terns of both efficiency and equity. All regions would benefit from more rational pricing policies in terms of ensuring sustainable use of land, water and energy resources. Higher investment in agriculture leading to continued production gains and falling real grain prices would have a much greater impact on the incomes of the poor, both rural and urban, than do cunrent subsidy policies. 2.8 Ferilizer. Fertilizer subsidies are the largest single subsidy item in the budget. The Central Government financial subsidy for fertilizer reached Rs. 46 billion in 1989/90 (1% of GDP) and will be an estimated Rs. 50 billion in 1990/91. First introduced in the wake of the 1973 oil price shock, the fertilizer subsidy has become an important component of the incentive structure. The objectives for the subsidy havfe been several: to encourage farmers to use ferdlizer on the one hand (and thereby achieve food self-sufficiency) and on the other hand to promote domestic production of fertlizers and ensure security of supplies. 2.9 The application of the ferdlizer subsidy in India is not straightforward, and is based on domesdc industrial pricing policies. Although domestic producdon has grown rapidly (para. 2.95), India stll imports about 25% of its needs (in part because all potash must be imported). 29 The subsidy for imported fertilizer is the difference between the c.i.f. landed price plus domestic handling and tansort Imported fertlizers are pooled and handled by several distributs. Since 1977, ferdlizer plants (the majority of which ame public sector or cooperative-owned) have been guaranteed an annual 12% after-tax reun on equity under the Retendon Price Scheme. The price paid for ferilizer from any plant is based on a cost calculation using actual input costs and certain agreed operating norms (including depreciation and assumed capacity utilization). The ratio between the lowest and highest retention price, i.e. the prices actually paid to ferdlizer manufacturers, is as much as 1: 2. The scheme is intended to cope with the wide range of plants in India of different sizes, vintages and technology, and thus production costs. In 1987, economic production costs for urea in India varied from US$1 12/mt to almost US$340/mt, at a time when world market prices for urea were less than US$120/mtn Contributing to high budgetary subsidies, however, has been the fact that Government has not raised farngate fertilizer prices since 1981, although procurement prices have risen by over 70% for rice and wheat (Table 3.5, Statistical Appendix). 2.10 For farners, the more relevant subsidy is the economic subsidy, calculated as the difference between actual domestic fertilizer prices and import parity prices (Table 2.2). Throughout the 1980s, the economic subsidy to farmers has fluctuated with world ferdlizer price movements, but in general has been lower than the budgetary subsidy (Table 2.1). The economic subsidy meached Rs. 39 billion in 1989/90. Table 2.2dxa-hUlla OAW) Impon Pa Price 2,654.95 2,563.63 2,404.14 3,012.S5 3,243.88 2.269 2,647.04 2998.18 3,420.18 DometucPgce 2,350.00 2,350.00 2,150.00 2,150.00 2,150.00 2,350.00 2,350.00 2,350.00 2,350.00 Subsidy to fanne 304.95 213.63 254.14 S I.8,0938 -87.41 297.04 648.18 1,070.18 Price Raub, 0.89 0.2 0.89 0.71 0.66 1.04 0.89 0.78 0.69 Dmrankimpi Pariy Price DAL' InpOl Puy Pice 3,176.51 3,219.37 3.11338 3.781.S4 3.84036 3,S30.97 3,837.60 4,783.84 4,971.77 Domestc Price 3600.00 3.600.00 3,350.00 3,350.00 3,350.00 3,600.00 3,600.00 3,600.00 3.600.00 Subsdytouacrx 423.49 -380.63 -236.42 431.54 49036 69.03 237.50 1,183.84 1,371.77 PriceRatio 1.13 1.12 1.08 0.89 0.87 1.02 0.94 0.75 0.72 DostcIpt Party Pnice Maip lmpofn PMY Pfise 2,193.53 1,424.20 1,495.91 1,69.92 1,858.92 1,730.99 1,810.61 2,442.19 2,759.13 Dornic Price 1,300.00 1,300.0 1,200.00 1,2=0.00 1,2O00.00 000 1,300.00 3OO00.00 1,300.00 Subsidy to faner 893.53 124.20 295.91 496.92 65802 430.99 510.61 1,142.19 1,459.13 Price Ra,o 0.59 0.91 0.80 0.71 0.65 0.75 0.72 053 0.47 D_mnncwmpcwt Paty Price Up to Deceber 1989 source: aGla, 1990. 2.11 i Subsidies for the operation and maintenance of irrigation systems have also grown rapidly in the 1980s, at an annual rate of 10.2% (Table 2.3). At the time of Independence, irrigation made a net positive contribution to govemrnment finances. Revenues from water charges exceeded government expenditures for operations and maintenance plus imputed interest on investment. However, the financial picture of the sector has deteriorated steadily. By 1989/90 no contribution was made to covering capital costs as current expenditures exceeded revenues frm water charges by Rs. 23.5 billion.2 2Sone auos (for instance, Gulati, 1989a and 1991) have included capital and intest costs for irrigation as pan of dte irriation subsidy. Undr this assumption, total irrigation subsidies would have been Rs. 23 billion per yar on average in the 1980s, or as much as Rs. 100 billion if capital costs are taken at the replacement value (accommodating in o and lags in completing prjects). In this repor, capital costs for iigation are considered as a public expediter than a subsidy, and only the gap between rcurrent expenses and revenues is tken as the dict irrigaion subsidy. 30 Table 2.3 Real Ecomic Cost of Innut Subsidies in Indian AgdrW=. j28O121-6 (million Rs at 1980-81 prices) Y.n FerlizeL lmagiA EI tiW Csdi lka 1980-81 6,592.27 6,512.80 3,530.19 5.954.52 22,589.78 1981-82 6,219.96 6,756.00 3,870.40 6,827.15 23.673.51 1982-83 356.91 6,943.30 5,187.52 7,220.20 19,707.93 1983-84 2,705.96 7.295.60 5,760.17 8,084.99 23,846.72 1984-85 9,788.67 8,134.10 6,906.29 8.935.78 33,764.84 1985-86 11,097.01 10,301.00 7,945.12 9,710.89 39,054.03 1986-87 1,646.53 12,865.10 9,369.63 10,555.58 34,436.84 Growth raze (%) (17.90) 10.21 14.96 8.52 6.20 Note: Subsidy for each year has been deflated using the GDP deflator with 1980-81 prices as the base. Irrigation is for recurrent costs only. Source: Gulati 1989; Ravishankar 1990. Figue 2.1: Real Ecnmic Cost of tSubsidies (at 1980-81 prices) 40000 35000 30000 M ~~~25000 U~~~~~~~~~~~~~~ Credit U Electricity 0 M Irrigation n R 15000 U Fertilize as 10000 5000 0 ~ 1980-81 1981482 1982.83 1983494 1984485 1985486 1986487 31 2.12 Escalating irrigation subsidies are a result of very rapid growth in current expenditures, combined with slow growth of receipts from water charges. Revenues as a percentage of recurrent expenditures for irration fell from 22% in 1980/81 to only 7.5% in 1988/89. At the same time, total expenditures on irrigation have shifted from capital expenditure on new irrigation investment to covering recurrent costs (in 1980/81, 78% of total irrigation expenditures were for new investment; this figure fell to 55% by 1988/89). Unfortunately, the growth of current expenditures does not derive from imnprovements in maintenance and operations. On the contary, there is ample evidence that maintenance is unsatisfactory. Instead, the growth of expenditures reflects burgeoning establishment (staff) costs. As an example, in Bihar during the first four years of the 1980s establishment costs, mostly staff associated with collecdon of water charges, increased by 148%, while expenditures on maintenance related works declined. Review of data from selected individual commands reveals that this situation, while extreme, is not unique. 2.13 Low levels and poor collection of water charges are a common problem. Almost every state in India has a system of water charges, often with regional, local or project-specific variations. The pricing systems are either a fixed rate per crop per unit area, the most common method for surface irrigation, or a fixed rate per unit of water, which applies to public tubewells and private diesel-powered wells. For wells powered by electricity, rates tend to be flat monthly charges. Where crop restrictions apply, rates are fixed per unit of land area. Water charges are low and adjusted infrequently. Review of charges indicates that, while they vary by state and crop, they are in the range of 1 to 6% of gross retums (Table 2.4). 2.14 ElectdiW. Subsidies for power to the agricultural sector (mainly to power pumps in tubewells) also have an important fiscal impact Agricultural consumers now account for approximately 25% of total electricity consumption and are responsible for the bulk of the power sectors financial losses. For}FY91, the Planning Conmission anticipates that the combined losses of state electricity boards (before subsidies) will reach about Rs. 43.5 billion (a return on net assets at historic cost, after depreciation, of - 14.4%). Although supplies to some types of consumers are profitable, losses on supplies to agriculture will be in the region of Rs. 41 billion (equivalent to US$2.2 billion or 0.87% of GDP). Using data for the beginning of FY91, the Planning Commission estimates that the state electricity boards' supply costs now average about 105 paise per kWh, compared with an average tariff to agricultural consumers of only 17 paise per kWh. Amounts actually realized from sales to agriculture are much lower, since many farmers do not pay their electricity bills (in Uttar Pradesh, accounts outstanding from agricultural consumers are the equivalent of three years' billings). 2.15 Cid. Subsidies on credit - defined as a combination of subsidies on interest rates and defaults on loans - reached an estimated Rs. 16.4 billion in 1986/87.3 These subsidies for credit are "off-budget", and are largely absorbed by the lending agencies, contributing to their financial frailty. In addition, however, the Government instituted a loan write-off scheme in 1990 that cost at least an additional Rs. 28.4 billion in that year (although estimates of the eventual cost range up to Rs. 80 billion), about one-third of which will be paid by state governments.4 Credit subsidies are also offered though a host of specific central and state programs, including oilseed production, drought prone areas, desert development, tribal development and minor irrigation. Three states - Uttar Pradesh, Maharashtra and Andhra Pradesh - together account for one-third of the credit subsidies (not including the loan write-off scheme). 3This is a conservative estimate, based on Gulad (1989a). Estimates in the banking community vary, depending an assumptions about the level of uncollectible overdue loans, but in general are higher. 4The loan write-off scheme, intended to compensate farmers for bad crop years between 1986 and 1989, has been applied liberally: all farners in eligible areas are pemitted to have up to Rs 10,000 of agricultural debt (principal and interest) written off, regardless of the type of loan (producdon or tenn). 32 Table 2.4: Irrifstion bar_. Gross Retr A Net ReM fcr Coal lrfat (niid-1980s) rrigaion rigation Irrigation Charges as Irigation Charges as Charges as % of Net Charges % of Gross % of Net Addi Retun Sm C-ro msft) R= &M kpm Bdm Ba Utmar Pradesh Sugarcane 349 4.6 12.2 n.a. Bihar Paddy 75 1.6 2.3 4.3 Wheat 79 1.2 1.5 4 Paddy 40 0.9 1.2 2.9 Wheat ?2 0.8 1.2 2.9 Orissa Paddy 'i3 1 4.5 na. Gujarat Paddy 110 1.1 1.4 1.5 Wheat 110 1.9 2.4 2.6 Bajra 40 0.8 1 1.2 Groundnut 200 1.9 2.7 3.6 Cotton 55 0.4 0.5 0.6 Maharashtra Wheat 100 3.6 11.4 - Paddy 105 4 11.9 - Sugarcane 740 5.3 10.7 11.5 Hybrid Jowar 77 1.9 4.2 29.6 Hybrid Bajara 108 5.1 20.3 3.7 Tamil Nadu Paddy 37 - - 1.5 Sugarcane 50 - - 1.7 Cotton 50 - - 3.7 Ragi 20 Sources World Bank (1991) 2.16 Subsidies originate both in the sucte of interest rates and in the high default rate within credit institutions (these issues are discussed more Mully in the section on credit, para. 2.79). Although real lending rates have been positive over the last decade, agricultuml credit is offered at concessiohal rates. Large and chronic overdue loans are the second source of high subsidies: if a borrower can take a loan with the perception that it need not be repaid, the major subsidy les in overdues not in concessional interest rates. Between 40% and 50t of agricultural loans are now overdue (depending on type of bank) - and a sizeable proportion has been overdue for over three years. As large farmers are the major beneficiaries of credit (especially term loans), they have overwhelmingly received the largest benefit from subsidies; subsidies have had much less impact on small and poor farmers. 2.17 Both agrcultural and industrial trade are highly controlled in India, although in the case of agriculture this has not always resulted in high effective protection (pan. 2.56). Compedtion from trade in agriculture is almost nonexistent. Imports of most agriculturl products are either banned, restricted or "canalized" through selected compaies, usually in the public sector (Table 4.6, Stadsical Appendix). The proportion of agriculurWal commodities that can be imported under genera licenses (OL) is only 8%, compared to 14% in the manufacturing sector. Perhaps 33 a better indication of the inward orientation of agriculture is given by the import/output ratio. For agriculture, this ratio is 0.9%, far below the manufacturing sector's ratio of 9%. Nominal tariffs for agriculture average 90.3%; trade-weighted tariffs average 40% compared to 94% in manufacturing. Many agricultural products are imported with low tariffs, while a few products (tobacco, rubber, coffee and jute) have very high tariff protection. The combination of high rates for these outliers and zero rates for canalized goods gives rise to high tariff dispersion: the coefficient of variation is 56% for agriculture and 35% for manufacturing. 2.18 Agricultural exports are govemed by the "vent for surplus" theory: only prduction surplus to domestic needs can be exported. Exports are regulated by licenses or by agencies, and are placed under one of several categories: not allowed, allowed on merits (case by case), limited ceiling (quotas), OGL subject to prescribed conditions (usually a minimum export price or quota restriction), and canalized. Export taxes are low (averaging only 1.5% of export value in 1987/88) and applicable only to a few commodities. In addition to export and import controls, trade in agriculture is also affected by various domestic instruments of trade control (compulsory levies, monopoly purchase provisions, interstate trade restrictions, control and stockholding and official price management) and high Government involvement in marketing of several commodities (rice, wheat, sugar, cotton and oilseeds). 2.19 Macroeconomic Policies. The two macroeconomic policies with the largest impact on agriculture are industrial protection and the exchange rate. Levels of industrial protection are high in India: the average effective protection coefficient for industry is 1.4, compared to 0.87 for agriculture. Heavy protection of industry has pulled resources out of agriculture and has negatively affected agricultural returns through high prices for industrial inputs (pesticides, machinery). An overvalued exchange rate has made agriculture less competitive in world markets. Impact and Policy Issues 2.20 The impact of India's pricing and trade policies is assessed from two vantage points. First, the outcome of these policies is evaluated in comparison with policy objectives for each of the three main elements of the incentive structure (price and market interventions, input subsidies and trade policies). To what extent have these interventions achieved their original objectives, and what have been the costs and benefits? Second, the combined impact of incentive policies on efficiency is evaluated by using comparisons with international prices and effective protection analysis. To what extent has agriculture overall, as well as individual commodities, been protected or disprotected (taxed) by incentive policies? What implications does this have for production mix, resource allocation, and returns to investment in the sector? 2.21 Price and Market Interventions. India's price and market intervention programs have had significant impacts on production patterns, consumer welfare and the country's public finances. Noteworthy achievements linked to these initiatives include the improved availability of wheat and rice, despite a virtual cessation of imports, in one of the world's poorest countries. Domestic pricing policies have provided incentives that have contributed to rapid growth in the rice, wheat and sugarcane subsectors. Yet these accomplishments need to be viewed in the context of various problems: escalating costs for both national and state market intervention programs, FCIrs inefficiency, inability to reach many of the poorest consumers in rural areas, market and trade controls which dampen producer incentives, financial problems threatening the sugar industry, and constantly shifting procurement and distribution rules. Producers and consumers have gone to considerable lengths to circumvent levy and PDS restrictions, while authorities have had to adjust controls and incentives continuously to obtain the quantities needed to resupply distribudon outlets. 2.22 Price and procurement policies have met some of their original objectives, but performance has been mixed. First, the existence of official pricing policies has improved domestic incentives for some producers and thus encouraged growth of key crops, but price supports have not compensated for declining real prices and profitability overall. Growth has been 34 highest in those crops which have had high domestic incentives (rice, wheat and sugarane).5 Average profitability of wheat, paddy and sugarane has been significandy above the mean for all crops C(able 3.9, Statisdcal Appendix). The existence of atwave returns for these crops has played an important role in glvas it encouraged area expansion to complement yield incease (par 1.38). However, due in part to the success of the Green Revoludon, zeal domesdc prices for rnce and wheat declined between 1970 and the mid-1980s (Figure 2.2). Aveaged across all states, real wheat prices in the mid-1980s were thre-fourths, and nrce prices about 90% of 1970 levels. This is reflected in declining domestic barter tms of a-de (Table 2.5) and declining profitability (Swamy and Gulati, 1986).6 The income terms of tade, which capue the effects of increased productivity and quantity, have not decHned as quickly as the barte terms of trade. Farmers which adopted new technologies and incrased production thus managed to arrest income losses or, in some states, to improve incomes. For example, in the Punjab, income tms of tade have remained favorable, due both to technology improvements and to the existence of subsidies and price supports (J. P. Singh, 1990). Thus, to the extent ta procuement programs have targeted those areas which have benefited most from Green Revoludon technologies (and thus have generated large surpluses), the existence of price supports, together with input subsidies, appears to have midgated (although not always fully compensated for) the impact of failing real domestic prices. Table 2.5: _A and lnome T _m of Trde o A_ _GWMM X= BmIDI Xn BmIflI (average) (average) 1952.64 84.9 86 1976-77 WJ.7 99.9 196465 94.0 93.8 1977-78 90.8 104.5 1965.66 102.9 98.8 1978-79 85.4 100 1966-67 112.9 106.2 1979-80 88.6 95.9 1967.68 115.6 107.9 1980-81 873 89.7 1968469 105.1 100.4 1981-82 82.9 89.9 1969-70 101.8 108.5 1982-83 84.7 91.7 1970-71 100 109.9 1983-84 863 97 1971-72 97.5 104 198485 86.0 97 1972-73 103.5 106.8 1985-86 82.4 91.6 1973-74 109.6 115.7 1986-87 88.0 91.1 (97475 99.9 112.4 1987-88 87.5 98.5 1975-76 84.6 101.5 Sauwe: Kane 1990. 5Domes=c incentives as used here are the financial incentives facd by farms mcoporaing both pnce suppor and input subsidies Effecdve incv intoduce the element of oppounity cost, by comparn domestic p and valu aded to and 6Swamy and GuWa (1986) demo that faim profltability declined in most sts in most cps durig the 1970s, leading to farmer agiations and the explicit reogniton of tends in the terns of Bade in sttling prourement price8. Although profitability recovered somewhat in the 1980s (which is also confirmed by impIvmets in effecdve raes of protion; Table 3.10, Statistcal Appendix), it was not enough to reves a deaiAnig Med 35 Figure 2.2: han in _ Re Meat 120 l\ 110 100 ..- 90 \ I\ \ Wholese Price 180 . - t - - - - - FamHatPrice 70 '.,--'., --------- P _cm Prc 60 50 40 - I i I I I I I I I I I I I I i I 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 Years Rim;2 Real MWholes. FArm Hfarve and Prourment PiEd 120 9l0 W' A=.}Wholese Price so 80 - _ ----- Farm Havest Price --------- Procurnent Price 70 60 50 1971 1973 1975 1977 1979 1981 1983 1985 1987 years 36 2.23 The reverse side of this situation is that not all producers and crops have profited from pnrcing policies. Producers located in states which did not have procurement programs, who did not use significant amounts of subsidized inputs (e.g. especially the smallest and poorest farmers), and who did not have access to or use of improved crop technologies, faced declining crop profitablity. Regions such as eastem India, where technology development lagged, were especially hard hit by declining profitability. The structure of domestic incentives has favored some crops, especially wheat, sugarcane, rice and some oilseeds, leading to inefficient shifts in the production mix (para. 2.58) and favoring some regions (especially those with irrigation) over others. The level of producer incentives (market and average producer prices) declines gradually when moving from large surplus to large deficit states (Table 3.7, Statistical Appendix). Moreover, when prices are compared to international prices, several commodities face disincentives to production (pam 2.54). 2.24 Second, price supports have had some impact on market prices in surplus states, but little impact in deficit states. Empirical analysis of the linkages between market and procurement prices has shown that procurement prices, together with stock levels and administrative controls, are significant in explaining market price levels, especially in surplus areas where procurement may account for over half the marketed surplus (Gulati and Sharma, 1990b). In deficit states, however, procurement and distribution programs have little impact on market prices. In fact, deviation of market prices from all-state weighted average prices was as much as 27% for wheat and 22% for rice in major deficit states (Lieberman and Ahluwalia, 1990). Interseasonal price variations for rice and wheat were also dampened, at least in the 1980s, and the variabiity of prices was less in surplus states than elsewhere (Table 3.11, Statistical Appendix). The data on intaseasonal variation in rice and wheat prices is more mixed. Limited analysis of data from the mid-1970s compared to data from the mid-1980s indicates a decline in seasonal price variation for rice, but an increase for wheat (Table 3.11, Statistical Appendix). 2.25 Third, government procurement and distribution programs have had a negative impact on market structure and development. One important impact has been to establish dual market structures. One market, intended for the poor, is expected to make available subsidized commodities, often procured at below open-market prices dtrough producer and miller levies. The second is a residual "open" market in which demand and supply operate more freely, but not without some restrictions, of which govemment import and export controls are the most notable. The existence of these dual market structures have worked against market integration and the price clearing functions of a nadonal market in India. 2.26 These dual market structures for different crops have been sustained by means of an intricate and changeable array of controls and policy interventions. A feature shared by all the procurement schemes has been an inability to arrive at a stable and durable set of instruments. Thus, levy shares and purchase prices, movement restrictions, stock limits and other facets of procurement arrangements are constantly in flux. There are also periodic limitations in the eligibility criteria for wheat, rice and sugar rations, and in the size and subsidy element of consumer entidements. For many producers (and processors), these initiatives are often coercive and are to be evaded when profitable and feasible. Generally, compliance has been enforced through numerous overlapping but imperfect restrctions, although some (but not all) state government authorities have learned how to internix rewards (e.g. lower levy shares, bonus prces, input subsidies and relaxadon of movement controls) with physical and financial controls to Obtain needed supplies in low production years. At the same time, the Government is becoming a major stockholder (more than 63% of wheat and 53% of rice arrives in the market in the first quarter of the year - over 90%o of wheat and rice in Punjab and Haryana; for other states the pattern of arrivals is more evenly spread out). Where state controls and levies exist on the movement of produce (for example, rice in Andhra Pradesh), a wedge is driven between pnrces in surplus and deficit areas, leading to lower pnces in surplus states and higher pnces in deficit states (Radhakrishna and Indrakant, 1987). The administrative costs and loss of efficiency due to these market effects, which are difficult to captme in the financial costs, must be added to the total costs of the system. 37 2.27 Fourth, turning to the impact on consumers, procurement and distribution programs have had generally favorable overall impacts on consumer prices and availability, but again the picture is not uniformly good. Increased production has led to increased net availability of gains in the country and falling prices, although not necessarily to improved nutrition for all social groups. Nearly 40% of India's population still receives less than 2,250 kcalday - the same proportion as in the 1960s, prior to the Green Revolution. Various indicators suggest that India has been reasonably successful in assuring that food supplies are available when there is a production shortfall. The exisdng storage, procurement and distribudon network in the country helped prevent famine in the wake of the 1987 drought Real prices of key foodgrains fell until the mid-1980s, and price fluctuadons have been reduced (the coefficient of variation for nominal rice prices fell from 19.5% in the 1970s to 12. 1 % in the 1980s; the same indicator for wheat declined from 20.6% to 11.2% in the same period). PDS has provided important nutritional benefits for the poor, and has been an effective albeit poorly targeted anti-poverty program. However, since 1985, there has been an increase in real wheat and rice prices (0.5% for wheat and 1.7% p.a. for rice in the period 1985/86 to 1988/89). Moreover, wholesale prices in deficit states have been significantly and consistently above the all-India average, with a particularly negative effect on the poor (Subbarao, 1990). 2.28 A key question is thus to what extent PDS and other (state-level) food security interventions have insulated the poor from rising open-market prices and have increased foodgramin availability. There are important problems in the PDS which are constraining its effectiveness in this regard and increasing costs. The first is that there is now no agreed mechanism for determining the allocation of PDS grains among states with widely varying production opportunities and consumption profiles. In theory, output, open-market availability and procurement effort by local authorities are supposed to deternine allocations from the central government In practice, the allocation by state is less than transparent and appears to be governed by factors other than poverty population rates.7 This was particularly apparent during the 1987 drought and a disappointing 1988/89 procurement year. 2.29 The second and perhaps most important criticism of the PDS is its limited impact on rural hunger. The 80% of India's poor living in rural areas currently have limited access to subsidized commodities. This is especially true of those living in the country's poorest regions, the eastern and cental states, which account for 54% of the rural population, 60% of the poor and 65% of the ultra poor.8 This region received only 38% of PDS supplies between 1986/87 and 1988/89, including the amounts going to Calcutta and other urban centers. 2.30 The primary reason for this is that the PDS is heavily oriented towards urban areas. Various estimates put the proportion of foodgrain and sugar issues absorbed in urban areas at 75-85% in the early and mid-1980s, with Bombay, Delhi, Calcutta and Madras constituting the highest priority markets. Some observers have argued that the PDS was intended for the poor who do not grow foodgrains (Lieberman and Ahluwalia, 1990), that in most rural areas, fair price shops would not be needed in normal-to-good agricultural years, and that their costs would be excessive, even to meet shortfalls in poor years. (This argument ignores the fact that surplus agricultural growth has been highly concentrated in what have become the richest regions of the country, leaving the rural poor in other areas not much better off.) 7See Table 4.15, Statistical Appendix, which computes the differences between actual allocations and allocations based on numbers or percentages of the population below the poverty line, from Tyagi (1990). 8Defimed as those receiving 75% or less of the officially defined poverty-line income. See World Bank (1989). 38 2.31 But the performance of the PDS has been questionable even as an urban-focused scheme. Surveys consistently find that middle and urban income consumers are major beneficiaries (Delhi has a particularly high take-off from the PDS although its poverty rate is not significandy higher than other major cities). Inefficient and leakage-prone operations are a further discouraging feature of the PDS: abuses which are regularly cited in the press inclz'4, inexplicable shortages (probably due to "losses" and diversion of supp ies, including the unclhiined quotas of upper income households, to the open market), substandard quality, illegal price mark-ups, forging of ration cards, and arbitry reductions in actual allotnents (Kapur, 1995; Singh, 1985). 2.32 Tlere is also concern that the procurement/PDS programs have actually worsened prices for some consumers. The major economic argument (as elaborated by Dantwala; see Lieberman and Ahluwalia, 1990) for levies under the procurement system was that producers who would supply a fixed amount at one price (ess than the market clearing price) would gain through open-market sales at a higher price (since withdrawing production from open-market sales would result in price increases). Paradoxically, however, those who would suffer would be the landless and rural poor, who are net buyers of foodgrains in the market and who are not covered by the PDS. Recent performance of the PDS during shortages also suggest that it has not been fully successful in containing consumer price swings, particularly in deficit years when it cannot fully make up for the food deficit Since the late 1970s, the rise in prices in off-years has exceeded, by a growing margin, the extent of the uncovered shortfall (Table 2.6). By 1987/88, the elasticity of prices to the uncovered deficit had grown to 2.6. This suggests that as long as procurement levels remain high, it will be important to "unclog" PDS and broaden its reach. Otherwise supplies that GOI has purchased could remain in storage with adverse impacts on prices. Table 2.6 ImnanC of Uveted Sh qsan Uncoverd Elasticiy Ptoduction Net Uncovered Shortfall as Percentage of Price to Net Require Shorfall Distribu- Shortfall Perentage of Chan in Uncovered Production mant (3) tion (5) Reaueiment Cerels Prie Shortfall (1) (2} (l)-(2) (44 (41-(3) (6) (7) (8) 1979/80 88.55 101.4 12.9 3.8 9.1 9.0 10.1 1.1 1982183 103.0 108.3 5.3 0.5 4.8 4.4 9.7 2.2 1987/88 111.5 119.5 8.0 4.2 3.8 3.2 8.2 2.6 Note: (i) Chone in amual Creals Price Index (197017l=100) is used to compute hange in ceel pce (i) Net Distibution - suppUes dnougb PDS less xzurmmL (ii) Req_ruus are calculated based on a mm of 150 kg of cereals per peAo per anm. Sourc: Lleberman and Ahliaa. 1990. 2.33 Budgeary Costs of Procument Programs: The Food Subsidy. The amounts being spent on the four major procurement programs (rice, wheat, cotton and sugar) and the PDS ar large and growing. Data on program costs and subsidies are most complete for FCI's wheat and rice procurement, storage and distribution activities. In 1987/88, the total cost of these together was Rs. 20.2 billion, of which procurement accounted for Rs. 3.6 billion (18%), distribution Rs. 14.6 billion (72%) and buffer stock activities Rs. 2 billion (10%) (Table 2.7). (The relatively large costs of distribution in 1987/88 were primarily due to the drought in that year and low procurement in relation to distribution.) The total food subsidy, defined as the consumer subsidy plus the cost of holding buffer stocks, was Rs. 21.3 billion in 1987/88 (0.7% of GDP). Some of this expenditure is not a consumer subsidy at all, but an outlay for FCFs inefficiency in storage and handling and expenditure for price supports. In looking at the component costs of the programs, total outlays to maintain foodgrain reserves actually fell in the 1980-88 interval. However, the costs per quintal of carrying over stocks continue to grow and remain larger than per unit procurement expenses, due in part to rapid growth in storage and interest charges. 39 2.34 Growth in these subsidies was most rapid dunug the late 1970s and early to mid 1980s, a period chaacterized by rising production and procurement and high levels of distribudon and foodgmain stocks. Foodgri stocks grew at an annual 10% rate in this period. Growth in the overall food subsidy slowed in the mid-1980s due to reduced spending on FM stocks. However, with producton increasing and procurement and food stocks recoverig m the last two years, a rising tend in food subsidies may again be seen in the next seveml years. On a per quintal basis, the consumer subsidy for rice increased at 21% p.a. while that for wheat grew at 14.4% p.a. in the 1980s (Table 2.7). The sing trend in the consumer subsidy has occurred despite the more rapid growth of issue prices compared to procurement prices in the same period. The food subsidy has also been rising rapidly in comparison to other government agricultural oudays. For instance, the food subsidy as a proportion of the capital outlay on major irrigation rose from 54% to 95% between 1980/81 and 1987/88, implying that some substitution of agricultural investment by subsidies has occurred. 2.35 These rising costs underline the extent of inefficiencies in FCI and argue for contracting out its purchase, storage and distribution functions. Costs incurred by private traders for storage have not escalated as much as FCI costs in the 1980s. Storage and transit "shortages" have been a perennial (and growing) problem. FCI continues to operate with antiquated planning, operational procedures and technologies in its handling, weighing, stoage and movement of grain (Lieberman & Ahluwalia, 1990). Expenses for personnel are high (outlays for which amount to 5% of total expenditures on wheat and rice). Many of FCrs acdvities duplicate those of state distribution agencies. However, given FCI's relative lack of autonomy and large number of constituencies, there is litde reason to dtink that the parastatal could ever develop the flexibility and sensitivity to costs and margins needed for success in grain trading and handling. Ab_27A_Idia n and Pand sumey Co" of TOW C saomerft* for Whet ad Rim HddinW Buffer Food 1S mnmu BW I"a1 a n) - --LQR Yi elfoema (1) (2) (3) (4) (5) (6)=(5/4) Andhma Pradesh Paddy 1984-85 35.48 55.94 1.57 1985-86 36.36 56.80 1.55 Haryana Paddy 1986-87 39.34 64.26 1.63 Punjab Paddy 1986-87 53.77 80.32 1.49 Utter Pradesh Paddy 1985-86 25.82 51.51 1.99 Hbuyana Whet 1986-87 29.09 41.98 1.44 Punjab Whea 1986-87 29.22 42.03 1.44 Utte Pradesh Wheat 1984-85 23.81 39.67 1.67 1985-86 25.27 44.09 1.74 Source: Computed from Tyagi (1990) 64 2.91 While there remains scope for gains from currently available technologies, it is not evident that India's research system is gearing up for the technical challenges of the coming decade. Unfortunately, there are at present no new technical breakthroughs, on the scale of the Green Revolution technology, waiting in the wings to shift Indian agriculture to a higher growth path in the 1990s. Yet increasing the technical level of Indian agriculture - encompassing development and broader adoption of improved seed varieties, pesticides and fertilizers, more efficient water management, and new soil cultivation and conservation techniques - will continue to drive future growth, particularly as production systems become more complex and intensive, as growth depends increasingly on higher yields, diversification and efficiency gains, and as India grapples with the problems of assuring sustainability of production on a limited land base. This chapter examines issues in the supply and adoption of new technologies. particularly ferdlizer and HYVs, and in the capacity of India's research system to generate new technologies for future growth. 2.92 Consumption. Although fertilizer use has increased rapidly since 1970, per hectare consumption remains low and concentrated in irrigated regions and on irrigated crops. Fertilizer consumption grew from 2 million mt to 11 million mt since 1970, or at an average annual growth rate of 9.4%. India is now the world's fourth largest consumer of fertilizer, after the USA, USSR and China. On a per ha basis, fertilizer use has grown from 7 kg/ha in 1966/67 to almost 55 kg/ha today (Table 6.2, Statistical Appendix). Despite this impressive growth, there is clearly potential for expanding fertilizer use and increasing its efficiency. Per hectare consumption lags behind that of many Asian countries (Pakistan and Bangladesh, for example, average about 83 kg/ha and 77 'g/ha, and China 237 kg/ha). Just three states (Punjab, Uttar Pradesh and Haryana) with 21% of gross cropped area account for over 35% of fertilizer use. Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu account for another 28% of consumption. One district in Punjab (Faridkot) and one in Andhra Pradesh (West Godavari) consume as much fertilizer as Orissa and Assam together. Over three-quarters of the fertilizer used in India is consumed on less than 50% of the gross cropped area, and this area is primarily irrigated land (70% of fertilizer is used for irrigated crops). Only four crops - rice, wheat, sugarcane and cotton - which together account for 57% of agricultural production, consume over 80%o of total fertilizers. 2.93 Government strategy for encouraging fertilizer use has depended heavily on high subsidies (para. 2.8), control of production and distribution (para. 2.95), and distribution of fertilizer samples ("minildts") and information through the extension system. For several reasons this strategy needs reorientation: fertilizer subsidies are large and unsustainable, Government control of fertilizer production and distribution is inefficient, and fertilizer use remains highly concentrated. 2.94 Ferdlizer adoption is heavily influenced by the availability of complementary inputs of irrigation and HYVs; price and informnation play a much smaller role. The existence of irrigation makes fertlizer use so profitable that it does not need a subsidy, while fertilizer use is so risky under rainfed conditions prevailing in much of India that farmers are unwilling to adopt it. Irrigation reduces the risks associated with fertilizer use, and thus the degree of water control in irrigated systems also plays a role (para. 2.135). Fertilizer use tends to be higher where there is groundwater irrigation, as opposed to canal or tank irrigation where water supplies tend to be less predictable. Analysis by NCAER (1990) shows that ferdlizer adoption is primarily explained by the percentage of irrigated area and HYV area; the influence of these factors is stronger than all other variables and statistically significant across all agroclimatic regions. Price variables, while inversely related to fertilizer use, are not found to be statistically significant. Other major explanatory variables for fertilizer use include access to fertilizer outlets (both distance to fertilizer suppliers and number of visits required to obtain fertilizer), access to crop output markets, cropping patterns (non-irrigated and non-HYV crops used significantly less fertilizer), farn size 65 (small farns use more fertilizer per ha), and access to institutional cmdit. For unirrigated crops, rainfall pattems and soil moisture were important determinants of use. Tenancy was important only for rainfed rice, suggesting that the problem is concentrated in eastern India. For unirrigated areas, the analysis suggests that measures to improve the quality of land and access to both input and output markets would increase fertilizer use. The importance of irrigation and HYVs - the Green Revolution package - is reinforced by other studies (Subbarao, 1990; Gulati and Shanna, 1990). The elasticity of fertilizer consumption with respect to irrigation (4.00) is over six times greater than the elasticity with respect to price (0.61) (Gulati and Sharma, 1990). Desai (1986) has argued that the enabling environment (including farmer knowledge, adequate availability and distribution of fertilizers, and technology) are the major factors influencing fertilizer adoption, and that only when actual consumption approaches the economic potential, does fertilizer use become sensitive to prices. 2.95 Production and Distibution. India is now the world's fourth largest producer of fertilizers (after the US, USSR and China). Some 130 manufacturing plants produce about 10 million mt of nutrients yearly, satisfying nearly three quarters of domestic demand (India must stili import most phosphates and all potash due to lack of domestic supplies) (Table 2.25). Production has grown rapidly, on average 15% per year for the past two decades, aided in part by guaranteed retunis under the retention pricing scheme (para. 2.9). Table 2.25: Repg_rLed FertHiiZer Production. Imports Movements and Stock Levels: 1980-1286 ('000 mt) Year Ending Openig Total Closing .~~~~~Q £ Qucion lIm Axab CMSUmo & 1980 1,085.40 2,987.40 2,005.60 6,078.40 5,255.40 823.00 1981 823.00 3,005.40 2,759.00 6,587.40 5,515.60 1,071.80 1982 1,071.80 4,093.00 2,041.00 7,205.90 6,067.20 1,138.70 1983 1,138.70 4,413.40 1,131.70 6,683.80 6,401.40 282.40 1984 282.40 4,555.60 1,355.10 6,193.10 7,710.10 -1,517.00 1985 -1,517.00 5,235.20 3,624.80 7,343.00 8,211.00 -868.00 1986 -868.00 5,753.00 3,314.80 8,199.80 8,474.00 -274.20 Source: FAI - Fertilizer Statistics 1988/1989. 2.96 Issues in fertilizer supply and distribution concern the pervasive role of the Government, controls on types of fertilizer produced, an overly rigid and unresponsive marketing system and needed improvements in marketing efficiency and coverage. (Further details are provided in Annex 1.) There is heavy Government involvement and regulation of the industry and distribution system. The Government owns 43% of the manufacturing sector, and regulates production through compulsory licensing, controls on production levels and mix, and pricing. The result of this heavy protection is an insulated domestic industry, where production costs vary by as much as 300%. To increase production and distribution efficiency, the Government allows the production of only a limited number of fertilizers (essentially urea, DAP and MOP), which reduces fanners' choices and appears to be leading to nutrient deficiencies in some areas. Control of distribution through annual fertilizer allocation and transport plans has created uncertainties for many distributors and failed to balance supply and demand throughout the country. Low and controlled margins discourage firms from supplying remote markets. Concentration of the industry in the west and south, and the sheer problems of supplying fertilizer to over half a million 66 villages and 180,000 fertilizer sales points compound problems in distribution. Transport and storage are posing increasing logistical bottlenecks, to the point where a major restructuring of transpoaion, particularly towards bulk handling, coupled with findamental changes in handling and storage, is needed. 2.97 Development and adoption of improved seeds or HYVs (here defined as short stature, fertilizer responsive, photo-period insensidve cultivars) for the major foodgrains, rice and wheat, have been the most successful technical innovation: more than half of the rice and almost 90% of the wheat area in !ndia is now covered by HYVs. In contrast, only one third of the area under coarse grains is covered (Table 2.26). HYVs for oilseeds and pulses for most regions of India have not yet been developed, with the exception of caster, soybeans and sunflower. In the last 20 years, the area under HYVs has shown a steady increase. But adopdon rates show a marked difference by region and by crop, with the westem and eastern regions lagging. As in the case of fertilizer, Government strategies for promoting the spread of HYVs depend on supply-side incentives, primarily a heavy focus on plant-breeding in the reseah system (paa. 2.114) to produce HYVs, a strong public sector involvement in commercial seed production and distribution, and (in some states) subsidies on seeds. Table 2.26: Coy em by He&qL_1987/88 (%) Eadd Mhc Malz ins East 49 100 81 56 North 68 92 22 72 South 82 - 76 53 West 33 66 24 45 Source: Pray (1990). 2.98 The most important factors in the spread of HYVs have been their profitability, either through increasing yields or through reducing production risk. HYVs for rice and wheat spread to irrigated areas fiust, where risks of adopting new technologies were least. A large number of HYVs for rice and wheat are pardcularly vulnerable to moisture stress and flooding, and thus yield best under irrigated conditions. Thus, variable rates of inigation doIvelopment account for difftrences in the uptake of HYVs - for rice, irrigation explains about 70% of the variation in adoption rates. There is less correlation for all foodgrins combined (inrigation explains about 60% of the variation), in large part because HYV varieties for coarse gris are not as dependent on irrigation. Only a few varieties of HYVs of rice, and the hybrids of coarse grains and oilseeds, have spread widely in rainfed condidons. Regression analysis of a number of factors affecting HYV diffusion (research intensity, extension, certified seed production, irrigation and infastructu) showed that the only variable significantly affecting adopdon was the existence of irrigadon (Pray, 1990). 2.99 Availability of HYVs tailord to Indias vasdy different agroclimatic and producdon condidons is constraining adopdon of some variedes and wider use in some regions. For coarse grains (maize, sorghum, millet), a consistent peaking of adoption rates at relatively low levels has revealed problems in the suitability of new vanieties to localized agroclimatic conditions. Research 67 programs have concentrated on breeding varieties at the zonal level rather than responding to the very different needs of separate agroclimatic areas, which may vary radically across a single state (Jansen, Walker and Barker, 1990). Once suitable coarse gram vareties became available in these areas, profitability and production risk were the key variables influencing their spmad. 2.100 The case of rice in eastern India also underscores problems in development of suitable HYVs by the research system. Of particular concem is that the eastern states are below the national average in use of HYVs of their most important crop, rice. Lags in adoption are largely due to the agroclimatic conditions of eastern India and the characteristics of rice HYVs. Much of the rice in eastem India is produced under flooding and upland conditions, which account for 42% of the area (Table 2.9, Statistical Appendix). As existing HYV varieties cannot be grown in deep water (over 30 cm) nor under rainfed conditions where they must be drought-tolerant, nearly half the rice area in eastem India effectively has no improved varieties available. HYVs do not yet exist for rainfed uplands, lowlands and deepwater conditions. Most research effort has gone into irrigated varieties, in part because central govenmment resources in ICAR and the state agricultural universities have focused on irrigated rice, and in part because the eastern states have invested fewer resources in agriculture research than have other regions. A second reason is the difficulty of designing fertilizer responsive varieties for rainfed conditions. The private seed industry, important for hybrid and coarse grains, is also less developed in the east, due to the relatively small size of the commercial seed market (which is mainly for maize). Other factors contributing to the limited spread of HYVs include subsidized sales of rice and wheat HYVs by government (which discourages private seed development), and the variability of conditions of rainfed rice production, which (as for coarse gains) demands development of agroclimatic specific varieties. 2.101 GOI has played an active role in seed production and distribution (para. 2.103), but there is not evidence to confirm that this has led to wider use of new varieties. Case studies of diffusion of improved seeds in India (Pray, 1990) suggest that public production is not necessay for rapid spread of rice and wheat HYVs and that the role of the public sector is essentially varietal development. If research can produce superior varieties and if farmers can obtain even a small amount of new seed of self-pollinated crops, farmers will multiply and spread HYVs ver rapidly, choosing new varieties on the basis of profitability.24 Commercial seed is necessary for hybrids, but private companies play a larger role than public seed companies in spreading hybrid varieties. Nor is extension essential. Indian farmers obtain most of their information about new technology from other farmers and from the media, although studies show that extension does increase farners' information about HYV paddy and wheat practices and their adoption (Pray, 1990). 2.102 Price is not an important factor in encouraging adoption of new seeds. Investment on seeds is relatively minor compared to other production costs, while returns to investment are sizeable, provided there are appropriate seed varieties. In thAe absence of suitable varieties, price makes little difference. Despite this, seed subsidies for basic grains have increased, both at the national level (where seed subsidies total Rs. 350 million) and in many states (West Bengal, Bihar, Tamil Nadu and Gujarat). The main impact is on public sector seed company losses and disincentives to private production, which may slow HYV production (para. 2.104). 2.103 Production and Distribution. Public sector seed corporations have played an important role in introducing HYVs in India, but the growing importance of the private sector coupled with the desire to encourage more international seed technology and investment in India suggests that the public sector rolL ;a seed distribution be reconsidered. Only 11% of India's seed 24Seed for self-pollinated crps, such as wheat and rice, is easy to reproduce at the farm level and does not reque rwal every year. Farmers often poduce their own seed as well as seed to sell to neighbors; thus it is difficult to capture finincial reuns to the introducdon of these varieties, discouraging private research. Hybrid seeds, however, must be renewed frequently through the purchase of new seeds in order to maintain yields. Thus, privae resech has tended to concentrate on these variedes where research and development investnents can be reoped tuegh seed sales. 68 needs are met through conwmercial seed, be it public or private (Table 2.27). Farmers are the main source of seed, either for themselves or for their neighbors. Of the commercial seed supply, private firms (numbering about 60 to 70) account for nearly 50% of supply, and have been particularly successful in producing hybrids for maize, millet, pulses and groundnuts. The public sector includes the National Seed Corporation (NSC) and 13 state seed corporations (SSCs). Seed distribution by both private and public companies is done through their own outlets, coopaives, private traders and (for public companies) through the extension service (for distribution of seed samples in the forn of "minikits"). Table 2.27: Sod REquiremensa Coand rcial SucplX fo Maior Eield Cros. 1985 Total Seed Total Planted Commercial seed Public seed Purchased Como FE MTLXm Wheat 2,088 53 34 105 66 158 Paddy 1,025 64 48 68 52 132 Sorghum 992 6 24 19 76 25 Maize 150 9 69 4 31 13 Pearl Millet 110 9 60 6 40 15 Pulses 677 9 39 14 61 23 Groundnut 635 24 63 14 37 38 Odu roilseeds 176 7 44 9 56 16 Total 5,833 181 43 239 57 420 Note: These figures may undeesuinae the contribut of priva frms which are beieved to supply more than 50% of the cammri seed in India. Source: Pray. 1990. 2.104 Issues in seed supply and distribution relate to the continuing prominent role of the public sector, overregulation of the market, lack of incentives for private research and development of new technologies, and large subsidies to public sectbr companies (Annex I). Despite Governmenes extensive involvement in seed production and distribution, it is not clear that public intervention is needed, especially in the context of India's large, sophisticated and mature seed industry. Nor does seed fit the definition of a public good. SSCs have provided emergency seed supplies in some cases (although their performance was negligible in the 1987 drought). Replacement of farmer seed with certified seed (a common justification of the need for public sector seed companies) would have limited if any impacts on foodgain yields, except for hybrid seeds (where the market is dominated by private sector companies in any event). However, there is evidence that public sector involvement in the industry has discouraged private sector investment and erected barriers to private research and marketing of seeds, including lack of rights for plant breeders, controls on new import lines, difficuldes in seed certification and barriers to seed export (although recent changes in industrial licensing policy to encourage foreign participation and technology imports is a positive step). Seed pricing and subsidies (which have led to losses in the NSC of Rs. 60 million per year, as weUl as losses in the SSCs), have little impact on adoptinn rates, drive the prvate sector out of production of some grains (especially rice), increase the costs of seed producon (through shifting production to higher cost public agencies), and thus may slow the spread of HYVs. 69 kinto the Futr The Availability of ew lTbnologes 2.105 Despite important strides in the development and adoption of new agriculturai technologies, gains have been lopsided, concentrated ir. only a handful of crops and in irrigated areas, and moreover appear to be slowing in some high potential areas. Both growth and regional development objectives argue for refocusing attention on diversifying production, developing rainfed agriculture, and boosting irigated yields closer to potential. Are the technologies available to do this? 2.106 On the one hand, there are clearly steps that can be taken to improve yields on already cropped land using available technologies. Ihe perfornance of irrigation can be improved even without expanding into new irrigated schemes (para. 2.151). Better water control and storage would contribute to higher yields on irrigated areas, as would increased efficiency in ferdlizer use. Supplying early water (in advance of the monsoon season) in eastern India, for example, would allow more timely planting and increases in yields. Ile scope for increasing HYV adoption, in the absence of any significant breakthroughs on new varieties, is limited. Improved varieties cover nearly all wheat land. Further adoption of rice and coarse grain varieties awaits development of cultivars better suited for specific agroclimatic conditions. 2.107 Of particular concern is the availability of technologies for rainked mrus, which are risky production environments, and where the spread of agricultural technologies has been much slower. Yet rainfed agriculture account: for a major proportion of agricultural output, including over 60% of rice, and most coarse grains, pulses, oilseeds and cotton. Fanners in rainfed areas face three major uncertainties: start of the rainy season (a late rainy season decreases yields and limits crop choices); uneven rainfall, leading to moisture stress; and an early end to the rainy season (again, limiting crop and variety choices and stressing plants). Farmers tend to be caught in a vicious cycle of moisture stress - low use of improved inputs - and thus low yields. Availability of improved varieties for rainfed areas remains limited, in part due to the concentration on development of irrigated wheat and rice varieties, and in part due to the much larger array of agroclimatic conditions rainfed producers face, and the need to tailor varieties to these conditions. The major exceptions are some coarse cereal varieties and oilseeds, although adoption rates appear to have peaked in these cropz. Fertilizer use also remains low (rainfed crops account for perhaps 20% of total fertilizer use, although there are no statistics breaking down fertilizer use by rainfed/irrigated conditions), largely because of the risky production environment but also because of more limited supplies in raijd;'.d areas. The primary emphasis in the past on improving cultivation in rainfed areas have been through soil and moisture conservation through contour bunding, bench terracing and other earth works. 2.108 Despite the limited array of technologies for rainfed areas, prospects are bright for improving yields through in situ moisture conservation practices in conjunction with the use of vegetative bunding (vetiver grass) for slope stabilization. Field trials on contour farming and the use of vegetative barriers show significant yield increases, even without fertilizer use (Oblitas et.al., 1989). In medium rainfall areas, this system of farning may open up possibilities of growing a short-season kharif crop (soybeans or short season sorghum) followed by a rabi crop of pulses raised on residual moisture. In low rainfall areas, the adoption of multiple cropping with a comb.nation of annual and perennial crops (e.g. horticulture) offers the possibility of more reliable retuns during years of en-tic rainfall. Vegetative bunding and contour cultivation offer a more cost- effective solution for controlling land degradation caused by erosion than the conventional engineered soil conservation structurs (such as earth bunds). 2.109 On the other hand, while advances continue to be made in many aspects of agricultural research in India, there are no new technologies on the horizon, no immediate prospects of shiftng the production function as was done in the Green Revolution. As 10 to 15 years usually elaps between the start of new research and development progams and their results, the technologies available in India in the 1990s will largely be a product of research decisions and 70 priorities made over the last decade. India's research system promises a continuation of the emphasis on foodgrain technologies (less for wheat and more for rice, coarse grains and pulses), with some diversification toward research on rainfed agriculture, crop management and rainfed varieties. Yet it is not apparent that current research trends will be adequate to sustain and support a higher agricultural growth rate. The challenge is whether India's research system can generate the new technologies needed. I-dia's Research System and the Generation-of New Techaoloe 2.110 India has one of the largest agricultural research systems in the developing world (only China's is physically larger although Brazil's spends more money). The zenith of the system's success has been the development of HYVs that led to the Green Revolution, and transformed Indiar. agriculture. The system has generated over 550 HYVs for foodgrains alone. Research is also carried out in livestock, forestry, fishery and other allied sectors. Public research is supplemented by a growing and dynamic private agricultural research capability. In short, India has a large, institutionally mature research system, staffed by many skilled scientists, that provides a solid basis for agricultural development. 2.111 There is a growing perception, shared by many scientists in India, that the agricultural research system is lagging and in particular not responding to the increasingly varied and complex needs of the agricultural economy. Research remains too narrowly focussed (on foodgrains and on irrigated regions), productivity and quality have declined, and agriculture's share of national R&D spending has shrunk in recent years. The Rao Report (ICAR Review Committee, 1988) on the publicly funded agricultural research system identified several technical, administrative and operational problems affecting the responsiveness of researcl. to emerging challenges, including an excessive emphasis on a "straightjacket approach" in research and uniformity of experiments, an inadequate focus on local problems, inadeauate financial resources and sub-optimal resource use, a lack of effective monitoring and weak links with extension. Prominent issues include (a) falling research productivity; (b) inappropriate research content and declining quality; (c) funding levels and resource use; (d) the need for adjustments in organization and management; (e) an eroding capital base (including human capital); (f) incentives for increasing private research; and (g) dissemination of technology. 2.112 Product-ixit in India's research system has been good and returns to invesunent in research have been high. Prior to 1975, calculations of rates of return for research varied from 40 to 72%. Between 1972174 to 1982/84, rates of return to public research expenditures for major crops ranged from 51% for wheat to 156% for rice and were over 200% for all crops (Evenson and McKinsey, 1989). Rates of return for private research range between 24 and 57%, with social returns to private research varying between 38 and 176% (Ribeiro, 1989). 2.113 There are now, however, indications that productivity is declining. While some decline in productivity might be expected after the exceptional perfornance in the Green Revolution period, this also suggests that resources are not being used efficiently, due to poor research and financial management. Measuring research productivity is difficult at best given the variety of products which a research system produces, and in India it is beset by problems of data availability. Certainly crop yields (one measure of research productivity) have increased steadily since the introduction of HYVs. Research productivity as estimated by crude measures such as research publications =nd new crop varieties per real rupee spent on research has declined since the mid-1970s (Table 7.3, Statistical Appendix). The best measure of research productivity is its contribution to agricultural productivity, which can be measured 1, total factor productivity 25This section is based on Agculaual eerh in India: Paol Pect md-Perormn (World Bank, 1990a), which provides a more detailed analysis and recommendations for improving the research system. 71 (17;p).26 Studies of TFP for 10 major states (outside the eastern region) show that TFP grew at a respectable rate of 1.35% annually over the period 1956-83 (1.2% p.a. in eastern India), in comparison with a growth rate of 1.84% for the US in the same period. During the early Green Revolution period (1963-73) ai.nual TFP growth in India was 1.89%, slowing to less than 1% p.a. from 1973-83. Public agricultural research was responsible for more than half the gain in TFP, while extension was responsible for a further third of the increase. (Evenson and McKinsey, 1989 and Pray, 1990). TFP growth per rupee of research expenditure appears to have declined. Taken together, the evidence on TFP, publications, and new variety data suggest that R&D output per rupee of inputs may be declining, although the indicators may not fully capture yield maintaining research. Despite declines, the high rates of retun to research indicate that allocation of resources to research is efficient. 2.114 It is now vital to reorient the conten of the research system. For the past 40 years agricultural research in India has been dominated by the struggle for food security, and considerable resources have been invested in developing foodgrain HYVs. Research has thus concentrated on plant breeding, on irrigated farming, and on releasing new varieties, which has led to imbalances in the scope of India's program. Perhaps most importandy, plant breeding alone has come to be viewed as the solution to most, if not all, of the constraints limiting foodgrain production. Indications are that the returns to this strategy have peaked. In particular, growth in rainfed regions and rainfed crops is lagging due to lack of suitable technologies, and dere are gaps between national average yields and research yields (Table 2.14, Statistical Appendix). To provide the foundation for future technical breakthroughs, India needs to expand its basic research, especially in the area of biotechnology, increase the openness of the research system, develop relevant scientific sldlls and promote international cooperation. There is also a case for shifts away from concentration on foodgrains and oilseeds research, to a wider array of commodities (especially horticulture, agroforestry, livestock, and fisheries) to support sector diversification. At the same time, problems in technology adoption and poor linkages between research and the field argue for an increase in adaptive (farm level) research and especially research on farming systems and soil and water management. 2.115 Lack of recent major breakthroughs in the genetic potential of major cereals has called into question the guliy of agricultural research in India. It is difficult to evaluate the quality of research programs, especially in a syste,m as large and diverse as that in India, but the broad indications are that the determinants of quality (leadership and management, incentives, technical skills, institutional facilities, articles published, etc) are suboptimal. Problems include isolation of research institutes; lack of lively, collaborative programs within India, a decline in research standards; institutional in-breeding; a conscious isolation of India from exciting scientific developments throughout the world; limited incentives to increase quality; overly bureaucratic management; and an increasingly narrow staff base. In short, the picture that emerges is that of research institutes and programs lacking the leadership and facilities to encourage innovative, cutting edge research and to stimulate scientists. 2.116 In spite of the importance of research and its high returns, annual puikllgn g for agricultural research in India is only about 0.3% of agricultural GDP. Other low income countries spend about 0.5% of agricultural GDP, medium income countries spend about 1% and high income countries spend about 2%. Low levels of public spending on agricultural research, especially in light of high rates of return to research (which indicate underfunding), suggest that India could expand research funding. However, increased funding alone will not provide the boost that the system needs: this depends on fundamental changes in organization and management, including better setting of priorities for research expenditures. Present high rates of 26TFP is essentially an index of all agricultural output divided by a weighted index of all conventional inputs such as lmd, labor, fertilizs, daft animals, machinery, etc. It is possible to decompose measues of TFP to analyze the relative contributions of research, irrigation, infrastructure, etc. to gain a better picture of their relative contribution. See Evenson and McKinsey (1989). 72 return could be maintained or enhanced by improvements in efficiency and resource allocation. Allocation of resources within research programs is skewed by any measure, and existing allocations are not based on either researh productivity and rates of emtn, or on congruence widt the weight of commodities in national production (which may be a factor in declining productivity). Over the last ten years (in the Sixth and Seventh Plan periods), the northern states received the bulk of research expenditures (30%), and the eastern states the least (13%) (Table 2.28). Agricultural research expenditures from both the central and state governments, as a percentage of state agricultural GDP range from 0.71% in the northem states, to 0.15% in the eastern states. Research has higher returns in some regions than in others (as indicated by TFP calculations, Table 2.28), and thus shifts in research allocations, particularly to eastem and central India, would have high payoffs. Priorities for research and allocation of resources must be based on systematic evaluations of the economic and social benefits from research programs. There are also changes needed in resource management and budgeting to ensure that the budgeting process is linked to strategy and becomes an effective tool to translate priorities into action. Table 2.23: i of Rescarch ELuden a Amnual Crowth in Anuala Growth Alocation of R E t ICAR and Ste Research as Agri. GDP In TFP/ Sith Plan Sevenbt Plan Poporti: of Agr. GDP Stae 192706 197f l L11HA SevnthPlm= NORTHERN REGION - 25.8 27.9 0.654 0.708 !'.4yaw 1.4 0.9 8 9.3 0.602 0.731 Hbna&al Pradesh 0.6 - 2.7 2.4 1.134 0.998 mmmu & Kahmir - - 0.5 0.8 0.133 0.223 PLmjab 1.4 0.6 3.8 3.7 0.198 0.191 New Delhi - 10.7 11.7 SOUTHERN REGION - 24.8 23.1 0.334 0.354 Kerala 0.7 - 7.4 6.3 0.604 0.568 Andhra PFtdesh 0.3 0.3 7.4 7 0.246 0.283 Tamnl Nea8 -3.8 -0.3 4.9 4. . 0.421 0.407 Kamataka 0.5 .0.4 5.1 5.1 0.251 0.285 CENTRALREGION - - 15.5 19.1 0.193 0.26 Uttr Pradesh 0.4 2.8 12.3 14.6 0.226 0.296 MadhyaPradesh 0.6 1 3.2 4.5 0.124 0.186 V6ESTERN REGION - - 21.5 17 0.279 0.291 Gujarat 0.9 1.6 5.4 6 0.248 0.448 Maharaahlm 3.8 0.5 11.6 5.9 0.349 0.218 Rajasthan 1.6 -1.6 4.5 5.1 0.204 0.286 EASIERN REGION - - 12.5 13 0.145 0.148 Assen 2.5 - 3.4 3.2 0.284 0.301 Blhar 0.8 .0.6 3.6 3.8 0.125 0.121 West Bengal 1.1 1.1 3.2 2.9 0.109 0.098 Orissa 2.1 1.5 2.4 3.1 0.145 0.192 pi IFP= Totl Farw Papduvity Sam= WOr Blan. Aglrol Remzh in 1W 9SI. 2.: 17 To support the changes in the balance of the research effort, reduce centralization and encourage creativity and excellence, substantial gizaional and manageg=nt chang are required Measures include increasing the autonomy of state institutions while encouraging states to finance a greater proportion of research, reviewing existing prgrams as a basis for setting priorities, rationalizing the number of research centers and stations, encouraging collaboration, defining institutional roles more clearly, and providing the leadership necessary to motivate and reward research staff. The greatest asset of India's research system is its large and talented corps of scientists, but this base is in danger of eroding. More resources must be devoted to training, improving the education c f new scientists, and preventing the in-breeding and growing isolationism of the national system. To support the work of the scientists, especially as India 73 expands into more sophisticated basic research, investments are needed to upgrade facilities, equipment, and libraries. 2.118 There is also considerable scope for sivates to expand and fill gaps in the research system, not the least in high technology and basic science. India's private agrcultural research industry is active, innovative, productive and growing. Increasingly, it is investing in advanced biological techniques. The profitability of these investments - and thus the climate for expanding private involvement in research - depends very much on the availability of patent protecion. This will be especially important in the seeds, pesdcides and other agro-chemicals, poultry, livestock and fishery industies. India provides litde protection of "intellectual property" tirough its patent laws. Failure to resolve this issue may result in India losing access to some important technology, a slowing of private R&D investment, and a need to spend scarce public resources to do what the private sector could have done. Extensim 2.119 Over the last 15 years, India has made a major effort to revise and improve its state extension systems. There are now four extension workers for every scientist in the research system. Retums to extension are high, at least 17% when all costs are set against the benefits from only crop, wheat. Analysis of TFP shows that returns to public extension in India in the 1963-83 period were 176%, and that extension accounted for nearly one-third of agricultural growth in that period (Evenson and McKinsey, 1990). 2.120 There are however a number of problems facing extension, both in its internal organization and in its links with the research system, that remain despite widespread improvements. One essential need is the "broadbasing" of the extension service to cover technology transfer for all on-fann, land-based activities. Previously, extension services focused more narrowly on foodgrain production, but there is a growing need to provide technical support in such areas as soil moisture conservation in mainfed areas, water management in irrigated areas, and all irrigated and rainfed crops (including horticultwe, farm forestry and fodder). A second key need is improvement of the quality of extension advice, through upgrading staff, better management and incentives, and rationalization of staff deployment. Third, extension funding has been squeezed due to state budgetary problems, although the amounts of financing needed to ensure adequate equipment and mobility for extension staff are modest, particularly in comparison to extension's high returns. Finally, it is time to review the various extension functions done by the research system (for example, through trarsfer of technology projects and ICAR's extension staff) in light of the much improved state extension systems. Land1 us and Techn y Adptn 2.121 There is growing concern that small and declining farm sizes together with land fragmentation and high rates of tenancy in lagging regions (particularly eastern India) may be acting as a constraint to technical innovation and investment. Unfortunately, evidence on the influence of tenancy on technology adoption and production is piecemeal and, for eastem India, incomplete. Studies on the relationship between farm size and productivity after the introduction of HYVs indicate that the new technologies have been scale neutral, but that small farmers have been slow to adopt them because they have poorer access to the inputs (seeds, fertilizers, pesticides, information and credit) in which the new technologies are embedded (I.J. Singh, 1990). Tenancy has been declining in India overall, appaently due to increasing modernization of factor markets (in the Punjab, for instance, there is a growing land rental market and large farmers are renting in land). Tenancy per se does not affect productivity once size, land qdiality and irrigation differences an accounted for (Singh, 1988a and 1988b), except in the smallest size groups. However, these groups predominate in eastern India, where there is also evidence that nutrient use on small farms is lagging (Singh, 1988a). Levels of rural investment may also be compounding problems - investmet in infastructure, water control and technology has been lowest in eastem India. 74 D. laftmc= hriggaboa27 2.122 Resolving the problems of irrigation in india will be the main challenge for boosting future agricultural growth. lle future of Indian agriculture is inexticably interlinked with the development of irrigation. Irrigation has been responsible for a large part of the sector's past growth and it will continue to be a major factor in the future. While it is possible to raise the productivity of rainfed agriculture, and there are indications that a technical transformation is ndeed underway, gains have been and are likely to continue to be slow in coming. Larger gains are likely to be generated by increasing the area undxr irrigation and raising the efficiency of existing irrigation schemes. This would, in turn, facilitate the shift to higher-value crops. While irrgation's future role is central, there are significant and difficult issues to be faced, as potential for new irrigation dwindles and costs escalate, as subsidies for operation and maintenance surge, and as perfonnance on existing schemes continues to be below expectations. 2.123 X C E t _ . The importance of irrigation for the development of Indian agriculture reflects the country's agroclimatic conditions. In large areas of India, rainfall is too sparse to support anytiing but cultivation of low-yielding, drought- resistant crops. In other areas where rainfall levels are sufficient for higher-value crops such as wheat and rice, heavy, irregularly-spaced downpours limit its agricultural benefits, resulting in erosion, low rates of percolation into groundwater, flash floods and difficulties in storing water. Surplus water from the monsoon can only be used during the dry season if stored either on the surface or under ground. 2.124 Most of the rain in India falls during the southwest monsoon from June to September. Regional variations in rainfall levels are great, ranging fom over 1100 cm per year in Assam in the extreme east of the country to only 20 cm in westem Rajasthan. More than 50% of irrigated land is in the Indo-Gangetic Plain. In this region, which stretches across north India from Pakistan to Bangladesh, there is a gradual transition in physical and socio-economic conditions with rainfall, cloud cover, surface flooding, rural population densities and subsistence fanning increasing from west to east. 2.125 Soil conditions, cropping patterns, fanning systems and land tenure arrangements also differ regionally. Rivers flowing through the Indo-Gangetic plain have large catchments, including snowmelt from the Himalayas and their flow is perennial. Here, topography permitted irrigation by diverting river flow into canal systems. However, as possibilities for diversion were exhausted expansion increasingly depended on storage. Geology of the plain is also favorable for groundwater storage. In south India, rivers are largely seasonal and geology is not favorable for groundwater storage. Systems have depended on storage of monsoon rains in systems ef small dams ("tanks") along the course of rivers. These facilitate the irigation of rice and the recharge of groundwater. 2.126 avne of Irration Systems. The type of irrigation system has important implications for performance, ease of management, and responsiveness. Four regional irrigation management systems have evolved in response to India's diverse water supply and agronomic conditions: U Z7This section is based on J gjnn Secia RC*k (Wodid Bank. 199 1) which provides a cmprhebensive review of ingaion issues. 75 -- the warabandi system of semi-arid northwest India, where inrigation water is rationed strictly according to farm area and supplied on a rotational schedule. Farners decide on the crops they will grow according to the moisture supply they expect. Since irrigation is generally not expected to respond to differing crop requirements or rainfall condidons, infrastructure and operational procedures are elatively uncomplicated; --the shejpali systems of western peninsular India, where farmers must obtain official sanction, usually annually, for their proposed cropping patterns, and are then entided t irrigation service according to dteir crop requirements. Since water requirements vary according to cropping patterns and rainfall conditions, distribution systems are more complex and management is more difficult; --the localization schemes of southern India, where the focus is on control of cropping patterns. Low lying areas which collect rainfall runoff are zoned for "wet" crops (rice and sugarcane), while higher areas are limited to irrigated "dry" crops. Water is released to the command area at the beginning of the cropping season until the maturity of the main crop. Distribution may be rotated if control structures exist, but response to rainfall conditions is limited; --the traditionalfield-to-field pattern of rice irrigation used in eastern India and the delta areas of the south, where continuous irrigation is previded during the rainy season (kharif) in order to ensure adequate supplies of water for timely start up of rice nurseries and effective use of rainfall during transplantation. Continuous flows are divided among farmers on the basis of ever smaller streams to the individual plot. Infrastructure and operating rules are the product of evolution rather than design. The tank systems of southern India are a variation of the field to field model in which chains of small dams are built to support field-to-field irrigation practices. 2.127 The primary distinction is between systems that distribute water according to predetermined procedures and require the farner to respond accordingly (such as warabands) and those that attempt to meet crop needs (such as sheipali). The fonner are sometimes referred to a supply-based, or crop to water, systems; the latter demand-based, or water to crop. In supply- based systems distdbutions are largely predetermined, the role of the irrigation department tends to be simpler and crop management decisions are left to the farmer. Demand-based systems require the irrigation department to respond to changing farner needs and require more complex and flexible infrastucture and intensive management or control over what farmers do. In actuality, no system is completely demand- or supply-based. Rather, these distinctions illustrate the tradeoffs between flexibility or responsiveness of systems and the degree of sophistication of management and complexity of infrastructure required. 2.128 Role of Irigation in Rural Development Expansion of land under irrigation has been an important feature of India's agricultural policy. The net area irrigated was doubled from 21 million ha in 1950 to 42 million ha by the mid-1980s (Table 2.29). With part of this double- cropped, the gross area irTigated rose fron about 23 million ha in 1950 to 54 million ha by the mid- 1980s. Irrigated agriculture now accounts for somewhat less than a third of India's gross cropped area, but contributes 55% of agricultural production. 2.129 The rapid growth of irrigation has involved a major drive, financed mainly by public investment, to construct new surface irrigation schemes and an enormous, largely private, expansion of tubewell irrigation. The area under surface irrigation increased from about 8 million ha in 1950 to 16 million ha in the mid-1980s. This growth has been dwarfed by the development of tubewells which were virtually nonexistent as late as 1960, but irrigated over 11 million ha by the mid-1980s. While tubewell development was largely privately financed, a considerable 76 subsidy is implicit in tariffs that do not reflect the long run marginal cost of supplying electricity (and with low collection rates) ( para. 2.14). 2.130 Irrigation has contributed to the acceleration of India's agricultural growth rate from about 0.4% during the colonial period to 2.6% in the post-Independence era. The expansion of irrigation and the consequent rise in the volume and reliability of water supplies has not only directly increased yields, but has been a vital factor in the expansion of the use of high-yielding varieties of wheat and rice and of chemical ferdlizers (para. 2.94). Irrigation has also increased the possibility of growing crops outside the rainy season (double cropping). About 60% of the increase in output since Independence is direcdy attributable to irrigation and perhaps 80%o to the combined impact of irrigation and modem inputs. 2.131 Although the principal effect of irrigation has been to encourage expansion of production of wheat and, to a lesser extent, rice, irrigated area devoted to higher-value crops such as oilseeds, sugar and cotton, has doubled since 1960. Irigation has also reduced inter-year fluctuations in agricultural output due to fluctuations in rainfall. This, coupled with the establishment of the national foodgrain stock and an improved distribution system, has gready reduced the possibility of famine. Table 2.29: Development of Irigadon: 1950-1985 (million ha) .19525 1906 12MI 180-81 19885 Canal Iriigation 8.3 10.4 12.8 15.3 15.9 Tanks 3.6 4.6 4.1 3.2 3.3 Tubewells n/a 0.1 4.5 9.5 11.3 OtherWells 6 7.2 7.4 8.2 8.7 Odter Sources 3 2.4 2.3 2.6 2.6 Total Net rrigated Area 20.9 24.7 31.1 38.8 41.8 Average Annual Growti Rate (%) - 1.7 2.4 2.2 1.9 Source: Ministry of Agriculture 2.132 Irrigation has also had a positive impact on farm incomes, employment and regional development. Farn incomes increase nearly in proportion to productivity gains from irrigation. Providing a fann with irrigation services will, on average, raise income by 80 to 100%. Employment also increases. Surveys indicate incremental labor use (outside household labor) of 60 to 80%. Irrigation development has a multiplier effect on nonfarm incomes: estimates indicate that a 100 rupee increase in farm income generates an average of 66 rupees in nonfarm income. Not surprisingly, district level data reveal a strong inverse relationship between the incidence of poverty and irrigation development. For districts with less than 10% of gross cropped area irrigated, 69% of the population had incomes below the poverty line; in districts where irrigation covered more than 50% of crop area, the incidence of poverty was only 26%. 77 2.133 Despite its positive impact on the evolution of the agricultural sector, on rural development and on poverty levels, there are serious questions about the future role of irrigation. First, there are questions about the physical resources available for fuure expansion and about the rates ofreturn on alternative expenditure pattns. Second, there are concems about the efficiency and effectiveness of existing irrigadion schemes. Third, there is the issue of the financial burden investmene, operatons and maintenance are placing on the central and state govemments. Fmnally, there are wories about the environental impact of large-scale imgation. 2.134 1. While yields in irrigated areas are, on average, more than double those in dryland farming, 2.2 mt per ha compared with 0.9, productivity of iigation is low by intenational standards. For example, irigated crop yields in east Asia tend to be in the range of S to 6 mt per ha. To some extent, this reflects climatic differences and the fact that India has been following a protecdve or extensive irrigation strategy, building systems that are designed to spread the water thinly so as to irrigate the greatest possible land area and encompass as much of the nual population as possible. It also reflects India's relatively lower water resources. Even so, research results in India suggest that yields on the order of 3 to 4 mt should be attainable and many projects are planned on this basis. 2.135 The low average productivity of irrigation masks strong regional differences due to differences within India in agroclimatic conditions and water management systems (Table 2.30). The two most productive iigated areas in India are the northwest and the delta areas of the eastern and southeastern coast. In the former, scarce water resources are rationed through the waraband system, but are often supplemented by (private) groundwater irrigation using tubewells. Since the system delivers predetermined quantities of water to each farmer proportional to the size of his land holding, infrastructure is relatively uncomplicated, requiring few control structures, is reliable, easy for farmers to understand and monitor, and requires few operational decisions by irrigation departmnent staff. In the latter, water supplies are ample and rice monoculture predominates. Water management is not a serious issue and close infonnal cooperation by farmers and the relatively simple infrasucture of field-to-field operations produce good results. Lowest yields are in eastem states were ittigation must respond to varying rainfall conditions but systems are characterized by poor control of water and management and insufficient drainage. In this region, agricultural development is also hindered by fragmentation of land holdings, insecure land tenure and weak institutional support (Box 1.2). 2.136 Systems that attempt to allocate water according to demand (sheipals) or to control cropping patterns (localization) have poorer results. Under Indian conditions, systems that require irrigation departnents to respond to fluctuations in rainfall and widely valying demand (such as sheipals) generally tum out to be too complex to manage properly. Moreover, if assumptions about the likely availability of water in the system, its seasonal distribution and variability, losses in conveyance, distribution and field application of water are incorrect, and systems are unable to meet demand, they turn out to be unstable and unreliable, with endemic farmer intervention. Farners at the head end, who receive water first, appropriate the water for themselves, often overwatering their water-intensive crops, while tailenders practice low input agriculture (and in extreme conditions may never see water). The problems of localization schemes are similar. Areas at the upper reaches, designated "irigated dry" divert water destined for the "irigated wet" areas. 2.137 Inadequacies in the perfonnance of irrigation systems relate to factors other than agrochimatic conditions, physical design and management systems. Irrigation departnents tend to be engineering-oiented, concerned with construction of systems rather than their operation. They are hampered by fragmented responsibility, lack of monitoring and evaluation and, as a consequence, accountability, poor raining and operations. Coordination between agriculture and irrigation departnents is weak, especially at the time of project preparation. Research on water management practices, suitable cropping patterns and opeations and maintenance technology is inadequate as are extension services. 78 Table 230: Cam in knd Aran ad C Ni,n AMarSt (196063 to 1980.83) Ranrl P= Cat Net crpping ) ,,! Sown Area MEM9 D=ft C" 1 12mm 12&0 M 1. Low Ran Regimn Punjab 590 53 82 127 161 Haiyam 610 32 62 133 149 Rajana 50 13 20 108 116 Gua 870 7 21 105 112 2. Medim Rainfll Regon Mdwashu 870 6 11 105 110 AndhahPtadeh 900 27 32 III 115 Taml Nadu 990 41 48 121 124 Kamaa 840 9 14 104 108 Uuar Pndeab 1040 29 54 127 142 3. HfDgbRaifaU RIetkm Mahya aP 1140 6 12 113 114 Bhr 1260 24 36 135 135 Wcd BenRS** 25 35 117 135 asa 1450 16 20 112 141 4. AllIndia 19 28 115 124 fow r197 fw 198384 Rqid nA ad gm o h4pi mmusaL Sum MhdmyofApfwhm1i.OL 2.138 Prrties for Eur Developme Anaysis of physical Potential and economic costs and benefits suggest that public expenditures on increasing the efficiency of existing systems (including repairing and upgrding infiastructe and drainage) and completion of existing surface irrigation systems, should have higher priority than investment in new surface systems or public tubewells. 2.139 The most comm rnly cited estimate of India's irrigation potential is 113.5 million ha, using water from all sources.28 Potential created is estimated to have been 67.9 million ha in 1985.29. This tieoretically leaves a balance of 45.6 million ha for future development. These estimates should only be considered rough orders of magnitude. Actual physical potential can only be assessed by a review of supply and demand conditions in natual hydrological units, i.e., river basins. Evaluation of demand must take into account provision of community watr for urban and rural populations, the water requirements of industry, thermal and hydmelectric generation and 28rIgaion poetial is the te ical gross cropped area that can be inigatd by fte infrtructure created and is thefore de cultivatd area to be irgated multpied by the assumed irgtio intensity. Estimation of the area to be imgated depends on in assumed cropping patten (water-intnty of th aops to be grown) and the es _mat efficiency of water use (in the case of suf wems, e pent of waer at the headwo that is not lost in conveyance and is available for applcaton at fte farm). 29lnvesunent ceats iigation potetial when the system can deliver water to the canal outeL It is counted as uilized when faumers acually convey water from te outlet to their fams. Ther is a sigifict gap between poential crated and udlized which is sometimes cited as evidenoe of unuilized capacity. However potential is based on assumptions about cropping pattns that may not be chosen by cultivators responding to risk and pmfitability. Systems are at times designed on the basis of oveopti c assumpions about water availability and system fienc. 79 river flushing compete with irrigation. These uses am expected to increase seven-fold by 2025. While this would not severely limit the overall availability of water for irrigation, regional supply demand imbalances may arise, especially around large urban areas. 2.140 Prospects for new surface irrigation systems are dwindling. Most of the easier and cost-effective options have already been utilized. The real per hectare costs of major irrigation systems may have doubled over the past three decades. Possibilities for run of the river diversion are virtually exhausted and increasing surface water supplies will depend largely on creation of new storage. Most of the easier to create reservoir sites have been taken up. The remainder often require interstate agreements which are difficult to reach30 and/or face environmental or resettlement constraints. New surface systems therefore face increasingly marginal conditions in terms of physical setting and economic rates of return. 2.141 Surface irrigation systems have lower economic rates of return (ERR) than other irrigation investment. ERR projections for major projects are inherendy speculative: construction takes many years and many more are required for farmers to adapt and use water supplies effectively. Ex ante estimates of ERRs on Bank-financed projects in the range of 10-20% have generally not been attained. Targets for irrigated area and output have not been achieved, completion has often been delayed and investment costs have been higher than estimated. Experience suggest that moderately well-performing projects will yield ERRs in the range of 5- 10% and excellent ones 10- 15%. 2.142 ERRs in this range should not totally rule out such investments. ERR calculations do not adequately capture the impact of projects on poverty alleviation and regional development. They do not fully incorporate the impact of surface systems in recharge of groundwater. Finally, assessment of benefits using international prices of crops does not measure the benefits of continued domestic food security. However, the low rates of return on these projects suggest that caution should be exercised in initiating new ones. 2.143 Initiation of new surface irrigation projects - or any water resource development projects in India - calls for more rigorous and objective analysis in project selection. At present, government project evaluations do not include ERR calculations, but rely on simple cost: benefit ratios. Lack of proper review of irrigation projects is a significant problem, and has doubdess contributed to the large number of project starts which are made. Project selection depends more on heavily engineering-oriented irrigation departments (who are more interested in technical issues and expanding lucrative construction contracts), politicians and farmers - all groups interested in maximizing project starts - than on rational and economic evaluation of development oppomunities. 2.144 New water development also calls for careful and thorough analysis of water resources. This involves an analysis of the basin and the existing and project demands for irrigation, power, municipal and industrial needs - as well as the operational objectives such as flood control. Often, over-use at some sites is already occurring, and new projects are planned based on the assumption that existing projects will restrict their use to that originally planned, or even "economize" to levels below that. New investments based on such calculations at best have no economic benefit, and more often will reduce one reliable and productive (if water intensive) project to two or more unproductive projects with unreliable water supplies. Simply intensifying development at the existing site, and giving better service to existing tail areas may often be a more economic solution. 30hrigation is a state subject under the Indian constitution; states are fee to utilize water within their boundaries States are not free to develop interstate rivers on their own, since most rivers flow through more than one state. If states are unable to agree on water sharing, a tribunal is established to determine riparian rights. Critia used iclude existing use, catchment area, potential for exploitation and need. The exisdng use criterion has the effect of encourgng premature project inplementation and excessive water diversion to establish a case. 80 2.145 A perennial problem in irrigation invesunents has been the large sgilloyvrf uncompleted jects from plan to plan. The Fifth Plan (1974n5-1978179) was characterized by a spurt in new project starts, encouraged by rising state revenue surpluses and a new emphasis on food self-sufficiency. The largest number of major and medium projects were launched in this period: 73 major and 331 medium projects, adding to the existing pipeline of 93 major and 165 medium irrigation projects. Although the number of new starts declined in the 1980s, as a concerted effort was made to clear the pipelne, the spillover of imigation projects into the 1990s remains high: 142 major and 216 medium iigaton pjects (with an estimated potential of 12.5 million ha), requiring nearly Rs. 240 billion (US$13 billion) for completion. An estimated 20% of these projects are in one state, Maharashtra. Deterioration of state finances and rising construction costs have contributed to this backlog. Current proposals for the Eighth Plan, however, do not foresee completing many of these projects (targeting completion mainly for externally-aided and medium projects), and in addition allocate up to 25% of Plan outlays on irrigation for new major and medium projects. Stretching irngation investments out over a dozen or more years has tended to decrease returns to irrigation investment and slow development of water resources. 2.146 Because of sunk costs, expenditures on completion of surface irrigadon projects should have high rates of return. It is not possible to say, however, why and to what extent these projects are "incomplete", and thus which deserve priority. Some projects are largely complete, but remain classified as incomplete to ensure funding in the capital budge. while others have barely started. A survey is urgently needed to identify priorities for project compledon. At the same time, however, given weaknesses in the project selection process, an assessment ne? 'ds to be made of the costs and benefits (including environmental impacts) of these projects, and competing water uses. 2.147 Data o. m,-undwater rsources are also somewhat speculative. The availabiity of groundwater for irrigation depends on annual recharge generated by rainfall. Measurement is difficult because some of the base flow or rivers in low rainfall periods is provided by groundwater, some of it is absorbed by deep rooted trees and shrubs, some flows into deep aquifers where it cannot be recovered, some is brackish or in other ways unsuitable for agriculture and some occurs in areas which receive heavy mainfalL 2.148 Crop yields on land irrigated by private tubewells are, nevertheless, significantly higher than those depending on public surface water schemes. Tubewell iTrigation is available on demand and can be better managed by farmers to meet the requirements of their crops. Irrigation from small private shallow tubewells serving 3-6 ha show rates of return in the range of 30%. This may be something of an overestimate due to underestimation of the economic costs of providing electric power. In interpreting these results, it should be noted that they generally benefit from water recharge provided by surface water systems (although in many areas of eastern India, groundwater does not depend on recharge). As such, they are often located on surface schemes (conjunctive use of groundwater). Investment in groundwater exploitation thus is closely linked with public investments in irrigation intrastructure. 2.149 Experience indicates that tubewell development should generally be left to the private sector. Available evidence indicates that public tubewells perform significandy less well than private tubewells. Moreover, fears of local water monopolies developing have proven unjustified. Studies of emerging rural water markets indicate that prices tend to be closer to the cost of extraction than to the marginal product of water. Private groundwater development has been especially important in increasing yields and crop diversification on public surface schemes where water management is poor, or where surface water supplies are limited. 81 2.150 Nblic tubcwsJh designed to serve fanners in an 80-100 ha block have lower ERRs. Although ERRs estimated in Bank-financed projects were expected to be 30-40%, assumptions about operations, area served, cropping mtensity and yields have proven to be optimistic. Field observations indicate the impact on productivity has been poor and actual ERRs will be well below expectat; 'ns. 2.151 Improving the Efficiency of Exis ing Systemw. The reasons for the under- performance of India's irrigation systems are varied and complex and there is no single recipe for improvement. The approach taken by the Bank-financed National Water Management Project is to improve water delivery on a scheme-by-scheme basis. General criteria for improving water management include ensuring reliable, predictable and timely water supplies within the scheme, while decreasing opportunities for ad hoc farmer interventions. Each system is approached as a unique entity and is analyzed individuatly. The aim is the development of an operational plan, with the assistance of the agriculture departnent and farner participation, for each scheme. This plan defines the principles of water distribution (indicating the allocation of water by area over seasons) and allocates responsibilities for implementation. It takes into account the pattern of water availability, the capacities of infrastructure, the requirements of crops and other agronomic considerations. The infrastructure of the system is then upgraded or adapted as required to permit implementation of the operational plan. hnprovements in management and supporting services are programmed to complement the operational plan. It must be emphasized that while improving water management is vital to improving performance of surface schemes, this is not a quick-fix for the ills of the inrigation sector. It is a complex, dme-consuming process requiring strong political commitment. 2.152 In designing operational plans and restructuring systems, one of the major issues is how responsive the system should be to crop requirements. Experience has shown that it is not usually possible to provide individualized service to farmers with the infrastructure available in surface irrigauion projects in India. Consequently, at some level in the system control must be transferred to the farmers. Farners can only be expected to organize themselves if the service they receive is reliable. The first step in ensuring this is to formulate an operational plan that is realistic in terms of its infiastructure and managerial requirements. Design (or revision) of systems should provide for as much flexibility and responsiveness to farmer demand as is consistent with Indian coqditions, especially the probable continued weakness of irigadon departnents. Systems should thwos have simple operating principles and control mechanisms. 2.153 Once farners are provided with timely and dependable water flows at the government oudet, they can be expected to make the required investment in land leveling and on farm channels themselves. Thus the command area development program (CADA), under which the Government assumed responsibility for these activities, would no longer be required. 2.154 Inceasing the Sustainabilityof lrigation. There are several dimensions to the issue of sustainability of irrigation: first is the life expectancy of infrastructure, i.e., the quality of construction and maintenance; second, is its the environmental impact, i.e., waterlogging and salinization (these environmental issues are treated in para. 1.19). 2.155 Construction quality varies widely throughout India. While there are many examples of high-quality construction, inferior work is all too common. Many structures completed in the last two decades are in need of reconstruction or renovation. Improvement in construction quality should start at the design stage, with more complete compilation and analysis of basic data, care in evaluating site conditions, ensuring that designs are appropriate for local conditions and that plans and specifications are complete and clear. Contracts should be packaged to facilitate high quality work. 82 2.156 Problems of corruption in irrigation construction appear to be widespread. Contractor selection should be based on technical quality and fmancial soundness, and payment should be suspended when work is not up to standard. At the same time, supervision of contractors is sometimes lackdng, leading to problems of construction quality. Clear channels of communication and responsibilities for contractors and irrigation departments need to be established. The most important requirement is, however, for improved quality control; firn and meaningful supervision of all stages of construction. 2.157 Signs of poor maintenance - silt deposits, weed infestation, broken linings, malfunctioning and damaged structures - are visible in most surface irrigation schemes. Pumping equipment in many public tubewells is out of order. Poor maintenance makes it impossible for irrigation systems to provide reliable service. The resources available for maintenance have been squeezed by the failure of states to collect meaningful user charges and by the growth of staff costs (para. 2.73). There are also technical issues in maintenance: maintenance techniques are primitive and outdated. 2.158 Improving maintenance requires a strong political and administrative commitnent by state governments. Baseline inventories of maintenance and rehabilitation requirements by command must be carried out. Annual maintenance plans must be developed with realistic average cost norms. The states should commit themselves to giving operation and maintenance (O&M) costs fint claim on resources, before the financing of new projects. Supervision and monitoring of maintenance by irrigation departments should be upgraded and the center should make adequate performance on maintenance a criterion for the allocation of Plan funding of irrigation investment. More research and training needs to be done on upgrading maintenance standards and techniques. As the reliability of water supply increases, and water user associations evolve and are strengthened, responsibility for maintenance of 7acilities below the govemment outlet should be transferred to the farmers. 2.159 Futur Stragy. The irrigation sector is in many ways a paradox. On the one hand, irrigation development has been the major determinant and source of past agricultual growth - including India's achievement and maintenance of foodgrain self-sufficiency. It is crucial to stabilizing production in drought years. Similarly, fume growth in production of basic foods and diversification into higher value crops will be based on existing and expanded irrigation infrastructure. 2.160 On the other hand, the subsector has severe problems in almost every aspect of implementation and perfornance: resource planning is weak, design is often poor and generally would benefit from incrased access to modern techniques; constuction quality is a major problem in most states; operation and maintenance are below acceptable standards; and cost recovery is virtually non-existent. The benefits of projects are generally lower than expected, late in materializing, and more expensive to realize than expected at the time of project definition and justification. 2.161 Reconciling these apparently contradictory facts is essential to setting appropriate strategy and realistic objectives for the subsector. Explanations are (in varying degrees): that poor perfornance is a relatively recent phenomenon and "old" projects were better designed, constructed and operated; that the feasible direct return to large-scale surface irrigation, primarily for foodcrops, may only be 5%, though secondaLy effects make overall returns adequate; that while performan'-i in surface systems has per se been poor, private wells (often facilitated by recharge from surface systems) have had very high retums; and finally that the newer projects have been sharing an increasingly constrained and unreliable water resource. 2.162 This situation highlights seveal lessons for future irrigation development. First, those technical standards which served well as the basis for India's many successful projects should be rigorously enforced today. Problems of construction quality, poor 0 & M and 83 inappropriate water management must be addressed. Second, new irigation development must be planned and coordinated on the basis of the river basin, not by state, requiring very careful and thorough analysis of available water resources and muldple water use. Third, the priorities for pului z.avesunent should be to make existing infrastructure more producteve and to complete viable unfinished projects, although ther is scope for expansion of irrigation in the future. Investments, either in completing schemes or in new ones, should be based on analysis of actual achievements in existing projects, rather than in inflated assumptions designed to meet unrealistic cost/benefit targets. In parallel, acceptable ERRs for irrigation projects should be reexamined in light of experience and significant secondary effects (such as groundwater recharge and development impact). Finally, wherever possible, direct private development or partial privatization (through passing ownership of parts of the system to groups of farmers) should be pursued, so as to increase accountability and foster the high levels of productivity already achieved under private wells. 2.163 Resolving the problems of poor performance in the irrigation subsector will also require political will. Most of these issues have political roots: poor quality control has direct links to corruption; the specialist skills needed for high quality planning, design, construction and operation are inhibited by the perpetual merry-go-round of transfers; and new irrigation projects (and public tubewells) are often chosen for expediency rather than ior returns. Irrigation development lacks an objective arbiter. all the parties involved (engineers, politicians, bureaucrats, and farmers) are in favor of irrigation investment. This crucial oversight role remains to be filled by the central agencies charged with that responsibility, though the recent National Water Policy paper sets clear and comprehensive guidelines for the required central input. 2.164 With these changes in place, difficult though they will be, irrigation can provide contiiuing, and often improved support to agricultural development - for some years through increased irrigated area (as potential created is actually used, as economic project starts are completed, and as new potential is judiciously exploited), and through more productive use of existing areas. Priorities for irrigation development are outlined in para. 3.52. Rur Infrastrucue 2.165 In India, many rural people lack access to transportation infrastructure, and animal carts still carry most of the people and goods. For these people, India is far from being a physically integrated country. This poses a significant constraint to rapid technological change and new developmental opportunities (Box 2.3). Lack of good transportation hampers agricultural development in many ways: prices for inputs are higher and output lower, marketing of high value perishable products is impossible, and access to new technology and information more limited. Bottlenecks in the overall transport infrastructure prevent specialization along lines of regional comparative advantage, and constrain opportunities to exploit India's burgeoning domesdc market Although the importance of rual roads is mcognized, there are issues over how and where to build rural roads and the sizeable funds required. 2.166 India has an extensive transportation network which j,icludes 1.8 million km of roads and 62,000 route-km of railways dtroughout the country's 3.3 million km2 (Table 2.31). Road density is about 0.5 kmn of road per mn2 of land, compared to about 1 km road/kan2 land in Europe and over 3 in Japan (although India has higher road density than many Asian countries, which range between 0.1 km road/kIn2 land in China and under 0.2 in Malaysia and Thailand). Despite substantial improvements since Independence, infrastrucme development in India has not kept pace with tranport demand, leading to high traffic intensities and marked capacity constrints, especially on the major highways. Road passenger and goods traffic (as well as total vehicle population) have increased over thirtyfold in the last 40 years, while total road length has increased only fivefold. The relative ieglect of major routes has led to severe road congestion, high vehicle operating costs, and bottenecks in marketing and the regional integration of agriculture which accounts for about 30 of goods moved by road. 84 BOX 2.3. Rul A relationship has long been recognized between agricultural development and investment in infrastructure such as transportation and communication facilities. Roads can stimulate agricultural change and modemization, not only through their immediate effects on relative prices and marketing opportunities (forward linkages) but also on their backward linkage effects. The most evident impact has been when roads open up opportunities for commercial agriculture, especially encouraging shifts to oroduction of higher value, transport-sensitive products (fruits, vegetables, dairy products). Just as important are roads' backward linkages, through enabling the supporting services to encourage technological change and diversification. Roads improve access to extension agents, banks, markets, and he-lth services, and act as poles of development for locating irrigation, markets and electricity infrastructure. The impact of these linkages is confirmed by empirical studies at both the micro and macro level in India: impacts of rural roads have been measured on production, extension, yields, and both input and output prices (Fischel, 1990; Faust 1990). In Andhra Pradesh, traders made extra-normal profits of about Rs.5 per quintal of rice in an infrastructurally undeveloped village, but no excess profit in four villages with better transport. Road construction in Himachal Pradesh (which increased by a factor of nearly 40 between 1950 and 1983) has made possible a spectacular increase in horticultural production. In Tamil Nadu, road development has had a positive impact on output, cultivation of new land, and increased value of agricultural produce, including diversification into dairying and poultry breeding. Villages near all-weather roads in India have higher land utilization, fertilizer consumption, use of HYVs, and livestock and vehicle ownership, than villages located away from all-weather roads. Roads have been cited as one inportant factor in encouraging fertilizer use. Aggregate studies for groups of countries (Binswanger, Yang, Bowers and Mundlak, 1987) have confimed these effects: road density has a clear positive effect on crop and livestock output, crop area and yield, and fertilizer demand. Binswanger et.al. (1987) estimated that the elasticity of output with respect to road density was 0.121. Similar analysis for India found a strong direct positive relationship between rural road density and crop output and fertilizer demand, as well as effects on other variables such as bank location, which in tum led to higher agricultural invesunent, increased fertilizer demand and higher output (Binswanger et.al., 1989). 2.167 In the last decade, rural roads have received 40% of total road expenditures (although main roads carry much higher volumes of traffic), in an effort to reach GOI's goal of connecting all villages with over 500 inhabitants to an all-weather road by the year 2000. Only one- half this goal has been met to date, and rough calculations show that the cost of the ambitious program could easily surpass Rs. 400 billion. There are marked regional variations in the coverage and adequacy of transport infrastructure. The highest village connectivity is found in the Punjab, Haryana, Kerala and Gujarat; the lowest is in eastern India (Table 2.32). 2.168 The issue is not so much whether to provide rural roads in India, but rather what kand of roads and how to build and maintain them. The first decision is between all-weather roads (which are more expensive) .nd more basic rural roads. Here decisions must depend on local conditions - rainy areas for example usually benefit more from all-weather roads, which are passable even in the monsoon conditions that prevail during planting seasons. 85 Table 2.31: Road Length by Road Category and Surface Type, 1988 ('000 km) Cement/ Water Concrete Bound Gravel/ mo= h National Highways 33 - 33 State Highways 111 11 5 127 Major District Roads 119 60 37 216 Rural Roads (Other District & Village Roads) 60 200 790 1050 Project Roads (Forest Dept, Irrig. Dept., etc.) 7 17 176 200 Urban Roads 74 25 41 140 TOTAL 404 313 1,049 1,766 Source: Fischel, 1990. Table 2.32: Roads by Ron in India SQae Roosf (1000km) (kn roads/sq kn arma) East 61.4 0.12 North 118.5 0.18 South 211.6 0.33 West 209.5 0.16 All India 601 0.19 Source: Statistical Abstract India, 1987. 2.169 The second set of issues relates to how roads are built. In India, there are major shortcomings in the institutions which plan, construct, maintain and finance mral roads which, unless addressed, could lead to wasting a large portion of the money and efforts spent on rural roads. Nwnerons agencies, from public works and irrigation departments to rural employment schemes, plan and build nrual roads with little coordination or overall planning. Rural roads are often either overdesigned for the projected traffic loads, or woefully underdesigned. Quality control and construction methods are poor, leading to waste of high-cost road materials. The problem is .)t so much labor-intensive construction methods, which are appropriate in India, but in ensuring sufficient equipment inputs, such as compactors, to guarantee minimum quality standards. More funds are directed to building new roads than to maintaining existing roads. Coordination on financing among the multiple agencies building rural roads is also lackdng. 2.170 Um= =. The importance of road infrastructure to stimulating nrual development is clear. It is also evident that given overall investnent needs and budget constraints in India that it will te nearly impossible to in:rease investment in rual roads significantly. There is 86 a strong case for shifting infrastructure investments to more backward regions with good agriculture potential (e.g., eastem India): this would entail a shift in priorities in allocating money for roads. Much can also be done to ensure that the resources currently spent on rura roads are used more effecdvely. Better coordination and planning of rurl roads, a re-examination of design standards, measures to ensure an optimum labor/equipment mix in construction, review of the role and potential of rural employment schemes in road construction, and allocadng more funds for maintenance would all contribute to more and better rural roads. In mtun, rural roads construction will facilitate the delivery of services, open up villages to new technologies, and expand opportunides for producing and markedng new commodities - precisely the type of enabling environment that will boost production and rural incomes. CHAPTER IE. SIEUI HQEFRNE M A. S=gr mr-Q 3.1 Indian agriculture has achieved modest success, but there is increasing evidence that Government development policies and strategies will not evoke the level and patterns of growth needed in the future. Foodgrain production has grown, India has become self-sufficient in basic foods, and famines have been largely eliminated (although nutrition levels remain low for many poor people). This growth moreover has been achieved despite considerable discrimination of the trade and price regime against many crops. But the achievements have come at a high cost, both in budgetary terms (due to large and escaladng subsidies) and in terms of suboptimal resource use and efficiency losses. 3.2 Although Government's strategy of extensive involvement in agricultural development achieved growth in tht past, the system is now collapsing under the weight of uncontrolled subsidies, and extensive rent-seeldng. The trend of shifting public expenditures from capital investment to subsidies and welfare programs coupled with stagnating levels of private investment (even with large credit subsidies) are major danger signs. Agricultural trade has declined sharply in the last decade. Moreover, the current policy mix of heavy Government intervention and regulation, and concentration of resources on a limited number of regions and crops, provides a weak foundation for future growdt. In the absence of technological breakthroughs and in the face of sobering resource constraints, future growth must come primarily from increasing the intensity and efficiency of production, and shifting at the margin into crops with higher value added. 3.3 The problems in the agriculture sector are not new - and have been years in the making - but the issues have been brought to the forefront in the current macroeconomic crisis. Sharp declines in resources, tightening capital markets and cuts in public expenditures are forcing the Government to confront many issues. Agriculture is a major contributor to the current situation (agricultural subsidies are the largest in the budget) and there is an immediate and urgent need to extricate the sector from the impact of the fiscal crisis. But even without the crisis (which at least has the advantage of focusing policymakers on many critical agricultural problems), Government policies are unsustainable and adjustments are needed. Cutting subsidies, further restraining public investment, but essentially keeping overall strategy intact will not address the underlying and fundamental issues affecting the pattern and pace of sectoral growth. These issues center around the naue and extent of Government's role in agriculture, efficiency and equity. 87 3.4 Extensive and active Government involvement in the sector, firom input production to market regulations to trade controls, is not only unsustainable in financial terms, but even more importantly is constaining growth. It is difficult to justify such levels of involvement when India has developed mature production, marketing and supply systems in most areas of the country. In the first instance, Government must sharpen the objectives of its interventions and policy goals, and reconsider how best to achieve these with different instruments, at lower cost and more efficiently. Govermment must concentrate on those areas where the public sector has a clear and unequivocal role (for example, incentives, infrastructure development, research, food security), and direct its resources and interventions towards improving the quality and management of these activities. Conversely, Government must cut back its involvement in areas where its operadons are less efficient and less critical, and where there are alternatives (input production and marketing, public tubewells, output marketing and trade are sotre of the must important examnples). It must also cut back its heavy regulation of economic activity in the sector, from licensing of small ferdlizer traders to trade controls to levies on rice millers and sugar processors, regulations which serve mainly to increase market costs and inefficiencies. 3.5 Closely related to issues of Govemment's role in the sector are those concerned with efficiency. In the resource-poor environment which prevails in India, there is a high premium on efficient use of resources, whether they be physical resources (land and water) or economic. Past policies have not sought to maximize efficiency. Results have included (among others) overexploitation of groundwater due to electricity subsidies; degmdation of land resources and loss of forest cover, incentives to produce crops in which India has no comparative advantage; diversion of rents to small groups (wealthy fanners, the fertilizer industry); distortion of signals to invest in agriculture; and low returns from sizeable investments in irrigation infrastructure. The losses are significant and have had a real impact on growth. As an indication, estimates of foreign exchange losses implied by current levels of disprotection for major commodities range up to US$3.4 billion annually (nearly half last year's cunent account deficit). 3.6 The third set of strategic issues concem equity, both interregional and interpersonaL Past growth in agriculture has been highly variable among regions. While this might be expected given the varying resource endowments of India's diverse agroecological regions, much of the inequity is also attributable to patterns of investments and agriculture policies which have disproportionately benefitted certain states and certain groups. The sharpest contrast is between the northwest and the east. The northwestern states have benefited from significandy higher investment per ha in irrigation development, subsidies, and research expenditures; they have also been the main beneficiaries of foodgrain procurement programs. This is in spite of the fact that eastem India has abundant water and good climatic conditions, and indeed was the most productive agricultural area of India prior to the Green Revolution. The social results of widely diverse levels of agricultual growth have been increasing poverty in the east compared to rising prosperity in the northwest. Interpersonal inequity is also evident in agricultue strategy: most of the benefits from subsidies have accrued to medium and large farners and urban consumers.31 The poor remain nutitionally vulnerable, despite India's success in boosting foodgrain output and attaining food self-sufficiency. All these factors argue for adjustments in strategy to reduce inequities and promote growth in lagging regions. Nor will there necessarily be a trade-off between growth and equity in this shift in stratqgy. The center and east are well endowed with agricultural resources and untapped irrigation potential. At the same time, the very su:cess of agriculture in the northwest and west suggest that these regions can be weaned from dependence on subsidies, protecdon, market and trade controls, and extensive Goverment intervention. 3.7 To the extent that India addresses these issues in adjusting its agriculture strategy, growth prospects will be improved. However, if policies are only adjusted at the margin to ameliorate the current crisis, and these medium-term issues are not tackled, both the level and quality of future agricultual growth and development will suffer. 31These isses are analyzed in more detail in Subbarao, 1985a and 1985b. 88 B. An Mjustment Brogm for Agcul=t 3.8 Agriculture adjustment in India must incorporate both short- and medium-term measures. The macroeconomic crisis dictates immediate actions to cope with the fscal and balance of payments deficits. NVhile adjustments in agricultural policy will contribute to restraining these deficits, medium-term actions to revise and refocus sector programs, polucies and intervendons are the heart of adjustments in agriculture. Four areas will be critical: revising pricing and trade policies; improving the efficiency of public investment and stimulating greater private investment; encouraging technology innovation and adoption; and improving the performance of irrigation. A matrix summarizing the adjustment program is included at the end of this chapter. Pricing and Trade Policy 3.9 Adjusting the structure of agriculture incentives is one of the priority tasks facing Government. In no other area are the themes of rethinking Government's role and increasing efficiency more prominent. There is considerable discrimination in the trade and price regime against agriculture, and the costs of current policies have been high, not only in budgetary terms, but also in misallocation of resources, losses of efficiency and foregone foreign exchange earnings. Incentives and benefits have been highly skewed towards certain crops, regions and farmers, who are now among the wealthiest in India. The most immediate short-term action needed is to eliminate input subsidies. But actions are also needed over the medium-term to: (a) correct skewed incentives; (b) restructure price and market interventions; and (c) liberalize agriculture trade policies. 3.10 Correcting Skewed Incentive. The greatest impact on agricultural incentives would come from reducing industrial protection, increasing competition, and opening up extemal trade. This would lessen the pull of resources away from agriculture and into industry, as well as decrease costs of industrial inputs into agriculture. Government's recent devaluation of the rupee and new industrial policy will have positive net effects on agricultural incentives, and are an important step in correcting skewed intersectoral incentives. Discussion of these steps and proposals for further industrial and trade reform are discussed more futly in Volume I. 3.11 Within the agriculture sector, there is a need to correct skewed pattems of protection, through reducing high levels of protection for oilseeds and sugar, and increasing incentives for rice, wheat and cotton production. In addition to measures to reduce industrial protection (para. 3.9), this wili involve eliminating input subsidies, reducing Government market interventions, adjusting domestic price incentives, opening up agriculture to international market signals, and reducing trade controls. More detailed recommendations in each of these areas follow. 3.12 E-liminating Input Subsidies. The most urgent short-tern need is to eliminate input subsidies. Despite their weight in the budget, subsidies remain only a modest proportion of production costs for the majority of farners (from 1 to 14%, depending on crop - Table 3.1). Input subsidies could be halved in one year by initiating steps to phase out ferdlizer subsidies and completely eliminating electricity subsidies (encompassing a savings of Rs. 58 billion). Total elimination of input subsidies however will require phasing in over a period of years (four to five), and attention to resolving underlying issues in the fertilizer industry, performance of irrigation systems, and credit policies and institutions. Steps to phase out subsidies are outlined in the following paragraphs. 89 h.1 Aej Area Share Of Subsidy (and) DinllOc as % of Subsidy (Avg. 1w80i81 - 1986a8ua beginnves Total Ara in Donyes , EMan kdadieclnin t (Rsi (c f) under Crop le nentive3 (%) wheat 53.65 192.5 48.91 295.05 2,075.52 77 14.2 Rimo 15.77 105 46.46 167.23 1.892.05 42 8.8 aisna 3.57 40 43.57 1,696.72 16 2.6 Groundnut 8.1 42.5 100.88 151.48 1,467.53 17 10.3 Rqapeed/Mustaid 9.95 117.5 on 127.45 2,612.89 47 4.9 Soybean 13.64 ba es 13.64 1,580.59 na 0.9 Commo 13.89 62.5 58.61 135 1,096.45 25 12.3 Sugarcane ~101.6 202.5 300.53 604.63 7,718.03 81 7.8 te Eoimd yer woulderemt 7% o iatR2Omrdtd art pice forN,8%ooaa6%fK(Tde49m Sausce Buad on (JuWS (1991) 3.13 Any program for dealing with anli= ould must address pricing both at the producer and at the industry level. One scenario is to phase out budgetary subsidies for fertlizer over a period of four years, with annual price increases beginning at 30% in the first two years, anddecliningetol 1-209 i(except for imported potash)uby the fourthyear (Table3.2).32 Under this scenario, the budgetary subsidy would be reduced by Rs. 16.7 billion (one-third) in 1991192, and largely elminated by 1994t95 (except for potash, which is imported, price inceeasfr for potash would need to be higher than 30% each year to eliminate the subsidy comnpletely). Remla prices in the fourth year would be 70% of import parity prices for N, 83% for P and 68% for K (Table 4.9, Statistical Appendix). Costs of inigated wheat and rice would increase by less than % in the first two years. These cost increases would be well within increases in official procurement prices, which have increased by an average 70% overall since 1981 (the last year in which fertilzer prices were changed), and 15-20% in the last two y alone. Thus, it is recom imended that procurement prices fo be adjusted to accommodate the price increase, as farmers have for a number of years already been gaining benefits from eroding real costs of fertiizer. Instead, the impact of phasing out subsidies should be considered witin the overall recommendations to restructu pricing and marketing intervention policies (para. 3.19). This scenario is one possible way of phasing out the subsidy. Following the budget, the Govemment announced price increases of 30% for fertiizer. 3.14 While these steps would help cope with the short-term budgetary prssures of the subsidy, it is imperative that change~s be made in domestic industrial pricing policy and that protection for the ferstizer industry be eflminated. This would have far-reaching impacts and would need to be phased in. It is not realistic to ask Indian farmers to bear the burden of high fertiizer prices due to industrial protection, coupled with output prices below international levels and controlled trade; this would further decrease already low domestic incentives. There are many proposals for reformn in the fertilizer industry, the most recent being those of the Govemment- appointed B.B. Singh Commnittee. Linkidng ex-factory prices directly to import parity would, over the longer-term, best ensure economic efficiency of fertilzer production. In the short-term, it is recognized that this approach is unacceptable to the Govemnment because of potential price instability and the impact on production and investmnent. To phase in price changes, the ex- 32These simple projections incorporate World Bank price projections for world fertlizer prices to compute import parity prices and value of imported fertilizers. For this purpose, no change in the retention pricing scheme was assumed, except for a 10% annual increase in production costs. Supporting details are in the Statistical Appendix, Table 4.9. If the retention pricing system is altered, higher or lower price increases might be in order to eliminate the budgetary subsidy. 90 fainory piice formula should be linked to the long run marginal cost of a small basket of effiient world producers as a means of imposing competidon and discipline on plant costs while sdll providng some price stability. To balance the radeoffs between market orientation and containment of budget subsidies, the price formula for new investment and the price ceiling for existing plants should be based on long run marginal costs. Accompanying these changes should be a program to reform and restructmue the feriliz industry, with attention to investment policies, plant restructuring, pricing reform and distribution policies (such a program is proposed in World Bank, Emslizer Indus8y Strategy Stdy. 1987).33 The Government also recently announced the freeing of low-analysis fertilizers firom price and movement controls. It would be appropriate to set a clear time limit - say, within four to five years - within which the industry should adjust to the market changes. Table 3.2 E1smated Fertiuzw Price Inrase to Red Subsd (% and Rs. billion) Iase itl price of N (%) 30 25 20 11 Inuease in pice ofP(%) 20 20 17 1S ueaseinpriceofK(%) 30 30 30 30 Projected budget subsidy, no price ncrease (Rs billion) 46.5 48.8 50.8 52.9 Projected ecmomnic subsidy, no pie inre (Rs billion) 66.4 873 109.9 135.8 Projected budget subsidy, with price incease (Rs billion) 29.8 29.6 19.5 8.2 Projected economic ulbsidy with price icese (Rs billion) 49A 49.5 49.6 55.7 Memo Itw, Ferdlizer subsidy in 1990 was Rs. 46.01 billion Naes: (1) Ames 101 mteass in domecptodWncda fm 1992-1994. (Z) Pocnowic aibsid is ddhted as the diffeseic biwema "h demacsle aid the iznport PunsyFe Ssm: Table 4.9, %iincal Apyadix 3.15 India's agicultural financial system has begun to erode under the burden of CC& sub d and it is vital dat these be removed and the financial health of credit institutions ensurd The recent Agricultural Credit Review Committee (ACRC) Report has offered a bli_..print for dealing with institutional issues, most importantly the need to put many rural credit institutions back on their feet through rehabilitation programs coupled with rationaliing loan portfolios. At the same time, it is important that the future viability of the system not be threatened. The recent decision to write off agricultural loans widely has sent an unfortunate signal to farmers, and it will take concerted efforts by policy makers and politicians to reinstall credit discipline. Proposals for addressing the problems of agricultural credit are discussed more fully in para. 3.43. 33One of the concerns of Government in removing pmtection for the domesdc fertilizer indusuy is the projcted impact on world pnces if India enters the world filizer market. Ideally, India should produce felizer undl its long run margin costs equal those of other world suppliers, and should import at levels above that. Aidough in dte sot-term. Indias enRy into the world maskt for iwcased suppl;es (say 2.5 million mt or 25% of curent consumpion) would increase pces by 30 to 50%. long run unpacts would be much less, on the order of 4% for nitrogen and 7% for potash. The point is tat gradual incmases in import might be a sensible policy outcome, whie iequ ad sizeable impos ae disruptive. 91 3.16 Increases also need to be made in elearicilW tariffs. In the short-term, an immediate average increase of 20% (with higher increases for more heavily subsidized agricultural users) could be made. Tariff collecdons also need to be considerably stepped up. In the medium-term, subsidized rates for agriculture should be completely phased out. This would help eliminate the current subsidy of Rs. 41 billion, and assist in the process of restoring financial health to the state electricity boards. 3.17 Reducing otheri subid will be a complicated and longer-term process. Increases in water user charges for surface irrigation schemes need to be linked to improvements in maintenance and water management. While water charges should cover at least the cost of operation and maintenance (O & M) of systems, there are several obstacles to achieving this. First, the reluctance of states to charge and of farners to pay for water is a reflection of the uncertainty, inadequacy and maldistribution of water in many commands (para 2.135). Under these conditions the marginal productivity of water to many fanners in a command may be quite low. Indian conditions of small, fragmented holdings make it difficult to introduce volumetric pricing of water, except to water user groups. The cost of individual metering would be high and the administrative burden, overwhelming. The principal reason for shifting from variable to fixed power tariffs for electric pumpsets was the difficulty of maintaining meters and collecting bills. Second, it is difficult to ask fanners to pay for inadequate maintenance and overblown irrigation establishments. 3.18 In the first instance, it is important that adequate O&M is carried out, which in tum requires that O&M needs be fully budgeted. Water charges are a state subject. In those states which have maJe progress on improving water rmanagement and O&M, water charges could be increased on schemes which have benefitted from these improvements. Phasing increases in water charges in step with system improvements will be more difficult than across-the-board increases, but would over the long run be more likely to result in sustainable financing of irrigation systems. A second option, which is being pursued on a pilot basis in Maharashtra (for surface irrigation) and West Bengal (for public tubewells) is to turn over revenue collection to groups of farmers organized into water user associations. For surface schemes, water could be measured (and priced) volumetrically at the chak (40 ha) level. The water user association would pay a set rate to the government, and collect fees from its members. For tubewells, 0 & M can be turned over to water user associations, who also set water rates. Both these options increase system accountability and farmer involvement The impact on producer returns from increased charges would be minimal as water rates, even at optimum levels, are a modest proportion of total production costs (Table 2.4) and as system improvements would be expected to increase production and thus returns. 3.19 Restucturing Government Price and Procurement Qperations. The high costs and negative impact of Government price and procurement operations argue for a fundamental rethinking of the current complex policy edifice, and most importantly, the extent and nature of Government's role in output markets. As input subsidies are removed, it is critical that farners are not penalized through low and artificially constrained prices, while being expected to pay full prices for inputs. Pressures to reduce food subsidies and the inter-linkages between procurement and distribution programs also emphasize the need for revising the objectives and designs of these programs. Recommended actions include measures to: (a) improve the impact and efficiency of food distribution programs; (b) end coercive procurement arrangements; (c) reconsider FCI's role; (d) review stock levels and management; and (e) revise price support objectives and interventions. 3.20 First, there is an urgent short-term need to improve the impact and efficiency of food distribution proagms. Poverty considerations will compel India to sustain publicly sponsored foodgrain procurement, storage and distribution efforts. These programs are even more important in a period of economic downturn and adjustment, to ensure an adequate social safety net The worsening fiscal crisis has already led to cuts in food subsidies. It is thus vital that 92 will irvolve targedng of tle PDS to the poor in both rural and urban areas, eliminating access of the non-needy (which account for over one-third of foodgrain offtake and even more for sugar), encouraging self-targeting through increased distribution of coarse grains and unmilled rice and elimination of sugar, ane. redirecting some flows of commodities from urban to rural areas. A difficult organizational task is involved - PDS oudets are much easfer to sustain in densely populated urban zones. However, experience from Kerala, Tamil Nadu, Gujarat and Andhra Pradesh shows that it is feasible for states to set up workable state-wide PDS systems which provide reasonable numbers of access points. Some useful guidelines exist in Kerala's food subsidy scheme which relies on coarse rice varieties not normally consumed by the non-poor, links the eligibility of rural households to the amount of land owned, makes heavy use of private retail outlets as distribution channels, and has avoided the large price discounts offered to consumers in Andhra Pradesh and Tamil Nadu. At the same time, there is a need to increase the efficiency of the PDS, for example, through contracting out some FCI functions to state or private agencies. 3.21 It is difficult to predict with accuracy how much food subsidies would be restrained by these measures in the short-term. Retargeting to the poor would entail both savings (as upper income groups are excluded) and additional costs (distribution to rural areas is likely to be more expensive). Indications are that retargeting would require less gain than is currently distributed, to provide the same level of benefits. To ensure coverage of the very poor (including the rural poor who are now largely excluded), numbering some 58 million households in 1988, annual foodgrain requirements would be 11.6 million mt, less than the 16 million mt distributed in 1989 (Subbarao, 1989). In the short-term, better targeting (especially to the ultra poor), modest increases in issues prices, and reduction in (currendy high) GOI stocks will help cut budget costs. In the medium- term, a reduction in FCI's role and costs, redesign of PDS interventions to incorporate more innovative and low cost distribution methods, and restructuring of market intervention and stocking programs will all work to restrain the food subsidy and improve its efficiency. It is important, however, that the significant nutritional and anti-poverty benefits offered by PDS not be eroded. Although costs may increase in moving to rural areas, it should be possible to increase program benefits significantly while still lowering per unit costs. 3.22 Second, there is an immediate need to g oercive procurement arfangements (primarily for rice, sugar and cotton in some areas), which are acting as a disincentive to production. The significant resources now used to defend and circumvent control mechanisms can better be used elsewhere. The government needs to intervene more selectively, relying on a small number of instruments whose use is governed by generally agreed rules. For &rie rather than resorting to levies and movement controls to extract surpluses, FCI and state agencies should use wholesalers and internediaries to carry out open market purchases of rice in areas with surpluses (as in currently done with wheat). This rice could be used to supply buffer stocks and sustain food subsidy operations. FCI should devote its own resources to providing price supports in areas thought to have untapped producdon potential. 3.23 For cotn, a high-level review committee has recommended ending the monopoly status of the Maharashtra cotton procurement scheme (which has been plagued bv high costs and leakages), restoring free trade and competition, and turning over responsibility for purchase, processing, sales, research and extension to cultivator organizations operating on a commercial basis. Central Government price support operations for cotton also need to be kept within manageable proportions; here too involvement of private sector wholesalers and traders can contribute. The Cotton Corporation of India can help this process by making extensive use of licensed agents (including facilities operated by growers' associations) to purchase, process and store cotton eliminating restrictions on private stockholding, and allowing the resumption of futues trading (after a hiatus of 21 years). 3.24 Restructuring of marketing and pricing policies is also urgently needed in the z subsector. Domestic market interventions are widely recognized not to be working well: problems include high open market prices, leakages of ration sugar to the open market, financial problems 93 and underuilization of the capacity in the mill sector, and a bidding war among state govenmments in pricing sugarcane. The sugar sub-sector has developed into a high cost, high price enclave in which cultivators gain substantial, probably excessive benefits from Government procurement and distribution policies, input subsidies and restrictions on sugar imports. However, because of the complexities of both the domestic milled sugar market (with its close relationship with the unregulated gtr and khandsari market) and the international markee, detailed empirical work is needed to develop a medium-emn sectoral strategy to reduce costs ane. increase efficiency in the sector. It is recommended that this work begin immediately. 3.25 Third, there is a need to reconsider FCrs role in market operations within the context of changing program objectives and the need to contain costs. FCrs operations are alrady too large and complex: rising costs indicate the organization's inability to cope with current, let alone expanded responsibilities. Although Government is seeldng ways to increase efficiency in FCI, this approach misjudges the difficulties that would have to be overcome to enatle FCI to control activities. Marketing is an activity which by its very nature is ill-suited to cumbersome, public sector entities. FCI should reduce its large direct role in purchasing, transporting and storing grain, through subcontracting to licensed agents, wholesalers and stockists, and providing price incentives for farmer storage of grains. As noted above, FCI should reconsider I concentrating its own interventions in areas where price supports would encourage production (for example, in Bihar and Madhya Pradesh for wheat). 3.26 Fourth, stk levels and manaegem require review. High levels of buffer and working stocks for wheat and rice (currently over 19 million mt) are both expensive and unnecessary, especially in light of changing objectives for market interventions and a new role for FCL India could be adequately protected with a smaller buffer stock, entering the world market to obtain supplementary supplies in poor production years and keeping foreign exchange to handle purchases in deficit years34 Concems of price rises when India enters the market could be mitigated using tools of price risk management (forward and futures contracts) coupled with more accLuate information gathering on production and stocks, and improved mechanisms for decision maidng on emergency food imports. FCI could retain responsibility for the maintenance of India's buffer stock. A review of stocking levels, analysis of the costs and benefits of different stock levels, and development of recommendations for encouraging private sector storage is recommended. 3.27 Finally, the Govemment needs to review price support objectives for each commodity, cross commodity price impacts, and the structure of domestic incentives. Current efforts to adjust procurement prices at the margin through the addition or subtraction of price elements defeat the objectives of these prices: they are meant to provide price supports, not substitute for ptice setting through the market. A review of the price support system is recommended, to revise objectives and provide clear guidelines for the role and levels of price supports. In general, procurement prices need to be divorced from the objectives of food distribution schemes, and need to be set at levels which provide support in surplus areas, but not excessive returrs. There also needs to be explicit recognition of international price signals. Allowing increased trade of rice, wheat and cotton at the margin would dictate greater attention to world prices in setting procurement price levels. For rice and wheat, a more focused targeting of the PDS may result in fewer market purchases, and thus less need to use high procurement prices to attact surpluses into the procurement system. In any event, procurement for PDS should be 34Modelling of the costs and benefits of such a policy are included in Reutlinger (1980). A related exercise done for India in 1977 showed that with a buffer stock of around 10 million mt, the probability of a shortfall below the target level of consumption would be only about one i5r twelve, even if the food import bill is not allowved to exceed its nomal aveW. The combinion of 10 miU.ion mt of buffer stock and an insurance fund of foreign exchange set aside amnly dI*e (lIfl) ee of US$150 million annually to import food if necessary, would eliminat virually al chances of a shortfall below the consumption targeL While the numbers would need to be adjusted in light of gOW in population and inflation, it indicates the radeoffs in stocking policy. 94 done through the open market as much as possible (as is done for wheat), rather than through levies and market restrictions. For cotton, development of cotton exts calls for ng prices tu the world market and devising measures to support prices and deal with price risks (e.g., futures markets, forward trading, long-term contracts). Revisions in sugar prncing are also a central component of any reform program, and should be carried out as part of an overall subsector restructuring (para. 3.24). Finally, high incentives for some oilseeds should be reviewed in the context of encouraging efficient production (para. 3.29). 3.28 Lb. The virtually closed nature of agricultural trade, on both the import and export side, has led to high protection for the oilseeds and sugar subsectors, taxation of foodgains and cotton, and a declining contribudon of agdLulture to foreign exchange earnings. Reversal of these trends through easing agricultural trade restricdons (in conjunction with broader trade refonms as outlined in Volume I) is a key item on the reform agenda. this will entail measures on both the import and export side, including (a) phasing out import restrictions, particularly for oilseeds and sugar, (b) removing restrictions on agricultural exports, particularly cotton, tea and foodgrains; and (c) opening up domestic marketing and the trade regime in general. 3.29 On the imporl side, opening up India's agriculture to more competition would result in important efficiency gains and improve incentives to producers. Two groups of commodities are particularly affected: oilseeds and sugar. India is presently, at the margin, an inefficient producer of dible pill, and current programs to promote domestic oilseed production are resulting in large net losses to the economy. While several observers argue that India cannot afford foreign exchange to purchase edible oils, analysis shows that inefficient production actually loses foreign exchange for the country by substituting oilseed production for more competitive crops. This is not to argue that India should not condnue to promote efficient oilseed production and development of its oilseed subsector. Ir. many areas, oilseeds can be grown competively. Continued research should be done into improving yields and production efficiency. But oilseed development should not be carried out behind a high wall of protection which will only encourage inefficiency and prevent development of a competitive oilseeds sector. If strides are being made in raising the efficiency of domnestic producdon, then concerns about the impact of liberalized trade in oilseeds are unfounded. Thus, it is recommended that restrictions on edible oil imports be eased, in conjunction with revision of domestic pricing policies for oilseeds, review of levels of edible oil distributed through PD = n- alysis of problems in the domestic crushing industry. Poor Indian consumers wou' d especially benefit from this policy, which would provide cheaper oils.35 Concerns about increased foreign exchange expenditure on edible oil imports need to be viewed within the context of larger gains from expanding production and exports of other commodities. While India would still continue to produce oilseeds, there would be shifts at the margin into crops with higher returns (cotton is one example) where India has a comparative advantage in production. Trade in sugar also requires re-examination within the overall context of adjustnents in sugar policies (para. 3.24). The world sugar market is one of the most distorted international commodity markets and thus international price signals must be treated with caution. Neverthcless, there is scope for increasing competidve signals in the Indian sugar subsector, and for better managing India's occasional imports and exports of sugar. 3.30 There are also several steps that India could take to increase agricultural enQn. Measures of comparative advantage and identification of institutional problems constraining exports indicate that expanding agricultural trade is both feasible and beneficial. Promoting exports would not only increase foreign exchange earnings, but would also open up opportunities for development of rainfed agriculture (cotton, fruits and other high-value exports) in India's poorer regions. Agricultuaml exports, moreover, have higher value-added than industrial exports (Kane, 3SConcems about health have also been widely offered as a rationale for restricting imports of cheaper saturated palm and coconut oils. However, these cheaper oils would largely be purchased by the poor population where the benefits from increased oil (calorie) consumpdon would greatly outweigh the potential health effects in a group which does not have problems of excessive fat consumption. 95 1990). While it is difficult to identify in advance export possibilities (which depend on dynamic world demand and market shifts), there are likely candidates. Several steps could be taken to maximize benefits from existing commodity exports as well. 3.31 The largest possibilities for higher exports are in the cotton sector. Policy changes will have to go beyond abolishing the current system of export quotas (which appear arbitrary), unrealistically high minimum prices and long delays for tender reviews by GOI. What is needed is a major institutional adjustment aimed at privatizing export marketing in its entirety and opening up the cotton sector to international market forces. It is vital for development of export markets, however, that consistent trade policies be put into effect, in essence to guarantee stability of exports. A transitional period will be needed during which different organizational and procedura matters can be debated and tested. A large role should be played in this process by various cotton growers' and processors' associations. 3.32 For other high value commodities, such as tea, cashews, coffee and pepper, India should seek to improve quality wnd concentrate on the premium end of the market to maximize foreign exchange earnings per unit. This is especially important in tea, where increasing domestic demand will constrain exports. Yet India clearly has the capability to produce high-quality teas, and should try to recapture the premnium end of the market by ' .'ning the London auctions. Similarly in cashews, where India has lost market share in the largest market, the US, the policy of exporting cashews to the USSR should be reconsidered. There appears to be scope for regional specialization in exports of high quality rice (basmati and superfine) from Punjab and Haryana, which would be encouraged by removing present restrictions (minimum export price, control on stockholding and interstate trade barriers). 3.33 India should also consider the potential benefits and costs of increased openness in foodgrain trade. Gradual opening of the sector to international market forces would improve competition, with benefits for both producers and consumers.36 India has developed a vital foodgrain sector that is competitive with imports, which should help allay Government concerns about the impact on production of basic foodgrains of more open trade. With demand for foodgrains levelling out and staying only slightly ahead of population growth in the next decade, more rapid growth in foodgrain production would require increased exports. nTere is some concem however that rice exports would have a negative impact on the poorest consumers (Quizon and Binswanger, 1986), and thus more analysis is needed on the net effects of more open foodgrain trade together with design of measures to offset the impact on the most vulnerable consumers. 3.34 Broader measures to open up both domestic marketing and the trade regime would result in significant benefits and efficiency gains to agriculture as well as to industry (World Bank, 1990a). These measures should include shifts from the use of quotas and restrictions (nontariff trade barriers) to appropriate import and export taxes, maintaining consistent export policies to allow development of ovarseas markets (and ending "stop and go" restrictions), and eliminating domestic market and price controls. Greater openness to the world economy will increase efficiency and competition within India's agriculture sector, even though it is unlikely that India would be more than a marginal importer/exporter of many basic agricultural commodities. Invest=xe 3.35 Prorities for Public Expenditur. Slowing growth of gross domestic capital formation in agriculture, and in particular, declining public capital formation, is a clear warning sign and a worrisome trend for future growth. While it is unlikely that in India's current fiscal crisis allocations to agriculture can be increased, there is considerable scope for improving the 36GuIaZ and Sharma (1990b) found that producers of wheat and rice were better off without input subsidies under a "firee trade regime", i.e., where domestic prices were closer to intemational prices. This is consistent with disproction of foodgmins, as shown by indicators of effective protection (par. 2.57 and Table 2.10). 96 impact of public expenditwes within the sector even in the short-tenn. Key actions are: (a) reduce subsidies; (b) prune and focis expenditures on prorit programs and services; (c) increase cost recovery; (d) control recurrent expenditures; and (e) strengthen sector management and budgeting. The task of overhauling public expenditures in the sector is made more difficult, however, by the states' predominant control of sectoral investmnents. Although the Cental Government has limited contro over state spending, there is an array of incentives (ded grants, project sanctioning, reform of central-state funds flows) which could be used to influence expenditure patterns at the state level. 3.36 Th. most urgent need is to reduce the heavy burden of subsidis, which is both contributing to the severe fiscal crisis at the center and squeezing out productive investment in the states. While some reductions in fertilizer and food subsidies can be maie immediately (paras 3.14 and 3.20), further reductions will involve medium-tenn programs. There is also a need to prune out the many sma!' subsidies found throughout the sector, covering everything from mango seedlings to fanrm implements and pesticides, as part of efforts to focus public expenditure and increase cost recovery. Allocations for the Integrated Rural Development Program (IRDP), however, have little to do with agricultural development and should be reclassified as anti-poverty schemes, not included in the agricultural budget. 3.37 Public e_xpendturs need to be better foused through review of activities in the agriculture budget at both the central and state levels, assessment of program impacts, setting priorities and targeting expenditures on priority areas. The proliferation of many small programs (and subsidies), often underfunded, is a distinctive featurv of the agriculture budget. Especially in this period of fiscal stringency, there is a need to set priorities rather than spread scarce resources too thinly over too many activities. Setting priorities for programs calls for a fundamental reassessment of the Go-ernment's role in the sector. the need for public involvement in many activities is dubious (particularly input supply), while the goals of others, such as the array of crop production schemes, might be better at;ained through expenditures on basic infrastructure and attention to the structure of incentives. 3.38 Main areas where the need for Government investmnent remains strong include rural infrastructure, irrigation (including drainage and land reclamation), research, extension, training and education, forestry and protecting the resource base. There is a case for increasing funds to research provided that fundamental improvements are made in research policy and priorities, and in system organization and management (para. 3.51). Government has a clear role here, and returns to research investments remain high. Investments in training and education could also be increased to build up human capital in agriculture. As pressures on th. resource base increase, programs in forestry, land reclamation, drainage and land management merit more artention. Continued investments in rural infrastructure (roads, water supply) are needed to provide a solid foundation for sectoral growth. Targeting expenditures on lagging regions (eastern and central India) can have high pay-offs for growth as well as for equity (Box 1.2). 3.39 Targeting expenditre on irrigation is a high priority, although this demands attention to the difficult problems facing the sector (para. 3.52 contains more detailed recommendations on improving sectoral performance). Priorities for expenditure include 0 & M funding, programs to improve water management, and completion of on-going projects. It is especially important that irrigation expenditures at the state level be protected. As the experience of the 1980s has shown, funding of on-going projects is one of the least protected components of stale budgets, and there is no reason to expect. that this will change in the 1990s, unless the Central Government provides incentives. Possible incentives could include matching grants, tying of central GOI sanctions for new projects to completion of the existing pipeline, and reform of central- state revenue sharing. 3.40 Expenditures must also be controled through improving cost recovery, controlling recurrent expenditures and improving sector management and budgeting. Cost ccoy can be improved both through increasing user charges for public services and through devolving certain activities to the private sector. In addition to the major subsidies, there is scope for eliminating 97 myriad small subsidies. There is no reason why govemment needs to provide low-cost seeds, pesticides, livestock health services and other inputs, and these activities should be left to the private sector. Rcurrent expenditum growth has been based on burgeoning subsidies and runaway growth in personnel expenditures; the problem occurs throughout the cental and state budgets, not in agriculture alone. But the impact on agriculture has been particularly severe as capital expenditures are crowded out. Restricting personnel growth is particularly important for 0 & M expenditumes (where salaries make up a high proportion of costs), as the quality of 0 & M is declining. Finally, much could be done to improve public secto managetrient. Rlanning and kp.gCjiXg6 and thus increase efficiency of public investment. Excessive numbers of programs, rapid growth in recurrent expenditures, and failure to complete irrigation schemes indicate problems in determining priorities and managing public programs. Focusing government involvement in the sector through more narrowly defining government's role and improving incentives for good management of public resources are key needs. 3.41 In the future, there is a strong case for increasing budget allocations to agriculture (net of subsidies). Investment in irrigation, infrastructure and technology generation has had a strong impact on growth and equity in India (Subbarao, 1990; Binswanger et. al., 1989; Khakwani and Subbarao, 1990, and Rao and Deshpande, 1986) and will continue to be vital for future growth. Disprotection of agriculture also indicates that increasing public investments will have high retums. But increasing public expenditures in India's resource-constrained environment demands that much more attention be placed on increasing the efficiency of investment and targeting it to priority needs and regions. 3.42 Private Investment and Agricultural Credit. There is also a need to stimulate private investment in agriculture. Changes in the incentive structure (removing disprotection, easing the trade regime, and reducing industrial protection) will exert powerful influences on incentives for investment in agriculture. But it is also paramount that the crisis in agricultural credit be resolved, in tandem with overall financial sector reforms, or else the credit system risks collapse. A comprehensive analysis and action program already exists in the Govemment's ACRC Report 3.43 The rural banking system needs consolidation. This will involve moving towards commercial bankdng for medium and large-scale farmers, addressing the problems of cooperative banking and weak institutions, increasing linkages with savings mobilization and devising altenative mechanisms for poverty alleviation. This process will require a phased implementation of several policy and institutional changes, within the overall framework of financial sector reforrn. In the near term, these should include: (a) protecting rural lending institutions from political interference and encouraging them to concentrate on collections; (b) following the ACRC recommendations to simplify and raise interest rates on agricultural loans to reduce subsidies and make agricultural credit more profitable; (c) reducing priority sector lending gradually (with a view to eliminating it) and targeting it better to reach weaker groups; and (d) setting institutions on the right foot through refinancing and closures, systems for improving accounting and assessment of bad debts, closer links to savings mobilization, and imprc'ed training. 3.44 The institutional changes will be, more far-reaching and difficult, and involve a close review and overhaul of outstanding loans. Crnmercial and regional rural banks should write off their bad assets and retrench by closing commercially inviable branches and merging others to make them viable. By the time this reorganization is completed, priority sector targets should be eliminated and banks should lend at their discretion on purely commercial terms. The case of PACS is more complex because in many regions they cannot be viable financial institutions, but can provide members with other valuable services in marketing and input purchasing. The important point is to make cooperatives true member-run cooperatives and decrease government control and intervention. PACS should be divided accoiding to their intrinsic financial viability and those that are judged not to be viable should not be used as financial intermediaries. The viable ones should operate as independent financial institutions subject to usual prudential standards. 98 3.45 It should be clear that Govemment policies - well intentioned but with adverse results - are contributing to the problems. Mandatory lending, inadequate interest rates and margins, and the unviable spread of bank branches have strained the system to the point of near collapse. Government concerns about credit costs and access for smaller and poer farners would be better addressed through changes to make the financial system viablc- and to budget credit subsidies openly, rather than to risk collapse of the credit system and the unacceptable result of no credit at all. reChnolg Adoption-and Inovagtetin 3.46 There remains scope for further adoption of existing technologies by fanners, particularly more widespread use of fertilizer and improved seeds, which would have a significant impact on agricultral growth. At the same time, there is growing concem that the research system cannot provide the technological foundation for future growth in the sector. Adjustments neded to encourage technology adoption and innovation focus on medium-tern programs to: (a) reduce Government's role in input production and marketing; (b) address land constraints; and (c) revitalize the research system; (c) broadbase extension; and (d) address land constraints. 3.47 Ferilizer. The current fiscal crisis presents an excellent opportunity to adjust policies in the fertilizer sector. Three steps are essential: reduce subsidies, increase competition in the industry, and reduce Government controls and interventions in production and distribution. It is vital that these steps are taken concurrendy in order to provide a sound basis for an efficient fertilizer production and distribution system. Proposals for reducing subsidies and restructuring the industry are discussed in para. 3.13. As subsidies are reduced, Govemment must turn to other measures to encourage fertilizer adoption. Irrigation (particularly groundwater) and infiastructure development, together with the development of ferdlizer marketing systems will be especially effective. Reduction of risk on both irrigated lands (through investment in conjunctive use of groundwater and better water management) and rainfed lands (through moisture conservation techniques and crop diversification), attention to credit supply issues and in some aras, tenancy issues would help stimulate fertilizer use. 3.48 Reducing Government intervention in fertlizer distribution and encouraging a flexible distribution system able to respond to supply and demand will be essential to overcome supply constraints to ferTdlizer adoption and improve industry efficiency. More rapid growth and diversification of agriculture will place new demands on the fertilizer system - to carry more types of ferdlizer, to lower costs, to permeate more areas. It is nearly impossible for the public sector to make timely and efficient decisions on moving and handling fertilizer and responding to demand and price signals. Many steps could be taken to improve the competitiveness of India's ferdlizer distribution system: cease Govemment allocation and annual fertilizer plans, eliminate controls on types of fertilizer produced, end licensing and reporting requirements for private sector traders, ensure adequate margins as part of pricing reforms, remove operational constraints on cooperative producers, and increase infrastructure investments, especially to allow bulk handling of fertlizers and ease logistical botdenecks. The recent decision to remove price and movement controls from low analysis ferdlizers (calcium ammonium nitrate, ammonium chloride, ammonium sulphate and sulphate of potash) is a welcome first step toward broader market deregulation. 3.49 Increased competition in turn will propel distributors toward nontraditional markets. Much of the rationale for Government control of ferdlizer distribution is linked to the perceived need to encourage fertilizer supply (and thus consumption) in more remote (usually rainfed) areas. While a laudable goal in principle and polidcally appealing, other non-supply linked reasons are much more important in determining fertilizer use. Rather than depending on an overdetennined allocation system - which introduces inefficiencies and distortions throughout the country without necessarily improving supplies in targeted areas - it would be better to tackle the problem more direcdy, through incentives for the private sector, including cooperadves to expand distribution networks (removing licensing requirements, for example, or providing tax incentives for distribution in new areas). 99 3.50 uoved Seeds. The key to the wider spread of HYVs in India is plant breeding to develop more improved varieties for those regions - largely rainfed - where HYVs have not spread. Public sector research will continue to play an important role here, except for hybrids. But public research needs to concentrate less on developing public hybrids to sel to farmers and more on doing more basic research that will encourage private plant breeding on crops like maize, pearl millet, sorghum, sunflower, mustard and pigeon pea. Other government action to encourage private development of HYVs would include greater access by the private sector to breeder seed and genetic material, improving plant breeders' rights, incentives for private R&D (tax breaks, for instance) and removing constraints to private sector marketing. This would include changes to the certification system, elimination of public sector monopolies, and having extension agents work more closely with the private sector. The current policy of reducing subsidies to public sector fims is important - some SSCs are efficient and could compete with private firms if the Government would allow them to operate independently. But they need to compete on an equal footing, and thus should not enjoy special subsidies and advantages. The only area in which more government seed production and distribution may be needed is breeder and foundation seed production of new HYVs (fodder and pasture seed, for example). 3.51 Research Ile priority is to tackle the serious problems within India's research system which are now inhibiting its ability to generate the technologies farmers want and need. Fundamental (and difficult) changes need to be made throughout the research system in two main areas: in refocusing research priorities and programs, and in improving management and organization. There is a need to broaden the scope of research into more basic and on-farm research, to reorder priorities away from a handful of basic foodgrains to a broader range of commodities (especially for rainfed areas), and to expand research in relatively neglected regions (central and eastern India, rainfed areas). At the same time, the vitality of the research system and its ability to encourage creativity wiU depend on deep changes in management and organization, incentives and resource allocation. There is an urgent need to streamline management and organization within the research system, upgrade scientists, encourage creativity and open up the system to international scientific achievements. Detailed proposals for reforms in both research policy and strategy, and in the system's management, are provided in the Rao Report (ICAR Review Committee, 1988) and the World Bank Research Review (World Bank, 1990a). Returns to research remain high, and there is a strong case for allocating more resources to research and development, especially at the state level and to certain states. Increased funding for research, however, will have little impact unless the root policy and management problems are addressed. There are also measures that can be taken to encourage private research, including improving intellectual property rights, encouraging greater openness and imports of international technology, and removing subsidies for seeds. Finally, to complement these changes, further steps need to be taken to strengthen extsion, including broadbasing of the extension service to cover all on-farm activities, adequate funding for the extension system, and continued upgrading of extension staff. digaion 3.52 Irrigation will continue to play a central role in agricultural development. However, high investment costs, disappointing performance and problems in operations require a fundamental revision of subsector strategy. A large part of this malaise stems from the fact that irrigation is largely managed by government monopoly, that a culture of "government needs to do it" prevails, and that the sector's bureaucracy has grown unwieldy, not adaptive to changing needs, with narrow engineering interests and lacking training and incentives to improve performance. Thus, the first order of business is for government at both state and central levels to reassess its monopoly and to scrutinize its role vis-a-vis the private sector, whose tremendous energies and capital - both human and financial - have barely been harnessed. Where appropriate, and opportunities abound, Government should begin to divest as much implementation and investment as possible to the private sector. Simultaneously, Government must also evaluate its own performance, implement improvements and assign new roles as necessary to state and central institutions. 100 3.53 Major efforts are needed in four key areas: (a) forging a coherent water policy; (b) setting investment priorides and regaining control of public expenditures; (c) improving system productivity and assuring sustainabHlity; and (d) building critical institutional capacity within die public and private sectors in order to manage irigation more efficiently and effectively. Many of these actions can be implemented immediately (especially to harness expenditures and improve system performance), while others should be begun now, but will require several years to phase in completely (greater system accountability, devolvement to the private sector). 3.54 Water Policv. Planning and coordination of water use must be done on a holisic basis, centered on the natural hydrological unit, the river basin. The issue is complicated by the fact that only one of India's 18 major nver basins lies within a single state. Multiple demands for water (for agriculture, municipal and industrial use) are growing and interests between states and users for scarce water supplies are clashing. In the first instance, India's Nadonal Water Policy, initiated in 1987 but with little operational follow-up, needs to be applied. The states should ratify the national policy and develop state water policies fitting within its context. River basin planning commissions should be established to plan and develop water resources, addressing multiple uses, and consideration should be given to legislative actions to coordinate water development incorporating both national and interstate interests. 3.55 Investmrnts ad Expendirs. In the dght fiscal situation that india will face for some years, it is imperative that scarce public resources be used efficiendy. The investmen focus for irrigation should thus shift toward areas where economic viability and near-term impact are high and per hectare cost low, and which support private investment. In nearly all states, the priorities for at least the next decade are first to concentrate on improving the performance of existing irrigation; second, to finish the large backlog of unfinished projects, where viable; and third, where regional development is dependent on the supply of additional water, to invest cautiously in new construction. Improving performance of existing systems calls for attention to maintenance (to preserve existing infrastructure) and to improving water management (para. 3.56). Expansion in the public sector should focus on completing projects with low remaining costs, rapid maturity, clearcut viability, adequate water, and sound technical preparation. These investmnents can be complemented by selected investment in flood control, drainage, storage, rehabilitation of saline lands and reconstrucdon of crumbling infrastructure. Two important investnents can largely be divested to the private sector groundwater and farm-level watercourses. On the exRendi side, soanrng recurrent costs and sadly lagging cost recovery must be redressed, through curbing staff recruiting, tightening financial controls, raising water rates and improving collection. Handing over the setting and collection of water rates to local govemments or water user associations can improve effectiveness while skirting the political pressures to keep rates low. Accountability and transparency of irrigation funding must also be improved. 3.56 Technical Perdorrance. Improving water management should be the principal technical goal of irrigation managers. The dimensions of the problems require a low-cost, replicable approach, focusing on diagnosing and resolving problems at the command level, bringing farmers into water planning and canal operation, complementary investment in low-cost infrastructure and upgraded daily management and monitoring. The technical scills for quality maintenance and construcdon are well-known, but lax supervision and corruption have hampered the tasks. Commitment and backing from senior state officials is needed to tighten management of maintenance and construction. Finally, greater attention must be given to environmental and resettlement and rehabilitation issues in planning and carrying out irrigation investments. 3.57 Private/GovernMent Roles and Caacity. The Govemment will still continue to play an important role in guiding and often implementing inrigation. In the public sector, the greatest challenge is to improve irrigation management, which is increasingly being overwhelmed by the growing complexity of the sector in the face of limited institutional adaptation and encroachment of rent-seeking and often disruptive political pressures. Changes are especially needed at the state level where irrigation departments have principal responsibility for implementation. The goal must be to shift irrigation department management from a narrow engineering focus to a managerial one. At the same time, greater accountability must be intrduced 101 at all levels. Greater involvement of the private sector in irrigation implementation will support increased accountability. The resources of universities, research centers, NGOs, consultants and fanner groups can all be tapped. Increasingly, functions especially at the local level (water rate collection, maintenance) can be fulfiled by water user associations or private contractors. In the longer-term, the Government sliould consider creating autonomous commands. Timeft=ra for Adiustnent 3.58 The agenda for adjustment is full, and encompasses both urgent short-term actions, and broader medium-term adjustments addressing more fundamental changes in agricultural policies and programs. In the short-term, priority actions include: (a) reducing agriculture subsidies; (b) regaining control of public expenditures; (c) improving the safety net offered by food programs while restraining costs; (d) initiating credit reforms to prevent the collapse of the agricultue credit system; and (e) ending coercive marketing and trade restrictions. While these urgent actions will occupy the attention of policymakers, it is just as important to begin medium- term reform programs, particularly in the areas of agriculture pricing and trade policy, input production and marketing (including restructuring of the fertilizer industry), research and inigation. These adjustments are essential for laying the foundations for future sector growth. 3.59 It is clear that the problems facing agriculture will not be easy to solve, and that these comprehensive shifts in policies and strategy will require sustained political support. While it is difficult to estimate the growth that will result from these adjustnents (in part because they depend heavily on changes in macroeconomic policies), partial analyses and models have demonstrated high returns from increasing investments in sector (for example, Subbarao, 1990; Binswanger et.al., 1989). The downside risk is that if nothing is done, growth will decline from already modest levels and per capita rural income growth will stagnate. The choices made for adjustment will influence poverty and equity in rural India as well: there is a strong case (on both growth and equity grounds) for targeting investments and services to the underdeveloped regions, particularly eastern India. The challenges facing India are great, but so are the potential returns, in terms of higher growth and prosperity, falling rural poverty, and the laying of solid foundations for a modem agriculturl sector. INDIA 1991 COUNTRY ECONOMIC MEMORANDUM Summary of Policy Issues and Proposals for Action AREA ISSUES RECOMMENDATIONS TIMNIG A. Trade & Pricing Policy 1. Macroeconomic Policies High industrial protection and Reduce industrial protection and Short-term steps unbalanced trade policies liberalize trade policies could begin now with discriminate against (detailed recommendations in full adjustments agriculture, leading to Volume I). Implemented over resource misallocation, medium-term. efficiency losses, and foregone foreign exchange earnings. 2. Agriculture Incentives Within agriculture, high a) Review domestic prlce policies Medium-term program. levels of protection for and reduce GOI market oilseeds and sugar; taxation interventions (Item (3) below). of rice, cotton and wheat production, leading to b) Open up agriculture to resource misallocation, International prlce signals and efficiency losses and foregone reduce trade controls (Item (3) foreign exchange earnings. below). c) Eliminate subsidies (Item (4) below). AREA ISSUES RECOMMENDATIONS TIMING 3. Pricing & Market Complex GOI market a) Restrain per unit costs of the Immediate priority, Intervention Programs interventions, particularly in food subsidy and improve impact due to budget foodgrains, sugar and cotton, of food distribution programs: strains 6 negative are fiscally unsustainable, - Target to poor, especially in Impact of adjustment and outside of some surplus rural areas. on poor. areas, have negative impacts - Increase coarse grain, unmilled on production incentives. rice distribution and cut out Needs of the public sugar. distribution system (PDS) - Use new methods of reaching influence pricing and most vulnerable, including marketing policies. Growing private sector distribution. food subsidies and high leakages plague PDS. PCI's b) End coercive procurement Immediate. costs are out of control. arrangements for cotton & sugars - Rely on open market for rice procurement. - Lift monopolies on cotton trade (including exports). ' - Review domestic market interventions In sugar and restructure. c) Reconsider FCI's roles Adjust PCI'e role in - Reduce FCI direct involvement line with overbaul in marketing & storage. of price & - Concentrate in areas where procurement price supports encourage programs (3 (d)). production. - Maintain buffer stock at smaller levels. d) Review and adjust pricing Immediate review policy. with phasing-in over - Develop clear objectives for medium-term. price supports and dlvorce from procurement programs. - Crop neutral pricing with links to international prices, resulting in correction of high incentives for oilseeds, sugar, low incentives for rice wheat. cotton. AREA ISSUES RECOMMENDATIONS TIMING 4. Input Subsidies High & growing input subsidies a) iert.lizer Budget cuts should for fertilizer, electricity, - Phased program of price begin in FY929 Phase Irrigation and credit are increases to reduce budget In industrial fiscally unsustainable. subsidy. restructuring over Subsidies have little impact - Base industrial pricing on 4-5 years. on reducing net disprotection international long-run marginal of agriculture, and remain cost. only a modest proportion of - Restructure industry & open to production costs. Subsidies competition. are highly inequitable, concentrated in the richest b) Credit To begin states and among the richest - Implement recommendations of immediately. farmers. ACRC Report (Item B (2) below) within overall framework of Financial Sector Reform (Vol. I). c) Electricity Phased program. to - Raise tariffs for agriculture begin immediately. to non-agriculture (viable) levels. d) Water Charges Medium-term. - Raise water charges in conjunction with system improvements (Item B (1) below). - Turn over collection and responsibility to water user associates. 5. Agriculture Trade Complex and extensive controls a) Phase out export restrictions Immediate steps, on trade of agriculture especially for cotton, rice, with medium-term coumodities have contributed fruits and vegetables. time framework. to declining agriculture exports, higb protection for b) Liberalize imports of domestic sugar & oilseeds agriculture commodities, producers, and few efforts to especially oilseeds. develop new labor-intensive, high value exports. c) Remove institutional barriers to trade, particularly tea and rublelrupee trade. A_EA ISSUES RECOMMENDATIONS TIM!RG 1. Public Investment Falling allocations to a) Reduce subsidies (Item A (4) I ediate. agriculture, growinlg recurrent above). expenditures, and falling real Investment. Spending for b) Rationalize public l diate. subsidies and welfare programs expendituress set priorities, crowding out productive assess program impactso, revis investment, especially in activities and target on Irrigation. Declining cost priority areas. recovery. Prolifieration of minor programs & subsidies. c) Target public enpenditure on Begin Implementing selected priority areas ahere changes In next government has clear role budget. (e.g., rural Infrastructure, irrigation,, research, extension, education, forestry, resource protection). c d) Increase irrigation expenditure Changes to begin In especially on improving next budget. efficiency of existing infrastructure, operations & maintenance, & completing projects (Item (D) below). e) Increase cost recovery, through As part of review in higher rates, iWproved (c) above. collection, and devolution of some activities to private sector. f) Control recurrent expenditures. Immsdiate. S) Strengthen sector management & medium-term budgeting. ARM ISSUES RECOMMENDATIONS ?TIRN 2. Private Iavestmeant and Private capital formation in a) Recommendations to improve Xedium-term Credit agriculture stagnating, even inventives (A above) and expand In face of growing credit complementary public Investment subsidies, due to declining will increase incentives for profitability, slowing private investment. complementary public investment, and problems in b) Agriculture Credit Irmdiate steps, the credit system. - Consolidate rural banking with medium-term Agriculture credit currently within context of overall institutional in crlsiss inadequate Interest financial sector reform (Volume strengthening. rates & margins, weak I). lnstltutionsl mandatory - Protect rural lending lending aend rapid expansion lnetltutions from politlcal stralinng system severely. interference. - Simplify and raise interest rates (ACRC Report). - Reduce priority sector lending and target - Address institutlonal issues. C. TECHNOLOGY 1. Inputs Fertillizer use remains modest a) Fertilizers in addition to As part of industry by international standards, reducing subsidies and restructuring. and ls heavily concentrated In restructuring the industry (A lrrlgated areas and on a (4) above)s limited number of crops. - Eliminate controls of Government marketing policles productlon & dlstrlbution may be restrlcting supplies. - Promote private sector Although use of high-yielding expansion of distribution seed varletles (HYVs) has networks. spread rapidly, adoptlon ie - Remove trade controls. increasingly constrained by lack of suitable varieties for b) Seeds Medium-taEm program. coarse grains and rice for - Target resources on developing eastern India. new varietles for rainfed areas. - Promote prlvate research. - Remove contraints to private marketing. - Remove subsidies for seeds. ARlL ISSUES RECOMMENDATIONS TIMING 2. Research Although scope remains for Detailed reform program in World Medium-term program. adoption of existing Bank Research Review, includings technologies, faltering performance of the research - Improve management & systems raises concerns about organization. the technological foundation - Set clear priorities. for future growth. - Improve coverage on a regional Productivity and quality have & crop basis. declined, research is - Upgrade human capital & improve overwhelmingly concentrated on incentives. foodgrains, management is - Open up research to poor, and public spending Is international science. low as a I of GDP. - Increase allocation of resources to research. - Encourage private research. 3. Extension Extension remains focused on To support research, further Medium-term program. foodgrains, often underfunded changes needed to strengthen and continues to have problems extension systems with staffing and research links. - Broad base extension to cover all on-farm activities. - Ensure adequate funding. - Upgrade staff. 4. Land Issues In some areas, particularly Address land issues through: Medium-term program. eastern India, small farm sizes & high rates of tenancy - Increased security of tenure. may be discouraging technology - Strict enforcement of land adoption. ceilings. - Investment in public infrastructure. - Increased access of tenants to inputs & infrastructure. ',p AREA ISSUES RECOMMENDATIONS TIMING D. INFRASTRUCTUEB 1. Irrigation Irrigation performance is poor Recomendations Can begin now. & declining, due to weak resource planning, poor a) Forge coherent water policy design, poor construction - Affirm National Water Policy quality, lack of adequate and adopt complementary state operation & maintenance (O&M), water policies. and generally Inadequate - Establish river basin planning management. Dwindling commissions. potential water resources, rising construction costs & b) Prioritize expenditure and Can begin now; delayed project benefits tighten financial management. medium- term weaken economic viability - Shift investment focus to (i) program. while limited cost recovery improve performance of existing and lack of OLM threaten infrastructure; (ii) complete financial funding & physical unfinished projects; (iii) sustainability. invest cautiously In new constructLon, including flood o control, drainage, storage and rehabilition. - Priority for funding 0 & K and improved water management. - Curb recurrent expenditures and financial waste. - Improve cost recovery. c) Improve technical performance Can begin nows - Ensure adequate 0 & M. medium-term program. - Improve water maagement. - Upgrade construction quality. - Improve environmental Impact. - Ensure adequate R & R. d) Institutional strengthening Can begin now; - Enlist greater private sector medium-term progrm. involvement and investment. - Improve public sector management and accountability. - Create autonomous surface irrigation comands. ____ ISSUES RECOHMDATIONS TiMI 2. Rral loads Rural transport Infrastructure a) Use resources spent on roads Hedium-term program. lags behind demand, with more effectively, throughs severe road congestion. high - Better coordination and vehicle operational c08tS, & planning. bottlenecks in marketing and - Re-examination of design reglonal integration. Rural standards. road standards are - Review role & potential of unecessarily high. Major rural employment schemes in problems exist In planning, road construction. construction, maintenance and - Allocate more funds to financing of rural roads. maintenance. b) Increase road Investment in more backward but high agriculture potential areas like eastern India. 9-, 0) uouug~. s. puv -uu sonssj Ol 111 Page 1 of 4 Issues in Input Supp-ly and Distribution cFBilize-r 1. Issues in fertilizer supply and distribution concem the extensive role of the Government, limits on types of fertilizer produced, a rigid marketing system, and needed improvements in marketing efficiency and coverage. 2. There is heavy Government involvement and regulation of the fertilizer industry and the distribution system. The public sector owns 43% of total fertilizer manufacturing capacity, and the cooperatives (which are quasi-governmental organizations) own another 16%; the private sector owns the remaining 41%, and their share has been increasing over time (Table 6.4, Statistical Appendix). Compulsory licensing for establishment, expansion or changes in production, and the official pricing scheme form an unusual straightjacket for the industry. Entry is strictly controlled, and any production changes (and by extension, any investments) have to be approved by the Central Government. There are controls on fertilizer type, quality, and packing, including bag material and labelling. The system protects the existing producer and maintains the status quo, often in the face of fundamental changes in technology and economics. As a result, India has a uniquely broadbased fertilizer production capacity, with the most important product - urea - manufactured in 32 plants of different sizes, vintages and technology, and hence with production costs which, ai the extremes, vary by 300%. This extreme variation in production costs and technical level of the industry in turn affects pricing policy and competitiveness. 3. In order to increase production and distributica efficiency, the Government allows the production of only a limited nwnber of basic fertlizr*s - essentially urea, DAP and MOPI - and discourages the manufacture of complexes and low is;llysis ferdlizers (less than 25% nutrients) (Table 6.3, Statisdcal Appendix). Urea now acco%ints for 64% of all nitrogenous fertilizers compared to 34% in 1970; DAP has moved from 4 t? 30% of all phosphatic fertizers, and MOP from 97% to 99% of all straight potassic fertilizers. Concentration on a limited number of high analysis fertilizers may increase efficiency of distribution by reducing the amount of inert material to be transported, and may reduce the inadvertent and ut n:cessary application of nutrients where a single fertilizer would be more appropriate. It may give tn.e farmer a clear choice of basic nutrients. However, such a policy requires effective education tUrirugh the extension s-atem on proper fertilizer use. Diminished availability of complexes rec; aces the farmer's choice for specific applications and may lead to deficiencies of certain nutr n s (for instance, there is evidence of increasing sulphur deficiency on selected soils in India, in part due to limited availability of ammonium sulphate). As the agriculture sector becomes more diversified, particularly into high value crops with specific nutrient needs, limiting fertilizer types will increasingly pose a constraint. 4. The distribution system is also heavily regulated by Government, although in recent years, the system has been relaxed somewhat The Government allocates domestic fertilizer supplies according to an annual fertilizer plan, which seeks to optimize transport and to prevent concentration of manufacturers in any single state. While individual manufacturers must conform to the plan, they are free to choose their marketing territories within a state. Difficulties in estimating demand and shifting allocations among firms have created uncertainties for distributors and led to glut situations (most recently for urea) or shortages. Gluts have led to aggressive marketing strategies and price discounts of as much as 40%. In turn, uncertainties have made it difficult for plant managers to expand their network of owned or supported sales outlets (for example, finns may arbitrarily "lose" a market in a fertilizer plan, despite having gone to the 1DAP or diammonium phosphate (18-46-0); MOP or muriate of potash (60% K20). 112 Page 2 of 4 expense of setdng up the marketing infrastructure). Controlled margins are also uncertain: margins have fluctuated around a decreasing trend ince 1967, varying from 10.3% to as low as 4%. In an effort to stimulate demand and fine-tune the distribution system, the Lead Ferdlizer Supplier Scheme was introduced in 1987-88. Under this scheme, one supplier was designated to prepare a plan to promote fertilizer and to compile stock and consumption statistics, for each area of the country. The program has not proved successful, in larage part because it is at odds with a system based on private sector distribution and competition. 5. The share of the private sector in the distribution of fertilizers is growing (private sector firms r,ow distribute about 70% of the fertilizer), and the share of cooperatives has declined from 60% in the early 1970s to only 30% today. In large part this is due to problems within the cooperative system. The preponderant government influence in cooperatives mean that they exhibit many characteristics usually associated with public enterprises: diffused and slow decision making, inability to withstand pressures and demands, and a generl lack of agility and operational fieedom to deal in a compedtive market. When shortages or oversupply demand market clearing price strategies, the cooperative system is at a distinct disadvantage. Cooperatives' declining share is important in that cooperative-owned plants account for 24% of national production, and are not allowed to market their products outside the cooperative system. However, there are plans by major cooperative manufacturers to expand output. Cooperatives receive certain benefits widtin the ferdlizer distribution system: for example, they are allowed a higher margin than the private sector (at present 6.4% compared to 5.5%), ostensibly because cooperatives penetrate further into the rural areas and fulfill a social role. This seems unnecessary, in light of the fact that most of the extra margin goes to the apex state federations, and private traders for nearly every other imaginable product has permeated rural areas. Many cooperatives also do not permit cash sales but extend fertlizer in kind as part of the rural credit system. When fertilizers are in surplus, this may lead to farmers accepting an unwanted type of fertilizer. Decreased availability of credit in the cooperative system caused by high arrears has contributed to the erosion of the cooperatives' market share in ferilizer sales. Yet private traders are unnecessarily constrained by the requirement that small fertilizer retailers need licenses and must meet obligatory bookkeeping and auditing requirements. 6. Problems in distribution are compounded by the concentration of the fertilizer industry (most plants are located in the west and south) and the sheer size of potential demand. India has well over half a million villages and about 180,000 fertilizer sales points. Less than half the villages are connected by road. Even in the Punjab, the most advanced state agriculturlly and one which is geographically compact, a fanner has to travel on average 8 to 10 kn to get fertilizer. Between this concentrated supply and dispersed demand, the allocation system has to distribute well over 500 million bags of fertilizer yearly. Furthernore, demand is seasonal, peaking once or twice a year. The only attenuating factor is the relative concentration of demand in irrigated areas (which nevertheless are scattered throughout the country). But as fertilizer use spreads to rainfed crops, distribution will become more difficult. 7. Transportation and storage pose increasing logistical bottlenecks. Transport costs are fully subsidized by the Govenment between factory and rail head, and partially subsidized between railhead and sales point, under the equated freight scheme. Although most fertilizer is shipped by rail, the railways are increasingly incapable of dealing with fertilizer freight, and truck transportation (which is more expensive) is taking up the slack. The rapid growth of fertilizer use in India is straining the distribution system to the point where a major restructuring of anportad on, particularly towards bulk handling, coupled with fundamental changes in handling and storage is needed. 113 Pag 3 of 4 8. Part of the Government's agricultural development strategy has been predicated on the proactive role of NSC and the state seed corporations. Do farners need the public sector to adopt HYVs? The rationale for government intervention usually rests on externalities, market failures, or the nature of public goods. Government interventions in markets to test new varieties, certify seeds, control quality and provide information (through extension) about seed varieties addresses the market failure that farners frequently cannot obtain accurate information about the genetic and physical characteristics of seeds. There may also be a need for Government involvement in seed production in the early stages of fodder and pasture seed, where the market is virtually nonexistent and costs are high, discouraging private investuent Govemment investnent in public research to develop new varieties can lead to efficiency gains. But the arguments that public seed procurement, processing and distibution of seeds increase efficiency are not as strong, especially in the context of India's large, sophisticated and mature seed industry. Nor does commercial seed fit the definition of a public good, as benefits from improved seed use clearly accrue to the individual. Although public seed corporations played a vital role early in the itroduction of HYVs (when, it can be argued, there were higher risks and market failures to be overcome), this role is less important today. 9. It has been argued that public sector companies, by encouraging fanners to purchase seed, result in higher yields, provide a security stock of seeds in case of emergency, develop varieties for "poor farmers", and prevent monopoly power. Review of the evidence on yield differences between SSC and farmer seeds showed only limited, if any differences for wheat and rice, and suggests that replacing farmer-generated seed with certified seed for self-pollinated crops would only increase yields by a limited amount. For hybrids, there is a yield difference of 30% - but in any event, the market for hybrids is dominated by the private sector. SSCs have provided emergency seed supplies in some cases (the recent cyclone in Andhra Pradesh is one example), but not always - their performance during the 1987 drought in some states was negligible. While it is true that private fmns also do not do much research on many crops which are important to poor farners - wheat, rice, pulses and some oilseeds - they do cany out much research on many other crops which are important, pardcularly coarse grains, sunflower and cotton. The common factor is not farmer demand or cash crops, but whether it is hybrid seed. 10. Finally, while there have been instances of private firms producing seed varieties which have captured major market shares (one example being a millet variety resistant to downy mildew), these instances have been shortlived, as the attractive returns have encouraged other private firms to step up R&D and introduce their own varieties (this competitive spirit, however, has not seemed to carry over into the public sector research system or seed companies). Evidence on seed pricing internationally shows that the cost of Indian maize seeds (the only seeds with international comparators) were low compared to developing and developed countries: in India, the cost of hybrid seed was 4 to 5 times the price of grain, while in Nigeria, Philippines, Thailand and Mexico, hybrid seed cost 10 to 20 times the price of grain. Although prices of private hybrids have sometimes been higher than those of public hybrids, the majority of economic benefits from growing private hybrids goes to farmers and ultimately to consumers. Thus, even if there is some market power, society is better off having private sector research and seed sales than if the private sector were kept out. 11. Public involvement in seed distribution shapes the market and nature of competition in the industry, and provides powerful incentives or disincentives, in some areas, to increasing private sector investnent. Relaxation of market regulations has contributed to the rapidly growing private investment in seed development and distribution. The recent change in industrial licensing policy in 1987 to allow companies with large foreign participation to engage in seed sales and biotechnology 114 Anno I Page 4 of 4 was an important step to open the country up to new technologies; the response to this change has been positive, with several companies seeldng to invest in seed production in India. Similarly, the 1988 change in seed policy to expand exports of certain key seeds (except wheat, rice and cotton seed imports, which remain banned) is also a positive move. 12. On the other hand, there remain barriers to private research and marketing of seeds, including lack of rights for plant breeders, requirements that new imported lines be deposited with the National Board for Plant Genetic Resources (a requirement that discourages companies with proprietary lines from imporing them into India), difficulties in securing national certification of seeds (seeds are cerdfied only at the state level, and states do not recognize certification from other states), village cooperatives that carly only seeds from SSCs and baniers to seed export. 13. Seed pricing and large subsidies both to SSCs and for sales of seeds from public sector agencies are also constraining private sector development and thus seed availability. Losses witiin the seed companies themselves are comparatively large - NSC runs an annual deficit of close to Rs 60 million, and several SSCs have also accumulated heavy losses. Although subsidies on seeds have little impact on adoption, they do have an impact on the structure of seed supply. The result of subsidies is that private sector companies have been driven out of production of some grains (especially rice) as they cannot compete with subsidized sales. Shifting rice seed production from the private sector to the public sector tirough subsidies may increase the cost of seed production (although the subsidy prevents the cost from being passed on to the fanners) by shifting seed production to the higher-cost public agencies, and may slow the spread of HYVs. 115 Annex I Lad Issues and Technology Adoption 116 Page 1 of 2 Land Isisues and Technology- Adoption 1. Small and declining farm sizes together with land fragmentation and high rates of tenancy in certain areas may be acting as a constraint to technical innovation and investnent. Average farm sizes have been declining in India and this trend will doubtless continue into the next decades due to population pressures on the land and lack of sufficient non-fann employment Land issues are particularly a problem in eastem India, which has one of the highest rates of tenancy in India (and is one of the few areas where tenancy has increased) and the smallest farms. Land issues are considered to be one of the major factors impeding agricultural growth in that region. Unfortunately, the evidence on the influence of tenancy on technology adoption and production is piecemeal and for eastern India, incomplete. 2. Farn size may have an impact on innovation either because available technologies are better suited to large-scale farms or because small farmers have less access to inputs, credit and information. A large number of studies on the relationship between farm size and productivity after the introduction of HYVs, have been done in India.i While the evidence is not conclusive, it suggests that small fanners are relatively slow to adopt new biological and mechanical technologies because they have poor access to improved inputs (seeds, fertilizers, pesticides, infonnation and credit). Prior to the Green Revolution, small farms in general were more productive than large farms as small farms could optimize the use of labor, which was abundant and low cost. But with the introduction of the new technology, the inverse relationship between farm size and output per hectare has weakened and in some cases reversed. Thus, while most Green Revolution technology is scale-neutral (with the exception of machinery and tubewells) institutional and financial biases work in favor of larger fanners to allow them better access to the technology, as it is largely embodied in inputs, and to supporting services such as extension, credit, information and marketing (I.J. Singh, 1988a). The issue is not so much land distribution as increasing access of small farmers to technology. Even where small farmers do adopt new technologies, productivity and thus returns may be affected by the fact that small farms, as both fins and households, may not be able to optimize efficiency due to the need to protect subsistence output (Binswanger, 1990). 3. Analysis of data on tenancy dispels the idea that tenancy could be responsible for lagging production in all of India, although gaps in the data make it difficult to draw conclusions on eastern India. Tenancy of all kinds accounted for only 11% of cultivated area and about 25% of cultivated holdings in 1971, and has been falling overall (although there is doubtless underreporting). The highest rates of tenancy are in the north, which also has the highest rate of agriculuWal growth. Nor are tenants exclusively small and poor farners: in the Punjab in particular there has been a trend toward larger farmers renting in land, and most tenant farmers also own and operate some land Tenancy is most likely to be a problem in areas where the incidence is above average and where tenant farmers are small, particularly in eastem India. Tenancy has performed an important role where markets are imperfect, by adjusting unequal supplies of labor (tenants) and land (landlords). 4. Studies show that tenancy per se does not affect productivity once size, land quality and irrigation differences are accounted for (Singh, 1988a and 1988b), except in the smallest size groups (O- 2 ha). But the smallest tenant farns are the ones that predominate in most eastem 1 See IJ.Singh, Th t (1990) for an exhaustive summary of available information. 117 Amefi Page 2 of 2 states, and unfortunately there are no comprehensive studies linking productivity and tenancy in this region . Examination of regional breakdowns of data on nutrient use and HYVs by size of holding and tenancy status revealed no systematic relationship between tenancy and input use overall in India once size of holding is controlled for (these findings are confimed by NCAER's surveys on ferdlizer). The only evidence of a negative relationship was for nutrient use in eastem India (Singh, 1988a). There are however also market imperfections in this region which may hinder the access of tenant farmers to modem inputs and especially credit. While there are no comprehensive studies examining the distributive impact of new HYV technologies, evidence indicates that tenants have gained significantly fiom new technologies, except those with holdings less than one acre. To the extent that tenant farmers rent in unirrigated land, however, their use of improved inputs may be constrained by lack of assured water. 5. Tenancy is not an overall constraint to agricultural development within India, but it does appear to be one of many factors affecting growth in eastern India. In general, tenancy appears to be on the decline in India, it is performing some useful functions in imperfect rural market economies in the meantime, it is not necessarily inefficient and conditions exist for making it relatively efficient, and it does not seem to represent a critical barrier to the adoption of new technologies (Singh, 1988a). 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New York: Oxford University Press, 1990. 126 List of Tab nd Elm= for CEM 1221 AGRICUILTUR Table 1.1 Growth of Nominal and Real GDP from Agriculture, 1970 to 1989 Table 1.2 Indicators of the Spread of Agriculture Technology in India by States Table 1.3 Growth Accounting: Indian Agricultme 1972-74 to 1982-84 Table 1.4 Gross Domestic Capital Formation in Agriculture Table 2.1 Land Use Classification, 1950 to 1987 Table 2.2 Distribution of Land Holdings in India Table 2.3 Operating Households by Tenancy Status Table 2.4 Operational Fann Holdings by States Table 2.5 Area Under Different Types of Tenancies by Size Group of Holdings Table 2.6 Production of Major Crops, 1950 to 1989 Table 2.7 Production Index of Principal Crops Table 2.8 Gross Area Under Major Crops, 1950-1989 Table 2.9 Area Under Rice Cultivation Table ,.10 Yield Per Hectare of Major Crops, 1950-89 Fig. 2.1 Trends in rice and wheat Yields, 1970-88 Table 2.11 Compound Annual Gi owth Rates in Non-fann Output and Nontradc-able Agricultural Output Under Altemative Agricultuml Growth Rates Te3 Table 3.1 Structure of Wheat Prices Table 3.2 Structure of Rice Prices Table 3.3 Real Price Trend Indices for Rice and Wheat Fig. 3.1 Rice: Indices of Real Wholesale, Farn Harvest and Procurement Prices, 1971-88. Fig. 3.2 Wheat: Indices of Real Wholesale, Farn harvest and Procurement Prices, 1971-88 Table 3.4 Divergence between Domestic and Effective Incentives Table 3.5 Fertilizer and Crop Price Trends Table 3.6 Prices Paid by Farners and Terms of Trade Table 3.7 Estimated Changes in Market and Producer Prices of Rice and Wheat in Selected States Due to Changes in Distribution and Procurement Table 3.8 Elasdcities of Agricultual Output with Respect to Prices and Non-Price Variables Table 3.9 Mean Value of the Rates of Return of Different Crops Table 3.10 Protection Coefficient of Selected Commodities Table 3.11 Statewide Deviation in Real Wholesale and Farm Harvest Prices for All-State Weighted Average Price Table 3.12 Indicators of Efficiency, Employment and Environment (Ratios in Relation to Wheat) Table 3.13 Domestic Incentives and Changes in Cropping Patter, 1980-81 to 1986-87 127 Table 3.14 Indices of Ferilizer and Agricultural Product Prices EA. S S Table 4.1 Trend in Per Capita Food Production in India Table 4.2 Wheat: All India Production, Procwuement, Procurement Issues, Stocks and Net Imports Table 4.3 Rice: All India Production, Procurement, Procmrement Issues, Stocks and Net Imports Table 4.4 All India Net Availability of Wheat and Rice Table 4.5 Degree of Government Intervention in Foodgrain Markets Table 4.6 Government Intervendon in Domestic and Intemadonal Agricultural Markets Table 4.7 Rice and Wheat: Percentage Shares of Main Producing States Table 4.8 Esdmated Effects on Profits of Wheat and Paddy Farmers of Eliminating Fertilizer Subsidy Table 4.9 Esdmated Ferdlizer Price Increases in India to Reduce Budget Subsidy Table 4.10 Distribution of Subsidies by State, 1980/91 to 1986/87 Table 4.11 All India Fertilizer Prices and Subsidies Fig. 4.1 Nominal and Real Cost of Ferdlizer Subsidy in India Fig. 4.2 Maximum Fertilizer Sales Prices, 1972-1990 Table 4.12 Number of Persons Per Fair Price Shop and Average Per Issues of Wheat and Rice Table 4.13 Foodgrains Share of PDS in Net Availability Table 4.14 Distribudon Costs and Costs of Carrying Buffer Stocks: Levels and Changes Table 4.15 Actual and Desired Pattem of Distiibution by States Table 4.16 Procurement Costs: Level and Changes for Wheat, Rice and Paddy Table 5.1 Gross and Net Irrigated Area, 1950 to Present Table 5.2 Irtigated Area Under Selected Crops in Important States Table 5.3 Investment in Major and Medium ITigation for 14 Major States Table 5.4 Irigated and Unirrigated Yields of Rice and Wheat in Major States Table 5.5 Growth Of Real Investment in Irigation by States Table 6.1 Fertilizer Consumption in India, 1950 to 1989 Table 6.2 Fertilizer Use by State, 1988-89 Table 6.3 Shares and Growth Rates of Urea, DAP and MOP, 1970-89 Table 6.4 Ownership Structure of Ferdlizer Manufactuing Table 6.5 Pesticides Consumption in India LEz_d_umandMda& Rh Table 7.1 Composition of Tern Loans for Agriculture Table 7.2 Expenditure Elasticities at 1986-87 Prices Table 7.3 Research Publications and Newly Notified Crop Varieties Table 7.4 TFP Decomposition of Estimates Table 7.5 Estimated Rates of Change in TFP by State 128 Table 7.6 NABARD Refinance by Purpose Table 7.7 Contributors to Growth in Real Net Cuunent Spending Levels Table 7.8 Growth of Real Investnent Credit and Agricultural Value Added Table 8.1 Male and Female Agricultural Laborers, 1971 and 1981 Table 8.2 Agricultural Wage Rates for Malt i and Females Table 8.3 Percentage of Rurl Females Woridng in Agriculture by State Table 8.4 Distribution of Female Workforce in Major States by Main Sectors Table 8.5 Per Hectare Employment Elasticities with Respect to Yields for Specified Crops and States Table 8.6 Labor Use for Major Crops and States Table 8.7 Distribution of Poor and Ulta Poor by States Table 8.8 Variadon of Female Hired Labor to Family Labor by Household Monthly Per- Capita Expenditure in Rural Areas Table 9.1 Real Growth in Rural Development Grants 129 Statistical Appendix Table 1.1 Table 1.1 Growth of GDP from Afrudsle 1970f71 to 1988/89 Real Agr. Agr. ADP Real Agri. GDP Growth Growth Rate GDP Rate Agr. GDP (% change to (Rs. bilion at (% Change to Y= (Rs bilioi nn 1mvious eale i2BLniu pmimn) 1971 174.24 3.78 396.01 -0.5 1972 180.83 10.24 393.86 -6.03 1973 199.35 34.38 370.1 7.31 1974 267.88 8.2 397.36 -1.8 1975 289.84 -3.9 390.22 1976 278.45 2.59 404.2 3.58 1977 285.67 14.52 388.14 -3.97 1978 327.16 3.01 429.34 10.61 1979 336.96 3.1 433.67 1.01 1980 347.42 33.78 386.88 -10.79 1981 464.79 12.67 464.79 20.14 1982 523.69 6.21 491.39 5.12 1983 556.22 19.89 483.58 1.59 1984 666.84 6.72 534.73 10.58 1985 711.66 7.55 535.02 0.05 1986 765.37 6.68 536.52 0.28 1987 816.46 12.26 524.26 -2.29 1988 916.55 24.1 530.53 102 1989 1137.41 622.77 17.39 Growth Rate Periods: 1970171 to 1988/89 1.92% 1970171 to 1980/81 3.70% 1981/82 to 1988/89 1.18% Source: Agriculture GDP from Economic Surgvey, C;OI Vanos Issues. Real Agriculure GDP is calclaed usng GDP deflation. 130 Statistical Appendix l ~~~~~~~~~~~Table 1.2 JI' 5 :f 555 iii' sUf3!;!:3oa.p m al inam.a 9.1g. wma018.9. dm aa) eg1 3 au. -3 I PP fm 193>0 ID 190&$7 ib G. Pm b= &Oqzpftl alam isy 1a b~r (Foaa3woypodma 4aaow.S=) 106. L 3-1 FC et8' Sifdaboma197748 ma 943 ... .3 S : AWicelFl,dEd9, M Q A, 19U Sc PM 9aaAtAGt to O^,n 1Q Sum: h1.Atmrno~D1awadNmmiud8al31h.Mo. 388 ziAVW3mm SbazwgkGAlAGIam.mOA. 3996 m 0 Tabe L2b2: DOS*rdbuo of Laid Hokum Ia Inda 1 No. dopenoal jjg A A rea aHled AYe 1 g_ U C egyt HeUla (15641) (196546) (198641) (196546) (1960I) (390546) (C0) {mOII ha) (ba) MA d 50,122.00 56.748.00 19,735.00 21.60600 0.39 038 (LbAWuhalba) 15641 158.11 112.11 113.21 Sma 16.012.0 17.881.00 23,169.00 25,533.00 1.44 1.43 (l0to2oha) (ILlI 11831 114.31 115.i1 S.ni-Medim 12,45S.0 13,53.00 34,645.00 36,7.00 2.78 2.76 (2.0to4.ob) 1141 113.51 12121 122.31 MAM 9,068.0 7,20 48..00 47,008.00 604 5.94 (4.0to 10.0 ba) (9.33 18.11 129.61 128.71 LAW 2,16&O 3,929.00 37,705.00 33.,17.00 17.41 1720 (10d abmoe) 12.41 121 1231 121021 1- AI H}ihp 88,983.0 97,731.00 163,797.00 163,933.00 1.84 168 1100 (100.1 (100.01 (30O0O. Nae: Daa am poviaimaaL Rgnr n brama bndi pebep_ig reqate caaa ttls. Somw. -godn C.AM& I-A I NI X NI 0 0 g I-at {D e. 134 Statistical Appendix Table 2.3- --- ~~~~~~~~~~~~~~~( IL 5 3 sitji Qq Iq t 2X' C 0~~~~~~C iiJ si . .. .. ,. .. .. 135 Statistical Appendix Table 2.4 Table 2.4 Opraional Eam HoWdin z. by tt 908 Average Size of Number of holdings Area Operated Holding _ m i'mo {ha) a) a Andhra Pradesh 7370 8.3 14333 8.7 1.9 4 Asam 2298 2.6 3121 1.9 1.36 Bihar 11030 12.4 11068 6.8 1 Gujaat 2930 3.3 10104 6.2 3.45 Haryana 1012 1.1 3562 2.2 3.52 Hinachal Pradesh 638 0.7 980 0.6 1.54 Jammu & Kashndr 1035 1.2 1030 0.6 0.99 Kamataka 4309 4.9 11746 7.2 2.73 Kerala 4181 4.7 1805 1.1 0.43 Madhhya Pradesh 6411 7.2 21931 13.4 3.42 Maharashtra 6862 7.7 21362 13 3.11 Manipur 136 0.2 169 0.1 1.24 Meghalaya 170 0.2 296 0.2 1.74 Nagaland 116 0.1 839 0.5 7.41 Orissa 3328 3.7 5278 3.2 1.59 Punjab 1020 1.1 3892 2.4 3.82 Rajashan 4487 5 19932 12.2 4.44 Tami Nadu 7191 8.1 7708 4.7 1.07 Tripura 308 0.3 330 0.2 1.07 Uttar Pradesh 17817 20.1 17971 11 1.01 West Bengal 5878 6.6 5555 3.4 0.95 Skkim 56 0.1 109 0.1 1.95 Union Territories 300 0.3 656 0.4 2.19 Total 88883 100 163797 100 1.82 Source: IDian Agriculture in Brief, MOA, G0I1988. Table 25: Ae Under Diffeen Tve offenamies. byS Grow, of H_Lding (1961-62 and 1971-72) 1961-62 1971-72 Size Group Cash Rent Fixed Poduce Share Produce Othrs Total Cash Rent Fixed Produce Share Produce Others Total (Acres) Under2.5 7 (17) 10(12) 12(43) 12(27) 11(100) 10(9) 13(10) 19(53) 18(28) 16(100) 2.5 - 5.0 11 (18) 18(14) 20(48) 14(20) 16(100) 13 (10) 21 (13) 24(55) 18 (22) 20(100) 5.0-10.0 19(22) 29(16) 25(41) 20(20) 23(100) 23(14) 29(15) 24(47) 24(24) 25(10) 10.0- 25.0 31 (2) 29(13) 25 (34) 29(24) 28 (100) 30(19) 30(15) 22(41) 26 (26) 25 (100) Over25.0 31(35) 15(8) 18(31) 24(25) 22(1000 24(28) 7(7) 11(39) 14(26) 13(100) ADGoup 100(26) 100(31) 100(38) 100(23) 100(100) 100(15) 100(13) 100(47) 100(25) 100(100) Totl (million acres) 9.0 45 13A 8.2 352 5.2 43 16.1 85 34.1 No: I))M p _ataps mpmxti i c wu t-d y typa anq a d tana mee in si- grap by ye. 2) F*rwmy not ad to mai dw o tandi ng and ca_eriwu Soame: Sni*e, 198b. JD rt (t VI 0 m * I. U' 0 Table 2.: PioutoRL gf N 1ronA nb 19511N 5t 1° I889 Vears Totmi Total RIOs Wheat Jowar Malle Sairs Total GfaM Grot Idnut Coaton Of Juts IF S garo8 Foodglna C8esaia Pulses 131913a 52.0 48 2130 638 608 la0 235 3.42 3.39 3.39 328 4.72 6t.63 19521D 59.20 50u L.9 750 7 136 287 3.19 9.19 4.21 293 334 4.63 5314) 1953/4 69.82 59*9 21.21 8.0 a8 3.0 4M 14.92 4.83 3.4 4.13 3.12 44.43 9505S 63.04 57.9 25.22 9. 9.20 2.9 3.52 10.95 .a 425 4.45 295 58.74 39556 G.m 554 2.6 876 673 2180 3.43 33.08 5.42 3.86 4.18 423 60S4 395/57 69.6 5LID 2948 9.40 7.2 3C0 2.87 1135 6.23 4.37 492 4.32 69. 3957M 64.31 S575 2.3 800 &64 315 3A2 9.56 4.89 4.71 4.96 4.0 71.16 39539 77.14 63.99 30.35 9.96 9.03 346 3.87 13.15 7.02 5.38 4.88 s20 7336 195 767 6437 333 3Q3 as8 4.07 3.49 3s30 52 4.56 3.68 4.3 77.2 89WM 8. 6931 34M H1.0 9.U 4.08 328 12.70 625 4.81 5.60 4.13 I30.0oD 963s 82.73 7095 mm6 3207 03 4.31 3.6S 11.76 5.79 4.99 4.85 636 30.97 I9E1 80.15 MCI 332 30.73 9.75 4.6 3.96 1133 5S.36 5.04 5.4 5.44 91.93 19650 3m 7037 37.00 9. 920 4.56 3.88 10.07 4350 s .30 5.74 6.08 104.23 1964S 89.36 7694 3931 12.26 94S 4.66 4.52 3242 5.73 600 6.03 6e0 121.91 196W 7235 62A0 3a59 140 738 4.82 3.75 9.94 4.22 4.26 4.5 4.48 123.99 39667 4.23 6513 30.44 IL339 9.22 4.89 4.46 8.33 3.62 443 5.27 5.36 .69 196718 93.S0 3gs. 37.61 1634 10O8 627 S.19 12130 5.97 S.73 3.78 632 95.50 196s 93.03 860 39.76 331 9.81 5.70 3.83 30.42 4.31 4.68 5.45 2.93 1246 196wsJ 9950 37.83 4043 209 9.72 S.67 533 33.69 .55 5.13 5.56 5.2 1335.0 1970Y73 30642 9661 4223 2313 8.3 7.49 8.03 13.82 5.20 611 4.77 4.94 12.37 3973l12 308.17 9407 43.0 2641 7.72 130 5.32 13.9 5.08 638 6.95 54 11337 1972tn 97. 7.12 39.2 24.74 697 639 3.93 9.91 4.54 489 5.74 4-.9 324.87 197W4 308.67 94.6 444S 23.78 9.30 5.80 7.5 3L03 4.10 5.93 6.33 622 14029 397415 993 8931 3933 24.10 30.41 5.56 3.27 IIO 4.02 5.11 7.16 4.47 144.2 19751 33m 3081 447 23.5 9.50 726 5.74 13.04 5.88 67 5.95 4.44 14040 197017 333.37 99.31 41.92 29.03 3032 646 55 11.36 5.42 5S26 54 5.35 153.03 3MMll 12643 3 1143 5267 31333 32S 5.97 4.73 1.97 3.41 6.09 7.24 526 3797 197U9 13190 119.2 5377 3533 13.44 620 557 3.8 5.74 621 7.96 647 1531.66 1979130 109.70 101.13 4233 3133 33.6 5.60 3.95 857 3.M 5.77 7.70 607 128.83 3938I 21US7 1370 D3) 53.23 3646 30 680 5.42 11.17 4.6 5.0 7.60 652 150.32 39W31 3 13329 121.79 332 37.4 12.06 69 5.4 13.51 4.64 722 7.8 679 186. 198213 12932 117A6 47.12 42.79 0.73 655 5.13 11.86 529 5.2 7.S3 5.95 189.51 1939"4 3 7 3394 60. 45.48 11.92 7.92 7.73 12.89 4.75 7.0 63 633 74.08 198435 1454 133S 5834 44.7 IIA 844 6.05 11.96 4.56 644 8.51 633 17032 193506 I304 3373 63 47M 130.2 664 3.66 13.36 3.79 53.2 8.73 30.93 170.65 393S47 14342 131.71 30.56 4432 9.19 7.59 4.51 lI.7 4.53 5.67 6.91 735 186.0 39571 140.35 12939 568 4617 12.2 5.72 3.3 I0.96 3.63 5.85 63t 5.79 196U74 '-3 19 37023 56.S 7067 53.99 1052 8.33 7.79 13.7 5.06 9.5 8.69 663 204.63 0 l b X0 - ^~~~~ |. -4 aaEsn **!s*EBN g~~~- a I 8 . t a p g 8 X 9 R M o 8 0 Xo |~ F H. s8088oFE808 0.~~~~s08000sgg31 2 I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~b Table 2S: 0O0ra Area Undsr m ml o I Irdis, 19511S2 la I Yearse Toal Total Rilmo What Jowar Maine Beira Total Gram Groundnut Colton Jute Sugarcane Foodgralna Cereals Pldses l93s3m 9196 73.19 29.83 9.47 13.94 3.31 932 18.78 6t3 4.02 656 079 1.94 1952153 302.0 8224 2.97 9.83 17.34 3.61 I&r 19.84 726 4.80 6.34 0.73 1.73 393130 109.07 81.34 31.29 30.68 17.76 3.87 1220 21.73 7.97 425 h99 a49 I.41 1945W 107.86 83.94 306 11326 17.46 3.73 11.37 21.91 9.25 534 7.35 0.30 1.62 935136 110.36 8734 31.52 1237 17.36 3.70 1134 23.22 9.78 5.13 8.09 070 1.85 19307 111.14 3.83 32.2 1332 16.24 3.76 1323 23.32 9.67 5.53 8.02 0.72 2.0 1957t38 309.48 86.94 3230 11.73 17.31 4.08 11.17 2234 9D9 642 8.0S 0.71 .07 193819 114.76 90A4 33.17 1262 17.96 4.27 11.43 24.33 I3OS 6.23 7.96 07 3.9 19S9160 115.82 90.99 33.12 13.38 17.71 4.34 1Q70 24.83 10.33 &44 7.30 .69 2.14 19ff 33.538 92. 34.13 1393 18.41 4.41 11.47 2356 9.27 146 7.61 0.63 242 196332 117.23 92.99 34.69 13.7 18.25 4.51 1128 24.24 9.37 690 7.9 092 2.46 I9621f3 117.64 9338 35.70 133.9 384I 4.64 l0.96 24.27 9.19 7.28 7.73 as3 2.24 396314 117.42 9324 33.81 13.49 3&38 4.3 31.30 24.19 9.33 689 822 0.87 2253 1964165 118.11 9424 364 13.42 11.06 4.62 11.83 23.88 8.7 7.38 837 0.83 2.60 '4 196356 334.30 9239 35.47 12.37 17.70 4.80 11.97 21.72 8.02 7.70 7.96 076 2.84 1966*7 133.30 93.18 352 12.84 0os 3 .07 12.24 22.16 8.0 7.30 7.4 0.73 2. 1967138 121.42 98.77 344 14.99 I.2 338 128 22.6s 826 7.53 t00 088 2.0s 1966W9 120.43 99.17 3697 35.96 3873 520 L2.03 2.26 7.31 7.09 7.60 0.33 2.33 1969n70 123.57 301.35 37es 163 38.61 3.86 3249 22.02 7.73 7 33 7.73 n77 273 s97f7l 324.32 101.78 37.S9 3824 37.37 3.83 3293 22.33 7.84 7.33 7.6 735 2.62 19717l2 322.6 3e<7 37.76 19.14 3178 3.67 11.77 2.3 7.91 7.53 7.80 0.82 2.39 1972/f 3392 91.36 3169 19.46 33.53 3.84 11.82 20.92 697 699 7.68 0.70 245 3973/14 12634 103.11 38.29 Is. 3673 102 33.93 23.43 7.76 7.02 7.57 0.79 273 3974/73 121.03 99.0I 37.89 13.03 1619 S.86 1128 22.02 7.04 7.06 736 Q69 2.89 397536 328.S 10.73 39.48 2e43 3109 603 0 3357 24A4 8.32 722 7.35 0s9 176 197w7 324.36 303.37 38.51 20.92 .77 6100 30.73 22.a 7.97 7.04 689 074 2.87 s97M78 327.2 104.02 4028 23.46 3L32 5.69 33.30 23.30 7.97 7.03 7.87 0.80 3.I5 397811 129. 30.33 40.48 22.64 l63L 5.76 3339 23.66 7.73 7.43 8.12 0.s8 3.09 197980 325.21 302.93 39.41 22.37 1667 .72 3 lo3 22.26 699 7.17 8.0e 0.83 2.63 19681 123.79 303.16 39.77 2130 35.61 s.98 11.63 22.63 12 691 7.87 0.94 263 3983132 329.34 05.29 4071 22.34 33.60 5.94 11.78 23.24 7.87 7.4? 8.06 043 3.19 39883 323.30 302.26 3826 2357 138 3.72 30.94 22.84 7.40 7.22 7.87 0.73 3.36 cn 9831a4 133.16 !07.62 4324 24.67 3143 3.86 11.83 23.34 7.36 7.54 7.72 0.76 3.11 0 t 3984183 326.67 103.94 43.36 23.36 15.94 3.80 3062 22.74 693 7.17 7.38 0.83 Z95 3 C 1983136 328.02 303.24 43.14 2.00 36.0- 5.88 30.65 24A2 7.80 7.32 733 1.15 zEs I- t 341687 327.2D 0 10404 43.37 23.33 15.93 5.92 33.27 23.16 6.98 69 693 0.8 3.08 1 198173 339.69 98.42 38.83 23.s 31o 5.36 71 23.27 5.77 6.84 646 0.70 3.28 t ( I3986* 328.30 10e.0 41.86 24a9 14385 3.9" 320 23.26 689 .3 7.30 .69 337t S== MDA. DlreCi if eSM3a ,~~~~~~~~~~~~~~~~~~~~~~ 140 Statistical Appendix Table 2.9 Table 2.9: Aea U-nder Rise CuliLvatin ('000 ha) Irrigated Rainfed A I. X,(m smgdh1 Eastem India 3.657 631 2,640 6,186 3,492 1.639 Assam 189 14 215 892 857 100 Bhihar 1,440 72 531 1,696 847 672 Orissa 893 169 691 1.743 886 150 W. Bengal 984 340 883 1,685 853 677 NE States 151 36 320 170 49 40 Northemn States 1.261 Southern Staes 3.808 1.682 785 1,092 339 240 All India 11.134 2.344 5.973 12,677 4.470 2,434 sowc. Prey, 1990. Table 2.10: &veraa Yeld at Malor Cr.op in India, 95119S to I (kglba) vows Total Total RICe Wheal Jawar Mau* Baira Total ratm Groundnut Colton W Jute al Sugarcuan Foodgralne Coreals Pulses (Chickpea) (lnt) (Gcne) 19ff52 S536 57 714 53 381 627 246 448 496 649 IS 1074 31786 195w 5no 6 76 743 420 796 296 463 S5O 611 89 1135 29495 195 640 68 902 750 455 785 373 489 606 82II l2 1129 31497 9SW 601 4 820 D03 5S7 "4 310 Sa 08m 766 100 1056 303 19555 GM606 639 874 703 387 704 302 476 504 752 u 1082 32779 19560 69 " goo 6ff 451 819 55 495 644 m tOo i0on 33683 1957158 5A7 g30 790 682 499 m 324 423 538 734 13 1025 34325 9515 on7 707 930 789 503 12 338 541 697 82 10 2277 37633 2f%W 6a2 713 937 77 484 938 327 4*5 544 s 0 86 1)97 35414 1296Y 710 753 103 85 533 926 286 539 674 745 125 1183 4559 29ssU 70s 763s M28 890 440 9a7 323 485 609 725 103 I22 42349 29 6 an 733 931 793 S 992 361 47 5S3 695 122 1256 40996 1964 687 757 204 730 50 9Rs 349 416 4"1 769 119 1260 46353 19645 757 816 018 933 S36 1ol0 383 520 65f 814 I22 1292 4638 1966 439 675 863 827 429 2003 314 438 527 554 104 1062 43717 19647 64 707 863 87 5it 964 36S 377 453 60 124 1210 40336 196752 783 so 232 1103 345 3225 405 534 721 79 123 1293 46645 2-a 1969 781 3 1076 2269 52s 997 32s 490 607 653 I22 200 4923 s969D so0 g65 073 2209 522 963 426 531 7125 70 122 1326 49121 197wn 8n 99 1123 1307 466 129 42 524 663 834 106 1286 48322 n97a1 as 936 1241 1380 460 to0 432 501 642 823 515 12X5 41521 29717n 813 S6 0l70 1271 449 104 333 474 651 S8 5 27 1228 50933 1971 827 918 1151 1172 544 965 540 427 528 t45 142 1412 51263 9740s t24 9D7 1045 I38 643 948 290 45S 570 724 161 1211 498355 19731 944 1041 1235 1410 591 1203 496 533 707 95 138 1367 3090 297477 me 9S Ion 1387 667 2060 544 494 680 747 44 1307 53313 1977118 992 2100 130 1480 739 2051 426 520 678 U6 157 1210 56160 19789 Ion 1136 2328 IS2 768 2076 489 515 745 835 167 1317 49141 1970 876 92 1074 1436 699 979 371 35 482 as 26 1310 49354 2981 1032 2l2s 123 1649 673 1237 466 493 692 727 264 1245 5684 19832 1032 2157 2308 1269 m 1162 470 463 590 972 166 1480 58 l223 2035 1251 1231 1216 657 1245 469 519 715 732 163 1458 36441 I934 1162 1296 1457 254 726 1352 652 546 663 940 141 1417 559 29135 2249 122S 2417 1870 725 2456 569 526 661 8m 196 1411 57673 198w6 115 1324 252 2046 633 1146 344 547 742 729 297 1210 58 19 7 I22 1226 1471 19126 56 228 401 505 649 841 169 1647 60 19875A 1173 1315 1465 200 762 1029 378 525 65 855 £8 1496 600 0 A WV8 2337 1490 168 2241 703 1401 646 589 735 1132 2G2 1725 61000 lb t tD Mo C it 8m MOA. DkcSINbEfSIfIAIcL~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~ Table 2.11: Compound Annual Growth Rates in Nonfarm Output and Nontradable Agricultural Output Under Atemative Agricultural Growth Rates Annual rmowth Resulting Growth Rate in Output of Other Sectors in Agiculaa Manufacturin Tetiary Nonfafnn Nontradable Aicullure Outputa Projecion Range Projection Range Projection Range Projection Range i) Growth Originates m Urigated Agriculure 1.00 0.72 0.38-0.72 1.05 0.57-1.06 0.86 0.46-0.86 1.89 1.13-1.90 2.40 1.90 1.15-1.93 2.54 1.60-2.55 2.19 1.35-2.21 3.80 2.66-3.81 3.25 2.73 1.78-2.74 3.41 2.32-3.45 3.04 2.01-3.06 4.81 3.55-4.83 4.00 3.46 236-3.47 4.22 3.01-4.24 3.80 2.65-3.82 5.66 432-5.68 5.00 4.45 3.22-4.47 5.27 3.94-5.29 4.82 3.54-4.84 6.77 53576.78 6.00 5.46 4.13-5.48 6.30 4.90-6.32 5.85 4.48-J.87 7.84 6.36-7.86 ii) Growth OriginMes in Rainfed Agrcultue 1.00 0.65 0.34-0.66 1.03 0.57-1.04 0.81 0.4440.82 2.02 1.21-2.03 ws 2.40 1.80 1.07-1.81 2.50 1.60-2.51 2.11 1.30-2.12 3.96 2.77-3.98 3.25 2.57 1.65-2.59 3.39 2.32-3A1 2.95 1.94-2.96 4.99 3.68-5.00 4.00 3.29 223-331 4.18 3.01-4.20 3.70 2.60-3.72 5.85 4.46-5.86 5.00 4.27 3.07-4.29 5.22 3.94-5.24 4.71 3.46-4.73 6.95 5.506.97 6.00 5.27 3.97-529 6.26 4.90-6.28 5.73 438-5.75 8.03 6.52-8.05 Nom a/ Tsadalb (cop)la IF u ody. lTelow iage valewasdoalvd by saig alHt senatonaSlSO mnutipiWsm dwso odthtteoa onfm 'lnoe -multplkie s 0.64. dh sumn as ow ecoxmcurw esticmM. Tle q np vaun isb ased on e dsasumpion ha th ful S1O mutipr iWmas by 2Jpum to 5Efle caodgoca e sad hifn expediun paer1 Han] and HagadeI RIral-Uthba Growt Lnakges n i Md... (1990).. Il rt tk. x Statistical Appendix Table 3.1 Table 3.1: Structure of Wheat Prices, Uttar Pradesh * (Rs/qtl) 1981 1985 1989 Open Market Retail Price 153 190 270 Price Paid by PDS consumer (Issue Rate) 152 181 214 Price FCI supplies to PDS (Issue Price) 145 172 204 Open Market Wholesale Price 135 160 203 Intemational Reference Price (Importable Hypothesis) 183 215 349 International Reference Price (Exportable Hypothesis) 123 124 213 Procurement Price 130 157 183 NPC, Importable Hypothesis (row 7/row 5) 0.71 0.73 0.52 NPC, exportable Hypothesis (row 7/row6) 1.06 1.27 0.86 prices prevailing in Uttar Pradesh for FAQ variety. Notes: (i) All prices refer to the average for the April-June quarter which corresponds to the peak marketing season for wheat (ii) TIe retail price is for the market at Kanpur, Uttar Pradesh. (iii) The issue rate is calculated by allocating a 5% markup for state transport and administrative costs to the issue price. (iv) The wholesale price is for the market at Hapur, Uttar Pradesh. (v) International referance prices are for the U.S. Hard Winter No. 2 variety (fob Bombay). Prices under the importble hypothesis are calculated at Lucknow and are taken from Gulat (1989) for 1981 and 1985. The methodology outlined therein is extended to 1989 data. Prices under the exportable hypothesis are calculated as: [fob price Bombay - transport cost Lucknow to Bombay - port clearance charges - marketing costs and distribution margins). For 1981 and 1985, data in Gulat op. CiL are used. Data for 1989 are obtained from sources indicated below; an exchange rate of $1 = Rs.16.63 forl989 (see World Bank 1990) is used. Sources: Gulati (1989); GOI Ministry of Agricultmue, Agricultural Prices in India 1982-85; GOI Ministry of Agriculture, BuLletin of Agricultural Prices, various issues; GOI Ministry of Agriculture, Bulletin on Food Statistics, various issues; FAO Quarterly Bulletin of Statistics, various issues; FAO Trade Yearbook, various issues. 144 Statistical Appendix Table 3.2 Table 3.2: Saucture of Rice Prices, Andhra Pradesh ¢ (Rs/qil) 1981/82 1985/86 1989/90 Open Market Retail Price 245 302 500 Price Paid by PDS consumer (Issue Rate) 171 200 200 Price FCI supplies to PDS (Issue Price) 175 217 244 Open Market Wholesale Price 237 275 400 Interational Reference Price (Importable Hypothesis) 365 292 614 Intemaauonal Reference Price (Exportable Hypothesis) 336 237 524 Procurement Price 191 235 304 NPC, Importable Hypothesis (wtd. avg. rows 4&7 divided by row 5) 0.55-0.58 0.85-0.87 0.53-0.57 NPC, exporable Hypothesis (wtd. avg. rows 4&7 divided by row 5) 0.60W0.63 1.03-1.07 0.63-0.66 ° Prices prevailing in Andhra Pradesh for course variety. Noes: (i) All prices ane averages for October to January which corsponds to th peak nwkedng season for ric in India. (ii) The retail price is for dte market at Kakinada. Andhma Pmdesh. (iu) The wholesale price is for the market at Vijaywada. Andhm Predesh. (iv) Ltenational referene prices (following Gula. 1989) are for Tlai White 5% Broken (foo Madras). Prices under the importable hypothesis. at Vijaywada, are taken from Gulati (op. ciL) for 1981182 and 1985/86. The same methodoligy is aplied to 1989)90 data. Prices under the exportble hypothesis are calculated as: [fob price Madras - tansport cost Vijaywada to madras - port cleamance charges- marketing cost and distributwn margins). Daga for 1981/82 and 1985/86 are taken from Gulati (op. cit.) and for 1989190, th sources indiated below are used. An exchange rar of SI = Rs. 1663 is used fotr 1989990 (see World Bank 1990). (v) Each of the NPCs is celculated using two altemative weighting schemes for doenstic iices coinesponding to two anative assumptions on how rie is maketed. Hence the mnge. In the fust case domestic reference price is calculated by assiging weights to pocum t price and whoesale pree in the rado of 75:25. In the second case die weights ae 55% and 45% respectively. See also Radhakrishna and Indakant (1988). Sources: Gulali (1989); 001 Ministry of Agricultur Agdeultur Prices in India 1982.85; 001 Ministry of Agticultue. Buletin of Agricultural Prices. varous issues: GO Ministry of Agncultre Bulletin on Food Statisdts, various issues; FAO Quarterly Bulletin of Stastics, various issues; FAO Trade Yearwook, vaious issues. Table 3.3: Real Price Trend Indices for Rice and Wheat. 1986 a/ (1970171 = 100) R I C E WHEAT Farm Harvest Wholesale Pzocurenient Issue Farm Harvest Wholesale Procurement issue State Pdce (Rddv &£Q Andhra Pradesh 99.2 101.1 107.7 76.9 Assam 105.8 - - 75.3 - - - - Bihar 79.9 89.2 87.7 77.1 80.0 73.0 78.7 84.2 Gujarat - - - 100.7 74.4 71.3 76.3 Haryana 93.2 105.5 91.1 67.2 68.5 64.3 68.5 73.4 Kamnataka 105.1 115.9 103.0 71.5 - - - - Kerala 93.6 - - 74.5 - - - Madhya Pradesh 79.4 90.6 93.0 69.8 85.3 90.2 71.3 76.3 Mahamshtra 81.8 104.1 NA 73.9 - - - - Orissa NA 99.4 98.3 74.4 - - - - Punjab 87.0 87.0 c/ 89.7 67.2 68.0 65.8 68.5 73.4 Rajisthan - - - - 74.2 NA 61.8 66.1 Tamil Nadu 98.5 109.7 NA 67.8 - - - - Uttar Padesh 75.0 66.8 78.1 64.5 68.4 69.4 65.8 70.4 West Bengal 67.9 93.3 90.1 76.5 - - - - Al India 81.9 b/ 88.9 b/ 87.4 b/ 72.3 77.8 b/ 75.4 b/ 73.8 b/ 79.0 w n Note: a/ Real prces derived by deflating nominal prices Ib state CPIAL. . bl Weighed avenage. cl 1.5 tines die farm harvs prices for paddy. Wholesale prices for a comparable quality are unavailable. .. 146 Statistical Appendix Table 3.4 Table 3.4: Diver ence between Domestic and Effective l[cenives State-level Domestic Ratio of ESC Commodity/ Profit Retun on Paid Rado to Wheat of to Al ESC Stale (Rs/ha) Out Cost (%) Prfit Retu ESC of wheat (1) (2) (3) (4) (5) (6) (7) WHEAT Haryana 3,164.59 96.93 1.05 0.80 1.03 Lit Maay PradeSh 2.247.16 148.67 0.75 1.22 0.96 1.03 Punjab 3,454.30 91.65 1.15 0.75 0.93 1.00 ULla Pradesh 2,803.75 92.33 0.93 0.76 0.91 0.98 RICE Andhra Pradesh 3,666.05 72.1 1.22 0.59 0.88 0.95 Bihar 2,583.91 170.86 0.86 1.40 0.86 0.92 MadyaPradesh 1.858.10 151.12 0.62 1.24 0.85 0.91 Orrisa 2,389.90 117.47 0.79 0.96 0.84 0.90 Punjab 4.438.99 86.23 1.47 0.71 1.01 1.09 Uttax Pdesh 2,139.00 101.49 0.71 0.83 0.85 0.91 GRAM Haryana 1.88432 189.6 0.63 1.56 1.05 1.13 MadhyaP rdesh 2306.65 19934 0.77 1.64 1.03 1.11 Rajasthan 2138.92 211.88 0.71 1.74 1.01 1.09 Uttar kads 2,82130 171.56 0.94 1.41 1.02 1.10 GROUNDNUr Gujarat 2,000.87 70.03 0.66 0.58 1.70 1.83 Andra Pfadesh 1.604.15 59.67 0.53 0.49 1.72 1.85 Tamil Nadu 2,697.09 82.84 0.90 0.68 1.73 1.86 MUSrARDSEED Uuar Pradesh 3.514.41 286.59 1.17 2.35 1.61 1.73 SOYABEAN MadhyaPradesh 2,198.02 187.27 0.73 1.54 1.21 1.30 SUNFLOWER SEED Maharashna 1,641.60 186.32 054 1.53 1.53 1.65 COTTON Maharashta 804.32 65.88 0.27 0.54 0.98 1.05 Gujarat 1.988.16 66.71 0.66 0.55 0.67 0.72 Punjab 3.628.94 139.91 1.20 1.15 0.86 0.92 SUGARCANE Mahaashba 11,094.22 81.55 3.68 0.67 1.70 1.83 Tamil Nladu 16,876.60 141.33 5.60 1.16 1.68 1.81 Uuar Pradesh 9,920.00 321.48 3.29 2.64 2.08 2.24 Naes: (1) All meios have ben WOWd m Wh whe as dte numaie which is as ltdiA wegted avenge pfit ha) for column 4. al India mte of pmftt W am) for colam 5, sd all-bdia ESC af whe for colu 7. (2) In case of rse. whde prh figa amuforpaddy. ESC is based an ie. caon> sado ame for sede4oon (kap) and gondnut for pods. (3) Damasic prita bised at 1988-89 jim. iths tbul (4) Al figumes ame bad on avgs of 198041 to 198647. (5) Raw ofp pfki andp peemaediffetcpn may lie diffatAl hr detils saSula asnd Shara (1990). 147 Statistical Appendix Table 3.5 Table 3.5: Feiie n rpPieTed.18/7-1989/9 (1980/81 = 100) Fertiizer Price IndeE Crop Prico lndoIu INDIA WORLD INDIA WORLD Xmnz gm gmRmam 21U mam Bin WhA 1980/SI 100.00 100.00 100.0 100.00 100.00 100.00 100.00 100.00 1991(82 117.47 118.26 73.15 93.74 109.52 111.11 60.67 8S.77 1982183 107.36 110,78 62.50 94.10 116.19 12137 57.35 68.81 1983/84 107.36 110.75 79.31 101.61 125.71 129.06 52.22 90.69 1984(85 107.36 110.75 6331 86.67 130.48 134.19 44.72 83.25 1985(86 117A47 118.26 49.51 79.08 135.24 138.46 43.60 76.58 1986/87 117.47 118.26 53.98 89.08 139.05 141.8 47.70 72.51 1987(88 117.47 118.26 71.76 100.26 142.86 147.86 62.43 91.01 1988(89 117.47 118.26 61.20 88.62 152.38 156.41 66.32 104.33 19899(0 117.47 118.26 176.19 370.90 USSIMs (Daneai Price) 342.20 218.18 (DMy. parity Price) 207.28 301.32 World 132.2 172.80 Donmstic Urea price and DAP price for Iniao we 107.56% and 126.26% respectively of World prices. Riead Whea1 PIEs for India and MWoRMdiif India 112.12 121.21 World 320.2 161.3 Rice price and wheat price for India ere 35.02% and 75.15% fespectively of World price. Nos: Crop prices in Inuia we proornce prices for each yea. Soturce: Ferulize Prime for India we akan from Fertilizer Statstics, 1989-90, and for the World fotsm World Bank Cmnmodity Division. Crop Price bInde for India frmFan omsnic Swvey 1989-90 and for World fra World Dank Commoudity Division. Inpost Parit prnce for Urea and DAP fran Oulati. 1990. Table 3.6: Pre aid by Famers and ms of e Commodiies Sold For Prices Paid for Commodities Purchased for Year Final Intermediate All Final Intennediale Capilal All Terns of Consunmption Consump ion Commodities Consumption Consumption Formation Uses Trade 1 2 3 4 5 6 7 8 9 1970-71 98.8 102.9 100.5 100.6 100.3 100.2 100.5 100.0 1971-72 102.7 102.1 102.5 105.7 101.6 107.8 105.1 97.5 1972-73 115.3 119.2 116.9 113.2 109.6 117.2 113.9 103.5 1973-74 145.0 144.9 145.0 133.6 126.3 134.3 133.3 109.6 1974-75 178.0 150.2 166.8 162.3 188.1 159.5 166.9 99.9 1975-76 153.4 126.2 142.4 159.4 193.1 188.9 168.3 84.6 1976-77 151.8 164.7 157.0 166.0 191.5 194.3 173.2 90.6 1977-78 163.9 166.1 164.8 177.3 193.6 191.6 181.6 90.7 1978-79 157.2 157.0 157.1 180.7 185.1 207.8 183.9 85.4 1979-80 179.0 194.9 185A 209.5 191.0 246.2 209.3 88.6 1980-81 202.2 230.6 213.6 233.3 255.0 317.9 244.8 87.3 1981-82 216.6 235.4 224.2 249.1 296.4 392.5 270.5 82.9 1982-83 230.8 246.7 237.2 254.5 308.2 429.1 279.9 84.7 198344 253.0 273.2 261.1 278.4 325.6 454.2 302.6 86.3 198485 265.3 293.9 276.8 298.1 328.8 503.2 321.8 86.0 1985486 282A 271.5 278D0 313.2 343.3 524.5 337.4 82.4 1986-87 311.0 327.9 317.8 337.3 368.6 542.5 361.2 88.0 D987-88 329.7 380.7 350.3 382.7 387.5 574.7 400.5 87.5 19889P 371.1 367.7 369.7 402.5 390.5 652.7 422.2 87.6 Saw= CACP H f (Ln.h w rt w n 0. x Table 3.7: Estimated Cbange in Market and Producer Pices of Rice and Wheal in Selected States due to Changes istbution and Prcurement (1) (2) (3) (4) Alpha 10% incease 10% increase 10% increase Existing Value a/ in disuribution in procurement in procurement intervention to and distribution no intervention 1. RICE Punjab % change in market price 6.63 -14A 94.7 80.3 -310.0 % change in producdonprice 6.63 -2.1 13.7 11.6 -302.0 UttarPradesh %change inmarketpnce 1.15 -11.2 14.0 2.8 -26.0 % change in production price 1.15 -9.8 12.2 2.5 -24.0 AndhraPradcsh %change imnmaiketpice 1.13 -11A 13.9 2.5 -22.0 % change in productio price 1.13 -8.8 10.7 2.0 -19.0 Mahya Pradesh % change in Market price 1.04 -12.5 13.8 1.3 -13.0 % change in productionr 1.04 -11.6 12.8 1.2 -11.0 West Bengal % change h market pnce 0.93 -12.6 12.7 0.1 -1.0 %changeinproductionprice 0.93 -12.5 12.6 0.1 -1.0 Tamil Nadu % change in maket price 0.91 -14.3 14.3 0.0 0.0 % change in prduction price 0.91 -12.8 12.8 0.0 6.0 Kala % change in market price 0.48 -14.2 7.2 -7.0 67.0 % change in prdua pnce 0.48 -14.2 7.2 -7.0 67.0 IL. WHEAT Punjab % change in market price 2A -21.7 51.8 30.1 -194.0 % change in production pnce 2A -8.5 20.2 11.7 -193.0 MadyaPradesh % change m maket pnce 0.96 -11.7 11.8 0.1 0.0 % change in production pice 0.96 -11.7 11.7 0.1 0.0 Produerices are woted avage of pouement wices and mret prices. All simul at based on d aawtg to 1980r CD al Alphn vale whch ist5 total produt divided by dmand in each awe am indates the surpos or deficity situin that suatm. Soue: (1) Derived fom data publtd by Depautent of Economics and Statists * M y of Agricultu. (2) Scandizzo and Swany, 1982. 150 Statistical Appendix Table 3.8 Table 3.8: Elticiies of Agricultuma QuUt with REspt to Price SNo-Prcia. Vara blesinI Elasucity with Respect to sudic Eid om Non-Pecri Yariables Bapna 1981 1/ 1955-56 to 1976-77 Aggregate Ouput 0.13-0.62 0.27-0.29 Krishna & Raychandri, 1980 1914.45 to 1957-70 Wheat 0.82 Chibber, 1989 1954-55 to 1977-78 Aggregate Output 0.28-0.32 0.99-1.01 Chibber, 1989 2/ 1954-55 to 1977-78 Aggregate Output 0.39-0.43 1.17-1.28 Krishna and Chibber, 1983 1961 to 1978 Wheat 0.66 Krishna, 1982 1952-53 to 1974-75 Aggregate Output 0.33 Binswanger, et al, 1989 3/ 1961-62 to 1981-82 Aggregate Output 0.13 Note: 1/ Estimases an for Punjab only 2/ this esimate includes the dummy variables for the post 1965-66 period in dte equation. 3/ 'Mere are short mn estimaes and they elimunate simultaneous equaton bias. Funher. they are based on panel data of districts within estinm Solse: Krishna and Chibber 1983. Chibber 1989. Chibber 1988, Krishna. 1982 and Binswanger. Rosenzweig. 1989. Table 3.9 Men Valme of t Rates of Retum of Different Cro (Rupees at constant prices, 1980/81) Value Addedha Net Profit/ha Value Added/Production Net ProfitProduction % (%) Paddy 2,898.60 632.26 81.78 17.15 Wheat 2,878.73 672.37 76.58 18.56 Maize 2,157.27 585.37 26.39 20.51 Jowar 1,263.24 231.37 8728 14.43 V Bajra 1,418.68 84.55 89.21 0.26 Groundut 2,075.38 432.30 71.58 14.51 Mustard & Rapeseed 2,840.53 1,224.04 91.21 33.62 Sugarcane 11,425.72 6,050.09 80.26 42.62 Coton 2,780.12 731.22 75.27 13.74 Jute 2,569.17 183.08 89.23 5.73 Al Crps 2,359.73 642.41 8328 16.48 Source: Liebemna and Ahluwalia 1990. b t pa a Wo rt 0. %O n 152 Statistical Appendtix Table 3.10 Tabl 3. 1 Prteton . _ __ _ _ A_ _ -_- Hypothesis/CropjProection Coefficient 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 Average WHEA\T NPCs 0.72 0.73 0.84 0.84 0,76 0.76 0.91 0.8 EPCs 0.67 0.68 0.8 0.8 0.72 0.72 0.89 0.75 ESCs 0.76 0.85 1.99 0.99 0.9 0.9 1.12 0.93 ANPCs 0.57 0.58 0.67 0.67 0.6 0.6 0.73 0.63 Domestic Price/a (Rs/q) 1 130 142 151 152 157 162 World Pice /b (Rs/q) 127 148 152 159 170 173 145 Price Ratio 0.92 0.88 0.93 0.95 0.89 0.91 1.12 0.94 RICE NPCs 0.45 0.51 0.75 0.7 0.72 0.78 0.8 0.67 EPCs 0.43 OA8 0.73 0.68 0.7 0.78 0.78 0.65 ESCs 0.58 0.65 0.99 0.9 0.96 1.01 1.06 0.88 ANPCs 0.36 0.4 0.6 0.56 0.57 0.63 0.64 0.54 Domesic Pice /c (Rs/q) 150 164 174 189 196 203 208 World Prke /d (Rs/q) 353 355 255 291 293 274 274 Price Ratio OA2 0.46 0.68 0.65 0.67 0.74 0.76 0.63 CGTrON NPCs 0.77 0.94 0.82 0.68 0.73 0.86 0.83 0.8 EPCs 0.66 0.82 0.71 0.58 0.62 0.74 0.69 0.69 ESCs 0.71 0.9 0.79 0.64 0.67 0.82 0.75 0.75 ANPCs 0.6 0.72 0.64 0.53 0.57 0.66 0.64 0.62 inomesticPrice/e(Rs/q) 895 1118 1118 1176 1206 1250 1264 World Prie /f (Rs/q) 1629 1415 1594 1949 1727 1333 1734 Price Ratio 0.55 0.79 0.7 0.6 0.7 0.94 0.73 0.72 GROUNDNUT NPCs 1.06 1.37 1.66 IAI 1.4 1.53 2.05 1.5 EPCs 1.09 1.44 1.74 1.47 1.47 1.58 2.13 1.56 ESCs 1.2 1.55 1.93 1.58 1.6 1.76 2.32 1.71 ANPCs 0.84 1.08 1.31 1.11 1.11 1.21 1.63 1.18 Domestic Pice /g Rsq) 294 386 421 450 486 500 528 World Price /h (Rs/q) 382 539 389 396 497 445 409 Price Ratio 0.77 0.72 1.08 1.14 0.98 1.12 1.29 1.01 153 Statistical Appendix Table 3.10 (cont.) WHEAT NPCs 1.15 1.09 1.24 1.29 1.27 1.33 1.99 1.34 EPCs 1.29 1.16 1.35 1.47 1.55 1.71 3.44 1.71 ESCs 1.57 1.35 1.57 1.73 1.81 2 4.07 2.01 ANPCs 0.87 0.83 0.93 0.96 0.93 0.97 1.38 0.98 RICE NPCs 0.5 0.6 0.94 0.89 0.94 1.09 1.16 0.87 EPCs 0.47 0.57 0.93 0.88 0.95 1.13 1.19 0.87 ESCs 0.65 0.77 1.26 1.21 1.3 1.6 1.68 1.21 ANPCs 0.39 0.46 0.7 0.68 0.72 0.83 0.87 0.66 COTrON NPCs 0.89 1.13 0.92 0.74 0.83 1.01 0.93 0.92 EPCs 0.78 1.04 0.8 0.62 0.71 0.89 0.79 0.8 ESCs 0.84 1.13 0.88 0.69 0.78 0.99 0.86 0.88 ANPCs 0.7 0.87 0.72 0.58 0.64 0.76 0.72 0.71 GROUNDNUT NPCs 1.25 1.72 2.03 1.69 1.76 2.03 2.87 1.91 EPCs 1.44 2.09 2.44 1.9 2.07 2.36 3A5 2.26 ESCs 1.57 2.24 2.69 2.04 2.31 2.63 3.76 2.47 ANPCs 0.99 1.34 1.57 1.32 1.37 1.56 2.2 1.48 Notes: /a Domestic price of wheat is approximated by its procurement price for FAQ. /b World price is of US Hard Red Winter No. 2 with ordinary protein, fob US gulf (at official exchai -e ate) for April to June quarter. /c Domestic pnice of rice is estimated as procurement price of paddy divided by 0.7, which is paddy-rice conversion factor for Indian "common' rice. /d World price of rice is of Tai white (milled) 5* broken, fob Bangkok (at official rate for October to January. /e Domestic price of cotton is approximated by procurement price of kapas (J-34/414F/H-777 variety) divided by 0.34, which is kapas-lint conversion mio. /f World price of cotton is that of cotton outlook index "A". cif Liverpool. /g Domestic price of groundaut is its procurement price (in terms of kenels). /h World price of groundnut is of kenels of any origin, cif Europe (Rotterdam). NPC is the nominal protection coefficient defined as the ratio of domestic to intemational border pnces EPC is the effective protecdon coefficient which is the ratio of value added measured at domestic aces to value added at international border prices. ESC is the effective protetdon coefficient adjusted for the subsidies and taxes on nontadeable. ANPC is the nominal protection coefficient adjusted for a premium on foreign exchange. Table 3.11: S_ewise Deviafion in RMl Wholee an Farm-yest Prices from All-stle Weigh8ed Aveage Price % dhviasiini V. deviation V. "devaion deviation in fice wholesale n paddy fam havet in wbeat wholesale an fum havest Stale ( Favage 197WV1I-1986187) (average 1970f1-1986/87) (average 1970fl-1986/87) (avge 1970fl1-1986j17) AndhbrPtaPes 4 -7 Bibtr 8 0 22 10 Gaja 27 22 HOYM S3 .2 .10 -3 Xunusaka 10 5 Mwlhyaftuleh 11 -11 13 7 cOba -7 Panjab -14 -12 -7 R $s*d -2 1 TF nB Nut -7 .5 Una Pruh -5 10 -9 WestlmBgad 22 9 Ca I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I 155 Statistical Appendix Table 3.12 Table 3.12: Inors of Effldny, Wovm nd Enviment (Hazos in lelin to wh_nt E nplymm Reaaris on BFiionti and Employmem Crpis Efflidcv 0 ndiwn Subdly bn Indicat Daucai Domesdt EffectivWe Inpu Share uaI tivw (rofit) (Renxn) Subsidy Domestic Effecve ~fV 1 2 3 4 s 6 7 8 9 WHEAT HuyaS 1.05 0.80 1.11 15 1.39 1.15 0.74 Does nothave sigafireciadverse evirovaiv Madhya Pndesh 0.75 1.22 1.03 0.71 0.91 0.62 0.69 lmnpacL Even second-round enploytnt dfecs Ptnjab 1.15 0.75 1.00 1.11 0.91 1.19 1.59 mininal. Uuar Padesh 0.93 0.76 0.98 0.97 0.98 0.93 1.6S Weighted Avase 1.00 1.00 1.00 1.00 1.00 1.00 1.00 RICE Andhra Prdesh 1.22 0.59 0.95 2.15 1.63 1.26 2.28 Rice in Punjab is hevy user of wara energy Bums 0.86 1.40 0.92 1.07 1.18 130 1.63 and pesides. Envirsonmenually deelnenaop. Madhya Padesb 0.62 1.24 0.91 0.86 1.31 1.17 1.09 Rising incide a of malnia andiwazecontm in Orisa 0.79 0.96 0.90 1.09 1.29 1.26 1.91 wdls. Hfiges consumer of input mbsidy. Punjab 1.47 0.71 1.09 4.03 257 1.53 1.59 Positive uigaificumdimecanploymueeffea (esp UnarPradeab 0.71 0.83 0.91 1.19 1.59 1.24 1.65 in AP and Orisa). but secnd round uffect is Weigtd Averge 0.96 1.03 O.95 1.39 1.53 1.29 1.54 rather limited. GRAM Raijtha 0.71 1.74 1.09 0.14 0.19 0.12 0.47 Leguminoasap. nifrn.ruing. deep-eoated Haryna 0.63 1.56 1.13 0.09 0.13 0.11 0.38 saver of farihs and waer. Noknown adves UtrPradesb 0.94 1.41 1.10 0.5 0.05 0.04 0.98 impseton eviromant. Int acainp isposifive. Madhaya Ptedh 0.77 1.64 1.21 0.17 0.21 0.19 0.61 Seond romdemploymem effect is weaL Weighe Aveae 0.78 1.60 1.10 0.12 0.15 O1S 0.63 GROUNDNUT Gujaa 0.66 0.58 1.83 026 037 0.26 0.93 Being legumin k is nitogen fiing esd ha Andia Pradesh 03 0.49 1.85 0.59 1.03 .44 1.60 posive im a on soil fertility. Hoewsv. Tamil.Nadts 0.90 O6 1.86 0.83 0.16 0.44 131 second-romnd employment effes ac not swng. Weighted Aveage 0.74 0.72 1.84 0.49 0.69 0.37 1.21 RAP6SEEDMUSTARD Utsr Prdesh 1.17 2.35 1.73 0.26 0.20 0.22 0.94 .do- SOYABEAN MadhaPrdoesh 0.73 1J4 1.30 0.14 0.19 0.16 0.79 -do- SUNFLOWER Mahbmnaa 0.54 1.3 1.65 0.07 0.13 0.08 0.68 -do C0lTON MahIIshuI 0.27 0.4 L.O5 0.12 0.43 0.20 1.39 Larges:useofpesticades,eunteratiesoanother Gujar 0.66 0.5 0.72 0.30 0.44 037 1.96 crops like chidpeas coretive sap needed Pmunb 1.20 1.15 0.92 1.20 0.92 0.61 1.53 dvough 3PM. High second round anploymcnL WagIaed Avagee 0.62 0.84 0.81 0.31 0.59 039 1.51 SUGARCANE Maliraos 3.68 0.67 1.83 6.47 1.67 0.68 5.70 Highly wataitensive, undisirable in low UU Prad#b 3.29 2.24 2.24 270 0.78 0.61 2.08 ainfall aes. Has positive ad high sond- Tanil Ss9u 5.60 1.81 1.81 2.95 0.50 0.37 5.04 round ffeaC on anploymatL Rati goes up from Weigjhed Av0age 3.78 2.03 2.03 3.27 0.88 0.63 2.90 Z9 to 3.81 indusive of sond-round effes. (1) AUl tdioucts base I a~ midot wt corimpootSdlng ftI w*&Mw lodicoi of wh. MRad m*2 on. - cts ofs ~d=wn pel (PlARs), i 13.1 mo Wntsz an pa- am cmO (pw c-) sad In col.4 Uffecove Srbs1y CaafkmwtA Res int o5 1 i totall obsWkye a glIm upin roftao to a1 bdia weiglted topa rbsion w han .5 I to.W mi 7 13t ndc of tWu at doMnatio e5 LifCuI umaVa3 ttinteoo to sUM for whet (allt ditl r4o ID LO 13F (to rlarb w a dltffy t an bus d a o to all hdb w 5 copt fr b.I ;caW vtscat£ eo nbrbu t nd z~4 cd avj (offi6~d wcnhcb cd .unfloaw), tho ugldcanioranco inO itt rdCtm IDa o!1 bitC 1t bo cnngd dlctL Table 3.13: Domestic Incentives and Ch cs in CmWing Paenm. 1980-81 to 1986-7 lat 1988-89 Prices) St= Aadba Am Bihar Gujaim ltayia Blmchal Kaman Madbys Maltashba OAs= Punjab Rmjahan Tamai Uns Wes TOW Wctd Cwps Pes PRwasb Prab Nadu Ptadesh Bea8l Waght Avene P*y 3,666.05 2,338.48 2,583.91 3,389.99 5,181.27 1,858.27 2,389.90 4,438.99 4,827.23 2,139.00 321.09 89.57 2,905.94 72.10 399.96 170.86 85.14 196.96 151.12 117.47 86.23 73.22 101.49 t12.26 22.96 125.24 0.03 -1.16 0.63 4.28 o0.73 0.04 -0.08 6.31 -1.96 0.41 -0.55 Wibm 3.763.19 3,164.59 1,90866 2,247.16 3,454.30 4,046.47 2,8D3.75 88.47 3.01169 240.12 96.93 11652 14&37 91.65 160.37 9233 33.13 121.74 2.13 2.85 0.43 0.11 1.03 230 0.25 Maize 3,30644 2,648.33 1362.21 1,898.63 47.69 2202.42 288.52 160.38 14S82 189.71 3.32 201.2 -3.83 1.47 088 1.16 Jowa 437.23 1,373.71 1,283.64 10259 1,114.50 84.74 1,063.69 44.74 119.14 35691 127.22 98.26 9.16 105.95 -2.87 466 6.58 -3.47 0.02 Baiu 1.804.87 1,191.46 737.16 1,6I3.43 71.08 1,072.49 105.47 166.05 26076 141.55 6.37 210.62 -1.61 -2.14 0.77 -2.73 BafrY 2,320.01 2297 2320.01 139.15 0.83 139.15 -525 Ragi 1,966.41 1,847.15 53.11 1,749.90 135.94 103.74 1.40 118.43 0.13 -1.12 GhMi 13s432 2306.65 2,13&92 2,821.30 82.30 233818 189.60 199.34 211.88 171.56 4.10 194.77 0.52 3.25 4.56 -0.20 Urad 1,62S.10 1,131.88 1,790.44 1,215.29 1,274.12 1,79538 6817 1.511.31 126.76 163.06 257.81 131.91 1S0.21 186.04 1.67 199.59 9.60 .0.45 3.68 8.32 0.23 -14 Ta 1,633.79 2,651.08 6,050.23 45.71 3,614.10 180.12 217.48 425.77 1.74 283.45 .u 3.05 -3.49 -1.15 r Moong 8606s 1,369.12 16.18 8555 55.71 13.62 i f 75.62 183.56 172.14 1.18 1a65 142.53 a -4i5 4.27 409 3.87 w Pmad 1,932.33 3383.M42 3,49109 3,514.41 71.52 3343.64 w 217.74 257.74 33284 286.59 2.26 289.91 W 5.46 2.60 1885 -12.69 G b G&ad Sbesi99190 157 Statistical Appendix Table 3.14 Table 3.14: Ini nie fFrilzradAlclua Product Prices Index of Weighted Ratio of Fertilizer to Years Ending Avg of Fertilizer Index of Agricultural Argricultural March of Nutrient Prices Commodity Prices Commodity Index 1965 100 100 100 1966 101 110 91 1967 113 128 88 1968 139 145 96 1969 144 141 102 1970 154 151 102 1971 155 156 99 1972 165 157 105 1973 168 173 97 1974 177 218 81 1975 337 266 127 1976 335 246 136 1977 292 248 118 1978 248 274 91 1979 245 269 91 1980 244 295 83 1981 341 329 103 1982 395 370 107 1983 396 389 102 1984 363 443 82 1985 363 474 77 Averge 98.93 Standard Deviadon 14.37 Std. Deviation as a % nf Avg. 15% Some: FAI Seminar Pceedings. Dec. 3/5 - 1987. 158 Stdtistical Appendix Table 4.1 Table 4. 1: Trend in Etr capitabo 1961l-o I1989 Per Capita Food Food Year Popuidon Producdon Production rifo-nT- rm3ron Mt) (kgs) 1961 442 82.02 185.57 1962 452 82.71 182.99 1963 462 80.15 173.48 1964 472 80.64 170.85 1965 483 89.36 185.01 1966 493 72.35 146.75 1967 504 74.23 147.28 1968 515 95.05 184.56 1969 527 93.01 176.49 1970 539 99.50 184.60 1971 551 108.42 196.77 1972 S64 105.17 186.47 1973 577 97.03 168.16 1974 590 104.67 177.41 1975 604 99.83 165.28 1976 617 121.03 196.16 1977 631 111.17 176.18 1978 645 126.41 195.98 1979 660 131.90 199.85 1980 675 109.70 162.52 1981 690 129.87 188.22 1982 705 133.29 189.06 1983 720 129.52 179.89 1984 736 152.37 207.02 1985 751 145.54 193.79 1986 766 150.44 196.40 1987 781 143.42 183.64 1988 797 140.35 176.10 1989 812 170.25 209.67 Sowm: MOA. Dlctm. of Stazbst_ 159 Statistical Appendix Table 4.2 Table 4.2: Wbeat, All-India Production, Prouuwemen Issues, Net Emuc mnme lsmzc si'-- Ihn 1971 23,832 5,101 4,455 5,826 1,811 1972 26,410 5,024 6,597 6,152 -492 1973 24,735 4,531 7,130 3,087 2,413 1974 21,778 1,955 5,669 2,145 4,460 1975 24,104 4,098 7,545 4,210 7,182 1976 28J,46 6,618 5,015 11,659 6 1977 29,010 5,171 6,396 14,642 5 1978 31,749 5,470 6,855 12,229 -678 1979 35,508 8,000 7,495 11,728 0 1980 31,830 5,866 8,819 9,003 0 1981 36,313 6,590 6,485 7,733 777 1982 37,452 7,725 7,168 10,181 1,988 1983 42,794 8,272 8,121 13,013 3,782 1984 45,476 9,311 6,505 17,813 1,819 1985 44,069 10,355 8,477 20,739 -351 1986 47,052 10,536 8,422 18,890 -68 1987 44,323 7,880 8,653 14,860 -2450 19880 45,096 6,535 8,571 7,552 2,000 19890 53,990 8,887 7,268 9,429 70 CDmolundcdiRan hf alh (% p.a.) 1970/71-1980/81 4.3 2.6 3.8 2.9 1980/81-1988/89 5.1 3.8 1.4 2.5 1970Y71-1988/89 4.6 3.1 2.8 2.7 1974/75-19885 6.2 9.7 1.2 17.3 NotES: (i) * oi (H) 1971 referfo l97fl h w on. (iii) Production _n procmnn3nt m on an agricultum year basis. Isanes ae on a calendar yer basis. Stoi an as at end of Jme Soumnes: Linberman and Ahluwa 1990. 160 Statistical Appendix Table 4,3 Table 4.3: Rice, AU-ubda Producdon Procurneent Lssue Stocks and Net WImur Net hn~~mm= IN= &wg W 1971 42,225 3,197 3,230 1,986 224 1972 43,068 3,116 3,586 2,408 14 1973 39,245 2,706 3,206 1,218 -18 1974 44,051 3,887 3,753 1,626 6 1975 39,579 3,795 3,211 1,593 139 1976 48,740 6,322 3,643 5,120 206 1977 41,917 4,432 4,599 5,592 20 1978 52,671 4,853 3,229 6,577 -139 1979 53,773 6,334 4,049 9,627 -329 1980 42,330 3,851 6,057 7,090 -478 1981 53,631 5,609 6,439 5,839 -254 1982 53,248 7,334 7,500 5,119 -408 1983 47,116 7,047 7,853 3,781 287 1984 60,097 7,731 6,730 4,621 550 1985 58,336 9,863 7,231 7,758 0 1986 63,825 9,876 8,460 9,262 10 1987 60,557 9,157 9,825 8,349 -106 1988* 56,434 6,895 9,530 4,159 37 1989* 70,664 7,661 8,529 3,596 13 1970171-1980/81 2A 5.8 7.1 1IA 1980/81-1988/89 3.5 4.0 3.6 -5.9 1970t71-1988/89 2.9 5.0 5.5 3.4 1974/75-1984/85 4.0 10.0 8.5 17.2 Nots: (i) 0 posm (6) l97l rferto 1970/71. tcm (ii) Production nd procwewt ae an an stcutum yew basis. lams a on a calendar yea basis. Stk oe sn at end of June Souces: L _ben and Ahuwaia O99M) 161 Statistical Appendix Table 4.4 Table 4.4: AU IdiA Net Avaiabiity of Wha ad Rio (000 MO Rice Wheat Rice Whea Rico Wheat Rice Wheat Prodn Prodn Net Net Change Change Net Net us2 so £ ImR=Qu 11gd Am AfAbilab Ajlbilil 1970f7l 39,016 20.948 224 1.811 1971/72 39,795 23.214 14 -492 422 326 39.387 22.396 197273 36,262 21,742 -18 2.413 -1.190 -3.065 37.434 27,220 1973174 40.703 19,143 6 4.460 408 -942 40.301 24,545 1974J75 36.571 21.187 139 7.182 -33 2.065 36.743 26.304 1975176 45.036 25,356 206 6 3.527 7.449 41.715 17.913 1976177 38,731 25.500 20 5 472 2,983 38,279 22,522 1977/78 48,668 27,907 -139 -678 985 .2.413 47.544 29.642 1978179 49.686 31.212 -329 0 3.050 -501 46.307 31.713 1979/80 39.113 27.979 478 0 -2,537 -2,725 41.172 30,704 1980/81 49,555 31,919 -254 777 -1,251 -1,270 50,552 33.966 1981/82 49.201 32920 408 1,988 -720 2.448 49.513 32.460 1982V83 43.535 37.616 287 3.782 -1.338 2.832 45.160 38,566 1983/84 55.530 39,973 550 1.819 840 4,800 55.240 36,992 1984/85 53,902 38.737 0 -351 3.137 2.926 50.765 35.460 1985/86 58.974 41,359 10 -6 1,504 -1,849 57,480 43,140) 1986/87 55,955 38.960 -106* -245' -913 4.030 56.762 42,745 1987/88 52,145 39,639 37 20000 4,190 -7.308 56.372 48.947 1988/89' 65.294 47.457 130 70' -563 1.877 65.870 45.650 Trend rates of gmwth(%nAL2& 1971172-1988/89 3.0 4.7 1971172-1980/81 2.6 4.0 1980/R1-1988/89 33 4.7 Nae (I) NOPVlsml (li) Net p ctiaa for rice and wsin 92.4% mid 87.9% of gross eroductm respcvy. See Bulkisn mFood Stgists (ait) Cues in sock (govenu) we caiwuused an mad i.. bads to creespmd to d skuicuwz yeu- (iv) r1gw. in espea of changes in stocks with uim wmipoducers nt kww. Mm. etas of atala ibily above diold not. Uh r to ake to be wktody equpivast Scm BPSbAeAtXue9 (I) uslinonoSwlyCDqn u lCst osyofAGncullrqeA 198 196 (HO emmnlc Suvey 162 Statistical Appendix Table 4.5 Table 4.5: Deg= of in FodgL ake Ratio to Trievurn Endin output of EEO262 12823 I67M 1288-89 WHEAT Procurement 4.04 20.1 15A2 17.13 20.45 16.46 Stocks 7.98 19.3 22.45 21.65 37.26 27.04 PDS Offtake 55.93 26.07 22.25 19.21 16.92 17.9 Impons 54.00 6.39 20.80 3.48 3.24 1.47 RICE Pocurement 8.99 7.69 11.17 13.14 15.07 13.27 Stocks 1.62 5.62 633 13.27 10.06 13.42 PDS Offtake 10.87 8.02 8.14 12.99 1197 14.79 Impors 2.05 0.27 0.19 0.00 0.41 0.36 Source: Oulad, 1991. BIhu6n an Food Stasizcs. Mbiiaz of Agdculn Gove mt of Idi (vaeous issues). 163 Statistical Appendix Table 4.6 Table 4.6: DOmestic Intervention Extenal ntesverticn -Wo-curanewu Price Buffer EXp PPM212du SUODM 2211 QmuLu am Q 9 L 0w s £ Ae Wheat Yes No Yes Yes Yes No No No nfonnal movement rections in some yew in suplus Fats Rice (non-basmad) Yes Yes Yes Yes Yes NO Yes Yes Monopoly Foceaneni in Thanjavur (). infomal conoob elsewhere. Rice(Basmati) No No No No No Yes No Yes Pko_rmnt through levy in m years fOnally PUse Yes No NO No No Yes NO No NAPED makes coammcial purchases no proamt ar prie suppoL CoarseCels Yes No No Yes No No Yes Yes PRotaremet by NAFED in some years as prices ruled below support level. Oiseeds Yes No No No No No No No Expcrt banmed except MPS grnwd nL NAFED is intavention agency. RawCoton Yes No No No No Yes Yes Yes hnpart is canalised, export uwder OBL through quota system. Sugar Yes Yes Yes Yes Yes No No No STC is cnalising agency. Pesent levy: freesale ration is 4S5S. Natal Rubber Yes No No Yes Yes No No No Expot is bamed, STC is caalizing agency. source: ulatl (1991) 164 Statistical Appendix Table 4.7 Table 4.7a: Wheat: Perenge Shams of the Main Producin es in All-India Producton and Procurement 1970/71-197273 1978fl9-1980/81 1986/87-1988/89 &26SAM P;RuctMon baEm B Bihar 9.15 0A4 6.46 0.54 6.80 0.00 Gujarat 3.18 037 3.58 0.00 1.75 0.00 Haryana 9.30 14A2 9.81 17.17 11.19 23.52 Malhya Pradesh 10.76 2.09 851 1.31 9.19 0.00 Punjab 21.51 60.21 22.19 59.83 22.30 63.40 Rajasthan 746 236 7.69 1.60 7.14 0.74 Utar Pradesh 3035 19.13 3352 19.07 36.39 12.33 All India 100.00 100.00 100.00 100.00 100.00 100.00 Table 4.7b: Rice Peretage Shares of the Main Production States n Al-lndia Production i rent 197017l-1972/73 1978f79-1980/81 1986/87-1988/89 ERRE .2M E . . i . _ v . . Andhra Pradesh 11.05 11.74 13.86 13.98 12.91 18.80 Assan 4.87 2.87 439 0.50 4.02 0.11 Bihar 11.15 1.28 9.83 0.49 8.98 0.06 Haryana 1.17 937 2.27 13.37 2.16 7.05 Karnaaka 4.66 1.21 4.51 1.61 3.53 1.28 Kerala 3.23 2.10 2.56 0.01 1.70 0.00 Madhya Pradesh 8.42 13.77 4.27 4.70 3.25 431 Maharshtra 3.03 537 4.27 0.71 7.20 0.00 Orissa 9.59 7.04 7.76 1.33 7.20 135 Punjab 2.06 22.73 6.25 47.84 8.74 44.26 Tamil Nadu 12.99 4.55 1036 2.44 8.81 9.29 Utar Pradesh 8.63 8.67 9.41 9.48 12.44 11.96 West Bengal 14.74 7.72 1338 2.26 15.08 0.87 AB India IOAO 100.00 10.0 100.00 100.00 Now lar whcea "uimkdh year mns asn Apri to mwdch. InO taee aboe, pw m figumes hae beesn anddizd to caresad to th"e agriwtwa y w%i&rusm frm Jy to Ju. Prordbc figure ar wacdng to td aulcuttr1al year. (i) B inao PFdSwdatcsG, 0i Mby ofAlcam. variow yea 00) NP(ket(1989). 165 Statistical Appendix Table 4.8 Ebasicy Eluid1y Hypohcal Ferilizer Feilie feir ouqtu Pmfit per Profit per outpice price with puoe wlb Output dmand to wpy to ha wsh ha w/o Pest to a== bsidy subidy pnce feuhler fetiier subsidy subsidy dcange no dange (R/kg) (RsAkg) tqd) pice pf (Rs) (Rs) profit mn pia (I) (2) (3) (4) (5) (6) (7) (8) (9) Pumiab 4.97 932 162.05 -13 403 23614 135 -41 166.57 4.97 9.32 162.05 -1 403 614 -308.49 -231 187.38 4.97 9.32 162.05 0 0 23614 -559.21 -337 189.33 Madhva Pmadesh 4.70 9.05 173.9 -1.3 -0.3 409.7 -7.64 -102 217.90 4.70 9.05 173.9 -1 -0.3 409.7 -90.86 t22 22667 4.70 9.05 173.9 0 0 409.7 265.63 -35 184.87 4.88 9.23 167.43 -1.3 40.3 833.12 495.71 -41 183.53 4.88 9.23 167.43 -1 -0.3 833.12 128.93 485 201.02 4.88 9.23 167.43 0 0 833.12 186.54 -78 190.03 Punidb (farntme 2 ha) 4.97 932 162.9 -13 40.3 199.7 50.63 -7S 169.91 4.97 932 162.9 -1 -03 199.7 -37337 -287 189.86 4.97 932 162.9 0 0 199.7 -553.98 -377 189.0S funis (fanmers 2 ha) 4.97 9.32 163.71 -1.3 -0.3 591.28 466657 -21 169.11 4.97 932 163.71 -1 -03 591.28 -11.07 -102 189.81 4.97 932 163.71 0 0 591.28 -257.75 -144 190.84 5.26 9.61 163.97 -12 40.2 1134.3 515.17 -55 177.77 5.26 9.61 163.97 -1 40.2 11343 258.02 -77 183.50 S.26 9.61 163.97 0 0 1134.3 430.56 -62 177.06 wen Benal 5.48 9.83 160.35 -1.2 -0.2 929.32 381.31 -59 184.34 5.48 9.83 160L35 -1 .0.2 929.32 336.72 .64 186.30 5.A¶ 9.83 160.35 0 0 929.32 805.04 -13 164.93 P_n_igo faner = ama ls ta 2 _ a 5.26 9.61 167.38 -12 -0.2 630.34 26.17 .96 181.30 5.26 9.61 167.38 -1 -0.2 630.34 -230.01 -136 187.20 5.26 9.61 16738 0 0 630.34 -70.75 -111 180i86 Puniab (dich fmarers - are mome than S ha) 5.26 9.61 154.64 -1.2 .02 2411.13 167067 -31 169.67 5.26 9.61 154.64 -1 0.2 2411.13 1434.98 -40 174.46 5.26 9.61 154.64 0 0 2411.13 1766.1 1 -27 165.57 Noete (i) lth 1989/90 evel of dhe subidy sue This woskm out to RaL 4.35 per kg. (i) Data on Punjab an: 'bays ana firn the 1986187 Coi of Cltdvvion Studie. Data on Madhya Pmdes and Wes Bngl are f*m die 1984185 Cost of Culivaion Studes S4we: Liebe and Ahluwawia (1990) Table 4.93 1jti&e EgIier EM Inc es In India to R 3tee _udget SubddV N I Ii ( N £1 YR 1"s df (1) F1nliwmpidwin on seqmveyearP / 5.11 594 2.17 7665 t91 3.255 11.5 11.8 4.88 14.03 12.6 7.32 15.7 13.8 9.15 P2) PMoj hodiputuydcPi 0L.9 10.41 6.69 12.26 11.81 7.75 14.03 12.6 8A. 15.76 13.81 9.15 17.32 1523 9.9 (3) Pdcdiffesenc(2X(1) 5.79 4.47 4.52 4.595 2.9 4.495 2.533 0.8 3.53 1.73 1.21 1.83 1.62 1.43 0.74 (4)iFe preaeeumu asindidbedo:W 7.661 891 3.255 11.497 11.8 4.88 14.03 12.6 7.32 15.7 13.8 9.15 17.3 152 9.88 (S) Pindiffm afwafincm(14)-(1) 2.555 2.97 IA5 3.832 2.89 1.62S 2.533 0. 2.44 1.67 1.2 I33 1.6 1.4 0.73 (6) Ain f(adliz_oownmian _ane 4: (Miolkmas ) 7.9 14 12 83 3.6 1.22 8.68 3.72 1.24 9.04 3.88 129 9.4 4 134 (1) FiS Sants fran inc Dte* im pnc (5p(6) (dillimRupees) 20,18S 10.098 1.302 31.806 10,404 3.983 21,986 2,976 3.026 1 5.97 4,656 2.361 15.040 5.60 978 33.585 44,192 27.988 22,114 21.618 Now o Fe5iz pzri far 1991 isbts prvaln ashdiud p-. for ode y eas ig wil be she inaed price of the pecding year. Impo pMnM - bas bew ca_psud _ig she pocsed word pnea DO (e A and Maca bM WM pvcs for o6er yes by adj_sg e 1990 es for Woldiflo. at, at Thl 1990 mwad aeS, po olandli diag hv bew asend for Ini cms of saspo n and handln ad and sits adjsed tfr inlaia fordhr yea Feuliurdanud p fjuama frm Flusa Cowumm _omiat (a (A)Aauning SKpdcm a iDa 1991 fiw N. P a IL (b)0 A=wo 50! pnce i oSf N f d K. 32I fw P In 1992. (c) Avm in22 am piD for. N 7*r P md 50* tos K i3993. (d)A qimi 12% Sn isp dN, 10IrPuA25*foeKforfebyeys1994 [el A ing 10 ipreinafor N ad P and 8 for Kin 1995. Socc: Pspcjd wodd fmli pn inllaou fn Woldd Bank. Comodity Dii. Or? 095 et ED 0 0. Tb 410 Tha ArIcuIlu t!!!y by Y'tes, 19831. to 19867 (ndWm Rs) 1is1 1962- 198344 198485 3983.96 _ 9___3 _ AbkSn 663993 13.16 7.439.92 1127 7,4575 1098 8.51664 I370 1022 1057 10.7)043 9.64 3042.7 9A 193.72 031 242 037 231 6 041 372.87 0.47 4128 0.42 57.42 0.52 54. 0. iw 43736 7.17 4,961.60 7.51 5,51376 8L3 6,40876 8.88 770690 7.93 8943.93 604 9,46031 6 X,439.11 3.9 271037 4.10 2,165 4.15 3,493.89 439 4,496 4.61 53.47.37 4. 5,178.67 4.6 31u 3J7170 520 09.24 5.60 3.721.32 US 4,24.30 5.35 5,30.37 5.49 6AM4I 5.44 ,274.09 536 k 1u3m 47.17 0.0 58.42 0B0 43.90 0.06 .63 QOl 106.94 0.33 117.42 0.33 7936 0.07 Aina Em 22M 038 26033 a 39 257.43 038 289.10 0.36 312.83 032 32330 039 275.8 02 Kaeub 3268.85 j.35 354.49 537 3,429.67 5.06 3,S96 4.93 4,527.92 4.66 5,124.05 4.60 5,23690 4.73 Kasb 3,420. 233 3,65.40 22 I.5423 225 i0 .71i.76 2.36 13994.5 2.88 2,27326 2.04 2,9.O3 2.36 M yhadtb 3,54.69 631 4,120.14 624 4,57636 6.74 5,424.70 6.82 6498.21 6.68 763.61 6.88 8.190,41 739 Udmean 3.432.82 559 4PZ4.46 609 4,20.A 6.20 3,3.41 6.50 7,170.18 7.37 8,'70.97 7.2 ,907 8.4 0dm 3.384A9 3.21 S4.47 54 3.79567 559 4,27.66 534 4,S5321 4.68 567 436 54336 4.82 PAjb 4355.40 8Ll 58.6 833 5,65.10 7.78 6.44753 8.3 8:8 8.77 0O,931 899 9,235.98 632 Rije 4,13137 677 4,96.90 7.10 3,16&73 7.61 5,964.23 7.50 6,41i.4 6.6 7.74956 6f96 3,2936 7AI TS*Nab 4,39.39 6.91 4S093 698 4,45an 657 5,43.00 634 6,9.00 6.47 62.24 8.13 6,16736 5.57 Uu9tada 30,5 I 17.29 13,30 17.27 33,964.6 1639 33,693.68 1722 174U932 17.74 203.46 17.99 188.4 36.6 W tSmp ,57684 5.85 3 f96 5.76 3883.54 5.72 4,47641 5.63 5,356. 5.531 5,94.35 5.36 5,96 53B TOTAL 361 1ion l6. 67,839. 100 79,37 I00. 97,236.0 1000 11,31481 1B0.0E 13,767. 16. 4rt 94 S :: 19t9. Ft 1 n cob S m Ft X3 168 Statistical Appendix Table 4.11 Table 4.11 All MIia Etlizer Pidcs nd Subs Fertilie Real Subsidy Subsidy Totd Wholesale Ferilzer Domestic hnported Fertilizer price index CPLAL price Fertiliz Fertlizer Subsidy 19221=a i5I (122tI=IZe1) (I2M RisbfL Rs. biL Rs.hilL (1) (2) (3) (4) (5) (6) 1973 106 117 0.91 0.00 -0.18 -0.18 1974 114 147 0.78 0.00 0.33 0.33 1975 203 192 1.06 0.00 3.71 3.71 1976 215 165 1.30 0.00 2.42 2.42 1977 187 157 1.19 0.60 0.52 1.12 1978 177 168 1.05 1.07 1.59 2.66 1979 175 165 1.06 1.73 1.69 3.42 1980 167 188 0.89 3.21 2.82 6.03 1981 243 213 1.14 1.70 3.35 5.05 1982 274 233 1.18 2.75 1.00 3.75 1983 278 251 1.11 5.50 0.55 6.05 1984 268 272 0.99 9.00 1.42 10.42 1985 263 273 0.96 12.O0 7.27 18.97 1986 267 289 0.92 16.00 3.23 19.23 1987 289 301 0.96 17.00 1.97 18.97 1988 289 339 0.85 20.50 1.14 21.64 1989 289 377 0.77 30.00 2.50 32.50 1990 37.71 8.30 46.01 1991 (BE) 32.50 7.50 40.00 Note: 1973 refers to 1972f73 and so on. CPIA4L is Consumer Price Index for Agriculura Laborers. Sources: RBI buletin (September 1989); Gult (1990); Budget Documnens 1990191. 169 Statistical Appendix Table 4.12 TABLE 4.12: Number of Persons _e Fair Price Shop and Average Per Capita of issues of Wheat and Rice in Selected States - 1985 Number of Per Capita Issues Prsons Per of Wheat and Rice AndhraPradesh 1,816 1.9 Assam 1,040 2.5 Bihar 2,029 0.7 Gujarat 3,651 1.0 Haryana 2,441 1.0 Himachal Pradesh 1,687 1.8 J&K 2,938 4.3 Kamataka 2,597 1.9 Kerala 2,245 4.8 Madhya Pradesh 3,116 0.6 Mahamashtra 2,160 1.5 Orissa 1,475 1.1 Punjab 1,773 1.0 Rajasthan 2,934 0.6 Tamil Nadu 2,574 3.4 Utar Pradesh 4,522 0.6 West Bengal 3,158 2.6 Delhi 2,267 9.8 All India 2,427 1.7 Sources: (i) Bulletin an Food Suis, Ministry of Agriculture, 1986 (ii) World Bank population pco 170 Statistical Appendix Table 4.13 Table 4.13: Foodgrns: Shae of PDS in Net availabiLty PDS as % Net oi net avalability of PDS avaiabity of Egdmu Egm fQa (Mill mL) (mill. mt) (*) 1971 94.31 7.82 8.3 1972 96.22 10.49 10.9 1973 88.79 11.41 12.9 1974 97.14 10.79 11.1 1975 89.33 11.25 12.6 1976 95.83 9.17 9.6 1977 98.99 11.73 11.8 1978 110.25 10.18 9.2 1979 114.86 11.66 10.2 1980 101.43 14.99 14.8 1981 114.29 13.01 11.4 1982 116.88 14.76 12.6 1983 114.74 16.21 14.1 1984 128.63 13.33 10.4 1985 124.34 15.8 12.7 1986 133.15 17.6 13.2 1987 134.61 18.37 13.8 1988 129.84 18.31 14.1 1989* 147.16 15.9 10.8 * Provisi Note: Avlblity fers to agricdu ye.r. dibtlon to caendar yea. Sourc: Economic Survey _gigjo 171 Statistical Appendix Table 4.14 Table 4.14: Dist_buton cots ad Costs of Cany_ Buffer Stocks: Details of Disiribetion Cost for the Public Distribution Sytem. Level 1987/88 Changes 1979/80-87/88 (% p.a.) Amount Rate Amoumt Rate (Rs mnilion) (Rasqtl. of sales) Transit losses 1135.8 4.84 14.89 6.84 Storage loss 2783 1.19 20.29 12.02 Freight 6080A 25.92 23.54 14.9 Handling and godown expenses 1307.1 5.57 27.09 18.22 Stre charges 1300.3 5.54 24.97 16.17 Interestpayments 3539.2 15.09 20.44 12.01 Admin. overheads 917.8 3.9 20.35 11.96 TOTAL 14555.9 62.05 21.9S 13.42 Detils of Cost of Carrying Buffer Stocks of Foodgrains: Amounts in Rs. Milion Rate Rs.qL. of average buffer Level 1987/88 Changes 1979/80-87/88 (% p.a.) /anount Rate Amount Rate (Rs. Million) (RsJqtl. of average buffer) Storage losses 208.5 3.77 2.29 10.97 Handling and godown expenses 232.7 4.2 8.78 17.97 Storage charges 942.8 17.04 6.39 15.39 Intercs:payments 491A 8.88 -14.1 -6.82 Admn. overheads 162.8 2.94 3.02 11.74 TOTAL 203U.2 36.83 .3.24 4.96 Saw= PCI 3ana repor. vaio= yew. Table 4.15: AcWal and Desired Pattern of Distribution by States Index Based on Actual Percetage Desired Pattemn of Variation Desired cf Population in Per Actual Pattern Distri- Below Percentage Capita Population of bution in Povety Urban er Capita Per Capita Total Distri- Actual X Disin- Q.E. States Line Poaiaon Production Income 2 to 5 bution Population Col (7) bution 1988-89 1 2 3 4 S 6 7 8 9 10 11 UtarPanxesh 115 77 80 111 383 0.54 111.00 59.94 15.21 5.34 hanjab 27 119 20 50 216 0.3 16.8 5.04 1.30 1.06 MadhyaPradesh 125 87 85 111 408 0.58 52.18 30.26 7.61 3.23 Bihar 127 53 139 142 461 0.65 69.91 45.44 11.56 4.68 West Bengl 108 114 121 78 421 0.6 54.5 32.7 8.23 11.93 Andhra Prdesh 96 100 126 101 423 0.6 53.55 32.13 8.11 8.29 Haryana 38 94 36 60 228 0.32 12.92 4.13 1.05 090 Tamil Nad 109 141 143 94 487 0.69 48A1 33A 8.44 9.87 Mahshtra D103 150 189 64 50q6 0.72 62.8 45.22 1139 9.56 Kmnamka 93 124 116 103 436 0.62 37.15 23.03 5.80 5.79 Rajas: an 91 90 110 108 399 0.56 34.26 19.19 4.89 4.41 Orissa 111 51 88 144 394 0.56 2637 14.77 3.71 2.33 GuOjara 68 133 237 80 518 0.73 34.08 24.88 6.32 4.97 Kerala 6a 80 467 96 708 1.00 25.15 25.15 638 1OA4 AR India o00 100 100 100 669.26 3945 m l.a. Sao=: Tygi (1990 ) Ft -n 0. 173 Statistical Appendix Table 4.16 Table 4.16: Procurement Costs: Level and Changes for WhM Rice. Pad Level Changes 1987/88 1979/80- 1987/88 Wt Paddy Rice Wt Paddy Rice *--. (Rquinti)--- --- (% p.a) Market charges 6.23 6.66 0.00 8.47 11.10 Cost of gunny 9.54 13.72 8.34 8.44 10.8 3.55 Sates4zchase tx 5.72 2.39 1.30 4.64 -1.28 -2.94 Storage charges 1.51 0.00 0.05 13.46 - Interest charges 4.57 0.00 0.27 1 1.82 - Market labor 1.75 1.24 0.00 6.47 7.6 Forwarding charges 0.46 0.38 1.71 -6.97 8.35 12.01 Intemal movement 2.93 7.11 0.38 11.69 17.93 3.00 Est/Adm. charges 1.42 0.00 0.91 3.60 - -1.42 TOtal 34.13 31.5 13.16 7.74 10.12 3.33 Soume: FCI anul m7pm wamoms yn Liebmn and Ablowalls (1990). 174 Statistical Appendix Table 5,l TableS.I: Tota Culdvated and rrigtted Area, 19511S2.19 W87 ('000 becwes) Area Sown Area 1iazed Grss Igated More Than More Than w % of Gos Year Net Once Gros Net oCre Gross Sown Area 1951/52 119,400 13,834 133234 21.049 2,131 23.180 17.4 1952/53 123.442 14,223 137.675 21,122 2,183 23.305 16.9 1953/54 126,806 15.674 142.480 21.869 2,494 24303 17.1 1954/55 127,845 16242 144,087 22,088 2.860 24,948 17.3 1955/56 129,156 18.155 147311 22,758 2.884 25.642 17.4 1956/57 130,848 18.644 149.492 22,533 3,174 25,707 17.2 1957/58 129,080 16,752 145.832 23.156 3.472 26.628 18.3 1958/59 131,828 19,801 151.629 23,401 3,547 26948 17.8 1959/60 132,939 19.885 152.824 24,037 3.417 27.454 18.0 1960/61 133,199 19,573 152.772 24,661 3.319 27,980 18.3 1961/62 135399 20.810 156,209 24,884 3,576 28.460 18.2 1962163 136.341 20,419 156.760 25,665 3.788 29,453 18.8 1963/64 136.488 20,480 156.963 25.888 3819 29,707 18.9 1964/65 138.120 21,109 159,229 26.600 4,105 30,705 19.3 1965/66 136,198 19,078 155I276 26.344 4,557 30.901 19.9 1966/67 137,232 20,123 157,355 26,907 5,776 32,683 20.8 1967/68 139,876 23,865 163,730 27,193 6.014 33,207 20.3 1968/69 137,313 22216 159,529 29,009 6.474 35.483 22.2 1969/70 138,772 23,493 162.65 30,197 6.777 36,970 22.8 1970/71 140,784 25.007 165,791 31,103 7,091 38.194 23.0 1971/72 140,040 25.154 165,194 31546 6.885 38,431 23.3 1972/73 137570 24,580 162,150 31,837 7222 39.059 24.1 1973/74 143.060 26.810 169.870 32,550 7,730 40,280 23.7 1974/75 138,380 25.810 164,190 33,710 8,030 41,740 25.4 1975/76 142,224 28,770 170,994 34.491 8,872 43.363 25.4 1976/77 140,180 27,100 167,280 35,147 8,405 43,552 26.0 1977/78 141,936 30.'59 172305 36,553 9,477 46,030 26.7 1978/79 143.008 31.756 174,764 38.060 10.246 48,306 27.6 1979t80 139,015 30,642 169.657 38,478 10,700 49.178 29.0 1980481 140299 32,797 173,096 Aw8180 1 1,069 49,875 28.8 1981/82 142.003 35.039 177.042 39,924 11630 51,554 29.1 1982J83 140,800 32.600 173,400 40.720 11.400 52.120 30.1 1983484 142.740 37,620 180.360 41,960 11,980 53,940 29.9 19844S .. .. .. .. 198546 .. .. .. .. 1986/87 = not available Source: MOA, DirecWfae of Economics and Statistics. 175 Statistical Appendix Table 5.2 Tabb 5.2 _To Bl2 g b Stats 1285.86 M Total am Rim qLu Bu MU BM 1u cmmM zM AndlurPradesb 94.1 1.0 9.8 17.3 64.3 33.0 2.0 Asm (a) 33.8 33.6 BOWar 35.8 30.2 78.8 13.3 43.8 4.2 Gujat 42.9 2.8 8.9 7.2 73.3 88.1 23.5 20.6 Hrymao 98.8 37.1 12.9 27.3 95.4 64.8 75.1 25.1 Hhna Pnmesb 56.0 2.8 45.3 7.4 17.0 14.7 17.4 5.9 Jcnmu & Kesbmi 89.8 74.5 0.5 7.7 24.1 12.5 40.0 7.0 Krntaka 56.9 6.3 6.5 81.4 25.3 19.6 8.4 Krala 41.7 41.4 Mad&yaP hdeah 18.1 0.1 0.7 36.6 23.6 17.4 13.2 Mabhsrtma 25.8 5.8 28 51.9 54.9 12.0 23.0 Manr 45.7 44.1 Meqbaiya (e) 47.7 38.9 Nagaltd 42.5 100.0 36.4 Orio 32.6 3.0 94.6 29.5 Punjab 98.8 100.0 78.1 58.5 94.8 80.0 94.0 11.1 Rajaemn 38.9 1.0 3.0 15.1 83.8 74.5 23.1 15.8 Sikkhn (g) 100.0 22.2 Tami Nadu 91.9 9.0 14.1 80.0 5.2 59.9 3.8 Tripur (d) 5.9 50.0 6.4 UtwI PVC3b (t) 28.0 0.8 1.0 17.9 83.6 44.1 51.3 15.3 Wen Bea8g 24.6 72.5 5.6 26.9 2.9 AllU-dia 42.1 4.6 5.4 17.6 75.0 49.0 36.5 15.2 Total Total Toal Rapeqed Totl OU (under all MMPnuBi Fma &MR Soa so= Com c An amPraesh 0.2 43.9 16.9 13.8 98.8 13.7 35.8 Acexn (a) 9.3 32.6 155.1 0 DBum 1.5 38.2 18M6 7.6 20.2 45.6 36.3 Gujap 5.4 20.5 12.4 92.5 21.3 1Oo 3Z.5 28.9 Ham 27 65 62.9 662 60.8 94.3 99.1 65.7 Hbcal Pradesh 4.5 16.7 9.1 7.7 24.1 26.8 23.9 17.4 Jlmu&Kaslur 10.1 38.4 1.6 7A 65.8 48.2 14 41.1 Karnataka 3.2 16 17.8 5.6 13.2 9A 25.4 18.1 Kcen 39.8 10 12.5 13.9 M adygafae 6.4 14.3 2.3 24.2 3.5 95.9 11.3 13.4 Mahadhka 4.3 10.4 2.7 0.9 ion 4 12 Mmnpw 44.1 41 Mqhlays (e) 38.1 24.i N4al4ud 33.9 29.4 Ofdbs 5.8 23 18.3 13.2 11.3 91.7 23.3 Ptab 43.1 91.9 46.7 84.8 72.5 92.3 98.8 91 R*tm 8.7 18.8 24.5 59A 30.1 100 90.4 21.3 Skklm (g) 19.8 11.9 Twita Ndu 3.6 52.3 28.2 2.7 30.6 100 50 47.5 Thpmu(d) 6.3 20.1 9.7 UtarPldh (1) 20.3 46.9 0.4 46.6 21.8 75 73.3 48.6 West Bala 1.7 25.1 54.1 44.1 15.4 23.9 All-ait 8.1 31.1 13.7 45.8 16 87.3 27.9 30.4 Nftc (A) 3mdan deVpm (m Me 5m 1953.54. (b) O flGVu fratX p 1934& (0 id anthe fgam fa IU at 19770 8aapt ad all ars. (a) Bud m d Ops for do ye 19JI142 (0 Bm a md Opu for U pa 13414 (a) u tonft ormfgs fto yam 19644 uc* tow unt AU aap. n a tbs ana avbb 11gms gm lelpd am ad p&m cm am Sgmm Au.4 d ftn*zo RFWIp mup ts hdhi 19M28. MOA. 003 I989. 176 Statistical Appendix Table 5.3- Table 5.3: Investment in Major and medium Lrigation 14 Majr Sates Excess (%) 1. Expenditure (million Rs at 80/81 prices) a/ Fifth Plan (1974-79) 47,200 48,490 +2.7% Sixth Plan (1980-85) 88,590 66,670 -24.7% Seventh Plan (1985-90) 80303 58,960 b/ 26.6% 11. Additional Capacity (000 ha gross) Fifth Plan 5,024 428 14.6% Sixth Plan 5,506 3,760 -31.7 Seventh Plan 4,102 2,851 -30.5 a/ Includes expenditure on drainage and flood control projects b/ Actuals for 3 years, anticipated for the 4th. plus target for the 5th Source: Ravishankar (1990) 177 Statistical Appendix Table 5.4 Table S.4: Md Unirriata foa ta (19F483) Norma Rainfall Rice (Autumn) VWheu Ste (mm) irgatead Uningaed Wiffe igated Unirrigated Diffeace KU ( Kgs (%) 1. Low Raifali Rions Pnjab 590 2957 1029 1928 (287) 2960 1616 1344 (183) Hbyua 610 - - 2.4S8 1644 814 (150) Rasthin 500 1737 613 1124 (283) 1.719 887 832 (194) Cujast 870 - - 2506 SlO 1996 (491) 2. !ti3i9LUiS Malmuahtr 870 na. nRA 1,159 471 688 (246) AnduaFPradeh 900 2115 920 1195 (230) Tamn Nadu 990 1880 401 1479 (469) - - K&nataks 840 18S4 1460 394 (W2) 1.083 383 700 (283) UurPtrdebs 1040 1426 950 476 (15S) 1.176 1101 75 (107) MbdhyaPradesh 1140 1143 758 385 (151) 1,654 800 845 (206) Bib. 1260 15S2 704 848 (220) 1.416 1020 396 (139) Wen Baigu n.. 1522 873 649 (178) Orisa 1450 922 670 252 (138) - - Saw= MhAMy of AgcricWo Tablc 5.5: Growth of geal Investment in Irrigation (Rs.Cr at 8011 pr) Trend 1974475 1976M77 1978/79 1979/80 1980/31 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 Orwih Rate Audita Pradesh 45.65 82.02 121.49 118.84 103.78 98.14 89.78 86.74 89.69 103.68 117.93 104.93 1.5% BUh 60.07 83.65 108.64 84.40 96.69 109.24 108.13 114.78 115.27 117.29 123.68 129.05 2.1% uvjalm 54.62 58.43 74.22 82.72 90.04 92.74 104.14 106.78 95.89 42.29 56.56 65.67 /a Haryana 13.52 47.56 59.32 54.08 48.44 47.43 48.85 30.37 32.87 58.24 56.69 21.35 1.1% Kamntuaka 40.08 56.93 87.17 88.11 78.55 76.42 74.99 74.95 75.64 80.08 82.24 57.88 1.3% Kerba 12.91 2693 39.99 37.39 38.98 39.41 35.22 41.12 37.35 30.64 24.06 19.75 /a MadhyaPadeh 44.99 6!'.44 79.77 88.40 87.86 92.38 85.82 103.74 122.13 148.96 143.16 137.36 3.8% M _haraslum 61.14 102.75 125.17 130.75 132.96 155.03 153.00 180.61 153.27 134.74 120.19 145.86 2.2% ori:9 25.75 31.55 57.02 65.68 83.67 80.02 77.00 68.74 72.42 56.07 59.13 67.87 2.8% 1 Punjab 10.78 21.19 29.40 35.93 34.80 40.42 35.67 31.43 31.19 40.10 28.01 26.37 2.6% RajasdtaL 39.19 51.70 63.83 60A1 62.63 70.03 70.38 69.19 46.48 51.50 48.86 58.60 /a Tamuil Nadu 12.89 28.1 18.79 16.07 16.84 17.74 25.12 27.17 23.27 21.08 20.15 17.01 /a UnarPradesh 109.14 118.32 160.57 178.97 172.87 165.10 140.27 152.40 146.87 174.97 129.84 126.88 0.7% Wesl Bengal 14.82 29.64 32.26 32.08 41.14 40.60 30.05 26.16 21.89 20.89 24.09 23. /a Togal(14Sls.) 545.55 806.72 1,057.63 1,073.83 1,089.26 1,124.70 1,078.44 1,114.19 1,064.24 1,080.52 1.034i59 1,002.45 1.I% A No sglflceay diffaat fom Naot StawLalnvstna he bee dcrived ty alying stadad adjustmets an Me budgety daa. Ih esiwng esimtes have bee deflated using the naixa aenmnt deflaor for patiN iveatnun In agricomue co SoucRwbb* 1990)D v rt Ot6 rt Sow RaviSbaikar (1990) 0~~~~~~~~~~~~~ I, n 179 Statistical Appendix Table 6. 1 Table 6.1: Consumption of Nutrients from 1951-52 to 1988-89 ('000 Tonnes) CONSt; dPTION Year N P205 K20 Total 51/52 58.7 6.9 - 65.6 52/53 57.8 4.6 3.3 65.7 53/54 89.3 8.3 7.5 105.1 54/55 94.8 15.0 11.1 120.9 55/56 107.5 13.0 10.3 130.8 56/57 123.1 15.9 14.8 153.8 57/58 149.0 21.9 12.8 183.7 58/59 172.0 29.5 22.4 223.9 59/60 229.3 53.9 21.3 304.5 60/61 211.7 53.1 29.0 293.8 61/62 249.8 60.5 28.0 338.3 62/63 333.0 82.8 36.4 452.2 63/64 379.1 116.5 50.6 543.2 64/65 555.2 148.7 69.3 773.2 65/66 574.3 132.5 77.3 784.6 66/67 737.8 248.6 114.2 1,100.6 67/6S 1,034.6 334.8 169.6 1,539.0 68/69 1,208.6 382.1 170.0 1,760.7 69/70 1,356.0 416.0 210.0 1,982.0 70/71 1,479.0 541.3 236.3 2,256.6 7112 1,798.0 558.2 300.6 2,656.8 72J73 1,839.0 581.3 347.6 2,767.9 73f74 1,829.0 649.7 359.8 2,838.5 74/75 1,765.7 471.5 336.1 2,573.3 75s6 2,148.6 466.8 278.4 2,893.8 76m77 2,456.9 634.7 319.2 3,410.8 77(78 2,913.0 866.6 506.3 4,285.9 78(79 3,419.5 106.0 591.5 4,117.0 79/80 3,498.1 1,150.9 606.4 5,255.4 80/81 3,678.1 1,213.6 623.9 5,515.6 81/82 4,068.7 1,322.3 676.2 6,067.2 82/83 4,224.2 1,435.9 726.5 6,386.6 83/84 5,204.4 1,730.3 775.4 7,710.1 84/85 5,486.0 1,886.4 838.5 8,210.9 85/86 5,660.8 2,005.2 808.1 8,474.1 86/87 5,772.7 2,105.6 860.1 8,738.4 87/88 5,668.3 2,163.0 864.5 8,695.8 88/89 7,246.1 2,721.6 1,068.2 11,035.9 Source: FPiizer Staduicsd 198849. 180 Statistical Appendix Table 6.2 Table 6.2: eizer U by Ste 1988-1989 I/ NPK Consunption Share of State to Total N+P+K Gross per ha. of All India Consumption Cropped Gwoss Crop Gross State (fmt) AMF Area Cropped Consumption (M0 ha.) (kg/ha.) Area 2/ (N+P+K) (%) (%) 1. EAST 1.432281 32Z926 43.5 18.6 13.5 Assam 25.420 3.794 6.7 2.1 0.2 Bihar 607.883 10,517 57.8 5.9 5.5 Oiss 151.848 9.259 16A 5.2 IA West Bengal 634,967 7.987 79.5 4.5 5.8 II. NORTH 3,855.447 39,829 96.8 22.5 34.9 Haryana 509.131 5.601 90.9 3.2 4.6 Hinahal Pradesh 30,291 974 31.1 0.5 0.3 Jammu & Kashmir 53,560 1.030 52 0.6 0.5 Pumjab 1,116,648 7,158 156 4 10.1 Uttar Pradesh 2,135,876 24,981 85.5 14.1 19.4 m. SOUTH 3,156,903 33,022 95.6 18.6 28.6 Andlua Pradesh 1,355,200 12,100 112 6.8 12.3 Karnataka 800.283 11,146 71.8 63 7.2 Kerala 213.804 2,866 74.6 1.6 1.9 Tamnil Nadu 767,819 6.819 112.6 3.8 7 Pondicherry 18.188 46 395A 0.0 0.2 IV. WEST 2S533,118 71,557 35A 40A 22.9 Gujarst 642,951 9.683 66A 5.5 5.8 Madya Pradesh 683.575 23,016 29.7 13 6.2 Mahrashtra 891,306 20,537 43A 11.6 8.1 Rajsdtan 304,702 18,137 16.8 10.2 2.8 Goa, Damian & Diu 5,593 158 35A 0.1 0.1 ALL INDIA 11,030.175 177,334 62.2 100.0 100.0 1) Yeu of cpoating nunfmi Mrch 31 to Apil 1 of te ne yar. 2) Zw! pgantes of coawnpdon do not dd up to 10OS due to onduiwu of mnall skies, udon territebis sad plasions. Table 6.3: Shas and Growth raes Urea. DAP and MOP, 1970-198 Nitogenous Phosphatic Poiash .. ___ ........~. . ___ ............. . .. ................................. -- - -------- - ----- - -- -- - -- - _.-.. _ ..... AU Other All Other Stmaght AB Straight All All Olher Nitogeneous Nitrogeneous Phosphatic Phosphatic Straight Potash mL F ae lUizers hiiilmnI2) DAP ErliizenL)3ilizers( MOPE Fetizfli Slams (a) 1970 34% 66% 100% 4% 54% 100% 97% 3% 1989 64% 36% 100% 30% 35% 100% 99% 1% Avemag Annual GrowdurasesI- 1970f79 16.7% 1.2% 12.8% 17.5% 4.4% 12.7% 18.7% negl. (d) X 1980/89 14.3% 33% 11.6% 31.0% 11.8% 10.1% 5.95% (b) negi. 1970/89 14.4% -0.6% 11.1% 24.4% 8.2% 11.0% 11.63% (c) negi. a) In lerms of matai produced. b) 198W88. c) 19708. d) Negligible. Soar: Faetilizer Stacisds, Fertilizer Association of India mI'. w I~~~~~ Table 6.4: Ownership Strct=ue of Fertilizer Manufacluring , (capacity figures in '000 of tons of nutrients per year) Nitrogenous Phosphatic kl Priv a t eQi C op _ Public Private o Total In Poducion capacity 4,331 2,284 1,532 8,147 814 1,593 309 2,716 %breakdown 53% 28% 19% 100% 30% 59% 11% 100% Unier Consrucdon Capacity 199 1,380 1,579 75 133 208 % Beakdown 13% 87% 100% 36% 64% 100% Appoved Capacity 84 11 95 % Breakdown 89% 11% 100% 1s aD Cousidered Capacity 334 334 668 17 17 % Breakdown 50% 50% 100% 100% 100% Totals 4,864 3,664 1,866 10,393 906 1,811 320 3,036 %Breakdown 47% 35% 18% 100% 30% 60% 11% 100% a/ O. occlwr 1, 1969. Son=c: FAI FlIW Stadcs 198849. a f ft .t n (0 I. K 163 Statistical Appendix Table 6.5 Table 6.5: Estimated Consumption of Pesticides Technical Grade (In Metric Tonnes) Pesticide 1985/86 1986/87 DDT 177 270 BHC 19,252 19,054 Aldrin 25 59 Other Chlorohydrocarbons 2,590 2,228 Methyl Parathion 1,545 1,331 Malathion 1,000 800 Finitrothion 99 79 Other Organophosphates 7,936 8,198 Carbarnte Insecticides 45 69 Sulphur 3,500 3,200 Lime Sulphur 1,800 1,650 Copper Compounds 4,800 4,400 Dithiocarbamates 2,638 2,834 Other Fungicides 453 463 OrganomeLcurials & Others 191 170 2,4-D 830 813 Triazines 11 45 Urea Derivatives 60 145 Other Herbicides 2,335 2,051 Plant Growth Regulators 3 6 Bromides 110 126 Aluminum Phosphide 996 1,343 Anticoagulants 4 3 Other Rodenticides 279 426 Misc. Pesticides 1,221 187 Total 51,900 49,950 Source: Indim Agriculture in Brief, GCI Publicaion, 1988. 184 Statistical Appendix Table 7.1 Table 7.1: SMIdon of Tam 1 for Amic (u) Annual Growth Rawe 1980/81 (b) 1987/88 1980/81-87/88 Amount % Share Amonwt % Share (c) 1. Total tem loams for a8riculture and allied acdviuies 11,092 100 25,450 100 12.6 1.1 Commercial Banks 7.457 67 18,545 73 13.9 1.2 Cooperative Banks 3,634 33 6,905 27 9.6 2. Tenn Loans for Minor Brigaeon IL.- 6,565 26 16.0 (d) 2.1 Comnmcial Banks 1.088 10 3.199 13 18.3 2.2 Cooperative Banks n.a. - 3,365 13 14.1 (d) 3. Term Lans for Agriculwral n.a. 6.938 27 10.1 (d) Machinery. Implements and Transport Equipment 3.1 Commercial Banks 2,694 24 5,690 22 12.7 3.2 Cooperative Banks na. 1,247 5 1.9 (d) At 128018 pzim 1. Alltermloans 11,092 14.147 3.5 2. Loans for mior irrigation na. 3.649 7.9 (d) 3. Loam for Agricultural Machinery n.a. 4.601 4.7 (d) (a) Refers to di_nu (de k8nding to fame1) diring July-June. (b) Refen to ApnilMarch for conermia bnk. (c) Cond growth te. (ds Refs to 1981/82- 19987ir Sourc Fw tum 1.1, 2.1 and 3.1 - RBI, Rapein on rancy & Fmue Volume 1. v8raus isses. For lans 2.1. 2.2,3.2.- Nationa Coopeative Land Devolopnait Bw& anks'icg 185 Statistical Appendix Table 7.2 Table 72: Enodir Elastici at 1986-_7 Rurol Expenditwe Groups Very Modately Non-Poor Non-Poor Rural Poor Lower High Aggregat_ Creals 0.886 0.608 0318 0.151 0.447 Milk & Milk Poducts 1.644 1.797 1544 0.580 1.094 Edible Oils 1.076 0.774 0.755 0.545 0.724 Meat. Fish. Eggs 1.218 1.205 1.089 0.509 0.866 Suga &Gur 1254 1.172 1.084 0.779 0.992 Other Food 1.003 0.934 0.928 0.470 0.757 Non-food 1.018 1374 I.S43 1.793 1.606 Urban Expenditure Groups Very ModeratePy Non-Poo Non-poor Urban Poor !oor Lower High Aggregate Ceresls 0.839 0362 0.194 0.059 0.255 Milk & Milk Products 1.517 1.671 1.403 0.619 0.892 Edible Oils 1.102 1.029 0.825 0325 0560 Meat. Fish. Eggs 1.168 0.983 1.182 0.555 0.759 Sugar & Our 1.142 0.980 0.726 0364 0570 Oter Food 0.974 0.925 1.019 0.682 0.797 Non-food 1.044 lAII 1375 1549 1.496 186 Statistical Appendix Table 7.3 Table 7.3: R_ssd Publictons ad Newly Notfied C, Vaee ner milli 19_ Varietes Publications Variedes per Mllion Publications per milion &kind I= l.Rs. An=D 120BRs. 1970-74 99 0.32 - - 1975-79 318 0.73 1974-78 2,130 32 1980-84 383 0.58 197943 2,69 2.8 1985-89 367 0.38 1984-88 3,143 2.3 (a) AssUms 8 10 year lag bewee mearch expenditne and vity release becase the system of all India tials usually requnn about five years of stng befoe a vaiety is releasd (b) Assunas a five year lag b8ewe expenditre and puldicaion. So1-: Wold Bank, 1990. 187 Statistical Appendix Table 7.4 Table 7.4: TFP Decom0 ition Estimates Dependent Variable: In Output Per Unit Input All India AU India North India Souih- in-ia Simple Complex Simple Simple Wcmndm yAdWH, Snecificatig Spificatio Smecfication Spmifkcatim Weighted Proportion HYV .3359 -.1510 .2624 .3364 [8.381 [.801 [4.47] [6.291 Public Research (GC) .0412 .0332 -.00068 .0402 [2.701 [2.05] [.03] [2.07] Public Research (State) .0557 .0579 .1073 .0589 [5.21] [5.35] [6.18] [4.17] Extension per Farm .1233 .1232 .1210 .0982 [12.951 [11.751 [7.80] [7.121 Literacy Rate -.0028 .0177 .7323 -.4511 [.051 [.301 [7.511 [5.941 NIA/NCA .2782 .2410 .2859 .1839 [8.44] (6.26] [6.44] [3.16] Private Research .0288 .0306 -.0095 .0483 [4.921 [5.141 [1.011 [6.441 Markets .0033 .0029 -.0010 .0051 [5.391 [4.68] 1.991 [6.711 Roads -.0082 -.0076 -.0049 -.0046 [3.111 [2.87] [.40] [1.-7 IADP (Dummy) .0204 -.0768 -.0778 .1442 [.861 [1.731 [2.26] [4.16] IADP x Proportion HYV -.2182 [1.49] IADP x Markets .0044 [1.30] IADP x Roads .00003 [2.99] Proportion HYV x Public .1390 Research (GC) [2.48] Proportion HYV x Extension -.0011 - [.02] Proportion HYV x -.0037 Private Research - [.14] Proportion HYV x .1932 NIA/NCA [1.66] # Obs 6,324 6,324 2,992 3,332 R2 .2562 .2589 .2939 .1871 F 86.75 68.69 61.83 38.11 Source: Birkhaeuser, Evenson and Fedar (1988). 188 Statistical Appendix Table 7.5 Table 7.5: Estimatd atEgs of Change in 33P by Sza STA 195 66 1263-73 1973-2 3 1956-83 Bihar 0.0488 0.0116 40.0056 0.0058 (.OOe) (.0055) (.0046) (.0014) Orissa 0.0877 0.0028 0.0152 0.0151 (.0095) (.0046) (.0059) (.0015) W. Bengal 0.0322 -0.0059 0.0105 0.0105 (.0069) (.0032) (.0042) (.0011) Haryana 0.0263 0.0555 0.0094 0.0268 (.0106) (.0087) (.0138) (.0025) Punjab 0.0231 0.0419 0.0157 0.032 (.0066) (.0062) (.0065) (.0013) Rajasthan 0.0062 0.0484 0.0162 0.0162 (.0129) (.0111) (.0088) (.0023) Gujarat 0.0556 0.0166 0.0163 0.P' (.01.8) (.0091) (.0093) (A. Mahamshtra 0.0108 0.0252 0.0045 QW01 (.0069) (.0061) (.0066) (.0016) Mliddl Madhya Pradesh 0.0119 0.0108 0.0104 0.0034 (.0066) (.0049) (.0048) (.0011) Uuar Pradesh 0.0212 0.0151 0.0284 0.0133 (.0041) (.0031) (.0076) (.0008) Andhma Pradesh 0.0161 0.0138 0.0029 0.0112 (.0072) (.0055) (.0066) (.0014) Karnataka 0.033 0.0141 0.0037 0.0126 (.0065) (.0077) (.0078) (.0017) Tamil Nadu 0.0266 0.0328 0.0028 0.0042 (.O068) (.0074) (.0117) (.0023) Sour co: Evenson and McKinsey (1980); Pray (1990). The growth rae is the estimate of parameter b in the following regresion: InFlP) = a + BYear + Distict Dummy Vaiables. Th sandard error is in paranthesis. 189 Statistical Appendix Table 7.6 Table 7.6 NABARD Refinance by Purpose (Rs. billion) Minor Farm krigatimn Mechanis IMP law 1980/81 2.65 (53.0) 5.00 1981/82 2.52 (42.0) 1.47(24.5) 6.00 1984185 3.35 (32.0) 2.00(19.1) 10.45 1985/86 3.85 (32.0) 2.10(17.1) 12.31 1986/87 4.60(35.0) 2.00(15.2) 13.14 1987/88 (July-March) 3.35 (34.7) 1.20(12.4) 2.74(28.4) 9.65 1988/89 (Jtly-March) 3.87 (30.5) 1.58(12.4) 4.08(32.1) 12.70 Figuues in bmckct refer to percenae of anna total rerinae. Soue: All hia Debt and Invesment Survey 198142. 190 Statistical A Table 7.7 Table 7.7: Contributors to Grwth in Real Net Cuent roendimg Levels a/ TOTAL AG. SECTOR l1ls 1 i00 i Agriculture 15 1 32 8 Irrigation 5 75 5 12 Rural Development 88 14 59 71 Allied Activities -8 10 4 9 WITHIN AGRICULTURE & IRRIGATION Ag.&Igatiol LQS ,m i0Q i0 Agriculture 74% 2% 86% 40% Cost Recovery Decline b/ 2% 2% -8% 1% Gross Current Expenditure 72% ns 94% 39% Salaries (45) (7) (35) (22) O&M (-2) (-5) (9) (10) Subsidy & Grants (29) (-2) (49) (7) Irrigation 26% 98% 14% 60% Cost Recovery Decline b/ 15% 12% 10% -2% GrossCurrentExpenditure 11% 86% 3% 62% Salaries (10) (18) (34) (47) O&M (-34) (13) (-27) (25) Subsidy & Grants (35) (55) (-4) (-10) a/ Based on she absolute chang in spending fmn 19801 t 1986/87 at cotat 1980/81 priceL b/ Negative value impi an ineae in fecoved COt. in absolute tem Soun:e: Ecoxoic Reclassification by Now Concep Consultancy 191 Statistical Appendix Table 7.8 Table 7.8: Growth of Real Investment Credit ar.d lcultural value Aadea a/ Investment SDP fmm Credit Agricultue l981/92-198S/6) (1980/81-1986/871 %9p.a. %p.a. Haryana 0.42 3.03 Punjab 1.32 5.39 Rajasthan 2.73 3.8 Assam 31.05 -0.18 Blhar 3.37 2.97 Orissa -7.17 0.43 West Bengal 31.22 2.79 Madhya Pradesh 7.97 0.37 Uuar Pradesh 0.38 2.1 Gujarat 10.13 4.45 Maharastra 5.38 -3.26 AndhraPradesh 11.82 0.83 Kanamtaka 22.91 3.01 Kerala 10.20 -0.33 Tamil Nadu 25.g6 0.85 a/ In 1980/S1 rnpees T hecr of net sown a of ah ste 192 Statistical Appendix Table 8.1 Table 8.1: Male And Female Agricultural Laborers, 1971 and 1981 Agricultural Labors (in millions) Percentage Change Females Males 1971 - 1981 Region/State 1971 1981 1971 1981 Females Males Eastem Region Assam 0.02 0.39 Bihar 1.80 1.94 5.00 5.40 7.80 8.00 Orissa 0.39 0.76 1.54 1.63 94.87 5.84 West Bengal 0.41 0.59 2.86 3.22 43.90 12.59 Southem Region Andhra Pradesh 3.28 4.30 3.55 4.05 31.09 14.08 Karnataka 1.00 1.72 1.72 1.92 72.00 11.62 Kerala 0.71 0.71 1.19 1.19 0.00 0.00 Tamil Nadu 1.67 2.82 2.82 3.13 68.86 10.99 Central Region MadhyaPradesh 1.83 2.31 2.22 2.54 26.22 14.41 Uttar Pradesh 1.23 1.07 4.22 4.21 -13.00 -0.20 Western Region Gujarat 0.64 0.92 1.25 1.59 43.80 27.20 Maharashtra 2.47 3.37 2.92 3.13 36.43 7.19 Northem Region Haryana 0.03 0.06 0.41 0.52 100.00 26.83 Punjab 0.01 0.07 0.78 1.04 700.00 33.30 Rajasthan 0.21 0.24 0.54 0.52 14.29 3.71 All India 15.80 20.95 31.70 34.42 32.59 8.58 Table 8.2: Agdcultual Wage Rates For Males And Females. 1070M71 And 198485 % Change in % Change in Ratio of Female/Male Change in Money Wage Rate of Female to Male Wage Ratio Real Wages of Wage Rate in Agricultural Labor Agricultural 1970(71- Agricultural Labor 1984/85 (Rs) 1970(ll-1984/85 Money Wages 1984/85 1970fl-1984185 Region/Stae Male Female Male Female 1970l 1 1984/85 Male Femalk Eastern Region Assam 12.87 10.65 225.00 239.17 79.16 82.70 3.54 20.06 25A3 Bihar 9.88 9.16 274.24 326.05 81.73 92.70 10.97 45.90 65.48 Orissa 8.42 5.99 284.47 304.73 67.59 71.21 3.62 40.62 48.14 Wesa Bengal 10.59 8.39 162.13 254.01 58.71 79.19 20.48 3.84 40.08 Souftemn Region Andhra Prades 10.41 7.64 285.55 289.80 72.82 73.44 0.62 45.09 46.33 Kanataka 7.31 5.93 198.37 252.98 68.31 81.07 12.76 3.56 22.91 Keraa 16.86 12.34 265.73 339.15 61.07 73.20 12.13 31.57 57.70 Tanil Nadu 8.83 5.05 249.01 255.63 55.86 57.18 1.32 18.46 21.25 Central Region Madhya Prade 8.53 7.11 296.74 361.69 71.74 83.40 11.66 44.72 68.25 UuarPtadesh 10.54 8.24 287.50 329.17 70.84 78.21 7.37 31.45 45.12 Western Region Gujardt 12.58 9.80 309.77 320.60 75.84 77.95 2.11 51.60 55.81 Mahaasbtra 9.46 6.07 233.10 229.89 64.74 64.18 -0.56 22.64 21.58 Northern Region C Haryana 19.35 14.99 191.42 278.53 59.64 77.47 17.83 0.05 29.94 Punjab 18.13 1491 183.12 265.44 63.85 82.25 18.40 -2.57 25.51 Himachal Prad 12.55 1125 205.35 22328 84.73 89.58 4.85 4.91 10.92 Rajashan 12.63 7.63 242.28 305.85 50.93 60.38 945 12.90 33.85 Source: A. V. Jose, 'Agrculture Wages in India,. (Tables 3. 4, 5, 6, 10 and 11), EPW. Jlune 25, 1988. 194 Statistical Appendix Table 8.3 Table 8.3: Perceage of Rural Females Working in Anicul by State 1983 Women Agricultural Women Vorking in Women Cultivators Laborers as % of Agriculture as % of as % of Total Rural Total Rural Female Total Rural Female Female Population Population Population Region/State 1983 1983 1983 Eastem Region Asssun 1.06 4.99 6.05 Bihar 6.03 8.61 14.64 Orissa 10.47 9.96 20.43 West Bengal 1.97 5.18 7.15 Southern Region Andhra Pradesh 14.85 22.69 37.54 Kamataka 14.84 17.82 32.66 Kerala 2.78 7.90 10.68 Tamil Nadu 12.56 19.90 32.46 Central Region Madhya Prade-' 25.71 14.65 40.36 Uttar Pradesh 11.33 3.40 14.73 Western Region Gujarat 17.28 14.60 31.88 Maharashtra 21.50 21.70 43.20 Northem Region Haryana 12.90 3.57 16.47 Punjab 2.70 1.22 3.92 Himachai Pradesh 43.89 0.46 44.35 Jarnmu & Kashmir 3.23 0.28 3.51 RajasiV-an 33.55 3.20 36.75 All India 13.32 10.83 24.15 Note: Data refer to "Main Workers, Usual Activity Status." Soure: Bennett, (1990). Table 8A: Disrtibuion of Female Woikfio= in Mjior States by Main Scors. 1981 Ag!tue Indeus Sernes Househld Non-Ht Tota Tradt & TranspDn & Ote Cuvas Lsam Total Manuf. Manuf. Manwt. Mining Constr. Cmearce Stoage Serves Total Eastrn Bi&fe 31.15 59.S 90.23 2.74 1.63 437 1.24 0.24 1.05 0.10 2.66 3.81 OrLssa 24.60 5891 83.51 5.44 1.91 735 2.16 0.53 1.91 0.13 2.66 4.70 Waes Basal 7.60 40.56 48.16 8.99 7.60 16.59 7.87 038 3.25 055 1219 16.59 SO& Anhta Prdesh 24.20 59.25 3.45 5.16 2.64 7.80 0.89 0.44 2.58 0.15 4.75 7.48 Kunataka 2L 46.69 74.99 5.80 4.66 10.46 3.57 0.79 2.33 037 4.44 7.14 0 Kaala 7.56 43.10 * 50.66 8.34 14.30 22.64 6.07 0.78 2.89 1.49 15.48 19.86 kn TlamulNadu 22.60 5523 77.83 638 4.71 11.09 2.33 0.68 2.49 0.25 532 8.06 cenr Madhy Padesh 21.84 43.78 65.62 3.98 1.26 5.24 1.06 1.05 0.94 0.11 258 3.63 Uuar Pades 51.37 34.56 85.93 5.04 1.85 6.89 0.33 0.25 0.92 0.11 5.54 6.57 Westu Gujap 35.90 46.12 82.02 2.62 2.23 485 5.19 0.84 1.57 0.2 7.18 9.27 Mlah_asbm 40.50 45A3 85.93 237 2.75 5.12 0.90 1.22 1.67 036 4.81 6.84 NoWWn Pkwaah 43.64 35.53 79.17 2.49 3.15 5.64 0.23 0.60 1.19 0.36 12.68 14.22 Rajasia 73.01 15.02 88.03 2.20 1.70 3.90 2.45 0.79 0.61 0.13 2.92 3.66 to m It Table .: Per HRam Enlome Elasticities With ReUpM to Yields for Spefied Q=ps and Swes 19971-72 to 1983-SA Al India Nestive Easicie Low Positive Elasicities High Positive Esicities labor Sink Elsicities Cp o Elasticities i Sta Eascity state Elsicity Ste Elsicity State Basicity Pddy Q7265 Haryana .0393 Kamanas 0.251 Tamil Nadu 0.904 West Bengal 5.599 Punjab -0.39 Gutjr 0.279 Andhr Pmdes) 131 Oissa 23.722 Uttar Pdero .0368 Mahatusra 0329 Bihar 28.04 What 0.7923 Rajasha -1.194 None Bihar 0.809 West Bengal 1.372 HBuy. 4.953 Punjab 489 Madhya Pad 4592 Uttr Pwada *0.488 Gujarat 0.431 %0 oQ4438 Uuwt Pdesh 4596 Mahaahu 0244 Madhya Pades 0.595 None Kanaaka 0.431 Tanil Nadu 0.741 Guiual 0.435 Andhra Prads 1397 Gromdmu bl Gujar 0.622 Andhra Pmudes) 1.773 Ceul sI Halya 4.107 None Rajasthan 0.538 Andhra hPa 4.052 Mahamnstra 0.918 Tamil Nadu 1.033 Kamataks 1.883 Gupam 6.471 SgmmdE 0307 UuarPradesh -1.895 Ma _asra 0.315 tn Tanilo d 0.1474 fD Ft X Wt Nates al Thee an esma by Tyag for the ped fhm de umim aening 1970-71 to the tnium ending 1978-79. . I.' bl Inner stae when yied goes down, bor Iq et hs been rising. c/The Mmhi easicitiesi some states asoced wih mmn difts fmm lecal to m a n. d/ Ne e yid gwth tcs. combined b flin bborintensty wae ecord fora the oher aes for which imc-nes da we, v t excep Pab which had a snmal negat yidd grwth ae and a sal ncasc in lbor inensty. Somro Tyag, 1981 and MW a, 1987. X Tabe 8.6: Labor Use (maa 2Aal fior Mpaim cros and States (Average from 19801 to 19&871P Staes Andhra Assam Bibar Gujarat Haryana HLmachal Kamataka Madhya MaWaashtra Orissa Punjab Rajasthan Tamil Unar West Weighted Crops Pladesh Pradesh Pmdesh Nadu Pradesh Bengal Average Paddy 150.9 81.47 10731 8351 125.79 72.26 126.06 104.7 159.36 108.80 129.19 101.84 Wheat 92.03 48.63 43.36 45.87 51.54 73.52 77.34 66.03 Maize 115.71 61.90 60.34 81.94 83.45 Jowar 50.09 59.57 52.33 50.32 72.03 61.63 Baa 85.62 42.29 29.55 69.47 45.46 Barley 70.76 72.11 Ragi 87.39 132.75 95.15 Gram 24.91 40.39 31.26 64.87 41.71 Urad 41.59 51.04 44.95 Y .%5 67.27 50.32 Tur 47.75 75.93 88.13 72.86 moong 54.59 47.69 45.67 36. 47.85 Mustad 71.88 34.37 4 . 62.2D 55.85 Groundmut 86.26 61.37 73.26 63.84 136.01 lOf 38 80.16 Soybean 51.92 46.10 50.60 Sunflower 38.62 4331 45.16 41.73 Cotton 129.17 95A9 66.89 91.79 101.27 99.76 Jule 182.45 102.00 196.62 197.77 179.25 Sugarcane 344.88 122.41 127.26 215.83 376.49 332.54 137A5 191.76 Tota WtL 64.04 75.42 76.06 56.95 75.33 7Z14 63.97 73.06 48.00 63.96 73.09 58.28 58.80 81.30 75.80 WL inAIGCA 7.39 1.99 5.75 5.95 3.17 0.54 6.38 12.55 11.54 5.02 3.92 10.53 3.75 14.05 4.19 W.Av(E) 97.92 84.69 78.45 78A5 48.65 52.63 79.01 56.70 86.49 111.18 72.51 44.41 148.09 86.12 134.93 82.70 ~rOD * Is average of tose years for which dat are available from the Comprehensive Scheme for Studying Cost of Cultivalon of Principal Crops, during 1980-81 to 1 I Sharma (1990 c). on 0% 0 Note: I WegW average ampoyment for aops has been woiked out by using area weights for TE 1983.84 i.e. share of a given state in total area of relevant crop. Simil > diffeent crops in goss cropped area of relevant state as weights. Weight in AIGCA is the share of a state's GCA in alllndia GCA for TE 1983-84. In Source: ¢ Giati and Sharma. 1990 c. Table 8.7: Distribution of Poor and Ultra Poor by States Rural India 1973-74 to 1986-87 Distribution of Poor (%) Distibution of Ultra Poor (%) States 73-74 77-78 83 86-87 73-74 77-78 83 86-87 Andhra Pradesh 7.0 6.0 4.9 5.2 6.0 5.1 3.7 4.0 Assam 3.0 3.8 3.3 3.6 2.2 2.9 2.3 3.0 Bihar 13.5 14.1 17.0 15.5 14.3 14.7 19.5 17.5 Gujrat 3.7 3.6 2.8 3.5 3.0 3.2 1.8 3.7 Haryana 1.2 1.1 0.9 1.1 0.9 0.8 0.6 0.7 Janmu & Kashmir 0.8 0.7 0.5 0.6 0.6 0.5 0.3 0.4 s Karnataka 4.8 4.6 4.1 4.8 4.9 4.6 4.2 5.0 Kerala 4.2 3.8 3.4 3.4 4.3 4.0 3.0 3.0 Madhya Pradesh 8.8 9.3 8.6 9.6 9.5 10.0 8.5 9.7 Mahaashtra 8.1 9.4 7.9 8.8 8.0 10.1 7.7 9.6 Oiis 6.1 6.1 5.5 6.1 7.4 7.0 5.7 6.9 Punjab 1.1 0.8 0.7 0.9 0.9 0.5 0.5 0.5 Rajasihan 3.9 3.5 4.0 4.2 3.3 3.2 3.9 3.8 Tamil Nadu 6.7 7.0 7.3 6.7 6.4 7.4 8.2 7.3 UnarPradesh 17.4 16.0 18.2 16.4 17.0 14.? 18.1 15.9 West Bengal 9.8 9.9 10.7 9.6 11.3 11.2 12.1 9.0 All India 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 x A iSuba& Kakan 1990. wo Table 8.8: Variation of Female Hired Labor to Familyr bX Household Monthly Per-cagita Expenditure in Rural Areas 1 2 3 4 5 6 7 8 Usual Activiq (Sauwlndustry) Hired Labor Self Employed Household (outside) (Inside) Ratio Monthly Family Fanily Per-capila Farn Non-Farm Expenditre Non Owner & Owner & (Rupees) Agriculture Agriculture Total Helper Helper Total 2:5 0- 30 5237 6.71 59.08 35.86 5.04 40.09 1.46 30- 40 55.83 5.38 61.21 34.52 4.27 38.79 1.62 40- 50 55.03 3.64 58.67 33.72 632 40.04 1.63 50- 60 51.75 3.64 56.75 36.83 6.43 4326 1.40 60- 70 49.15 6.33 55.48 38.18 630 44.48 129 70 - 85 43.70 6.35 50.05 42.88 7.07 49.95 1.02 85 - 100 39.92 5.90 45.82 47.06 7.11 54.17 0.85 100- 125 33.85 5.98 39.83 52.56 7.60 60.16 0.64 125- 150 28.21 8.15 36.27 55.49 8.19 63.68 0.51 150- 200 23.17 7.23 30.04 61.40 8.20 69.60 038 200- 250 19.78 9.87 29.65 61.96 839 70.35 032 250 - 300 16.58 9.87 26.45 64.90 8.64 73.54 026 300 & Above 18.77 13.81 32.13 61.76 5.70 67.46 030 0 X NotGiven 28.43 3.70 32.13 56.71 11.15 67.85 0.50 All 39.49 6.54 45.88 47.01 7.10 54.11 0.84 cft OD n .I- Source: Calculated from NSS 38th Round, Report No. 341, Table 46. .0 xD Table 9.1: Real Growth in Rural Development Grants (Rs.Cr at 80/1 pr) Trend 1974t75 1976177 1978179 19,:i/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 Orwth Rate AndhraPradesh 18.40 25.32 28.16 32.79 53.57 87.49 67.79 74.94 109.88 153.50 203.45 173.69 9.0Yo Bihu 28.46 23.11 46.03 36.08 51.96 79.51 94.37 93.14 139.58 154.92 165.33 165.81 7.9Yo Gujarat 11.65 16.87 26.19 27.11 56.44 53.08 55.93 56.97 61.46 55.83 89.76 101.42 7.5% Haryana 3.34 4.25 7.21 18.22 11.91 11.43 11.54 12.16 17.71 23.02 25.11 32.16 7.5% Kanataa 9.44 26.77 27.57 31.40 32.49 44.90 65.93 65.66 96.66 90.43 86.75 91.03 8.0°/ Kerala 8.48 9.29 15.98 20.01 28.45 33.02 29.16 45.52 50.94 51.62 45.98 46.95 7.2%o MadhyaPradesh 9.80 15.11 21.12 78.12 77.13 51.86 55.81 69.91 84.02 85.91 98.17 113.99 8.7%o Maharashta 42.06 9.97 19.79 20.89 40.50 16.84 41.09 43.40 123.08 150.35 255.06 258.34 9.0%o O Orissa 12.51 15.33 24.97 35.84 23.37 24.40 24.04 29.52 34.44 59.69 61.21 61.43 5.30 0 Punjab 3.27 4.67 5.27 11.64 12.83 15.79 14.54 17.23 20.95 19.42 20.75 17.13 6.9% Rajasthan 8.08 7.25 35.03 43.84 36.47 9.40 9.22 11.70 30.78 39.62 105.55 203.61 8.4% TanilNadu 41.50 44.92 44.92 36.32 60.95 95.12 106.40 84.71 113.71 107.47 100.82 103.66 4.1% UnarPradesh 25.75 34.88 39.84 38.87 45.62 51.18 106.07 138.96 186.58 230.20 248.52 227.56 9.3Yo West Bengai 13.78 15.44 32.23 22.28 24.21 27.84 25.01 32.08 32.61 108.70 103.39 102.94 6.8%o Total(l4Sts.) 236.51 253.19 374.33 453.40 555.90 601.85 706.88 775.90 1102.38 1330.68 1609.83 1699.69 7.7%o Note: Nominal expendinur on rual devdopment hs been deflated using the national acoDunts deflator for public consumption. tort 0*0 Source: RavWiwka (1990). H 'D rt . 0 1 in 0 tDa m