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2014 GAP Report® – Measuring Agricultural Productivity Growth in India
India’s agricultural sector is rich and diverse. It is the world’s second largest rice and wheat producing country and the largest exporter of rice. It is also the largest producer, consumer and importer of pulses such as pigeon peas, chick peas, mung beans and lentils. One-fifth of beef traded worldwide is from India — an industry that grew nearly fivefold between 2008 and 2013.44 India also accounts for one-tenth of the world’s fish and seafood trade.45 A wide variety of spices and fruit juices are sourced from India and the country is the world’s top producer of milk.46
To achieve these results, India’s agricultural sector has been transformed over the past six decades. Following years of food shortages, early advancements in crop production relied heavily on expanding cropland, irrigation and fertilizer use, as well as the introduction of improved seeds for food grains. In the past three decades, research and technology-led growth helped reduce the cost of cereal production by 1 to 2.3 percent per year and today there is new growth in vegetable, fruit, feed grain and livestock production.47
As pressure on water and land resources intensifies due to population growth, urbanization, and industrialization, India’s agriculture sector will need to continue to close yield gaps and reduce production costs through Total Factor Productivity (TFP) growth. As TFP increases, the cost of production decreases, and prices fall and stabilize.48
AGRICULTURAL PRODUCTIVITY GROWTH 1947–1980
From independence in 1947 until 1956, little progress was made in agricultural development as the new government’s attention focused on Partition and rehabilitation. This changed dramatically from 1957 to 1968, when the expansion of the country’s research capacity and initiation of price support programs for farmers set the stage for the Green Revolution.49
Building Institutional Capacity
In 1957, the Rockefeller Foundation initiated a program with the Government of India to develop national research programs to improve cereal crops, working with the Indian Council on Agricultural Research (ICAR) and the Indian Agricultural Research Institute (IARI).50 To increase research, education and extension capacity across the country, India established a system of agricultural universities based on the U.S. land-grant model. The first nine universities were completed by 1968, the start of the Green Revolution. India’s National Academy of Agricultural Sciences concluded that the Green Revolution, “with its impressive social and economic impact, would have not been possible without the significant contributions made by the agricultural universities, both in the form of trained scientific manpower and the generation of new technologies.”51
Severe droughts and famine in the 1960s convinced the Government of India to prioritize self-sufficiency in rice and wheat — the staple foods of the country — in national policies. However, this would require farmers to adopt new technologies that the vast majority could not afford. Food grain procurement and public distribution programs were established and managed by a newly-formed Food Corporation of India. The Indian government set incentive prices for food grains, assuring farmers that their crop would be procured at the full cost recovery price, plus some profit.
The Green Revolution and Dissemination of New Technologies
Early in the Green Revolution (1969–75), high- yielding, semi-dwarf varieties of wheat and rice were introduced to farmers, along with increased use of fertilizers, agricultural chemicals, machinery and irrigation. Subsidies were provided for seed, water and fertilizers. There were tremendous productivity gains and, by 1980, the country produced enough rice and wheat to meet basic needs. The economic benefits to farmers, however, were strongly skewed toward a few northern states where the Green Revolution was started.52
To create greater equity in access to resources, from 1975 through the 1980s, the Indian government disseminated crop production inputs and technologies to farmers in more states. An unintended consequence was less discriminating use of inputs, including water, pesticides and fertilizers, leading to land degradation and reduced groundwater in some areas of the country.
These experiences drove home the message that simply increasing inputs or expanding irrigation and cropland is not the answer to food security concerns; rather, farmers need to increase productivity without degrading the resource base. This requires choosing the right seeds and the right types and amounts of inputs for local conditions, and applying them in the right way, to assure that productivity growth is truly sustainable. Measuring TFP is one of the ways the Government of India determines whether productivity changes are due to application of improved technologies rather than just increased use of water and other inputs, which helps guide policy decisions.
In addition to technology-driven efficiencies, TFP growth can be driven by shifting to crops with a higher economic benefit. Both of these factors have played a role in India’s agricultural productivity growth.53
POST-GREEN REVOLUTION AGRICULTURAL PRODUCTIVITY GROWTH IN INDIA
Using Indian government data, Dr. Nicholas Rada’s new study54 (2013) examines farm productivity growth for 59 crops and 4 livestock products between 1980 and 2008 in 16 states, 6 regions and on the national level. TFP was measured for these crops and regions (Figures 12 and 13).
Figure 12: Six Regions and 16 States Examined by the Rada Study (2013)
Figure 13: Agricultural Crops and Livestock Products Examined by Rada (2013)
The Rada study shows several prominent trends in productivity growth of different crops, as well as shifting agricultural production patterns in different regions of the country.
As shown in Figure 14, the share of area planted with primary food grains, such as rice and wheat, has declined since the 1980s and there has been a slowdown in cereal grain productivity. Over the past 30 years, the national trend has been toward higher valued crops — grains, pulses, oilseeds and specialty crops have given way to vegetables, fruits and livestock products such as eggs, milk, poultry and meat. The reallocation of land to higher valued crops is driven by increased yield potential and growing demand for those products. Livestock product growth was greater than aggregate crop production in all regions studied except for two states, Assam and West Bengal.
Figure 14: Composition of India’s Production Growth by Commodity Group (1985–1989 and 2005–2008)
Before 1980, the northern part of India led in agricultural productivity since it was the center of irrigation expansion and Green Revolution technology-led growth. In the 1990s, spending on irrigation, water management and scientific research was cut and extension services declined. There were limited advances in traditional food crops and agricultural productivity growth stalled.55
Figure 15: Average Annual Changes in Commodities’ Share of Output Growth, 1980–2008
The North still has the highest mean revenue share, but production growth has now shifted from the North to rainfed areas in the South and West. As shown in Figure 15, from 1980 to 2008, agricultural output growth in the South and West was driven by diversification from grains and pulses to high-value crops, particularly vegetables, spices and livestock, resulting in the highest TFP gains (Figure 16).
Figure 16: Comparative 1980–2008 TFP Growth Rates for India and the Six Regions*
Figure 17: Food Demand Compared to Agricultural Output from TFP Growth in India, 2000–2030.
For the North, the TFP growth rate from 1980 to 2008 was the lowest of all the regions, 1.38 percent, while the South was the highest at 2.84 percent, and the West was the second highest, 2.02 percent (Figure 16). A 2014 World Bank and FAO study found that nearly half of the differences in TFP growth rates across the country can be attributed to state-specfic policies, institutions and public investments. In addition, the study suggests that intensive input use negatively affects TFP in highly subsidized grains, compromising future productivity growth.56
At the current rate of TFP growth, domestic production by 2030 will meet only 59 percent of India’s food demand (Figure 17).57 This indicates that greater attention is needed to increasing productivity through technologies and practices that do not stress the resource base and, if the current trend continues, important will become more important for meeting growing demand.
In 2011, Chand et al. assessed the contribution of different productivity enhancing factors to TFP growth for a variety of Indian crops.58 They found that public investment in agricultural research constituted a significant source of TFP growth in 11 out of 15 crops. Public investment in extension and technology transfer contributed positively toward TFP enhancement in only two crops, which likely reflects suboptimal investment. The authors suggest that improvements in both the investment levels and quality of extension services are needed. In addition, to achieve the 4 percent growth per annum in agricultural GDP — the Government of India’s Planning Commission target— greater emphasis should be placed on the development of livestock, horticulture and fisheries.
When Indian Finance Minister Arun Jaitley presented the government’s 2014–15 budget in July 2014 he said, “the government is committed to sustaining 4 percent growth in agricultural GDP and for this we will bring a technology driven second green revolution with focus on higher productivity,” including a “Protein Revolution” and expanded “Blue Revolution” of inland fisheries.59
Figure 18:Yields and Profits from Hybrid Rice and Seed
INCREASING RICE PRODUCTIVITY IN EASTERN INDIA
The results of some of new and promising initiatives to increase productivity are not reflected in the Rada study, such as Bringing the Green Revolution to Eastern India (BGREI), which began in 2011 with a focus on increasing rice and wheat production through improved varieties, cultivation practices and water use efficiency. The seven eastern states account for 56 percent of India’s cropland that is used for rice production, but they produce only 48 percent of the nation’s crop.60 In contrast, the Punjab accounts for 6 percent of land under rice cultivation and it produces 11 percent of the nation’s rice crop.61 Improved rice productivity would have a significant impact on household food security and income generation and on the region’s economic growth.
In the eastern region, developing and using the best seeds for different types of soil and climatic conditions is a priority for increasing productivity. India’s Directorate of Rice Research coordinates multi- site evaluations of promising experimental hybrids from both public and private researchers at 25 to 30 locations representing different agro-climatic zones of the country. For example, water conditions vary throughout the country and hybrid seeds have been identified that are best used in either water submergence, flood, drought or salinity prone areas. In Eastern India, hybrid seeds developed through this process have achieved, on average, 30 percent higher yields in farmers’ fields than existing inbred rice varieties.62
Pusa RH-10, a hybrid basmati rice developed by the Indian Agricultural Research Institute (IARI), shows even higher increases under rainfed upland conditions and the aromatic flavor and texture is very popular. Since the private sector has been more effective than government in hybrid rice seed production, a public-private partnership between IARI and the non-profit Indian Foundation Seed and Services Association was formed, which resulted in the faster spread of the Pusa RH-10 hybrid. Evaluations indicate that seed production was highly lucrative for farmers. A particular benefit was the generation of additional employment of 65 person days/hectare and most of the producers are women. BGREI, and similar science-based initiatives and public-private partnerships, create numerous benefits and have a positive, cascading impact on the economy.63
TABLE OF CONTENTS
Measuring Agricultural Productivity Growth in India