Posts filed under ‘Readers’ Contributions’

Rest In Peace, Verghese Kurien

(Note from Ed : This post is reproduced from another blog – with the author’s approval, of course. Here’s a link to the original post)

The news this week in India is full of tributes to Verghese Kurien, the father of the “white revolution” there. Thanks to his life’s work of helping form milk cooperatives throughout the country, dairy farmers thrived, and India went from milk deficiency to production titan over the last several decades.

Kurien’s death on September 9 even caused the Amul girl to shed tears – she’s the cartoon mascot of the Gujarat Cooperative Milk Marketing Federation who anyone who’s bought butter in India knows well.

The Jester believes the story of Amul is exactly the kind that the development community needs to tell more of: helping those at the roots of the global economic tree self-organize so as to improve their bargaining power with respect to those who control the trunk. It’s notable that in awarding him the World Food Prize, the committee cited “his recognition that feeding the world’s citizens includes coordinating breakthroughs in production with effective management and distribution strategies” (NYT Sept. 10, 2012). The Jester can almost hear the sound of one hand slapping… the collective palms of the WFP officials striking their foreheads when they realized it’s not just chemicals, new seeds, and artificially inseminated cows! You need effective management and distribution strategies! Whoa, what an idea! Did you hear that, Rich Philanthropists and Multilateral Policy Makers?

Apparently, Kurien didn’t stop at milk: In the 1980s, he began working to expand vegetable oil cooperatives. If there were a Kurien for every smallholder farm product, “international development” might very well go the way of “groovy” and “far out” in the American lexicon.

“Thanks, Jester, for stating the obvious,” the old-hat reader might say. “But why is this topic of interest to the Jester?”

What caught the Jester’s eye was a little sentence buried in an obituary by the New York Times (thanks to Melissa Ho for sending). It said, “Mr. Kurien returned from doing graduate work in mechanical engineering… and began working at a government research creamery.” That’s right — Kurien studied mechanical engineering!

Looking back from 2012, it’s incredible that Kurien didn’t feel the crushing internal pressure ”to put his technical skills to use for society” as the Jester all-too-often hears from idealistic technology graduates (who are obviously not reading the Jester’s archives!).

It’s amazing that he didn’t decide to design a fancy-but-affordable contraption to milk cows more efficiently (cow-milking machines designed in the developed world are not sensitive to the subcontinent’s local context — there are lots of buffalos in Mother India, don’t you know? And, buffalos from different states respond to different languages, to say nothing of the varying dialects from district to district.).

And it’s absolutely, positively stunning that he didn’t invent a wireless udder monitor that sends cattle owners an SMS when their cows are due for a milking, thus saving dairy farmers the arduous task of squinting to see if an udder is full. (Then again, Kurien had the great advantage of having been exposed to the challenges of dairy farmers well before time division multiple access communication protocols.)

Yes, that’s right — it is actually possible to apply the problem-solving skills that one hones through a good engineering education towards helping people organize, own, and manage their own production capacity, as opposed to helping design fancy gadgets that streamline production capacity that otherwise barely exists.

This week, the Jester’s hat flies at half mast. Verghese Kurien — the Jester wishes that you are resting in a deep, profoundly well-deserved peace.

(Note from Ed : For more posts by the same author, here’s a link to his blog)

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September 18, 2012 at 4:07 am Leave a comment

Farming as a profession

Six months ago while attending a small agriculture related workshop I was asked what would I change about agriculture in India if I could change anything. My response was that I would change everything from what is grown, who grows it, how it is sold — almost every aspect of agriculture. But one of the biggest changes I would like to see is “farming as a profession”.

The simple act of putting the word “profession” next to “farming” forces us to invert on its head our typical view of farming, as an activity undertaken by mostly uneducated, unskilled, poor people in rural areas.

Seeing farming as a profession helps us envision an alternate future where farming is undertaken in a more scientific manner, where farmers select which crops to grow based on the ecological conditions of their land (terrain, soil type, water, weather, etc.) as well as the potential net income from the crop. A world where farmers are aware of the optimum inputs (water, fertilizer, pesticides, etc.) required for their crops.

Professions demand a drive towards excellence through continuous learning and improvement and farming wouldn’t be an exception. Farmers would need knowledge, skills, tools and techniques to excel at farming.

People working in the Indian agriculture industry typically mention various issues that need attention; issues such as need for more R&D on seeds, seed banks, access to weather and market information, irrigation, better infrastructure, inefficient and non-transparent markets, etc. But hardly anyone talks about the issue of farming skills and knowledge, which is the biggest component of making farming into a profession.

According to a 2010 paper on information needs of Indian farmers by the International Food Policy Research Institute (IFPRI):

Considering the large number of marginal and small holder farmers, particularly in rain-fed regions, a major need is to build the capacity of farmers to demand and access information to increase their productivity, profitability, and incomes. The information must be reliable and timely. For example, technologies need to be suited to the farmers’ capacity to take risk, which tends to be low in rain-fed regions, and integrated with available and timely services that support the relevant technology.

The same study mentions that for small farmers, the biggest sources of info are other farmers, input dealers and radio.  For large farmers, the biggest sources of information are TV, other farmers and input dealers.  Roughly 40% of small farmers and 55% of large farmers claim they get some agri-related information from at least one source.

There are many organizations (government, private and civic sector) which are trying to address information needs of farmers.  Most of these efforts are stand-alone and do not  address the problem in an integrated manner.  A private sector service may provide market price information, Digital Green videos may provide info on cultivation techniques while government agencies may offer information on seed varieties.

I wonder if there are any service providers who offer an integrated solution through multiple partnerships with government agencies, private and civic sector organizations.

 

  • Richa Govil

(Richa shares her thoughts on rural businesses at ‘Stirring the Pyramid’)

August 6, 2012 at 8:13 am Leave a comment

Why don’t Indian farmers grow more fruits and vegetables?

In India, rice and wheat comprise 70% of the agricultural produce by area, but less than 25% by value.  That is, wheat and rice are low value crops to grow compared to other options. Yet, the land area dedicated to wheat and rice has not been decreasing significantly.

Government data shows that the consumption of wheat and rice has been declining around 1-2% in both urban and rural India, while demand for fruits and vegetables has been rising by 2-3% annually.  This again begs the question: Why aren’t farmers shifting to growing more fruits and vegetables?

In addition, detailed studies across the country have also shown that while farmers just about break even (gross return compared to gross costs) on cultivating wheat and rice, growing fruits and vegetables is a profitable undertaking (gross returns are on average 2x the gross costs). Besides fruits and vegetables, there are other crops also which generate higher income than wheat and rice which we won’t go into, to help keep this post focused. (Refer to earlier post for detailed data on gross returns on different cereals, fruits and vegetables)

Having gone through these reports and data, I have been wondering, why, despite all this, do farmers choose to grow mostly wheat and rice?

In other words, if Indian consumers are demanding more fruits & vegetables and these crops are more lucrative anyway, why do Indian farmers keep growing more and more wheat and rice?

Are farmers completely unaware of the difference in returns? Or, is it that despite knowing the disadvantages, they choose to grow wheat and rice?

The first possibility seems rather difficult to believe.  While I am sure farmers have not done a detailed P&L for growing wheat versus okra, it is unlikely that farmers are completely ignorant.  They probably do have a rough idea of probable market prices, input costs and profits.

So what is it about fruits and vegetables that keep farmers from growing them?

Out of intellectual as well as professional curiosity, I have being digging deeper into this question, with the help of field visits and people working in the agri sector.

Here are the results from my own observations and discussions with agri-sector professionals and experts.

  1. Minimum support price. Wheat and rice come with a government minimum support price (MSP), and fruits & vegetables don’t.  Farmers find it assuring to know that MSP exists and may influence open market prices and/or demand for their produce. (Leave aside the fact whether MSP has a real impact on market prices/demand in reality)
  2. Risk of crop failure. Pulses, fruits and vegetables are more vulnerable to adverse weather, leading to higher risk of failure.  Rather than pay for crop insurance (wherever it is available), farmers prefer to simply avoid these crops.
  3. Care and effort required in cultivation: Wheat and rice require less care and effort to grow than fruits and vegetables. Higher care for crops means reduced availability of farmers for alternate income-generating activities, whether crafts or wage labor.
  4. Need to sell quickly due to lack of storage facilities:  India has about 5400 cold storage units. So farmers don’t really have much of an option to store fruits and vegetables for later.  The need to sell immediately means that they are at the mercy of current market prices, unlike for grains which can be held on to for longer.
  5. Price volatility: Fruits and vegetables experience a much higher degree of price volatility than grains.  Part of the reason for this is the high level of mismatch between demand and supply of fruits and vegetables. Part of the reason is the inefficiency of markets in matching supply and demand in different parts of the country.  And of course, part of the reason is their inherent perishability and lack of a cold-chain.
  6. Price realization due to spoilage: Lack of proper storage and transport facilities has yet another impact – spoilage of produce resulting in lower price realization due to poorer quality of produce by the time it reaches markets.
  7. Stored crops as financials assets: As one agri-expert put it, farmers treat grains like fixed deposits, for lack of other ways of saving/keeping money.  They store them and sell them off as needed.  You simply can’t do that with fruits and vegetables! Even cold storage would extend the life of fresh produce by only so much (unless processed, of course – but that’s a completely different topic).

Almost all of the reasons above relate to risk – either production risk, logistics risk or market risk.  Only two non-risk reasons can be seen in the list above – opportunity cost of choosing crops which require greater time and care, and usage of stored crops as financial assets (which in principal can be addressed with better financial access).

Typical solutions to risk management are insurance products, but typical crop insurance products cover only a limited subset of these risks.  And in any case, insurance subscriptions in India have been much lower than hoped for by policy makers and non-profits alike.

So what mechanisms and institutions are needed to address the plethora of risks, to enable farmers to actually deliver what people want to eat and also what gives the farmers higher margins?  Or, if we expand our thinking to non-food crops, we can ask: what mechanisms and institutions will help farmers shift to more lucrative crops?

 

  • Richa Govil

(Richa shares her thoughts on rural businesses at ‘Stirring the Pyramid’)

August 3, 2012 at 4:59 am 4 comments

Role of Agriculture in Economic Growth

Previously, I have commented on India’s agriculture GDP and the workforce engaged in agriculture.  So I decided to dig deeper into the structural transformation of developing economies to understand where all this is heading.

In the process I came across a thin book titled “A World without Agriculture” by C. Peter Timmer. It is an academic work, not necessarily meant for popular reading, but it is worth getting through.

The book is based on data from 86 countries over 35 years, so it provides a very long-term fact based look at where things may be headed for countries like India going through economic development.

Below, I am paraphrasing/quoting some of the interesting points from the book.

 

The Structural Transformation: What, When and How

As expected, as economies develop, the share of agriculture in national GDP drops over time. However the agriculture GDP continues to grow in absolute terms (unless of course nature or politics go horribly wrong).  For example, India’s agri GDP is currently 18.5% of national GDP, down from 42% in 1970.

The share of agri employment in total labour force also declines over decades. At some point, the agri employment starts decreasing in absolute numbers, not just in percentage terms. For example, agri employment is currently 52% in India — that is, 52% of the workforce is involved in agriculture.  This number was 70% in 1970. In India, the number of people employed in agriculture is still growing — we added 20 million people (net of urban migration) working in agriculture over the last decade.

The gap between the share of agri in employment (52%) and share  of agri in GDP (18.5%) first widens and then starts narrowing at some level of threshold per capita GDP in the economy.  While this number varies from country to country and based on decade, some definitive things can be said about this turning point.

The turning point appears to be around $9-10K GDP per capita across the globe. Also, this number has been growing: i.e., the threshold at which the gap starts narrowing is becoming higher and higher.  “Such results are strongly suggestive of a failure of modern economic growth processes to integrate the agricultural sectors of poor countries into the rest of their economies, despite relatively successful aggregate growth records.”

“A widening sectoral income gap — as differences in labor productivity between urban and rural areas become larger – spells political trouble. Rural households that feel left out of the growth process can vote governments out of office… It is no wonder that policymakers feel compelled to address the problem, and the most visible way is to provide more income to agricultural producers.  The long-run way to do this is to raise their labor productivity and encourage agricultural labor to migrate to urban jobs, but the short-run approach — inevitable in most political environments — is to use trade policy to affect domestic agricultural prices. In low-income economies, agricultural protection is a child of growing income inequality between the sectors during the structural transformation.”

Looking back at the structural transformation of developed countries: “Virtually the entire growth experience of modern developed countries has been spent on the convergent path of sectoral labor productivity.  This is in sharp contrast to currently developing countries, which are mostly at income levels per capita where sectoral labor productivity is [still] diverging.”

 (East) Asia versus other countries

There appears to be something distinctively unique about the path Asian countries have taken so far (mostly East Asia, e.g. Indonesia).

“Asian economies tend to employ disproportionately more farm workers in the early stages of development.” Also, “Asian countries provided more price incentives to their agricultural sectors … as a way to prevent the movement of labor out of agriculture from being “too fast”. The net effect is that the turning point for the gap (between agri employment and agri GDP) is around $1600  of GDP per capita for Asian countries compared to $11,000 for non-Asian countries. “This difference underscores two distinctive features of Asian economies: their more rapid growth and the greater role of agri productivity in that growth.”

A side note: India’ GDP per capita is currently around $1500 at current exchange rates.

Paradoxical Role of Agriculture in the Structural Transformation

“The past decade has brought a quiet revolution in the understanding of determinants of poverty and the mechanisms for reducing it in a sustainable fashion.  Partly, it is a simple recognition that economic growth is the main vehicle for reducing poverty – provided the distribution of income does not widen too sharply.”

“In current strategies used by countries and donor agencies to cope with poverty, the role of agriculture has been limited, largely because of a failure to recognize the importance of direct links among agri development, food availability, caloric intake by the poor, and poverty reduction.”…

“The case [for linking agri to poverty reduction] builds on three empirical relationships: between agri growth and poverty alleviation; between increases in domestic food production and improvements in nutrient intake; and between agri productivity and productivity growth in the rest of the economy.”

“An agriculture-driven growth strategy, if it does not sacrifice aggregate growth, directs a greater share of income to the poor – that is, it is more pro-poor. Such a strategy is the first step in breaking the cyle of poverty.”

So the paradox is that in trying to make agri a vanishingly small sector of a growing economy, the economy must invest in increasing agricultural productivity.

Rural Employment

“Throughout Asia, most rural households earn half or more of their income from non-farm sources, and often this sector is the “ladder” from under-employment at farm tasks to regular wage employment in the local economy, and from there to jobs in the formal sector.” So investing in creation of this ladder is equally important.

Conclusions

  1. “Structural transformation has been the main pathway out of poverty for all societies, and it is depends on raising productivity in both the agri and non-agri sectors (and the two are connected).”
  2. “The process of structural transformation puts enormous pressure on rural societies to adjust and modernize, and these pressures are translated into visible and significant policy responses that alter agri prices.”
  3. “Despite the decline in relative importance of agricultural sector leading to the “world without agriculture” in rich societies, the process of economic growth and structural transformation requires major investments in the agri sector itself.  This seeming paradox has complicated (and obfuscated) planning in developing countries, as well as for donor agencies seeking to speed economic growth and connect the poor to it.”
  • Richa Govil

(Richa shares her thoughts on rural businesses at ‘Stirring the Pyramid’)

July 31, 2012 at 7:03 am Leave a comment

Why the shrinking share of agriculture in India’s GDP is a good thing

After the release of the latest economic statistics in March 2012, many in development sector circles raised concerns about the rapidly declining share of agriculture in the country’s GDP and rural to urban migration.

But none of these laments make sense, and worse, they are not based on facts.

According to Planning Commission data (from their website), in the last 10 years, the total GDP of the country has more than tripled. Even with the decline in Agricultural share of GDP from 21% to 18.5% (at current prices), agriculture GDP has increased by 2.8x.  This is a good thing and an expected development on the path to economic development.

Similarly, while the % of population engaged in agriculture may be going down as % of population, in absolute numbers, it is still increasing.

These macro-economic trends are part of the long-term structural transformation of the Indian economy.

In fact, the percent of population engaged in agriculture must go down much more dramatically to increase overall agricultural productivity even further and bring average farming incomes above the poverty line. (More on this in the next post)

The development sector should stop doing itself and its target populations disservice by promoting poorly-informed ideas and knee-jerk reactions, and think more deeply about the social and economic direction in which the country needs to go.

  • Richa Govil

(Richa shares her thoughts on rural businesses at ‘Stirring the Pyramid’)

July 18, 2012 at 8:42 am Leave a comment

Farm Sizes & Incomes in India

When looking up any research or facts about about farming in India, one often come across comments about the smallness of farms in India.  So I wanted to understand how small is small.  Here are some statistics from National Sample Survey Organization (NSSO):

Below table shows the data on the average farm sizes in India:

Total area No. of holdings Average farm                         holding size
(million hectares) (millions) (ha/ holding)
1960-61 134 51 2.63
1970-71 126 57 2.2
1981-82 119 71 1.67
1991-92 125 93 1.34
2002-03 107 101 1.06

 

In 2003, the average farm size (what NSSO calls operational landholding) was about 1 hectare, which equals the area of a 100m x 100m plot.  70% of farmers have plots sizes smaller than a hectare.

Next I looked into historical farm sizes and discovered that in the last 30 years, the average farm size has halved. That is, the average farm size in 2003 was 48% of the farm size in 1971.

So the same farm that supported a single family in 1971 now has to support two families.

I suspect the halving of farm sizes within 30 years has much to do with splitting of farms among male offspring of farmers.  With no substantial employment or income-generating opportunities besides farming in rural areas, it is no wonder that splitting of farms is common practice, ultimately making the farms too small to support a family.  [See back-of-the-envelope calculations in an earlier post]

This leads to another line of thought: What is the average income of a farming family in India?

Here also NSSO comes to the rescue and provides us with detailed data.  The average farming household’s income from all activities is apparently Rs. 2,115 per month. The breakup of this income is as follows:

  • From cultivation:                   969
  • From animals:                         91
  • From wage labour:                819
  • From non-farm activities:     236
  • Total household income:    2,115

The average family size in rural India (as per census data) is 5.4.  So the Rs.2,115 per month translates into Rs.13/day per capita, well below the poverty line.

This begs the question: Is small-scale farming a sustainable economic activity?

 

  • Richa Govil

(Richa shares her thoughts on rural businesses at ‘Stirring the Pyramid’)

July 10, 2012 at 6:24 am 4 comments

Is farming an economically viable opportunity?

This is a question that has been at the back of my mind for a couple of years. Luckily, I now have the opportunity to dig deeper into it.

Here is some data on gross returns, defined as (total value realized – cost of cultivation) divided by cost of cultivation.

Gross Returns%
Cereals
Wheat 4%
Paddy -7%
Maize -32%
Bajra -43%
Jowar -48%
Ragi -50%
Veg
Onion -irrigated 148%
Tomato 101%
Beans 81%
Brinjal 78%
Onion – dryland 63%
Okra 60%
Bhindi 52%
Fruit
Mango 360%
Chiku/ Sapota 194%
Lichi 115%
Guava 95%
Grape 53%

 

[Data from “Can Horticulture be a success story for India?” by Dr. Surabhi Mittal of ICRIER.]

As you can see, farmers barely break even on wheat/rice.  In contrast, fruits and vegetables give attractive returns.  Of course, here we are ignoring the fact that for fruits, you have to wait multiple years before trees are mature enough to fruit. And, we have ignored non-food crops in this comparison. But still these are very stark differences in returns.

This data makes you wonder why anyone would bother growing wheat or rice.

Yet, government data shows that roughly 70% of cultivation is for cereals.

It would be silly of us to assume that farmers are completely ignorant of the substantial difference in returns.  They may not have done the detailed studies and calculations done by Dr. Mittal, but they would know the ballpark difference in returns. So why not shift to more lucrative crops?

It turns out that there are many  reasons for lower cultivation of fruits and vegetables,  including higher production risk (pest attacks and sensitivity to adverse climate), high price volatility, as well as the  lack of proper storage and transport facilities required for perishable crops.  I also wonder how much of the relative risk perception is affected by the minimum support prices offered by the government for grains. We will explore these reasons in future blogs.

To get back to our original topic of economic viability of farming, the answer seems to be disappointing.

Given the low or negative returns from what is actually grown, (mostly cereals), is it any wonder that the state of farming and farmers in India is what it is today?

  • Richa Govil

(Richa shares her thoughts on rural businesses at ‘Stirring the Pyramid’)

July 2, 2012 at 3:56 am Leave a comment

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