India: Roles and Challenges of Small Holder Agriculture

1. India: Roles and Challenges of Small Holder Agriculture S.Mahendra Dev Director and Vice Chancellor, IGIDR, Mumbai, India

2. Contents of the presentation • Introduction and background • Role of small holding agriculture for food security and livelihoods • Small holders and livelihoods • Issues and challenges for small holders • Opportunities for small holding agriculture --Technological innovations --institutional innovations • Policies to support small holders • Lessons from Indian experience

3. Introduction and background onIndian Agriculture • India ‘s population is 1.21 billion in 2011. 67% are rural. Majority are in agriculture. • Importance of agriculture in Indian economy. Although it contributes only 15% of GDP, the share of workers is about 55%. • Marginal and small farmers dominate • Major crops are rice, wheat, maize, coarse cereals, groundnut, cotton, sugarcane, fruits and vegetables • 60% of cultivated area is rainfed as only 40% of area is under irrigation. • Rural poverty is 41%in 2004-05. • Agriculture is a ‘State Subject’. In other words, the policies of provinces are also important

4. Performance of Agriculture • Growth performance in agriculture%) 1950-1 to 1964-5: 2.51 (area gro. +yield gro) 1967-8 to 1980-1: 2.20 (yield gr. green revol) 1980-1 to 1990-1: 3.07 (spread of green rev) 1992-3 to 2004-5: 2.76 (reform period) 1997-8 to 2004-5: 1.60 (neglect of agri.) 2004-5 to 2010-1: 3.47 (revival of growth) • The policy, institutional and investment focus during green revolution time helped India achieve its food self sufficiency goals. • However, now different policies are needed to focus on small holdings, rainfed areas, women, lagging regions, rural non-farm for sustainable agricultural transformation

5. Agriculture GDP growth

6. Challenges in Agriculture including small farmers • Concerns and challenges in Agriculture --Green Revolution technology mainly benefited the high potential and irrigated areas. They have less impact on dry land and rainfed areas. Also, yield growth plateaued in the irrigated areas. Technology fatigue. ---With urbanization and income growth, consumption patterns have shifted from cereals to non-cereal food (pulses, edible oils, fruits, vegetables, dairy and other livestock, fisheries) -- Supply of these commodities are in short supply compared to demand. As a result food inflation increased in recent years --Deceleration in growth from 3.5% during 1981-97 to 2% during 1997-2005. Decline in yield growth.

7. Challenges in Indian agriculture --This led to rising rural distress and also farmers’ suicides. -- Land and water problems, vulnerability to world commodity prices, ----Disparities in growth across regions and crops: growth rate declined more in rainfed areas. • Long term factors: Steeper decline in per capita land availability. Shrinking of farm size • Slow reduction in share of employment (still 55%) • Main problem is low land and labour productivity in agriculture. Gap between agri. and non-agri. is widening. • We should blame non-agriculture (industry and services) for not absorbing workers from agriculture.

8. Sources of growth in agriculture • What are the reasons for slow growth in agri. during mid-1990s to mid-2000s • Steering Group for 11th Plan has estimated sources of growth • Sources of growth: Five factors: (a) Public invest. (b) private invest. (c) Technology; (d) diversification (e) fertilizer • There has been slowdown in all these factors • Terms of trade also declined • Higher growth in the post-reform period only in the case of agricultural credit

9. Decline in growth (%)

10. Some Dynamism in Recent Years • 4% growth in agri. During 2004-08. Record foodgrain production during 2008-09 (241 m.t.). Exports in cotton, rice and sugar till 2008. • Revolution in cotton. Cotton prod. doubled in six years. Some positive signs on bio technology (BT cotton). Success in hybrid maize. • Some increase in high value agriculture • Some rainfed regions showing high growth in agri: Bihar. Gujarat showed 9% growth in agri.2001-09 • Comfortable buffer stocks; 60 million tonnes • Terms of trade in agri. improved

11. Three Goals of Agricultural Development • 1.Achieve 4% growth in agriculture and raise incomes. Increasing productivity (land, labor), total factor productivity, diversification to high value agri. and rural non-farm by maintaining food security. • 2.Second goal is sharing growth (equity): focus on small and marginal farmers, lagging regions, women etc. Share of women is increasing in agri. On lagging regions, focus on Eastern India and other rainfed areas. • 3. Third is to maintain sustainability of agriculture

12. Role of Small Farmers • Indian agri. is the home of small farmers (80%). • Therefore, the future of sustainable agriculture growth, food security and livelihoods in India depends on the performance of small and marginal farmers • Marginal (0.01 to 1.00 ha); small (1.01 to 2.00), semi-medium (2.0 to 4.00),medium (4 to 10), large (above 10) • Agricultural Census data shows that there were about 121 million agricultural holdings in India in 2000-01. Around 99 million were small and marginal farmers. • Average size has declined from 2.3 ha. In 1970-71 to 1.37 ha. In 2000-01. Average size of marginal 0.24 ha • Small and marginal farmers account for more than 80% of total farm hhs. But their share in area is around 44%.

15. Role of Small Holders • Access to irrigation: irrigation for small holdings 51% compared to 31% for large farmers • Access to fertilizers, area under HYV and cropping intensity: It is inversely related to farm size. • Cropping patterns: Do small and marginal farmers grow high value crops? They allocate large proportion of land to high value crops like fruits and vegetables and also to rice and wheat than other farmers. Thus they contribute to food security and diversification. But less on pulses and oilseeds • Farm size, output and productivity: Productivity is inversely related to farm size. Small holdings continue to produce more in value terms per hectare than medium and large farmers

18. Small holders and livelihoods • Around 98 million out of 120 million farm holdings are small and marginal farmers. Therefore, their performance is crucial for livelihoods. • It is true that small holders have higher productivity than large holders. • But it is sustainable because consumption expenditure of small and marginal farmers exceeds their estimated income from agri+ non-agri by a substantial margins and the deficits (dis-savings) have to be plugged by borrowings. • According to 2003 NSS data, -Marginal farmers monthly consumption Rs.2482 and monthly incomeRs.1659 -Large farmers: consumption Rs.6418 income Rs.9667

20. Issues and Challenges for Small farmers • The 11th Five Year Plan says “ The agricultural strategy must focus on the 85% of farmers who are small & marginal, increasingly female, and who find it difficult to access inputs, credit and extension or to market their output”. • “While some of these farmers may ultimately exit from farming, the overwhelming majority will continue to remain in the sector and the objective of inclusiveness requires that their needs are attended to” • Inherent disadvantages faced by the small farmers would be larger with increasing market integration and globalization.

21. Issues and Challenges for Small Holders • Some of the general issues that confront small holders are: imperfect markets for inputs/products leading to smaller value realizations, • absence of access to credit markets or imperfect credit markets leading to sub-optimal investment decisions or input applications; poor human resource base; smaller access to extension services and technology • Poor access to ‘public goods’ such as public irrigation, command area development, electricity grids. • Key issues and challenges are the following • Role of women

22. Challenges of Small Holders • Social groups: Scheduled Castes and Scheduled Tribes • Land issues: land and tenancy security • Low level of formal education and skills • Credit and indebtedness • Globalization challenges: Volatility in international prices; challenges of integration of value chains, super markets. • Impact of climate change • Water problems • Diversification challenges • Risk and vulnerability

23. Opportunities for Small holding agriculture • Research and extension • Technological innovations --zero tillage --Public sector led improved technologies --Nutrient management --Bio-technology --Information technology • Institutional Innovations --land and water management: institutions like water user associations for water management of canal irrigation

24. Institutional Innovations • Women’s collectives: Women’s cooperatives, producer women’s groups and other forms of group efforts (e.g. Deccan Development Society in Andhra Pradesh). • Gujarat put in place institutional environment for development of agriculture (e.g. KrishiMohatsav). This Mohatsavaserves as an institutional platform at the village level and proved to be an important support for farmers. • Similarly Andhra Pradesh: The Community Managed Sustainable Agriculture (CMSA) programme. It addresses the major causes of agricultural distress and help farmers in adopting sustainable agricultural practices. It covers 2.7 million acres and benefit 1.05 million farmers

25. Institutional Innovations • Institutions for Marketing of Small holders --There are several models: Contract farming, self help group model, co-operative model and producer co-operatives --One of the most successful producer organization is dairy cooperative with 12.3 million members. --Contract farming is also successful in some cases --Some examples of group approach are: ApniMandi in Punjab and RytuBazarin Andhra Pradesh

26. Small farmers, value chains and Supermarkets • Wholesale, processing and retail segments are growing in India. • In India, super market revolution is also catching up. Average annual growth rate of top 10 retailers during 2000-06 in India was 50%. • Linking small farmers to super markets. Linking farmers with input suppliers, logistic suppliers, agro-processors and retailers • In those cases where small producers have been able to integrate into the supplying chains, supermarkets have offered enhanced security and considerably higher margins than the traditional clients, such as wholesales and groceries

27. Challengeing the conventional view on value chains: IFPRI study • 1. Conventional view: Food supply chains are dominated by long chain of many hands. Findings: supply chains can be short • 2. Earlier view: Staple’s value chains are dominated by small traditional processors and retails. Findings: Things are changing. Role of large cold storages, modernizing rice mills, small but rapidly increasing super markets in retail chain • 3. Earlier view: Little change in technology since green revolution. Findings: there are substantial changes in technological and factor markets • 4. earlier view: little role for quality. Now the role of quality is important

28. Challenging the Conventional View • 5. conventional view: traditional supply chainssay high rates of wastage and transportation costs. Findings: Both are only 10% of final consumer price • 6. Conventional view: Govts. Play a major direct role in value chains. Findings: It is true in India in the case of foodgrains but not in non-cereals • 7. Conventional view: food security debatemainly on farm sector. Findings: traders and retailers play big role. • 8. Earlier view: Retail margins are increasing over time and cause for inflation. Findings: Retail margins have not increased

29. Institutions • New institutional approaches are needed to help the farmers e.g. formation of producer groups. • One of the important policy issue is how to link small farmers to high value agriculture. • There has been diversification of Indian agriculture away from foodgrains to pulses, edible oils and to high value products like vegetables, fruits, milk, eggs, fish and meat products. • Although foodgrains are important, future sources of growth and incomes are going to come from high value agriculture. • Being perishable, it needs fast moving infrastructure and institutions.

30. Targeted Growth Rates for 11th Plan

31. Small Farmers and Information • Indian private companies and NGOs are global leaders in providing information to farmers, as a spinoff from India’s meteoric rise as a world leader in ICTs. • E-Choupal (Internet Kiosks) has expanded access to internet in rural areas. Up to 6,400 internet kiosks were set up between 2000 and 2007 by ITC Limited, one of the largest agricultural exporters. • It reaches about 4 million farmers growing a range of crops - soybean, coffee, wheat, rice, pulses or shrimp - in over 40,000 villages. • They get free information in their language about local and global market prices, weather forecasts, farming practices and crop insurance. • It serves as a purchase centre, cutting marketing costs and allowing farmers to obtain a bigger farm price.

32. Small Farmers and Information • The M. S. Swaminathan Research Foundation established Knowledge Centers in Pondicherry. • The women self-help groups use the centers’ computers to manage their business accounts and coordinate their activities, using video links with the other villages. • Mobile phone coverage in India is expanding at breakneck speed. • By linking communication technologies to market exchanges in commercial centers, even small farmers can overcome the enormous informational asymmetries that limit their bargaining power in traditional supply chains. • The revolution in mobile phones is helping the small farmers to get information about crop prices and input prices and other related information on agriculture.

33. Special Programmes for Small and Farmers • National Commission for Enterprises in the Unorganized sector (NCEUS) has advocated a special programme for marginal and small farmers. • Objectives are: (1) to improve income prospects; (2) to improve the skill base; (3) provide income earning opportunities in the non-farm sector; (4) to ensure the needs of small farmers and adequately reflected in other agricultural and development programmes for livelihood security • Principal activities proposed under the special programme are (a) Promotion of group approach to small farmers: It proposes setting up of Marginal and Small farmers’ development society (MSFDS) for the promotion, capacity building and coordination of development of

34. Special programme for small farmers Marginal and small farmrers’ groupsI (b) Enabling gender access to institutional credit (c) Training and capacity building (d) Support for strengthening and creation of non-farm activities (e) Gender focused activities (f) Planning for development of marginal and small farmers • It also advocates implementation mechanism and financial resources, M&E • Basically, the commission advocates that there is a need to special focus on small and marginal farmers for growth and equity in Indian agriculture

35. Rural non-farm sector • Poverty can not be removed with 55% of workers in agri. Need to promote rural non-farm sector. • India currently produces about 50 million tonnes of fruits and 90 million tonnes of vegetables. Only 2% of these fruits and vegetables are processed as against 23% in China, 78% in Phillippines, 83% in Malaysia. • Half of those engaged in agriculture are still illiterate and just 5% have completed higher secondary educ. • Even in 2004-05, around 60% of rural male workers and 85% of rural female workers are either illiterate or have been educated upto primary level. • In other words, education and skills are constraints • India can learn from China on rural transformation.

36. India and China: Manufacturing • India leap frogged from agriculture to services without focusing on manufacturing sector. • The share of employment in manufacturing in Malaysia is 50%, in Korea 62%, in China 31%. On the other hand, the share of employment in manufacturing in India is only 12% • Diversification towards rural non-form sector in China is one of the important factors responsible for rural poverty reduction (poverty 3%). This was partly due to agricultural productivity.

37. Lessons from Indian Experience • Green Revolution and Small Farms • Food Grain Management • Dairy Cooperatives • Water management in Gujarat • Self Help groups and group approach • Rights based approach • Learning from others: India can also learn from countries like China, Brazil. India can learn from China on rural transformation and infrastructure. • It can also learn from Brazil on agricultual research (like EMBRAPA) and zero hunger program

38. Conclusions This paper examines the role and challenges of small holding agriculture. India has done well in attainting food grains self sufficiency since the days of green revolution. Difference between green revolution period and the expected ‘second green revolution’ is that (a) globalization challenges, volatility in prices (b) shrinking farm size (c) rain fed farming challenges (d) environmental stress and climate change Small farmers are certainly going to remain in India the next decade or more. Way ahead: Main goals are (a) raising agri. growth productivity rise, move towards high value agri. and rural non-farm and maintain food security (b) shared growth (small farmers, lagging regions, women etc. (c) sustainable growth

39. Conclusions • There are six deficits in agriculture. These are: (a) investment, credit, infrastructure (b) research, extension (technology) (c) Market (d) diversification (e) institutions (f) education/skill • Food security has been an overriding priority in India’ since the 1960s. The focus paid off with attaining food grain security and poverty reduction. • The strategy concentrated on rice and wheat in irrigated areas. • The future growth will need to rely on a dual strategy of diversification into non-cereal high value crops and rainfed areas with focus on small farms. • Basically investment and institution strategies have to focus on small and marginal farmers, women farmers, rainfed areas, environmental stress, rural non-farm sector for sustainable agri-transformation.

40. Conclusions • Small farmers have difficulties to access inputs, credit and extension or to market their output. • Investment in infrastructure like roads, irrigation, communications etc. can benefit small farmers • Many institutional innovations are coming up to link small farmers to high value agriculture and help increasing their productivity and marketing (contracting farming, dairy sector, cooperative marketing). • ICT revolution in India is also helping small farmers with information, input supplies and marketing • Risk mitigation strategies are needed for small farms. • There is a recognition now that small farmers need a special focus in order to have growth and equity in agriculture and food security.

41. Conclusion • Elephant (India) can learn from Dragon (China) on rural transformation particularly rural industrialization. • Small farmers need agri. Diversification and income from rural non-farm sector. • Need for massive increase in investments for agriculture and rural infrastructure by simultaneously improving the institutions for better delivery systems • Govt. is thinking of big push to health and education in 12th Plan • Such a big push is needed for agriculture sector for food security, livelihoods, sustainability and transformation.

42. THANK YOU