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Revitalizing Agriculture and Rural Development to Sustain Growth and Reduce Poverty

Dina Umali-DeiningerLead Agriculture Economist, World Bank

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Most of South Asia’s poor are in rural areas

Where are South Asia's Poor?

73%

27% 23%

77% 84%95%85%

95%

16%15% 5%5%

0%

20%

40%

60%

80%

100%

Bangl

ades

h 200

5

India

2004

/05

Nepal

2003

/04

Pakist

an 20

04/05

Sri Lan

ka 20

02

Bhutan

2000

Rural Poor (%) Urban Poor (%)

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Most of rural people and poor depend on agriculture

Agriculture in the Economy

80%

52%58%

14%

81%

40%34%

60%

93%

0%

20%

40%

60%

80%

100%

Agriculture as % of GDP 2003/06

Share of Labor Force in Agriculture 2000-03

0.0 50.0 100.0 150.0

ChhJhaBih

MPOrisRaj

TNMah

UP

GujKarAP

All India

AssUttnWB

HarKerPun

Labor Productivity, Rs 000/worker

Non Ag

Ag

India: Low labor productivity contributes to rural povertyAgriculture a major employer in South

Asia, but contribution to economy is shrinking

4

New opportunities: A “new agriculture” with dynamic demand

0

200

400

600

800

1000

1200

1400

1600

1800

Meat & MeatProducts

Fruit &Vegetables

Coffee & Tea Fish & FishProducts

Ex

po

rts

, $

mil

lio

n (

20

00

pri

ce

s)

19902006

Rising consumer demand for highvalue crops and animal products

Rising high value crops and animal products in exports

0%

5%

10%

15%

20%

25%

30%

35%

Ric e W heatproduc ts

V eg &Fru its Meat,Milk,Fis h,

Eggs

Sh

are

in H

ou

se

ho

ld E

xp

en

ditu

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,%

1980/81 2002

Sri Lanka India

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Challenges in Agriculture in South Asia

• Slow down in agricultural productivity growth– < 3% per year, in context high rural poverty rate– Climate change: droughts, cyclones, floods– Leading to rising rural-urban & regional income disparities

• Increasing land and water scarcity– Land degradation: erosion, over-extraction of groundwater, waterlogging

• New demands on agriculture: – strict sanitary and phyto-sanitary standards

• Health epidemics linked to agriculture– Avian flu, mad-cow disease

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India: Slowdown in yield growth and large yield gaps in many states

With large gaps between potential and actual

yields (2003-05)

• Wheat: 6% (Punjab) to 84% (M.P.)

• Rice: Over 100% in Bihar and UP

• Maize: 7% (Gujarat) to 300% (Assam)

• Soybean: 7% (Rajasthan) to 185% (Karnataka)

• Sugarcane: 16% (A.P.) to 167% (M.P.)

Technology Index

70.0

90.0

110.0

130.0

150.0

170.0

190.0

1980

-81

1982

-83

1984

-85

1986

-87

1988

-89

1990

-91

1992

-93

1994

-95

1996

-97

1998

-99

2000

-01

2002

-03

Slow down in progress in yields for 10 major crops

Need invest more in research Need invest more in extension

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Strategic priorities for Agriculture

INCLUSIVE GROWTH & POVERTY

REDUCTION

Improving agric productivity and competitiveness

Sustainable Natural Resource Management

Rural Livelihood

Development

Ag Technology Water use

Enabling policy environment

Markets

LandWaterSocial empowerment

Skills development

Income generation

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A. Improving agricultural productivity & competitiveness

1. Rationalizing role of government Promoting more effective public expenditures

Towards productivity enhancing investments: research, extension, irrigation, roads, electricity, markets, education

Improving policy and regulatory environment Promoting PPP

0

1

2

3

4

5

6

7

1975-79 1980-84 1985-89 1990-94 1995-99 2000-02

Perc

ent of A

g. G

DP

Public Expenditures India

Subsidies 75%

Public investments 25%

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A. Improving agricultural productivity & competitiveness

2. Technology, innovation & markets Effective agricultural research and extension systems

increase agricultural productivity and enable diversification to high value products (F&V, livestock, fisheries) by small farmers

Link farmers to market, Promote value addition and value chain development Invest in rural infrastructure: roads, electrification, markets Foster producer associations, agribusiness development services

3. Water/Irrigation management Better irrigation service delivery

Farmer participation in management thru WUAs, pricing, water regulatory authority

Reduce losses better O&M of irrigation system, technology—drip irrigation

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B.Sustainable Natural Resource Use

Watershed Management Participatory and holistic approach to soil

and water conservation at watershed level

LandReforming of land ownership and tenancy

policiesImproving land administration systems

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C. Rural Livelihood Development

Promote growth of Rural Non-farm economyPromote employment and investment opportunities

improve rural investment climate, public-private partnerships

Develop skills of rural people for employment in RNF Education, vocational training

Help labor out of agriculture: requires massive investment in human capital

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Challenges to making this happen

• Government failures– Lack of financial resources– Inadequate capacity to implement programs

effectively– Political economy: vested interests against reforms

• Market failures: high costs of working with small/marginal farmers

• Lack of awareness/knowledge of new approaches

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Conclusion• Agricultural growth is critical to

promoting rural growth and to reducing poverty in rural areas

• Making this a reality requires commitment of all stakeholders—government, farmers, private sector, civil society