50641911 Diversification 1

7/28/2019 50641911 Diversification 1

1/39

P. Parthasarathy Rao

Dharmendra Kar

Agricultural Diversification in

India: Regional Analysis

Workshop cum Training on Agriculture and Rural Indebtedness

Jointly sponsored by the Project for economic Education, Press Institute of India and

the Indian Liberal GroupOct 30, 2005 - New Delhi


2/39

Diversification of agriculture:Schematic

1

High diversification

low percapita income.

SUBSISTENCE agriculture; low and erratic

rainfall, poor infrastructure, low irrigation,

low population density. RISK MITIGATION

Strategy (Rajasthan, MP)

4

High diversification- high percapita income:

Commercial oriented diversification:

need to sustain diversification through

technology, vertical integration and

value addition (Maharashtra, AP,

Karnataka)2

Low diversification - low per capita

income.

Agro-climatically better endowed region,

Lack of infrastructure, low irrigation, pooradoption of improved technology

Need to promote diversification through

technology, and infrastructure development.

(Orissa and Bihar)

3

Low diversification - high per

capita income.

SPECIALISED AGRICULTURE:

high level irrigation, inputs,

mechanization, low income risk

no concern for sustainability, labor

problems, low relative profitability of

substitute enterprises (Punjab and

Haryana)

Resource endowments

D

iv

e

r

s

i

f

i

c

at

i

o

n


3/39

Facets of Agricultural Diversification

Shift from farm to non-farm activities

Shift to high value commodities/enterprises

Use of resources in diverse andcomplementary activities

To meet household food security

Minimizing production and marketing risks

Generating additional income

Macro level

Micro level


4/39

Definition of Diversification for this study

Spatial sub-division of districts based on

diversification towards HVCs

Nature and speed of diversification

Role of urbanization determiningnature and speedof diversification

Andhra Pradesh: Case study

Implications for policy and regional planning

Diversification towards High Value Commodities (HVCs)

HVCs for this study include: Fruits, Vegetables, Milk and

Meat

Objectives:


5/39

Demand side factors

Population growth

Income growth

Urbanization

Change in taste and preferences

Export potential

Supply side factors

Technology

Infrastructure

Market linkages

Resource endowments

Socio-economic factors

Determinants of diversification


6/39

Agricultural diversification (High Value Commodities)


7/39

Relative importance by level of diversification: 1998

20.954.124.9Share in urban population (%)

20.060.319.7Share in population (%)

28.157.914.0Share in VOP (%)

35.653.011.3Share in NCA (%)

27.854.018.1No. of districts (%)

8616756No. of Districts

LowMediumHigh

Level of DiversificationSelected indicators


8/39

Selected indicators by level of diversification: 1998

56810991370Value of HVC per district (Rs million)

0.40.50.7Road density (Km/100 sq km geog area)

21.622.027.1Market density (No./10,000 sq km geog)

8.89.64.4Tractor density (per 000 ha)62.488.498.1Fertilizer (kg/ha)

26.743.827.7Area under HYV (%)

95211951660Normal rainfall (mm)

35.740.729.1Irrigated (%)

60.680.388.3Small land holders (%)

2.61.50.9Land size (ha)

25.429.441.9Literate rural female (%)

26.022.331.5Urban population (%)

227370426Population density

LowMediumHigh

Level of diversificationIndicators


9/39

Nature of diversification: 1998

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

High Medium Low

Share

(%)

Crops Fr&veg Total livestock High value commodities


10/39

Diversification and

Urbanisation


11/39

Diversification and urbanisation


12/39

Relative importance of urban and other

district groups: 1998

37.221.741.2Share in urban population (%)

49.730.220.1Share in population (%)

52.533.014.6Share in VOP (%)

58.331.410.3Share in NCA (%)

60.529.410.0No. of districts (%)

1879131No. of Districts

OthersUrban

surrounded

Urban


13/39

Selected indicators of urban and other districts: 1998

79411481813Value of HVC per district (Rs million)

0.40.60.7Road density (Km/100 sq km geog area)

18.624.930.0Market density (No./10,000 sq km geog)

8.38.711.5Tractor density (per 000 ha)

73.283.1110.7Fertilizer (kg/ha)

36.437.737.5Area under HYV (%)

122911621253Normal rainfall (mm)

36.240.046.2Irrigated (%)

75.075.880.9Small land holders (%)

1.81.61.4Land size (ha)

27.430.745.4Literate rural female (%)

20.419.655.9Urban population (%)

278.6350.3725Population density

OthersUrban

surroundedUrban

Level of diversification

Indicators


14/39

Nature of diversification by district groups: 1998

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

Urban Urban surrounding Others

Share

(%)

Crops Fr&veg Total livestock High value commodities


15/39

Sources of diversification by district groups:

1982-98 (1982 prices)

0.00

10.00

20.00

30.00

40.00

50.00

60.00

Urban Urban surrounding Others

Share(%)

Fr&veg Total livestock High value commodities


16/39

Nature of diversification in urban surrounded district

groups and highway passes

No. of National Highway passes

Zero(0.39)

One(0.57)

Two hi hwa s

and above(0.82)

Items

1982 1998 1982 1998 1982 1998

No. of districts 25 45 23

Share in agricultural value (%)

Fruits 4.42 4.93 10.30 11.24 6.92 9.91Vegetables 6.93 6.06 8.68 7.40 5.66 6.31

Bovine milk 13.35 14.81 11.94 14.14 14.28 16.94

Meat 0.87 1.19 1.34 1.96 1.59 1.54Poultry, pig meat and eggs 1.19 1.45 1.60 2.86 2.31 3.07

Total HVC's 26.8 28.4 33.9 37.6 30.8 37.8


17/39

Spatial Analysis: HVCs


18/39

Area under fruits

(000s ha)

(% NCA)


19/39

Area under vegetables

(000s ha) (% NCA)

S f i i 1998


20/39

Share of livestock value to total agricultural value: 1998

Milk Meat


21/39

Concluding remarksHVCs account for > 50 % of agricultural production in 56

districts and < 25 % in 86 districts

Milk and poultry meat had the fastest growth rate among HVCs

Urbanisation has a significant influence on diversificationtowards HVCs , particularly poultry meat and fruits

Other factors:

road density, small farms, improved technology, fodderavailability and rainfall positively influenced diversification

Tractor density, HYV area and irrigation negatively influenced

diversification


22/39

Andhra Pradesh: Case study


23/39

Andhra Pradesh farming sector:

Facets of the crisis Yield stagnation in traditional crops

Food self-sufficiency achieved

Accounts for 35% of riceprocurement in India

Relentless pressure on naturalresources

Declining water tables

Unsustainable rice cropping

Excessive use of inputs

Fertilizers, pesticides, water,electricity

Newer pressures from tradeliberalization

Prices, quality, sanitary and

phytosanitary (SPS) measures

Rising rural unemployment

Decline in rural per capita incomes

Inadequate access to formal credit

Poor rural and marketinginfrastructure

Profound disquiet in rural areas

AP has dubious distinction ofhighest farmer suicides

High levels of out-migration tourban areas

Highest incidence of child labor


24/39

Annual compound growth rates of agriculture sub-sectors and

GDP, Andhra Pradesh (1993-94 prices)


25/39

NSS Round Expenditure SharesFood item

1983 1987-88 1993-94 1999-00

Total cereals 49.8 41.8 41.2 40.7

Milk & milk products 7.5 8.4 8.9 10.0

Meat, egg & fish 7.6 7.3 7.6 7.5

Vegetable & fruits 8.4 10.9 11.2 11.6

Food total 100 100 100 100

Diets trending away from basic cereals


26/39


27/39

HVCs based diversification zones

High Medium Low TotalCommodities

(Zone 1) (Zone 2) (Zone 3) (All zones)

(% to total value)

Paddy 16.0 38.2 25.0 27.8Commercial crops

123.5 16.8 33.5 24.8

Total crops 49.4 62.5 73.4 63.6

Fruits 16.0 14.7 3.5 10.7

Vegetables 2.9 1.2 2.2 2.0

Total livestock 31.6 21.6 20.9 23.7

High value commodities 50.6 37.5 26.6 36.4

1: Commercial crops include oilseeds, sugarcane, cotton, chillies, turmeric and tobacco.

Composition of the value of agricultural production by level of diversification;

Andhra Pradesh, 1999-2001 (1980-82 prices)


28/39

Districtwise HVC share in total value: Andhra Pradesh,

Distribution by HVC share

Change in share, 1982 to 2001


29/39

Indicators High

(Zone 1)

Medium

(Zone 2)

Low

(Zone 3)

Population density (No./KM2) 319 291 236

Urban population (%) 37 22 22

No. of small land holders (%) 82 84 78

Irrigated area (% to GCA) 34 59 36

Feed availability (t/livestock unit) 1.3 2.0 1.6

Rainfall (mm) 793 1031 847

Selected indicators by level of diversification; Andhra Pradesh, 2001.


30/39

Income from HVCs - Kurnool, AP: 2002-03

(household survey)

Rainfed

Irrigated


31/39

Employment effects of HVCs, AP, 2002-03household survey (average)


32/39

HVCs: Challenging policy terrain

Marketing

Domestic

Export

Processing

Contract farming

Case study: Gherkins

Credit

Infrastructure


33/39

Growth rateItem Share in totalenterprises

1999-001991-92 to

1999-00

Manufacture of dairy products 1.8 4.91*

Canning and preservation of fruits 1.0 0.58

Processing, canning and preserving of

fish, crustaceans and similar foods0.6 3.91

Grain milling 66.7 1.43*

Manufacture of bakery products 2.4 4.27*

Processing of edible nuts 8.4 5.1*

Source: Mahendra Dev and Chandrashekar Rao, 2005

Share of food processing industry by type: Andhra Pradesh


34/39

Company Crop Area (ha) District Covered

Sical, Godrej, Palmtech

Mark fed.

Oil palm 38000 East & West Godavari

Cadburys India Ltd Cocoa 8500 East & West Godavari

BHC Agro Vegetables 417 Chittoor

Global Green, CapricornFoods Ltd.,

Gherkins 3333 AEZ-Gherkins Districts

A.V.Thomas Co. Marigold 208 Ananthapur

Dabur India

Amla (Indian

Gooseberry)

417

Across State

Exim Foods Pvt. Ltd. Baby corn 208 Around Hyderabad

Venkateshwara Hatcheries Broiler birds 50-75 farms Around Hyderabad

Source. A.P Horticulture Department.

Contract farming: a new frontier


35/39

S.no Name of AEZ Districts coveredFruits /

Products

Total estimated

cost (crore Rs.)

1 AEZ Vijayawada Krishna Mangoes 18

2 AEZ Hyderabad Ranga Reddy,

Mahabubnagar and

Medak

Grapes and

Mangoes57

3 AEZ Gherkins Ranga Reddy,

Mahabubnagar, Medak,

Karimnagar, Warangal,

Nalgonda and

Ananthapur.

Gherkins

20

4 AEZ Chittoor Chittoor Mango pulp

and vegetables

11

5 AEZ Chillies Guntur Chillies

Source: A.P Horticulture Department.

Agri-Export Zones (AEZ) in Andhra Pradesh


36/39

Distribution of priority sector credit

Andhra Pradesh 2003-04

Crop sector

Priority sector


37/39

Distribution of credit by diversification zones,Andhra Pradesh, 2003-04


38/39

Pro-HVC policy interventions

Pricing water

Building efficient marketing networks

Implement Model Marketing Act

Dismantling government monopoly

Increasing investments in infrastructure

Roads, cold storage, bulk coolers

Foster improved linkages between

rural-urban markets

Emphasizing vertical integration thrucontract farming

Increase enforceability

Harness private sector innovations

in food processing and marketing

Adding value thru processing

Simplify procedures for setting up

food processing industries

Enhancing access to formal credit

Expand crop/rainfall insurance

schemes

Enabling public-private partnerships

Extension


39/39

Documents

50641911 Diversification 1