India Accelerating Agricultural Growth August 31 2007 New

India Accelerating Agricultural Growth August 31, 2007 New Delhi 1

Agricultural Sector: Important for economic growth and reducing poverty p p 70% of population, 75% of poor are in rural areas Agriculture: main source of livelihood for 60% of population Contributes about 20% to GDP Essential role in national food security 2

Key Issues and Challenges p Slow down in agricultural GDP growth n n n p Low agricultural productivity n p From 3. 5% in mid-80 s to 90 s to less than 2% in mid-90 s to 2000 s, Poorest states (MP, Orissa, Rajathan), growth less than 1% Lead to widening rural-urban income gaps Crop yields are low relative to other countries, disparity in yields across states Increasing natural resource degradation n n Soil erosion, salinity, alkalinity, declining ground water levels Partly due to fertilizer, power and irrigation policies 3

Key Issues and Challenges p Subsidies crowding out productivity enhancing investments n n E. g. irrigation, agric research, extension, rural roads, markets, electrification Subsidies increased from 3% (70 s) to 7% (2000 s) of Ag GDP, public investments decreased from 3. 4% to 1. 9% of Ag GDP. Source: Chand Kumar 2004 4

GOI 11 th Plan Priorities & Programs p GOI priorities: n n n Accelerate expansion of irrigated area and improve water management in rainfed areas; Bridge the knowledge gap through effective research and extension; Foster diversification to higher value horticulture, fisheries, and animal husbandry; Increase foodgrain productivity for food security; Facilitate access to credit at affordable rates; and Improve farmer access to markets. 5

GOI 11 th Plan Priorities & Programs p Water Resources Mgt and Irrigation n n Accelerated Irrigation Benefits Program to complete major/medium irrigation schemes Challenges for state govts: p p p Weak institutional framework for efficient, sustainable and equitable allocation and use of water Inadequate expenditures for O&M Limited cost recovery encourages wasteful use of water, causing waterlogging/salinity problems Free/highly subsidized power-contributing to declining GW levels Rainfed areas (60% of cropped area) p p National Rainfed Areas Authority to develop action plan Challenges: consistency and coordination of multiple programs, weak implementation effectiveness 6

GOI 11 th Plan Priorities & Programs p Bridging Knowledge Gap n n n p GOI increasing resources for strategic and location specific research GOI and states scaling up ATMA approach to improve extension effectiveness Additional central assistance (Rs 25, 000 crores) for agriculture development based on state district agricultural development plans Diversification of Production n n to improve farmer income opportunities GOI National Horticulture Mission, Bharat Nirman rural infrastructure development program (irrigation, rural roads, rural electrification), agricultural market development 7

GOI 11 th Plan Priorities & Programs p Foodgrain vs high value agricultural production? n Rising incomes driving demand for high value crops n 11 th Plan: to achieve 4% ag growth target, need to increase foodgrain yields by 2 -3% per year to ensure food security and compensate for possible shift to high value production n Measures to raise agricultural productivity for both foodgrains and high value crops are therefore critical 8

GOI 11 th Plan Priorities & Programs p Improving rural investment climate n n Storage, movement credit controls removed Pending reforms: institutional and policy framework for land p p p Liberalize land leasing Update land records and modernize land administration Fostering Rural Non-farm sector growth 9

World Bank: Lending Assistance in Agricultural Sector p Improving agriculture productivity and competitiveness n n n p Improving natural resource management n p Water resource management, irrigation system rehabilitation and modernization, strengthening institutions (WUAs) and regulatory framework (allocation and mgt) Strengthening agricultural research and extension system Improving market infrastructure and services Support for improved watershed management, participatory forest management, Fostering institutions of the poor n Build institutions for the poor (SHGs), facilitate access to credit and links to markets 10

World Bank Assistance to Agricultural Sector p Current portfolio: 21 projects, $3. 4 billion p Analytical and Advisory Activities: recent studies n n n Re-energizing the Agricultural Sector to Sustain Growth and Reduce Poverty Land Policies for Growth and Poverty Reduction Unlocking Opportunities for Forest Dependent People Taking Agriculture to the Market India’s Water Economy: Bracing for a Turbulent Future State agricultural sector reviews 11