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 Group Oct 30, New Delhi

Diversification of agriculture:Schematic 1 High diversification –low per capita income. SUBSISTENCE agriculture; low and erratic rainfall, poor infrastructure, low irrigation, low population density. RISK MITIGATION Strategy (Rajasthan, MP) 4 High diversification- high per capita 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, poor adoption 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 DiversificationDiversification

Facets of Agricultural Diversification Shift from farm to non-farm activities Shift to high value commodities/enterprises Use of resources in diverse and complementary activities To meet household food security Minimizing production and marketing risks Generating additional income Macro level Micro level

Definition of Diversification for this study Spatial sub-division of districts based on diversification towards HVCs Nature and speed of diversification Role of urbanization determining nature and speed of 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:

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

Agricultural diversification (High Value Commodities)

Relative importance by level of diversification: Share in urban population (%) Share in population (%) Share in VOP (%) Share in NCA (%) No. of districts (%) No. of Districts LowMediumHigh Level of Diversification Selected indicators

Selected indicators by level of diversification: Value of HVC per district (Rs million) Road density (Km/100 sq km geog area) Market density (No./10,000 sq km geog) Tractor density (per 000 ha) Fertilizer (kg/ha) Area under HYV (%) Normal rainfall (mm) Irrigated (%) Small land holders (%) Land size (ha) Literate rural female (%) Urban population (%) Population density LowMediumHigh Level of diversification Indicators

Diversification and Urbanisation

Diversification and urbanisation

Relative importance of urban and other district groups: Share in urban population (%) Share in population (%) Share in VOP (%) Share in NCA (%) No. of districts (%) No. of Districts OthersUrban surrounded Urban

Selected indicators of urban and other districts: Value of HVC per district (Rs million) Road density (Km/100 sq km geog area) Market density (No./10,000 sq km geog) Tractor density (per 000 ha) Fertilizer (kg/ha) Area under HYV (%) Normal rainfall (mm) Irrigated (%) Small land holders (%) Land size (ha) Literate rural female (%) Urban population (%) Population density Others Urban surrounded Urban Level of diversification Indicators

Nature of diversification in urban surrounded district groups and highway passes

Spatial Analysis: HVCs

Area under fruits (000’s ha) (% NCA)

Area under vegetables (000’s ha) (% NCA)

Share of livestock value to total agricultural value: 1998 MilkMeat

Concluding remarks HVC’s 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 diversification towards HVCs, particularly poultry meat and fruits Other factors: road density, small farms, improved technology, fodder availability and rainfall positively influenced diversification Tractor density, HYV area and irrigation negatively influenced diversification

Andhra Pradesh: Case study

Andhra Pradesh farming sector: Facets of the crisis Yield stagnation in traditional crops –Food self-sufficiency achieved –Accounts for 35% of rice procurement in India Relentless pressure on natural resources –Declining water tables –Unsustainable rice cropping Excessive use of inputs –Fertilizers, pesticides, water, electricity Newer pressures from trade liberalization –Prices, quality, sanitary and phytosanitary (SPS) measures Rising rural unemployment Decline in rural per capita incomes Inadequate access to formal credit Poor rural and marketing infrastructure Profound disquiet in rural areas –AP has dubious distinction of highest farmer suicides –High levels of out-migration to urban areas –Highest incidence of child labor

Annual compound growth rates of agriculture sub-sectors and GDP, Andhra Pradesh ( prices)

Diets trending away from basic cereals

Composition of the value of agricultural production by level of diversification; Andhra Pradesh, ( prices)

Districtwise HVC share in total value: Andhra Pradesh, Distribution by HVC share Change in share, 1982 to 2001

Indicators High (Zone 1) Medium (Zone 2) Low (Zone 3) Population density (No./KM 2 ) Urban population (%)3722 No. of small land holders (%) Irrigated area (% to GCA) Feed availability (t/livestock unit) Rainfall (mm) Selected indicators by level of diversification; Andhra Pradesh, 2001.

Income from HVCs - Kurnool, AP: (household survey) Rainfed Irrigated

Employment effects of HVCs, AP, household survey (average)

HVCs: Challenging policy terrain Marketing –Domestic –Export Processing Contract farming –Case study: Gherkins Credit Infrastructure

Share of food processing industry by type: Andhra Pradesh

Contract farming: a new frontier

Agri-Export Zones (AEZ) in Andhra Pradesh

Distribution of priority sector credit Andhra Pradesh Crop sector Priority sector

Distribution of credit by diversification zones, Andhra Pradesh,

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 thru’ contract 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