Revitalizing Agriculture in Andhra Pradesh: Role of High-Value Commodities P. Parthasarathy Rao ICRISAT IFPRI-ICRISAT Collaborative Project July, 2005

Presentation Andhra Pradesh: a snapshot Agriculture sector: a silent crisis Mapping of High-Value Commodities (HVCs) Policy interventions Conclusions

Andhra Pradesh: A Snapshot

Andhra Pradesh, India

Andhra Pradesh: fast facts Population: 76 million Rural population: 63% Agriculture GDP: 25% 3 agroclimates: dry, semi-arid, and coastal Irrigated area: 45% Front-runner in macro-economic reforms World Bank: “Andhra Pradesh is a leader in economic reforms but not yet in economic growth”

Andhra Pradesh is catching up with other developed states

Agriculture Sector: A Silent Crisis

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 Chandra Babu Naidu’s Government voted out of power in 2004

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

Diets trending away from basic cereals

Mapping HVCs

Share of high value commodities: Andhra Pradesh to All India

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)

Factors determining diversification : All HVCs, Vegetables and Poultry meat & eggs: Tobit model results,

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

Price spread: selected markets, Andhra Pradesh, 2004 Vegetables Fruits

Agri-Export Zones (AEZ) in Andhra Pradesh

Share of food processing industry by type: Andhra Pradesh

Contract farming: a new frontier

Distribution of priority sector credit Andhra Pradesh Crop sector Priority sector

Distribution of credit by diversification zones, Andhra Pradesh,

Policy Interventions

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