She asks why farmers don’t grow fruits and veggies over cereals?
Archive for the ‘Agriculture’ Category
This is the title of my new paper. It look at the economics of the bill and the debates so far.
Comments/suggestions are always welcome..
Nice speech on the topic by Dr. K. C. Chakrabarty, Deputy Governor, Reserve Bank of India.
Issues of low agri productivity have been known for a long time. This one just helps know more and has some nice tables and graphs. Summary:
I feel that instead of lamenting that productivity has been low, we must look at the past to the Green Revolution in the 1960s to draw confidence that productivity can be improved. We need to find ways to surmount the existing constraints and step up productivity using finance as a tool. The Green Revolution paved the way for food security in India. No major technological breakthrough has emerged since then, and with the need for higher production growing, a second green revolution is inevitable. In fact, to borrow a term coined by Prof Swaminathan, we need an evergreen revolution. However, to cater to the food security and food safety net, India needs a higher production along with enhanced productivity in cereals, pulses, oilseeds, vegetables, poultry, meat, fish and milk.
This is a superb note from Cullen Hendrix of College of William & Mary.
There are two major reasons cited for food insecurity:
- Revisiting Malthusian ideas: food insecurity is because of high population growth and limited resources.
- Food sovereignty: The problem is international food markets. Countries should focus on national food sufficiency and not really bother about international trading.
He says both views are overblown:
This brief assesses the claims of these two groups. The focus should be to build international food markets:
Ashok Gulati who was earlier at IFPRI is one of the eminent agriculture economists and thinkers on the subject. He has just been made chief of Commission for Agricultural Costs and Prices, a position which could have been given earlier. May be we could have more reforms and action on agriculture front.
He gives a superb interview in Financial Express:
How do we deal with the agriculture crisis?
PM’s Economic Advisory Council was asked to review the proposed National Food Security Bill. Here is the Final Report and here are the Highlights of the report. It was released last week but I completed it only now.
NFSB has been proposed to address the huge health deficiency in the country.
This is the title of my new paper on the topic. Comments/Suggestions are invited.
The amount of rains in monsoon season is always a very important economic indicator every year. This year it will be all the more as we had a severe drought last year and had deficient food production which needs to be replenished. Inflation also will depend on monsoon. India also needs to push agriculture reforms and a better growth will lead to more investments. And then there are so many connections to monsoons in India – rural income/demand etc.
IMD has released its forecast (HT: India Industry Tracker Blog, a blog by my colleague on indian industry) for south-west monsoon (June-Sep) for 2010. IMD uses a two-stage forecasting strategy for long range forecasting of the south-west monsoon rainfall over the country as a whole. The first long range forecast is issued in April and the forecast update is issued in June.
The industry blog further explains how IMD categorises rainfall amounts:
The IMD categorises rainfall into various sub-sections:
- Drought — rainfall less than 90% of the LPA
- Below normal monsoon — rainfall between 90-96% of the LPA
- Near normal monsoon — rainfall between 96-104% of the LPA
- Above normal monsoon — rainfall between 104-110% of the LPA
- Excess monsoon — rainfall more than 110% of the LPA.
So, the first forecast for 2010 is:
IMD’s long range forecast for the 2010 south-west monsoon season (June to September) is that the rainfall for the country as a whole is likely to be Normal.
Quantitatively, monsoon season rainfall is likely to be 98% of the long period average with a model error of ± 5%. The Long period average rainfall over the country as a whole for the period 1941-1990 is 89 cm.
For a graphic on India’s monsoon forecast vs actual rain, see this. Need to run some statistics on this.
RBI Executive Director Deepak Mohanty has been giving excellent speeches of late.
His two recent speeches are also worth a read.
Both are extension of his previous speeches.
In monetary policy implementation, he discusses the RBI monetary framework over the years and the transition from monetary targeting to multiple indicators. He says RBI’s move from money to interest rates is in line with developed economies:
It is very difficult to analyse agriculture sector for paucity of data. You don’t get long time series for most variables. RBI’s handbook on Indian economy provides some data but is not enough.
Planning Commission has launched an excellent website/databank which gives you loads of data on Indian agriculture.
Thomas Lubik and Stephen Slivinski of Richmond Fed explain the basics of output gap in their short note. Much of the policy based discussion is based on how much the output gap is. So. it is nice to brush through basics.
The output gap is a measure of how far away an economy is from a desirable level of output. It can be important in policy discussions because it presents a gauge of when the economy might be overheating or underperforming and can have immediate implications for the stance of monetary policy.
A typical story is that during a recession actual economic output drops below a desirable, or “potential,” level, which creates a negative output gap. In a boom, output rises above its potential level, resulting in a positive gap.
In the latter case, the economy can be described as “overheating.” This would generate upward pressure on inflation and might prompt the central bank to “cool” the economy by raising interest rates. On the other hand, an economy that is performing below its potential may require a more stimulative monetary policy.
The authors explain there are two ways to calculate output gap:
- Potential output – actual output
- Natural output – actual output
“Potential” output is the level that would occur if product and factor markets were perfectly competitive – meaning there are no real rigidities, such as the existence of monopolistic producers that can restrict output to artificially low levels.
“Natural” output, on the other hand, describes the level of output that can be achieved under imperfectly competitive markets. Here there are real rigidities, but no nominal distortions such as the costly and time-consuming process needed for prices to adjust.
However, there are not much differences when the gap is calculated using the two approaches.
The authors also explain the various ways in which the gap could be calculated – CBO, their own model and Fed Model. They also look at the estimate of output gap from these models. They say the output gap though useful is very difficult to estimate:
The output gap is meant to be a useful indicator for monetary policymakers because it signals to what extent the over- or underemployment of productive resources during the business cycle might feed inflation. The main challenge, however, is to compute the output gap “correctly.”The computations can be based on purely statistical measures derived from historical data or be based on an approach suggested by modern theory. Different models produce different gaps, however. This suggests that the uncertainty surrounding the various measures renders the output gap a potentially faulty gauge for assessing the economic situation and guiding monetary policy.
A nice primer. Typical economics problem. Output gap is a very useful concept but difficult to estimate.
Surabhi Mittal and Deepti Sethi of ICRIER have a very good paper giving an overview of food security issues in South Asian economies:
Food security is defined as economic access to food along with food production and food availability. Agriculture in the SAR (South Asian Region) is caught in a low equilibrium trap with low productivity of staples, supply shortfalls, high prices, low returns to farmers and area diversification – all these factors can be a threat to food security. South Asia still has the highest number of people (423 millions) living on less than one dollar a day. The region has the highest concentration of undernourished (299 million) and poor people with about 40 per cent of the world’s hungry. Despite an annual 1.7 per cent reduction in the prevalence of undernourishment in the region in the past decade, the failure to reduce the absolute number of the undernourished remains a major cause for concern. Estimates by the Food and Agricultural Organisation (FAO) indicate that by 2010, Asia will still account for about one-half of the world’s undernourished population, of which two-thirds will be from South Asia.
Though SAARC countries have established a food bank to meet the needs of food security in the region, it has not been operational even during times of crisis. This is despite the felt need of member nations to evolve mechanisms to make the SAARC Food Security Reserve operational.
It is against this background that this study has been undertaken. Conducted in collaboration with think-tanks from South Asian countries, it aims to identify issues relating to food security, the policy initiatives taken to tackle these issues, evaluate these policies and suggest measures to overcome identified constraints in order to improve the food security situation in the region.
It discusses the agrcultural growth and aspects of food security in each South Asian economy. Then it looks at safety net programmes in each of these economy. This compilation of the various safety net programmes is very useful.
I didn’t know that there is a Food Bank in South Asia however it has not been used. The authors then point the need to work on this food bank and increase trade for addressing food security. It should also look at agricultural research as a solution to the food woes.
A good crsip paper on food security issues.
This is an old RBI paper (released in 2008) and I happen to go through it only now. The timing is more appropriate now as we go through a agri crisis.
The paper was written by Prof. Pulapre Balakrishnan, Ramesh Golait and Pankaj Kumar. It highlights the supply side constraints in Indian agriculture.
The Study addresses slow growth of the agricultural sector since 1991. The Study documents the movement of the factors that have been recognised as determining agricultural growth during this period with a view to identifying the proximate causes of the slowdown. The focus in this Study is exclusively on crop agriculture. Factors, such as, relative price movement at the aggregate and at the disaggregated (crop-wise) level, import penetration, shrinking farm size, investment in agriculture, research and extension and agriculture credit have been investigated to ascertain their impact on agricultural growth in India since 1991.
The major findings of the Study are :
- The Study does not find evidence to the contention that relative price movement might have played a determining factor in explaining slow growth of agriculture since 1991. The profile of relative prices over the past 15 years indicates too mild a shift, if at all, to consider relative price movements as central to understanding the slowing of agricultural growth since 1991. The role of import liberalisation in determining this price movement appears to be marginal too, except perhaps for some crops in some periods.
- The Study finds that smaller farm holding-size, by making it more difficult for the majority of Indian farms to access new technology and adopt more efficient forms of farm production organisation, may have adversely affected agricultural growth.
- The Study reveals that among the factors likely to be responsible for slow growth is stagnation of public investment for almost a quarter of a century, along with a slowing of irrigation expansion since 1991.
- The Study observes that production is increasingly being carried out in a more open economy, even though import penetration is very low currently for most crops. The Study suggests the need for expansion of publicly-provided research and extension to support farming under a changed environment.
- The Study documents, public expenditure on research and extension, historically low as a share of agricultural output in India by international standards, has registered a slower growth in real terms since 1990.
- The Study cautions against the reading that greater spending alone is the solution to the current impasse in Indian agriculture. The Study provides evidence, intended as an illustrative case, that steady growth of real expenditure since 1991 has actually coincided with a slowing rate of expansion of the percentage area irrigated. This indicates a declining efficiency of public investment and suggests that governance is as much an issue as greater allocation of funds.
Much of this is well-known but the authors put it nicely. The low investment in agriculture research (pathetic actually) is a point made in very few papers on agricultural economics. The authors also point the idea is not simply throwing too much money into agriculture (which we always do) but make it more efficient.
Mr Shard Pawar, Minister of Agriculture has given an insightful speechexplaining India’s agriculture woes this year. There are n number of suggestions/criticisms on Govt’s role in this crisis, but it is important to know the situation as well.
Read it carefully.
Dhrijesh Tiwari from Indian Agricultural Ministry explains the agriculture stats system in the country in this short note.
In India, agricultural statistics system is decentralized both horizontally and vertically. Primary statistics are collected by the provincial governments and consolidated for the country by the national Ministry of Agriculture. Major data sources for agriculture statistics are
(i). Agriculture Census
(ii). Livestock Census
(iii). Marine Fisheries Census
(iv). Input Survey
(v). Land Use Survey
(vi). Land Use Survey of National Remote Sensing Agency
(vii). General Crop Estimation Survey
(viii). Integrated Sample Survey of Major Livestock Products
And all this is within Ministry of Agriculture. Further:
Apart from the Ministry of Agriculture, there are several other Ministries at the national level which are engaged in generation of related statistics as part of their functioning. Table below gives a quick look of that:
Table 1: Decentralized agriculture statistics in IndiaAnd the list is not exhaustive!! He then suggests ways to integrate the agri stats system and the important role National Statistical Commission has to play in the process.
Fertilizers – Ministry of Chemicals & Fertilizers
Agricultural Trade – Ministry of Commerce
Rainfall – Ministry of Science & Technology
Reservoirs – Ministry of Water Resources
Agricultural Population – Ministry of Home Affairs (decadal),Ministry of Rural Development, Ministry of Statistics (periodical)
Floods – Ministry of Home Affairs
Agriculture GDP – Ministry of Statistics
While the table above is not exhaustive, it gives an idea as to how widely spread is the domain of agricultural statistics in India.
This is a major problem with Indian Statistics sytem in general. There are just too many sources and it is a monumental task to have any idea about government’s policies in any sector. The media is replete with suggestions to press reforms in various sectors (with each expert suggesting his sector is top priority). Here is my 2 paisa suggestion- please reform and update the statistical system.