Eradicating poverty from the planet was the top-most target in a set of 17 goals adopted by the UN last September as a part of its sustainable development agenda. Nations across the globe, including India, endorsed it. The strategies to achieve this goal have been left open to countries. In this context, the Rural Development Report (RDR) 2016 of the International Fund for Agricultural Development is timely.
The RDR’s Asia and Pacific Region (APR) release will be in India on October 17. The report is among the more comprehensive documents that try to understand the role of rural transformation in eradicating poverty and securing food and nutritional security within the context of economy-wide structural transformation in several countries. It is based on an empirical analysis of 60 countries drawn from various regions.
Nine are from the APR. Comprising Bangladesh, Cambodia, China, India, Indonesia, Lao People’s Democratic Republic, Pakistan, Philippines and Vietnam, the region is the most populous and has the largest number of poor on this planet. There are 16 countries from Latin America and the Caribbean; seven from the Near East, North Africa, Europe and Central Asia; 15 from East and Southern Africa; and 13 from West and Central Africa.
RDR 2016’s first lesson pertains to the conceptual framework of development. It notes that economies of almost all the 60 countries are undergoing some sort of structural transformation — some are moving fast, many are moving at a moderate pace and some are going very slow. The transformation is reflected in rising productivities in agriculture and the urban economy as well as in the changing character of the economy — the preponderance of agriculture making way for the dominance of industry and services, greater integration with global trade and investments and growing urbanisation.
RDR’s second lesson is that rural areas cannot remain insulated from this economy-wide change. They are also transformed with rising agricultural productivity, increasing commercialisation and marketable surpluses, diversification to high-value agriculture and off-farm employment through the development of agri-value chains.
The third, and the most important lesson, especially for policymakers, is that rural transformation on its own may not be effective in reducing poverty unless it is inclusive. This challenge is at the heart of the report. Agricultural development is a key element of such inclusiveness since a majority of the working force in most countries at low to moderate levels of rural transformation is still engaged in agriculture.
What can India learn from this, given that agriculture still engages half of its workforce, and about 85 per cent of its farms are small and marginal (less than two hectares)? Compared to China and Vietnam, which have experienced fast structural and rural transformation, India’s story is of slow transformation. As a result, poverty reduction in India was at a much slower pace during 1988-2014, compared to China and Vietnam. The RDR 2016 tells us that India’s poverty reduction was slow during 1988-2005, but during 2005-12, it accelerated dramatically — almost three times faster than during the earlier period.
What did India do during this period? Research reveals that the relative price scenario changed significantly (by more than 50 per cent) in favour of agriculture in the wake of rising global prices. This boosted private investments in agriculture by more than 50 per cent. As a result, agri-GDP growth touched 4.1per cent during 2007-12, as against 2.4 per cent during 2002-07. The net surplus of agri-trade touched $25 billion in 2013-14; real farm wages rose by seven per cent per annum. All these led to an unprecedented fall in poverty. A good price incentive can thus trigger investments in agriculture, leading to productivity gains, increases in real farm wages and fall in poverty.
To make the rural transformation more inclusive, India will have to focus on raising productivity in agriculture through higher R&D (seeds) and irrigation and build value chains for high value agri-products like livestock and horticulture, which account for more than half the value of agriculture (cereals account for less than 20 per cent). In the building of these value chains by mainstream small holders — say, through farmer producer companies — India can create large off-farm rural employment and augment incomes of farmers and others living in rural areas. This would require large investments both by the private and public sector. If India can do all this efficiently and through a participatory mode, it can certainly hope to eliminate not only poverty but also malnutrition by 2030. For more details on RDR 2016, stay tuned till October 17.