Beyond agriculture

Although, there is considerable heterogeneity within each group, it is argued that the strategies and policy instruments vary with the group. Briefly, in Sub-Saharan Africa, the focus has to be on raising productivity of small farmers; in South Asia, greater attention must be paid to promotion of high value agriculture and non-farm activities, and to enable people to move out of agriculture; and, in Latin America and the Caribbean, the emphasis must shift to reduction of remaining rural poverty through conversion of small farmers into suppliers to rapidly growing food markets. My comments are confined to the second group of transforming countries to which India belongs.

Let me first delineate the main strategic concerns. These include, one, promotion of high-value activities to diversify smallholder farming away from land-intensive staples to cater to rising urban incomes and dietary changes; two, extension and adaptation of technologies to enhance land productivity in less-favoured areas with a large concentration of extreme poor; three, provision of infrastructural support to facilitate diversification of agriculture and of rural economies; four, expansion of rural non-farm activities to absorb a rapidly growing labour force, and finally a massive increase in investment in education and vocational skills to make it easier for people to migrate to areas/sectors with greater potential for labour absorption.

In elaborating these concerns, WDR 2008 makes observations that are pertinent and insightful. Briefly, the high-value revolution is led by the private sector, with the state facilitating it. Scale economies in processing and marketing are achievable with fragmenting and shrinking farm size. Contract farming has considerable potential in reducing transaction costs and risks of smallholders. However, the distribution of gains along the value chain depends on the bargaining power of various players. So producer groups could help smallholders achieve scale in marketing and negotiate better prices.

Also, it is imperative to maintain productivity growth in food staples. Both the high-value revolution and the extension of new technologies to less favoured areas require better water management in order to check mounting scarcity and deteriorating quality. A case is also made for promoting non-farm employment in secondary towns and to strengthen rural-urban linkages. Regional and territorial agricultural clusters — with processing and packaging of high-value commodities — deserve serious attention. Investment in infrastructure and skill development would facilitate this transition. In particular, better quality of school education would prepare the next generation to leave agriculture.

While much of what WDR 2008 recommends for transforming economies such as India’s is persuasive, two caveats are necessary. One is that if the recent spikes in foodgrain prices — especially of wheat, rice and maize — persist, the declining share of agriculture may slow down or halt. The presumption here is that rapidly rising demand for biofuels will continue to exert upward pressure on foodgrain prices in the absence of substantially higher yields. The second and perhaps equally important caveat is that the WDR 2008 is rather sanguine about the transformation taking place. Specifically, transition to high-value agriculture, promotion of non-farm employment and shift of rural population out of agriculture risk protests, violence and rupture of social fabric. A case in point is recent violent clashes and simmering discontent in Nandigram and elsewhere. Domestic institutions of conflict management —including but going beyond social safety nets (for instance, institutionalised ‘voice’ mechanisms designed to resolve recurring conflicts through, say, a mandatory approval in a Gram Sabha meeting) — may help in achieving a smoother transformation to a rapidly evolving economic environment.

The writer is professor of public policy, Faculty of Management Studies, University of Delhi