Annual Report

Abstract

The National Centre for Agricultural Economics and Policy Research (NCAP) continued its efforts towards achieving excellence in agricultural economics and policy research in the country. The research studies of the Centre have enormously helped the Council in participating in agricultural policy debates and decisions more vigorously. The Centre had 20 scientists (including one ICAR National Professor and one National Fellow) and 15 other staff in the year 2007-08. The total expenditure of the Centre during 2007-08 (April-March) was Rs 445.95 lakh. A high-powered Research Advisory Committee guides the Centre on its research programmes, and a Management Committee administers the functioning of the Centre. Besides, a number of internal committees like budget committee, store purchase committee, etc. facilitate the decentralized management of the Centre. Research studies of topical in nature are conducted at the Centre under five broad themes, viz. technology policy, sustainable agricultural systems, markets and trade, institutional change, and agricultural growth and modelling. Each theme area is headed by a senior professional with a support of small team of scientists working under each theme. Research programmes within and across the themes are so designed as to accomplish the mandate of the Centre. During the year 2007-08, the Centre has conducted 40 research studies. Five consultancy projects have also been completed by the Centre during the year. The Centre has not only maintained but also increased the linkages and collaborations with many institutions in India and abroad. The Centre organized quite a good number of workshops, seminars, brainstorming sessions, and policy advocacy programmes. The main research achievements and a glimpse of activities undertaken during 2007-08 are reported below: Slow growth in agriculture during the past few years has led to a crisis in Indian agriculture. Accelerating the growth in agriculture is a major challenge before researchers and policymakers. The Centre has conducted several studies to analyze the growth performance, instability and risks in agriculture. = Analysis of growth in agriculture has revealed that agricultural growth performance was satisfactory before 1995-96, but slowed down afterwards. This has been due to slowdown in the growth of fertilizer-use, irrigation, cropping intensity, diversification towards high-value crops, and terms of trade after 1995-96. The study has suggested that stepping up of public investment in agricultural R&D, development of irrigation facilities, evolving appropriate institutional mechanism, promoting fertilizer-use, increasing power-supply to agriculture, establishing competitive markets for inputs and output and developing measures to mitigate risk in farming are the important steps to overcome the crisis in Indian agriculture. = In a study on instability in Indian agriculture, it was concluded that Indian agriculture has developed resilience to absorb shocks due to agro-climatic and other factors. Another study on risk assessment in India has shown mixed results with respect to yield risk of different crops for the period 1981-2004. Adoption of measures like increasing irrigation facilities, promoting soil conservation measures, and xi Annual report 2007-08 National Centre for Agricultural Economics and Policy Research xii evolving new varieties have been suggested to minimize yield risks. Results at the disaggregated level in Andhra Pradesh have shown that risks in production and gross returns had reduced for rice, but increased for groundnut. The study has suggested that region-and crop-specific insurance mechanisms should be devised to address yield risks. Meeting food demand of burgeoning population has been at the centre stage of agricultural development. Imbalances in the demand-supply in foodgrains during the past few years have sparked the prices of staple foods in India and across the globe. The Centre has undertaken some studies on this important issue. = Domestic demand for cereals has been projected to be 219 Mt by the year 2012 and 261 Mt by the year 2020. The demand for pulses by these years would be 16 Mt and 19 Mt, respectively. Thus, the overall foodgrain demand has been projected as 235 Mt by the year 2012 and 280 Mt by 2020. = During the past two years (2005-06 and 2006-07), demand-supply imbalance in wheat has created challenges for both policymakers and researchers. There has been a considerable increase in the prices of wheat during this period. This has been due to decline in production and poor procurement by the government. To raise production and procurement of wheat, the government had adopted a price policy support which yielded desired results. To increase domestic production of wheat, rapid dissemination of improved technologies would play a significant role. = The shortage of wheat and its increasing prices have become a major concern not only in India but world over also. A study has shown that in controlling the prices of wheat in the country, the stock of foodgrains with the government makes a very significant impact. The behaviour of open foodgrain market can be largely checked by heavy stock inventory, besides some other factors. The study has suggested that two million tonnes of additional buffer stock of wheat would enable the government to intervene in the open market in case the private traders try to tighten the supply with the intention of raising prices and also to meet the PDS commitments. Research and development (R&D) has potential to provide long-term solutions to the problems of agriculture sector. Several R&D related issues like research resource allocation, public-private partnerships, role of R&D in managing agrarian crisis, agricultural biotechnology, and investment in fishery research have been studied by the Centre during the year under report. = Public-private partnership has become an integral part of the agricultural development process. The policy dialogue initiated by ICAR and decisions arrived at during the past few years are path-breaking in several ways. The technologies developed through public-private partnerships that include hybrid rice, zero-tillage, IPM, etc. are beneficial in many ways. To encourage this partnership further, ICAR provides funding support under its externally-aided programmes. The study has pointed out that many national R&D companies may not be able to compete with multinationals under the new IPR regime and would need the support of public system for R&D, even on benefit-cost sharing basis. = ICAR in partnership with SAUs has developed numerous improved technologies for various farm operations. These technologies make farm operations easy, save natural resources, reduce crop losses, improve shelf-life of farm products and increase food production. A review of such studies has shown that available stock of technologies has enormous potential to accelerate the pace of agricultural xii National Centre for Agricultural Economics and Policy Research xiii Annual report 2007-08 growth and farm income. The only need is to establish an appropriate support mechanism for exploiting the huge untapped potential. = Government of India has invested huge resources to harness the potential of biotechnology. The emphasis in crop biotechnology is on tissue culture, tolerance to biotic (insects and diseases) and abiotic (moisture, salinity) stresses and improving quality and shelf-life of agri-food products. The presence of private biotech research is limited. Measures to attract private investment in biotechnological research have been suggested. = Sustained growth in fisheries production is a testimony to the impact of research resource allocations to this sector. A study has revealed that allocation of resources to fisheries development has increased more than 400-fold from I to X Five-Year Plan, which demonstrates the increasing priority attention of the government to this sector. To sustain growth of the sector, development of technology, infrastructure and marketing arrangements are critical. Investments on infrastructural development like construction of mini harbours, landing centres, trawlers and mechanized vessels, supply of nets, etc. are expected to increase the catch and farm income further. Intensive cultivation practices in agriculture have posed severe stress on agricultural resources, resulting in degradation of soil and water quality and rapid consumption of finite resources. The availability of resources is becoming a major constraint to agricultural development. Therefore, management of natural resources has become very crucial. The Centre has undertaken some studies on optimization of resourceuse efficiency in agriculture. = A study on ‘System of Rice Intensification’ (SRI) in the peninsular India has found it to be more advantageous over the traditional rice cultivation. The practice has potential to provide a higher rice yield (2-3-times of country’s average of 2 t/ha) and conserve water (20-40% of the normal practice), besides providing savings in seeds and fertilizers. This innovative practice can be really effective to increase rice production if supportive policy interventions are evolved. = Water being the most critical input in agriculture, a number of water-saving technologies (WSTs) are being developed. It has been found that WSTs are mainly used for horticultural crops. The empirical evidence on micro-irrigations is skewed towards drip system, because of its large application in horticultural crops. The study has suggested that for deciding priorities and provision of subsidies on WSTs, economic returns from investment and their use in crops should be estimated. To popularize the use of WSTs, awareness among users should be generated on a wider scale. = Rainfed agriculture has a high potential in meeting the rising demand for food, provided a workable strategy is developed. On the technology front, modern technology requiring low external inputs along with soil-water management practices have been observed to be critical. Effective coordination of institutions providing services is equally important. Long-term investment in infrastructural development is also needed. Such an orientation is expected to transform rainfed agriculture from a subsistence to sustainable commercial venture and would provide food and income security to farmers relying on rainfed areas for their livelihood. xiii Annual report 2007-08 National Centre for Agricultural Economics and Policy Research xiv = The issue of climate change and its potential impact on agriculture is being widely debated globally. The copping strategies based on limited sets of variables (especially temperature and moisture) have been found less effective in dynamic setting. There is a need to integrate socio-economic variables with bio-physical model for better results. Location-specific appropriate technologies might help adaption to the changing climatic condition. To reduce risks related to climate change, it is necessary to formulate appropriate credit and insurance policies suiting to different ecosystems. Considering the importance of emerging institutions in Indian agriculture, which is dominated by smallholders, the Centre has conducted studies on institutional arrangements like contract farming, crop insurance, access to information, seed system, credit delivery, etc. = Contract farming is expected to improve the socio-economic conditions of a majority of smallholders. Its success depends on its capability to improve farm profitability and reduce cost on marketing and transportation. Considering non-farm factors, like regulation in offtake of produce, provision of inputs, services, and payments would foster a strong relationship between firm and farmers. A long-term commitment and mutual trust between these partners are essential for the success and sustainability of contract farming. = Access to information by farmers is one of the key issues in agricultural development. A study on sources of information and its flow to farmers, particularly about improved farm technologies has revealed that access to information sources increases with increase in farm-size. This variation is more pronounced for the sources like extension workers, TV and primary cooperative society. For smallholders, progressive farmers and input dealers have been found the major sources of information for improved technologies. = Credit is one of the critical inputs and an effective means of rural development. A study at the Centre has identified the determinants of the choice of a credit outlet. It has been found that maturity in age, family-size, education level and land-size influence the borrowers’ tendency to go in for institutional sources of credit. There has been less probability of the weaker sections in getting institutional credit. The self-employed persons have preference for institutional credit, while labourers chose non-institutional sources. = A study on the seed systems being followed in the states of Andhra Pradesh, Haryana, Himachal Pradesh and Uttar Pradesh has revealed that almost all farmers procure seeds of high-value crops like cotton, tomato and peas from commercial sources, i.e. private seed dealers, seed corporations or governmental stores. During 2003-04 and 2004-05, about 60 per cent of the seeds in the case of paddy, and 40 per cent in the case of groundnut were procured from commercial sources. It is a positive sign as better quality of seeds would improve crop productivity and raise farm income. = The public sector plays a major role in the supply of seeds, particularly of open-pollinated varieties (OPV) grown in unfavourable environments. It is particularly important in the case of ‘orphan’ crops (e.g., groundnut and potato) with low seed-multiplication rate and high seed requirement. Private seed companies can play a significant role in augmenting the supply of OPV seeds. The government has enacted almost all legislations to comply with the provisions of the TRIPS agreement of WTO. But, the new IPR regime may increase the transaction cost for accessing the plant genetic resources, which will have implications on plant breeding efforts. xiv National Centre for Agricultural Economics and Policy Research xv Annual report 2007-08 Indian agriculture still has enormous potential to grow across sectors and regions. Past sources of growth are plateauing, therefore new sources need to be identified. A few studies have been undertaken at the Centre on exploring the sources of growth in agriculture. = Livestock is an integral and complementary sector of Indian agriculture. A study on total factor productivity (TFP) in the livestock sector has revealed that it had grown at an annual rate of 2.3 per cent during the period 1971-2004. This growth in TFP has accelerated overtime, from 1.5 per cent during 1971-81 to 2.6 per cent during 1981-91 and further to 2.9 per cent during 1991-2004. = Rising global demand for livestock products has offered an opportunity to India to increase livestock export, especially of bovine meat, whose domestic demand is low. A study on identification of determinants of export in livestock products has revealed that ratio of domestic production to consumption plays a significant role in increasing export of bovine meat, poultry, livestock and mutton. It has been found that devaluation of currency during 1990s and its management during post-liberalization period played an important role in the export of livestock products. The removal of quantitative restrictions also played a significant and positive role in its export of eggs, bovine meat and muttons. = Indian agriculture is overwhelmingly dominated by smallholders. A study on the role of smallholders in diversifying towards high-value crops has evinced that gradual diversification is pro-smallholder, as they contribute largely to the cultivation of vegetables and lesser extent to fruits. It is because of availability of enough family labour with them. Although, fruit cultivation is also labour-intensive (as compared to cultivation of staples), it is highly capital-intensive, making it a less attractive for smallholders who tend to have low-capital endowments. = The horticulture sector is constrained by poor marketing arrangements and lack of infrastructure. Recent studies have reported that farmers get less than one-third of the price paid by consumers. During the survey in Hyderabad, features of both public owned (Rythu Bazar) and private innovative marketing institutions (by corporate sector) were studied. Data has shown that innovative models for marketing of fruits and vegetables are more efficient than public-owned markets due to lower marketing cost. = With tremendous growth in fisheries, the sector is being referred to as the sunrise sector in India. A study has reported that during the period 1981-06, the growth in fisheries output has been 4.6 per cent, though largely due to growth in inland fisheries. In the coming decades, aquaculture would be a major contributor to fish production, as fish farmers are expanding water-bodies area and following improved practices. However, there are several challenges in fish production that need attention. = The emerging problems like reduction in fishing days, decline in income and employment opportunities, rising food prices, etc. are the threats to livelihood of people living in the coastal areas. A study conducted by the Centre has suggested adaptation strategies and coping mechanisms to improve livelihood of people in the coastal areas. It has been found that integration of local conditions with emerging challenges is necessary for it. xv Annual report 2007-08 National Centre for Agricultural Economics and Policy Research xvi = A study on economics of rice production has revealed considerable increase in the use of inputs like fertilizers, machinery, and irrigation in the states of Andhra Pradesh, Haryana, Madhya Pradesh, Punjab, Uttar Pradesh and West Bengal during 1983-84 to 2004-05. Striking differences are seen in fertilizer-use for rice production in different states. The study has observed that in spite of increase in fertilizer application, there still exists considerable scope to enhance application of fertilizer and machinery for higher yields. = A study on medicinal and aromatic plants in the state of Uttarakhand has shown that economic returns are significantly higher from these than commercial crops like sugarcane. However, there are constraints like inadequate processing, price risks and lack of plant material for large-scale adoption. The study has observed that farmers’ access to technical know-how and institutional credit on priority basis could promote establishment of processing units in the rural areas. Also, efforts towards strengthening of the market information system and management of price risks will go a long way in promoting the cultivation of medicinal and aromatic plants in Uttarakhand. = The study on potential of different sources of farmers’ income has revealed that farm households derive a significant proportion of their income from non-agricultural sources, as against the common perception that agriculture is the main source of income to farmers. In the year 2003, the wages and non-farm business activities had accounted for about 20 per cent and 24 per cent of the total income, respectively. Though, these sources are quite important for raising income of small and marginal farmers, there is high inequality in their distribution across farm households, because of their limited access. Only 14 per cent households have reported about earnings from non-farm business and 46 per cent from wage labour. The study has suggested that for raising farmers’ income, it is essential to accelerate the pace of diversification of rural economy towards non-farm activities, empowering farm households in overcoming barriers to their entry into non-farm sector. = The analysis of income diversification at the disaggregated level and its implication on income inequality help in policy decisions. To identify the factors determining income inequality, a study has been conducted in the four eastern states, viz. Bihar, Jharkhand, Orissa and West Bengal of India. Among the determinants having positive correlation with total income (both farm and non-farm) are holding-size, age and education of household-head, value of productive assets and livestock, access to market and credit. Sex of household-head, access to road and farm income (crop and livestock) have not shown a significant influence on the level of income. In the case of non-farm income, factors like household-size, age, education and sex of household-head, landholding-size, and access to road have depicted a significant influence on it. The holding-size has depicted an inverse relationship with non-farm income, the larger the holding size, the smaller is the non-farm income. = Estimation of the share of household factors in income inequality in eastern India (mainly the states of Bihar, Jharkhand, Orissa and West Bengal), has revealed that education of household-head is the most important factor (having weightage of 8.31%), followed by the value of productive assets (5.04%), landholding-size (3.7%), age of household-head (3.07%), access to market (1.39%) and value of livestock (1.33%). In the case of farm income, landholding-size has been found as the most important variable, followed by value of livestock, age and education of household-head and access to credit. In the non-farm income category also, education and age of household-head have xvi National Centre for Agricultural Economics and Policy Research xvii Annual report 2007-08 been recorded as the important variables influencing income inequality. The study has highlighted that to have income equalizing effect of different source of farmers’ income, limiting factors need to be addressed. = Food safety issues are a major concern in the export of food commodities from India to the developed countries. Increasing number of non-tariff measures (mainly SPS and TBTs) is adversely affecting the country’s food export. During 2006-07 (April-March), the refusal of consignments of Indian food products by USA and Japan accounted for 54 per cent and 97 per cent, respectively, of its total export. The major reasons for refusal of Indian consignments have been found as microbial contamination, filthiness, insanitary conditions, unsafe additives, etc. Thus, a majority of rejections are attributed to the lack of observance of basic hygiene and existence of microbial contamination. The study has suggested adhering to the SPS standards to export livestock and realize a higher return per unit value. = The specifically-designed poverty alleviation programmes for generating both self-employment and wage-employment in the rural areas has shown positive results. These programmes are broadly grouped into (i) increasing farm and labour productivity and income, (ii) transferring cash/ foodgrains to poor, and (iii) reducing cost and prices through subsidies. The study has suggested that country has to give more emphasis on a multi-dimensional approach involving improvement in farm productivity, employment guarantee, development of women and children, health care, infrastructure development, sanitation, insurance, etc. for reducing poverty in the country. Analysis has shown that while planning the poverty alleviation programmes, the emphasis has to be given more on social sector than simply addressing on income poverty. Thus, a well-balanced strategy, taking lessons from the past, could result in placing the country on a sustainable growth path. The Centre has given special attention towards the problems and prospects in the North- Eastern Region (NER) of India, along with tapping of opportunities for the benefits of farmers in the region. = A study on crop diversification towards high-value crops has revealed high prospects in growing fruits, vegetables, oilseeds, floriculture, etc. In another study on identification of factors influencing income and employment from livestock in the NER has shown that availability of labour, occupation of households, and farm-size have made positive and significant impact on livestock-rearing, indicating existence of a strong crop-livestock interaction. Availability of irrigation facilities and institutional credit also influence livestock-rearing in the area. = In NER, farmers practise mixed-cropping, which can be integrated with water harvesting technologies for saving runoff water. For growing crops, lower terraces are more useful for rice, whereas maize and sesamum could be grown in the upper terraces. Similarly, the available terraces (about 35-40% of the total land area) can be effectively utilized for raising perennial fodder/grasses and legumes, which would help in checking soil erosion and provide fodder for livestock. There is a need to put in place the innovative institutional arrangements for marketing of products. = The threat of avian flu has received significant attention all over the world. In a study at the Centre, economic loss from avian flu, the most infectious disease of the poultry sector, has been assessed, after its outbreak in the Manipur state in July 2007. The total loss to producers xvii Annual report 2007-08 National Centre for Agricultural Economics and Policy Research xviii has been estimated to be of Rs 316 lakh, whereas farmers have received only Rs 99 lakh (about 31%) as compensation. Due to incidence of avian flu, increase in the prices of pork and fish has been registered as 35 per cent and 85 per cent, respectively in Manipur. The study has observed that the poor compensation would (a) affect the livelihood and sustenance of poultry farmers and their families, and (b) lead to poor compliance in culling and disinfection operations and hence, lack of eradication of disease outbreak that would have more serious implications. = The Centre is handling a mega project on Visioning, Policy Analyssis and Gender (VPAGe) funded under the National Agricultural Innovation Project. Four workshops have been organized during the year under the project, including project launcing workshop. The NCAP website available at http://www.ncap.res.in has been redesigned and regularly updated. The NCAP publications are now available in the PDF format and can be downloaded. Data revealed that policy briefs, workshop proceedings and policy papers were the most referred publications during the year. The website for Networking of Social Scientists, http://www.agrieconet.nic.in, is facilitating research, resource-sharing and optimization of response time for addressing methodology-related problems. The ARIS facility at the Centre has been equipped with 512 kbps leased line from ERNET to provide E-mail and Internet facilities to NCAP staff. The Centre now has its independent mail server which is being used to its potential. As a part of the dissemination of research output, the Centre and its staff has published one book, twentyfour journal articles, twenty-six book chapters, and seven discussion papers during the current year. The Centre's staff has been involved in a number of professional and policy interactions and projects. It organized ten workshops and several meetings at NCAP and outside. It also collaborated with a number of national and international research organizations. These activities could facilitate achieving of greater impact and wider visibility of the Centre during the year.