Friday, October 11, 2013

Robust agricultural growth is key to India's economic growth prospects.


Last week, the prime minister's Economic Advisory Council projected 4.8 per cent growth for agriculture in 2013/14. In comparison, agricultural growth last year was 1.9 per cent.

If the projection proves accurate, it will come as a shot in the arm for the ailing Indian economy. Robust agricultural growth is expected to contain inflation, support industry and services, and increase employment opportunities in rural India. It might also ease pressure on government employment schemes. A government statement said that the early monsoon season has had a positive impact on sowing. The reservoir position at the end of August was 29 per cent better than the overall average of the last 10 years. Both kharif and rabi seasons are expected produce good output. Agriculture's contribution to the overall gross domestic product (GDP) has fallen from about 30 per cent in 1990/91 to less than 15 per cent in 2011/12. Nonetheless, given that roughly half of India's workforce is engaged in agriculture, it remains the backbone of the Indian economy. Agriculture's performance assumes greater significance in view of the recently passed Food Security Act and the ongoing National Rural Employment Guarantee Scheme. Agriculture supports the vast majority of low income, poor and vulnerable people in the country. 

An average Indian spends almost half of his total expenditure on food. N R. Bhanumurthy, Professor at the National Institute of Public Finance and Policy,  says this year's agricultural production will in turn drive industrial growth and consequently have a positive impact on services. "With all these, I will be not surprised if GDP growth is between five and 5.5 per cent," he adds. According to Bhanumurthy, low agriculture growth pulls down overall growth because of its indirect connection to industry and services. "The rise in agricultural activity will ensure a lower pressure on public spending and employment schemes. For the common man in urban areas, this should logically lead to lower inflation. In rural areas, there will be increased demand for employment in both farm and non-farm activities ," he says.

But Madan Sabnavis, Chief Economist at Care Ratings, says the projection is overstated. "I see agriculture growth in the range of three to four per cent," he says.High growth in agriculture will increase rural incomes, according to him. But how rural India will spend this income is unclear. "Since gold prices are higher than last year, gold will not attract sizeable rural spending. So, higher rural income will be mainly channelised into bank savings and consumer durables, automobile and housing," he adds... This will have positive implications for steel, cement and manufacturing industries. Migration from rural India may be checked. Sabnavis also said that agricultural commodity prices may not drop on account of higher output, but price increases will be moderate at best. He noted that agricultural output takes into account only the staple crops, while it is commodities like vegetables, eggs and milk that have been driving food inflation in recent times.




The economics of hybrid rice in India

Hybrid rice has the potential to increase yields by 15-30% and help India meet its food security demand.
With the Lok Sabha recently passing the National Food Security Bill (NFSB) that promises subsidised foodgrains to 75% of the rural population and 50% of the urban population, India is under huge pressure to significantly increase its cereal grains production. One such method of doing so is through the accelerated adoption of hybrid technologies, including hybrid rice.
Hybrid rice has the potential to significantly increase rice yields, often to the order of 15-30% relative to local or even modern high yielding varieties. These higher yields allow for more intensive rice production, thus allowing farmers to either produce more output on a particular plot of land or to diversify into higher-value crops like vegetables and other horticulture crops. Both strategies potentially result in higher farm incomes and more abundant food supplies that can stabilise prices for both urban and rural food-insecure households.
The government of India has set an ambitious target to increase the area under hybrids to 25% of total rice area by 2015. Despite these promising results, the pace of hybrid rice adoption in India has been slow, particularly in comparison with experiences in China. At present, over half of all rice area in China is under hybrid rice, resulting in improved food security for an estimated 60 million people per year. The adoption of hybrids has been much slower in India, with only about 7% of rice area under hybrids. The low rate of adoption is largely due to poor grain quality and the resulting low market price, difficulties in achieving high rates of heterosis in tropical hybrids, high hybrid seed cost, limited availability of quality seeds, and hybrids not suited to ultimate consumers’ tastes and preferences. These are just a few of the main challenges facing the expansion of hybrid rice in India.
Most of the India’s hybrid rice is currently grown in the eastern and northern parts of the country, where yields have historically been low and where the yield gains attributable to hybrids are most apparent; currently 80% of India’s hybrid rice is limited to areas such as Jharkhand, Bihar, Uttar Pradesh and Uttarakhand. There have been significant efforts by state governments to encourage hybrid rice adoption, but uptake has been slow. For instance, Uttar Pradesh provides a 25% subsidy on hybrid seeds. In Uttarakhand, farmers get either R200 per quintal or 50% of the cost, whichever is less. And this year’s budget allocated R1,000 crore to help farmers in eastern India to boost the adoption of hybrid rice varieties.
While early efforts to develop and deliver hybrid technologies were due to the public sector and international research organisations, most of the new hybrids that have been released in recent years have been the result of private sector research. Because hybrids offer a form of biological intellectual property rights protection, they appear an ideal technology for further private sector investment. It is estimated that about $9 million was invested in research and development to improve yield performance, reduce yield variability and improve grain quality in 2009, with plans to invest further in marketing and distribution network. Similar investment to improve taste and cooking quality could also be initiated, addressing one of the major challenges constraining rapid adoption of hybrids throughout India. In addition, because of the intellectual property rights protection conferred by hybrids, they offer a platform through which improved traits can be almost immediately remunerative for private firms willing to make the upfront investments in the development of these improved traits (e.g., drought tolerance).
Ultimately, for the technology to be a viable solution for transforming rice cultivation throughout the country, increased public sector and private sector investments in the discovery, development and delivery stages of the innovation process will be needed to produce better adapted and commercially accessible hybrid rice that could translate into a wide range of positive impacts for both farmers as well as end consumers.
There is a limited scope to increase land under rice cultivation in India—it is difficult because 60% of farms depend on monsoon for rains and land and resources are increasingly under pressure from urbanisation. So, hybrid rice may contribute to addressing India’s serious food security concerns, including contributions to meeting the demands arising from the upcoming national food security programme that guarantees subsidised grains to millions of India’s poor.
---- Patrick Ward, Post-doctoral fellow at International Food Policy Research Institute-----------

Rain-fed growth for India

A good monsoon will drive demand in rural India, which accounts for 56% of the country’s total income.
This year, India saw the best monsoon in one and a half decades. Rural India—home to 70% of the population, accounting for 56% of the country’s total income and 33% of its savings—is set to benefit from the abundant rainfall this year. As per the India Meteorological Department, India’s monsoon rainfall in 2013 has been 5% above normal, with 30 out of 36 sub-divisions reporting normal or excess rainfall. Despite the low direct share of agriculture in India’s GDP, rural prosperity has been a key driver of the overall economy. Years of above average monsoon rainfall have been characterised by rising rural prosperity, and with India Inc progressively increasing its distribution footprint into rural India, we expect the multiplier impact of rural prosperity to be higher in the current year relative to previous years of strong monsoons. Our analysis of 24 years of monsoon data leads us to conclude that years of above average monsoon rainfall are marked by strong growth in agriculture GDP and correspondingly rising aggregate demand in the rural economy evidenced by high growth in demand for tractors/2W/4W etc.
With urban India seeing muted growth on rising interest rates and high inflation, the companies like M&M, Maruti, Bharti, HDFC Bank and ITC—which have invested in building a presence in rural India—should benefit from good monsoon.
There is clearly a strong empirical correlation between strong rainfall and agriculture GDP/foodgrain production growth. In our analysis of data of more than 2 decades, agriculture/foodgrain growth has averaged 5.3%-6.7% in years of above average rainfall while averaging only 1.9%/-0.6% in years of below average monsoon rainfall. Monsoon rainfall also tends to follow cyclical patterns, implying that a year of good monsoon preceded by a year of bad monsoon tends to generate higher agriculture GDP /foodgrain production growth This pattern sets a strong platform for agriculture GDP growth this year as 2012-13 monsoon rainfall was weak (at minus 9.5% below average) and erratic, leading to agriculture GDP growth of only 1.9%.
The Prime Minister’s Economic Advisory council expects FY14 agriculture GDP to rise by 4.8%. Rising penetration of mobile telephony, internet and satellite television coupled with increasing road connectivity (70% of India’s villages are now connected by all weather roads) and rising aspirations have resulted in an accelerated integration of the rural economy into the mainstream economy.
We are confident of a strong recovery in rural demand in FY14. Our confidence in estimating strong rural demand from high agricultural production stems from:
* Area sown under autumn Kharif crop is currently 5% higher on a yoy basis.
* 30 out of 36 meteorological sub divisions have seen either normal/above normal rainfall making the season among the best in terms of spatial distribution in 15 years.
* Water levels in India’s reservoirs currently stands at 15% above last year’s levels.
* Agriculturally critical months of June and July this year received extremely good rainfall which has facilitated extensive crop planting.
* Horticulture crop which yields significantly higher margins than foodgrains should also benefit immensely leading to higher farm incomes.
* High water tables are likely to encourage multiple cropping which should lead to higher cash flows for farmers.

Banks to disburse 7.5 lakh crore as agriculture loan

Union Finance Minister P Chidambaram on Sunday said that banks would disburse 7.5 lakh crore rupees as agriculture loan in this fiscal year. He also added that the interest for agriculture loan is only 7% and interest subvention of 4% is given to those who repay the loans.
Chidambaram said that Government is committed to give increased support price for food grains like paddy, wheat to farmers. "Agriculture is the poorvikam (original vocation) of the country and if the farm sector did not prosper...then the country will not prosper. In the last ten years the minimum support price for paddy has been raised ten times,” he said at the inauguration of the 1459th branch of Vijaya Bank in Thayamangalam here
Chidambaram urged farmers to avail bank loans, with the cheap rate of interest. He also emphasised on the need to increase food production and said that the agricultural sector had seen 'excessive' growth recently.

Improving access to services for women in agriculture


Groups that offer agricultural services must find ways to engage the millions of women working the fields who aren't being reached by current programmes
Agriculture extension programmes should focus on supporting and training the many millions of women who work on farms in India. Photograph: Str/EPA
Women account for 43% of the agricultural labour force (pdf) in developing countries on average but only receive about 5% of training and advisory services, known as agricultural extension. This makes them less productive than men, and closing that gap could reduce the number of undernourished people in the world by 12-17%. How might it be done?
A starting point is to look at how agricultural extension services are delivered. Traditionally, these have been provided by the public sector, with ministries of agriculture responsible for sending experts to visit farmers. But although women play a significant role in farming, they are still often perceived as not being "real" farmers.
"Many people assume that farmers are men," says Kristin Davis, aresearch fellow at the International Food Policy Research Institute. "In fact women are often either household heads themselves or by default because their husbands are working in cities or mines. But traditionally the focus has been on men and technology."
Persistent inequalities in land rights reinforce this exclusion, because women still hold less land than men in developing countries and have less security of tenure, so that when husbands die their land may go back to their family. This means that where extension services are delivered based on land ownership, women farmers are more likely to be passed over.
"There's also the fact that some people are landless and still farming," Davis adds. "In India, women go out and use land not owned by anybody. So we have to redefine what is a farmer."
Agricultural extension has seen a paradigm shift over the decades, moving from top-down 'training and visit' approaches to more participatory and demand-driven approaches such as farmer field schools and mobile data services. This has the potential to broaden access, but can also reinforce women's exclusion. ICT services delivering agricultural information, for example, still depend on women having access to technology and being able to pay for some private data services.
"Women often don't have access to the technology as well as men do," says Davis. "If there's a radio in the home it's often controlled by the man, and they listen to the programme the man wants."
In many countries, levels of numeracy and literacy are also lower for women, which means that even if they have access to information through mobile phones, they may not be able to translate that into improved farming practice.
One way to tackle this is to rely less on words and data, and more on visual transmission. In India, Digital Green's video-based form of agricultural extension is both visual and participatory, with farmers making videos to share with other farming communities.
"The literacy rate of men in rural India is around 77% and of women ... 58%, so video is powerful given the lower rate of literacy among women as well as the inherent visual nature of farming," says Rikin Gandhi, CEO of Digital Green.
Digital Green has used existing networks of women's self-help groups involved in micro-savings and credit to reach women farmers, and has found the video screenings to be a very popular form of outreach.
"Currently, 76% of the 115,000 farmers attending our video screenings are women," says Gandhi. "When women become the first recipients of new knowledge in their household, we have found that their husbands often ask them about what videos they watched. Over time, we have seen that some women are able to have more of a decision-making role in their households."
Possibly the best known participatory approach to extension is the farmer field school which first emerged in the late 1980s in Asia. Farmer field schools move away from the top-down style of training to make learning more farmer-led and inclusive, which can be a way of reaching more women farmers.
"Our research showed that farmer field schools are very effective at reaching women as well as men," says Davis. "It's taking place right there in the community, working on a field, and it's a group so it's more culturally appropriate in many places."
Even so, there are still some practical barriers to women's attendance, which are easily overlooked.
"Women, because of their multiple responsibilities in the household, may have a much more restricted ability to travel, particularly to evening meetings," says Kathleen Colverson, programme leader in livelihoods,gender and impact at the International Livestock Research Institute.
"That's a real concern, and it's something I've discussed with male extension agents. If you wish to encourage female attendance at meetings, provide transport and childcare so that women will be able to come."
The majority of extension workers are still male, and redressing this balance may also help make the services more accessible to women. According to Colverson, cultural norms in communities are more of a barrier than any reticence on the part of male extension workers or women farmers themselves.
"About 90% of extension workers are male and my experience has been that they recognise the need to reach out to women farmers, but they are clueless on how to do it or they are obstructed for other reasons," she says.
"At one training I did recently, one man stood up and said I really understand the need but show me how I can work with traditional male elders who are not receptive and not interested."
Addressing access to agricultural extension therefore depends on much more than just the provision of the service itself. Factors as diverse as cultural norms and access to childcare or even clean water can all directly influence women farmers' ability to access information and training.
"We have consistently advocated for free essential services, particularly water and sanitation services," says Ines Smyth, senior gender adviser at Oxfam. "They are crucial for women because they reduce the burden on their time as well as improving health and wellbeing. When they could be at training, they are not available because they're busy in their role as carers."
But, as Smyth points out, this also means there are various ways for development organisations to support women's access to agricultural information and training, without having to actually provide those services themselves.
"That's our responsiblity as practitioners, to work out how can we make the most difference," she says. "Where are the openings and opportunities, and who else is doing what? We need to think creatively about points of entry."

Agriculture growth likely to be 5% in 2013-14

Economists are expecting agriculture to grow five per cent in FY14 from the two per cent seen in the previous financial year. According to CLSA, the area sown is up seven per cent year-on-year and foodgrain production could reach a record 259 million tonnes in FY14. The brokerage also expects agriculture GDP to rise from last year's two per cent to five per cent this year. Rural India accounts for 56 per cent of the country's total income and 33 per cent of India's savings. Both incomes and savings are likely to rise substantially as this year has seen one of its best monsoons in over a decade and a half. Analysts believe, with Indian companies increasing their reach in rural areas, rural prosperity will improve the fortunes of corporate India, too. Deutsche Bank Global Markets Research has analysed 24 years of monsoon data and concluded that years of above-average monsoon rainfall are marked by strong growth in agriculture GDP and correspondingly rising aggregate demand in the rural economy, evidenced by high growth in demand for tractors/two-wheelers and four wheelers.
Not surprising, then, that Maruti is increasing its reach in rural India from 45,000 villages last year to 100,000 this year. The passenger car maker derives 35 per cent of its revenues from rural India. Similarly, 70 per cent of HDFC Bank's new branches have been opened in semi-urban and rural areas. Shree Cements derives nearly half of its cement sales from rural India. Mahindra & Mahindra have already seen a sharp pick-up in tractor sales over the past few months and currently the company derives 65 per cent of sales from rural India. Analysts say companies that have been focused on growing their rural markets should do well and the festive season would be a good indicator of how strong aggregate demand will be this year, thanks to a pick-up in rural incomes. ITC, Dabur and Mahindra are CLSA's preferred picks to play the (rural) theme.

Saturday, October 5, 2013

Horticulture Australia signs deal with Indian govt

Indian government institutes will now be able to engage with Australian research and development (R&D) agencies, through an agreement with Horticulture Australia Limited (HAL).
The Memorandum of Understanding (MoU) was signed with the Indian Council of Australian Research.
“India has one of the largest horticulture sectors in the world, with many of its growers facing similar challenges to Australian growers,” HAL chair Selwyn Snell said.
“Until now, the two countries have been working independently to advance their industries through research and development that focussed on overcoming such challenges. Working collaboratively will benefit both countries as we identify research gaps and potential opportunities.”
After the MoU was signed, a research workshop was held in Bangalore to identify key strategic collaboration areas, involving HAL, government departments, and representatives from various Australian horticultural sectors including apples, pears, almonds, mangoes, processing tomatoes, strawberries, table grapes and vegetables.