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Investment, subsidies, and pro-poor growth in rural India:

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  • Fan, Shenggen
  • Gulati, Ashok
  • Thorat, Sukhadeo

Abstract

"This paper reviews the trends in government subsidies and investments in and for Indian agriculture; develops a conceptual framework and model to assess the impact of various subsidies and investments on agricultural growth and poverty reduction; and, presents several reform options with regard to re-prioritizing government spending and improving institutions and governance. There are three major findings. First, initial subsidies in credit, fertilizer, and irrigation have been crucial for small farmers to adopt new technologies. Small farms are often losers in the initial adoption stage of a new technology since prices of the agricultural products are typically being pushed down by greater supply of products from large farms, which adopted the new technology. But as more and more farmers have adopted HYV, continued subsidies have led to inefficiency of the overall economy. Second, agricultural research, education, and rural roads are the three most effective public spending items in promoting agricultural growth and poverty reduction during all periods. Finally, the trade-off between agricultural growth and poverty reduction is generally small among different types of investments. As for agricultural research, education, and infrastructure development, they have large growth impact and a large poverty reduction impact. Several policy lessons can be drawn. Agricultural input and output subsidies have proved to be unproductive, financially unsustainable, environmentally unfriendly in recent years, and contributed to increased inequality among rural Indian states. To sustain long-term growth in agricultural production, and therefore provide a long-term solution to poverty reduction, the government should cut subsidies of fertilizer, irrigation, power, and credit and increase investments in agricultural research and development, rural infrastructure, and education. Promoting nonfarm opportunities is also important. However, simply reallocating public resources is not the full solution. Reforming institutions can have an equal, if not larger, impact on future agricultural and rural growth and rural poverty reduction." from Authors' Abstract

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Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series IFPRI discussion papers with number 716.

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Date of creation: 2007
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Handle: RePEc:fpr:ifprid:716

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Keywords: Rural poverty; Agricultural growth; Public investments; subsidies; Pro-poor growth;

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Cited by:
  1. Yoseph Yilma Getachew, 2012. "Distributional effects of public policy choices," Working Papers 2012_04, Durham University Business School.
  2. Hazell, Peter B.R., 2009. "The Asian Green Revolution:," IFPRI discussion papers 911, International Food Policy Research Institute (IFPRI).
  3. Gulati, Ashok, 2009. "Emerging Trends in Indian Agriculture: What Can We Learn from these?," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 22(2).
  4. Joseph, Kelli L., 2010. "The politics of power: Electricity reform in India," Energy Policy, Elsevier, vol. 38(1), pages 503-511, January.
  5. Renkow, Mitch, 2010. "Impacts of IFPRI's "priorities for pro-poor public investment" global research program:," Impact assessments 31, International Food Policy Research Institute (IFPRI).
  6. Ministry of Agriculture GOI, 2012. "State of Indian Agriculture 2011-12," Working Papers id:4851, eSocialSciences.
  7. Klasen, Stephan & Reimers, Malte, 2013. "Looking at Pro-Poor Growth from an Agricultural Perspective," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149745, Agricultural and Applied Economics Association.
  8. Spielman, David J. & Kolady, Deepthi & Cavalieri, Anthony & Chandrasekhara Rao, N., 2011. "The seed and agricultural biotechnology industries in India: An analysis of industry structure, competition, and policy options," IFPRI discussion papers 1103, International Food Policy Research Institute (IFPRI).
  9. Pfeiffer, Lisa & Lin, Cynthia, 2013. "The Effects of Energy Prices on Groundwater Extraction in Agriculture in the High Plains Aquifer," 2014 Allied Social Science Association (ASSA) Annual Meeting, January 3-5, 2014, Philadelphia, PA 161890, Agricultural and Applied Economics Association.
  10. Mason, Nicole M. & Jayne, Thomas S. & Myers, Robert J., 2012. "Smallholder Behavioral Responses to Marketing Board Activities in a Dual Channel Marketing System: The Case of Maize in Zambia," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126927, International Association of Agricultural Economists.
  11. Mason, Nicole M. & Jayne, Thomas S. & Myers, Robert J., 2011. "Zambian Smallholder Behavioral Responses To Food Reserve Agency Activities," Food Security Collaborative Working Papers 120768, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  12. Stephan Klasen & Jan Priebe & Robert Rudolf, 2010. "Cash Crop Choice and Income Dynamics in Rural Areas: Evidence for Post-Crisis Indonesia," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 33, Courant Research Centre PEG.
  13. Raabe, Katharina, 2011. "The Dynamics of Service Delivery and Agricultural Development in India - A District-Level Analysis -," Proceedings of the German Development Economics Conference, Berlin 2011 68, Verein für Socialpolitik, Research Committee Development Economics.
  14. Mogues, Tewodaj & Yu, Bingxin & Fan, Shenggen & Mcbride, Linden, 2012. "The impacts of public investment in and for agriculture: Synthesis of the existing evidence," IFPRI discussion papers 1217, International Food Policy Research Institute (IFPRI).
  15. repec:ags:midips:140910 is not listed on IDEAS
  16. Grabowski, Richard, 2009. "An alternative Indian model?," Journal of Asian Economics, Elsevier, vol. 20(1), pages 50-61, January.
  17. Gulati, Ashok, 2009. "Indian Agriculture: Changing Landscape," 2009 Conference, August 16-22, 2009, Beijing, China 53205, International Association of Agricultural Economists.
  18. Akramov, Kamiljon T., 2009. "Decentralization, agricultural services and determinants of input use in Nigeria:," IFPRI discussion papers 941, International Food Policy Research Institute (IFPRI).
  19. Birner, Regina & Resnick, Danielle, 2010. "The Political Economy of Policies for Smallholder Agriculture," World Development, Elsevier, vol. 38(10), pages 1442-1452, October.

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