Los Angeles: SAGE, 2012. xxx, pp. 360 (Figures, tables, maps.) US$60.00, cloth. ISBN 978-81-321-0858-0.
The economic liberalization of 1991 was a watershed in Indian economic history. It launched India on a faster growth path and made the country into the toast of the whole world. We celebrate growth because it helps reduce poverty. The rate of poverty decline in India, however, was not commensurate with the rate of per capita GDP growth. In other words, “the poverty elasticity of growth” in India has been much lower than in other less developed countries. Why this might be so is a very interesting and important question, and there is every reason to believe that the answer lies in the pace of development in Indian agriculture. A large proportion of India’s poor subsist in agriculture, and an improvement in agricultural productivity would have a direct impact on India’s poverty. We cannot hope to understand the slow progress on the poverty front without understanding what has been happening in Indian agriculture. For any researcher who wants to understand the ebb and flow of development in Indian agriculture, this book is like manna from heaven.
This is not a book for light reading. In fact, half the pages are full of tables with numbers and flipping through it may be quite intimidating. It is an outcome of extremely painstaking work for which those of us who are looking for answers to questions on Indian development can only feel grateful. Using the data compiled by the Directorate of Economics and Statistics (DES) of the Ministry of Agriculture (Government of India), the authors trace the patterns and sources of growth in agricultural output and labour productivity across different regions of India and also across different time periods through a district-wide analysis. The analysis draws a detailed picture of how the extent as well as the sources of growth were different across three clearly identifiable time periods: 1962–65 to 1980–83, 1980–83 to 1990–93 and 1990–93 to 2005–08. The first period saw the early fruits of the Green Revolution in the well-irrigated areas of the northwest and the second its diffusion across the relatively less developed areas of east and central India. Most interestingly, in the third period (i.e., post-liberalization period), growth in agriculture decelerated; a surprising outcome as one expected that the sector would do much better than in the earlier period, as the official discrimination against it through adverse terms of trade would end. But several factors countered the favourable movement of the terms of trade. The high-yielding technology of the Green Revolution started experiencing diminishing returns while at the same time public investment in agriculture declined. Whatever growth took place in the post-liberalization era was largely the result of switching from food grains to high value added crops (e.g., Bt cotton).
The methodology used throughout the book is easy to understand. Output is measured in terms of Rupees per hectare at 1990–93 prices. A Cobb-Douglas production function is estimated with land, labour, fertilizer, tractors and infrastructure as inputs for each of the four time periods across all districts. Thus, diversification of a food grain area into higher value-added crops would have the same effect as an improvement in total factor productivity, and so it should. A comparison of coefficients across four regression equations corresponding to the four time periods gives us an idea of the changes taking place over time. For example, the marginal product of land (the coefficient of land in the regression equation) increases while that of labour decreases steadily from 1970–73 to 2005–08, indicating that the land to labour ratio declined during that period. This result brings out the alarming aspect of the Indian growth pattern: the rate of employment creation in non-farm sectors is unsatisfactory, unlike that in East and Southeast Asia. The fast-growing sectors in India did not absorb labour from agriculture fast enough and as a result the population pressure on land increased.
In the most recent period (2005–08), “labour” becomes statistically insignificant as a variable to explain the variation in the value of output per hectare across districts. This is very interesting in the context of all the complaints of the farmers about the shortage of labour they are facing today. Of course, the authors’ analysis does not go beyond 2008 and it would be fair to ask whether the picture has changed so drastically since 2008.
Another useful exercise that the authors undertake is the estimation of labour productivity (output per worker). This is important because output per worker is likely to be correlated to wages, and an increase in agricultural wages is a good indicator of a decline in poverty. Sadly, even the elasticity of labour absorption with respect to the value of output shows a clear and steady decline from the 1960s to 2005–8. Thus, during the post-liberalization period, neither farm nor non-farm sectors generated employment at a satisfactory rate. The authors could have done more to probe why this is so even in the farm sector. For example, the methodology treats fertilizer and tractors symmetrically as just two inputs. There is no attempt here to look for the labour-saving bias of tractors. Is it the type of crops or labour-saving machinery that was responsible for the low rate of employment creation?
What would be most interesting to the readers is an answer to the question: what should we do now? The last chapter sums up all the findings and offers sensible recommendations. The liberalized regime has certainly opened up the possibilities for exports and hence facilitated crop diversification. However, it has also increased the volatility through the fluctuations of international prices. An important recommendation therefore is to develop some institutional mechanisms to enable small farmers to take on such risks: crop and income insurance as well as a Price Stabilization Fund for small growers. Irrigation is also a key in lowering the risk and instability associated with new technologies that offer higher expected incomes. Typically, low productivity districts are also the dry land districts lacking in irrigation. The authors also remind us that though agriculture is an important factor in determining the rate of poverty decline, it is equally important that non-farm sectors raise their rate of labour absorption, thereby reducing the population stress on land.
On the whole, the book will be very rewarding to researchers working on Indian developmental issues.
Ashok Kotwal
The University of British Columbia, Vancouver, Canada
pp. 172-174