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India 1960-2010: Structural Change, The Rural Nonfarm Sector, and the Prospects for Agriculture

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Alwin Dsouza, Arizona State University
This presentation is dedicated to the memory of Dr. Hans P. Binswanger-Mkhize who sadly passed away in August 2017
Presented at the ReSAKSS-Asia conference “Agriculture and Rural Transformation in Asia: Past Experiences and Future Opportunities”. An international conference jointly organized by ReSAKSS-Asia, IFPRI, TDRI, and TVSEP project of Leibniz Universit Hannover with support from USAID and Deutsche Forschungsgemeinschaft (DFG) at the Dusit Thani Hotel, Bangkok, Thailand December 12–14, 2017.

Published in: Economy & Finance
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India 1960-2010: Structural Change, The Rural Nonfarm Sector, and the Prospects for Agriculture

  1. 1. INDIA 1960-2010: STRUCTURAL CHANGE, THE RURAL NONFARM SECTOR, AND THE PROSPECTS FOR AGRICULTURE Alwin Dsouza, Arizona State University This presentation is dedicated to the memory of Dr. Hans P. Binswanger-Mkhize who sadly passed away in August 2017 ReSAKSS-Asia conference December 12, 2017
  2. 2. Outline 1. Rapid growth, but slow structural transformation 2. Poverty, labor markets. 3. The rural non-farm sector and its drivers 4. The vision for agriculture, policies and programs
  3. 3. The stylized Structural Transformation  At the outset of Structural Transformation (ST), labor and economic output are both concentrated in Agriculture  Because labor productivity in agriculture is lower than in industry  the share of labor in agriculture exceeds the share in nonagriculture  During ST, the gaps in labor productivity and between the agricultural shares of labor and output widen  A turning point is reached when the productivities and the shares start converging  recently estimated by Peter Timmer at between 1600 and 9000 dollars per capita incomes ($ of 2000)  Convergence is driven by rapid absorption of labor in the
  4. 4. Structural transformation: Korea and India
  5. 5. Structural Transformation in India
  6. 6. Productivity Growth in Agriculture * till 2007 Indicator Growth rates for decade or three year avg. centered on last year shown Average growth rate of 2006--- 2009 1961--- 1970 1971---1980 1981--- 1990 1991---2000 2001--- 2009 Agricultural GDP growth 3.8 1.5 3.3 2.7 2.8 3.1 Growth of Agric. Output per worker 0.6 0.4 2.3 1.2 1.1 1.5 TFP growth India* 0.0 0.0 2.0 1.5 1.9* TFP growth China* 0.0 0.0 2.8 4.2 2.7* Total population growth 2.1 2.3 2.2 2.0 1.6 * Till 2007
  7. 7. Structural Transformation has been very slow, a turning point may be far away The rural and agricultural labor forces are still growing Rural-urban migration is very slow After a sharp slowdown, agricultural productivity growth has accelerated only very recently Increasingly divergence in labor productivity between agriculture and non-agriculture
  8. 8. The rural non-farm sector: the major source of rural income and employment growth
  9. 9. India’s structural transformation is stunted Much of the growing labor force is stuck in rural areas The largest growth in nonagricultural employment is in the rural non-farm sector rather than in urban areas In all sectors there are few high quality jobs with security of employment and benefits While the urban-agricultural productivity differential has been rising, rural urban income differences grew little on account of non-farm growth
  10. 10. Major reforms in policies and programs are required  More responsive, accountable and better financed research system  Efficient use of inputs through better technology and genetically advanced crops.  Better financed, diversified and accountable agricultural extension system.  Greater role for private sector in both research and extension  Expansion of electricity for effective use of irrigated water.
  11. 11. The marketing and value chain This sector is modernizing very rapidly Remaining constraints in marketing systems need to be eliminated Competition in the sector needs to be fostered to contain margins between producer and consumer prices Efficient farmer organizations and contract farming need to develop much faster
  12. 12. Thank You

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