Wednesday, April 27, 2011

Agriculture–Pathways to Prosperity in Asia and the Pacific

Almost 4 months after the Rural Poverty Report 2011 was released, a newly published report from IFAD concentrates on rural poverty and agriculture in Asia and the Pacific region. The reason behind this increased attention on this part of the world may be that more than 680 million people in the Asia-Pacific region still continues to live on less than $1.25 a day, and 70 per cent of them reside in Bangladesh, India, Nepal and Pakistan. This has been observed by the report titled Agriculture–Pathways to Prosperity in Asia and the Pacific, March 2011. Most of the poor from this region are either landless or own a limited piece of land, possess large families, are less educated and have limited access to credit and technology.

The IFAD report shows that intensity of multidimensional poverty (MPI) is highest in South Asia, which houses 29.5 percent of global population, but has 51 per cent of the world’s multi-dimensionally poor. India, Bangladesh, Nepal and Pakistan have high MPIs in South Asia. 51 per cent of the population in Pakistan, 58 per cent in Bangladesh, 55 per cent in India, and 65 per cent of population in Nepal are MPI poor. Living standard has the highest contribution to poverty in India, Bangladesh and Nepal. Deprivation rates in health parameters are found high in Pakistan and Nepal. Deprivation in terms of nutrition is high in Nepal and India. China has only 13 per cent of the population that is MPI poor, while Thailand has only 0.8 per cent. India, Afghanistan and Bangladesh have close to 50 per cent of rural children who are undernourished.

Smallholders in India who operate/ own less than 2 hectares accounted for about 71 per cent of the rural households in 1993 and about 88 per cent in 2004 indicating increase in land fragmentation. Nearly, 25.3 percent of the rural households in India were chronically poor during the period 1971-1982. The NCAER study shows that 30.0 percent of the rural households in India were chronically poor during the period 1969-71.

Almost 70 percent of poor live in rural areas of Asia and they depend on agriculture for their livelihood. In South Asia, about 80 per cent of the poverty remains a rural problem despite rapid industrialization and economic growth, according to the report titled Agriculture–Pathways to Prosperity in Asia and the Pacific.

The IFAD report mentions some of the shocks that erode poor people's assets and capabilities such as: natural disasters, climate change, pest outbreaks (e.g. avian influenza), vulnerability to food price fluctuations, illness, and death. It explains some of the risk-coping mechanisms households usually undertake in the face of poverty for e.g. selling productive assets, borrowing, depleting savings, migrating, and reducing expenditure on food, healthcare and education (notably affecting women and children).

There exist gender inequalities in education, economic opportunities, wages and nature and extent of work, according to the IFAD report. A study in West Bengal shows that among women who had taken loans for income-generating activities, only 5 per cent reported having total autonomous control over the money; 56 per cent reported that they share control over the loan money with their husbands; and 38 per cent reported that their husbands have sole control over the proceeds of the loan. Women’s share in non-agricultural wage employment remains low, particularly in South Asia. For India, it is estimated that 55 per cent of the wage gap between men and women cannot be explained by productivity and endowments, which suggests the presence of systematic gender-based discrimination in pay.

The decline in the proportion of people living in rural areas between the period 2000-04 and 2005-09 has been more prominent in East Asia and South East Asia as compared to Central Asia and South Asia. The IFAD report suggests that rural population in Asia and the Pacific region is likely to peak in 2014, with the total numbering 2400 million, which would decline thereafter. The contribution of agricultural value added to GDP is low in the entire region, and declined marginally between 2000-04 and 2005-09 for South East Asia and Pacific Island, and, more significantly in East, South and Central Asia. South Asia (31 percent) has seen lowest growth in per capita income between 2000-04 and 2005-09 as compared to East Asia (64 percent) and Central Asia (43 percent).

The effect of rise in food prices on GDP between 2006 and 2007-08 is considerable as a 50 per cent rise in food price decreases the GDP of Asia and the Pacific Region by 1.05 per cent. A combined shock of a 60 per cent rise in food and fuel prices decreases GDP by 1.41 per cent.

The report finds that usage of ICTs helped farmers in terms of knowing prices of agricultural commodities or weather conditions for e.g. SEWA (India) performs this service for women and ITC’s e-choupal (India) uses SMS to inform small producers. In India, the number of self-help groups linked to banks has increased from about 500 in the early 1990s to more than 3 million in 2008. The Indian Dairy Cooperatives network comprises 12 million members, including landless labourers and women, and produces 22 per cent of India’s milk supply. In order to increase the welfare of migrants, Rajasthan introduced mobile ration cards for its them, while Orissa and Madhya Pradesh introduced improvements in the safety and efficiency of remittances.

The report finds that diversification of agriculture into livestock and aquaculture has added to increased prosperity and food security in China, Vietnam, Sri Lanka, Laos and Philippines. It finds that the linkage between agricultural (rural) and industry (mainly around urban centres) remained weak in major South Asian countries except China and Vietnam. In India during the process of economic transition, not enough movement of labour took place from agriculture to industry. On average, rural non-farm income (RNFY) constitutes roughly 50 per cent of rural household income in Asia and the Pacific Region, of which 40 per cent comes from local non-farm business and employment and the remaining from transfers and remittances. Due to paucity of human, financial and physical capital, the poor households often remain confined to the low-productivity non-farm activities, which trap them in poverty. Gender, caste and social status determine one's participation in non-farm jobs. Evidence suggests that each dollar of additional value added in agriculture generates USD 0.6 to USD 0.8 of additional rural nonfarm economy’s income in Asia and the Pacific Region. Based on state level time series data for India covering the period 1971-72 to 1983-84, it has been found that expansion of casual non-farm employment is strongly correlated with growth in agricultural wages.

On the basis of simulations the report finds that the Asia and Pacific region would require a 56 per cent increase in agricultural ODA, a 28 per cent increase in agricultural expenditure, a 23 per cent increase in fertilizer use, or a 24 per cent increase in agricultural investment during 2007-13 in order to achieve the MDG 1 (at US$2 poverty line). It suggests that investment in agriculture is the key to poverty alleviation. For the Asia and the Pacific region, the elasticity of the head-count ratio of poverty with respect to agricultural growth is -1.18 (at $2 a day poverty line) and -2.73 (at $1.25 a day poverty line). Government can play a pivotal role in organizing the smallholders (who face several challenges, such as high transaction costs in accessing inputs, credit and marketing facilities) so that they participate in supply chain/ supermarkets. IFPRI estimates that 87 per cent of the world’s small farms (those less than 2 hectares) are in Asia and the Pacific Region. Secured land rights and women having joint ownership of land can increase productive investment in agriculture.

Key findings of the report:

  • In 2005, the total number of people living in extreme poverty, defined as those living on less than US$1.25/day (2005 PPP) was 1.4 billion in the world. Of these, approximately 1 billion, i.e. about 70 per cent live in rural areas.

  • The number of rural poor has declined rapidly in Asia and the Pacific Region over the past decade (from 1057 million to 687 million).

  • While East Asia had over 500 million rural poor two decades ago, the number today stands at only 117 million.

  • The incidence of rural poverty has declined from 59 per cent to 31 per cent in the last two decades for the Asia and the Pacific region as a whole.

  • While in East Asia, poverty as a share of rural population is close to 15 per cent, in South Asia over 45 per cent of the rural people are poor.

  • In East Asia the rural poverty incidence declined from over 63 per cent to 15 per cent over the past two decades. Similarly, in South East Asia the incidence of rural poverty declined from 52 per cent to about 26 per cent in the last two decades.

  • Sri Lanka, Indonesia, Vietnam, Bangladesh, Lao PDR and China have made significant progress in reducing hunger. Slower progress has been made by India, Pakistan, the Philippines and Nepal.

  • 51 per cent of the population in Pakistan, 58 per cent in Bangladesh, 55 per cent in India, and 65 per cent of population in Nepal are MPI poor.

  • There are over one billion youth in the world today. Eighty five per cent of them live in the developing world. Some 61.5 per cent live in Asia and the Pacific.

  • In India, over 300,000 children work in the carpet industry, many of them under conditions that amount to bonded labour.

  • In rural India, about 47 per cent were poor while nearly 75 per cent were vulnerable.

  • In India, a study by Gaiha and Imai (2007) based on the analysis of the 61st NSS Round (2004-05) shows both higher incidence and intensity of poverty among the marginalised groups including Scheduled Castes and Scheduled Tribes. While the overall incidence of poverty in rural India was about 25 per cent, among the STs and SCs, about 44 per cent and 32 per cent, respectively, of the households were poor. The incidence of poverty among others was 19 percent. The causes behind this phenomenon are: poor quality of education, remote locations, limited access to markets and lack of decent physical and social infrastructure.

  • More than half the deaths caused by natural disasters in 1985-94 were concentrated in South Asia. From 1995-2004, the share of East Asia and the Pacific in the total number of deaths rose to 59 per cent while the share of South Asia dropped to about 20 per cent.

  • The average holding size is 0.5 hectare for Bangladesh, 0.8 hectare for Nepal and Sri Lanka, 1.4 hectares for India and 3 hectares for Pakistan.

  • There has been a fall or slowing down of growth in monthly wage rates in most countries of Asia and the Pacific region including India during 2006-2009.

  • Sectoral composition of rural non farm economy indicates that rural non-farm employment is almost equally distributed between manufacturing (27 per cent), trade and transport (29 per cent) and financial and personal services (31 per cent) in Asia and the Pacific Region.

  • In India, for instance, while the ratio of non-farm to agricultural income is 4.5 to 1 for the average household, for the poor it is only 0.75 to 1.

  • A 1 per cent growth in agricultural value added per capita results in a GDP (per capita) growth rate of 2.13 per cent.

  • South Asia (or South East Asia) would need only a 5 per cent (or 8 per cent) increase in annual growth rate of agricultural ODA, 2 per cent (or 4 per cent) increase in annual growth rate of agricultural expenditure, 3 per cent (or 4 per cent) increase in annual growth rate of fertilizer, or 2 per cent (or 3 per cent) increase in annual agricultural investment in 2007-13 over and above the baseline scenario to achieve MDG 1, at US$2 a day, by 2015.

  • The world population is expected to be about 9.1 billion in 2050. With increasing urbanization and high income levels, food production must increase by 70 per cent to meet the food demand in 2050. Since the scope for net increase in arable land is highly limited (especially in Asia and the Pacific Region), 90 per cent of this additional food requirement has to be met through increases in yields in areas with intensive agriculture.


Agriculture–Pathways to Prosperity in Asia and the Pacific by the IFAD, March 2011,

Investing in agriculture key to ending extreme rural poverty in South Asia – UN, The United Nations, 19 April, 2011,