igidr-ifpri -spatial effects of agricultural policy choices, a-ganesh kumar, igidr

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IGIDR-IFPRI Conference on Harnessing Opportunities to Improve Agri-Food Systems 24-25 July, 2014 Spatial Effects of Some Agricultural Policy Choices A. Ganesh-Kumar, IGIDR, Mumbai Manoj Panda, IEG, New Delhi

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Indira Gandhi Institute for Development Studies(IGIDR), and the International Food Policy Research Institute (IFPRI) on ‘Harnessing Opportunities to Improve Agri-Food Systems’ on July 24-25 , 2014 in New Delhi. The two day conference aims to discuss the agricultural priority of the government and develop a road map to realise these priorities for improved agri food systems.

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Page 1: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

IGIDR-IFPRI

Conference on

“Harnessing

Opportunities to

Improve Agri -Food

Systems”

24-25 July, 2014

Spatial Effects of Some Agricultural

Policy Choices

A. Ganesh-Kumar, IGIDR, Mumbai

Manoj Panda, IEG, New Delhi

Page 2: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Enormous spatial variation in Indian agriculture

Crops cultivated, resource base (irrigation), technological progress & input usage pattern, productivity and output levels, ...

Constitutionally agriculture is a state subject

Agricultural performance in different regions likely to have differential impacts

Understanding the spatial aspects is critical for policy analysis

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 2

Spatial dimension in Indian agriculture

Page 3: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Seeks to understand the spatial dimensions of some agricultural policy choices

Total factor productivity improvement

Fertiliser subsidy reduction

Irrigation expansion

Greater market integration

Removal of agricultural export barriers

Using a spatial CGE model

Framework allows for inter-state mobility of labour and transmission of price changes across the country

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 3

This presentation

Page 4: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Based on the following study:Ganesh-Kumar, A. and M. Panda (2014) “Some Policy Options for

Indian Agriculture: Analysis Using a Regional Computable General

Equilibrium Model”, report prepared for the World Bank

References should cite the above mentioned study

These are the authors’ views – not to be

attributed to IGIDR / IEG / World Bank

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 4

This presentation …

Page 5: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Model is based on a “regional” SAM for 2006-07

23 regions

24 commodities: 15 agricultural, 5 industrial & 4 services

32 production activities: 23 regional agriculture + 9 non-agriculture

6 labour types: location (rural/urban) & skill level (unskilled, semi-skilled and skilled)

5 capital types: 3 agricultural (region-specific) & 2 non-agricultural

137 household types: location by States and Rural / Urban & 3 MPCE percentiles

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 5

Features of the spatial CGE model

Page 6: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Captures the spatial location of agricultural production and household consumption

Agricultural supply and household behaviour are modeled at the State level

Non-agriculture supply is “national”

Government is an aggregate of Central and State governments

Nationally clearing commodity & labour markets with inter-state price differentials through fixed coefficients

Locally clearing markets for land (irrigated/rain -fed)

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 6

Features of the spatial CGE model …

Page 7: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Agricultural supply determined regionally Activity-commodity

approach o One activity produces

more than one commodity

o A commodity is produced by more than one activity

State-specific input & output prices

National commodity output = sum of state outputs

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 7

Features of the spatial CGE model …

Agricultural supply

Raw materials

Labour by type Regional Paddy

agriculture

Irrigated land activity Wheat

maximizes

Rainfed land profits …

Other ag. Capital

Optimal factor demand Optimal output mix

Total cost = Total revenue

Page 8: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Non-agricultural supply determined nationally

National treatment of factors used in non-agriculture

Distinguishes several prices – imports, exports, domestic market price, producer price

Consumer price index is the numeraire

Household are spatially located

Income from factor endowment, government transfers and foreign remittances

Outlays on direct taxes, savings, and consumption

Commodity demands through piece-wise Linear Expenditure System

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 8

Features of the spatial CGE model …

Page 9: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Government

Revenue from taxes (direct, domestic indirect, tariffs), and from its ownership of capital

Expenditure on subsidies, transfers and current consumption

Savings is residually determined

Balance-of-Payments

Commodity imports & exports determined endogenously through Armington approach

oDomestically produced and traded goods are imperfect substitutes

Various foreign flows fixed in Dollar terms – Net factor income, remittances, government borrowings

Capital flows clear the forex market at fixed exchange rate

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 9

Features of the spatial CGE model …

Page 10: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Savings – investment

Investment levels are exogenous

oDemand for capital goods – as fixed proportion of total fixed capital investment

oStock (working capital) requirements for each commodity fixed in real terms

Rupee savings from households, government & foreign are endogenous

Savings adjust to meet investment targets

Johansen closure – tax rate for top 20% of households is endogenous

oHousehold disposable income & hence private savings

oGovernment revenue & hence government savings

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 10

Features of the spatial CGE model …

Page 11: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

11IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014

3% TFP exogenous rise in all

States

Page 12: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Autonomous rise in productivity

Technological change

oResearch outcome – Better seed varieties

o Improvements in extension

Modern farm equipment

Improvements in farmer/worker skills

Farm / natural resources management practices

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 12

3% TFP exogenous rise in all States

Page 13: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 13

Impacts of TFP rise

Rural

Decile

01-04

Rural

Decile

05-08

Rural

Decile

09-10

Urban

Decile

01-04

Urban

Decile

05-08

Urban

Decile

09-10

Jammu & Kashmir 3.13 0.10 0.20 -2.95 0.02 -0.08 0.00 0.00 0.00 0.00 0.00 0.00

Himachal Pradesh 3.03 0.00 0.20 -2.97 -0.01 -0.21 -0.01 -0.01 -0.01 0.00 0.00 0.00

Punjab 2.96 -0.05 -0.02 -2.99 -0.07 -0.09 -0.01 -0.02 -0.04 -0.01 -0.02 -0.03

Uttarakhand 3.05 0.00 0.19 -2.99 -0.01 -0.19 -0.01 -0.01 -0.01 0.00 0.00 -0.01

Haryana 3.02 0.00 0.08 -2.96 -0.01 -0.09 -0.01 -0.01 -0.01 0.00 -0.01 -0.01

Delhi 3.01 0.00 0.03 -2.95 -0.01 -0.04 -0.03 -0.02 0.00 -0.01 -0.01

Rajasthan 3.17 0.15 0.25 -2.92 0.03 -0.07 -0.01 -0.01 0.00 0.00 0.00 0.00

Uttar Pradesh 2.97 -0.05 0.00 -2.98 -0.02 -0.07 -0.01 -0.01 -0.01 0.00 -0.01 -0.01

Bihar 3.02 0.00 0.05 -2.96 -0.01 -0.06 0.00 -0.01 -0.01 0.00 0.00 -0.01

Assam 2.98 -0.06 0.08 -2.98 -0.02 -0.15 -0.01 -0.01 -0.01 -0.01 -0.01 0.00

West Bengal 3.06 0.04 0.11 -2.94 0.00 -0.06 -0.01 0.00 -0.01 0.00 0.00 0.00

Jharkhand 3.05 0.00 0.14 -2.99 -0.01 -0.15 -0.01 -0.01 -0.01 0.00 0.00 -0.01

Odisha 3.05 0.00 0.09 -2.99 -0.01 -0.10 -0.03 -0.03 -0.02 -0.02 -0.01 -0.01

Chattisgarh 3.05 0.00 0.08 -2.98 -0.01 -0.09 -0.03 -0.03 -0.02 -0.02 -0.01 -0.01

Madhya Pradesh 3.10 0.05 0.13 -2.97 0.01 -0.06 0.00 -0.01 -0.01 0.00 0.00 0.00

Gujarat 3.02 0.00 0.08 -2.96 -0.01 -0.08 -0.02 -0.02 -0.01 -0.01 -0.01 -0.01

Maharastra 2.79 -0.26 -0.13 -3.04 -0.05 -0.18 -0.03 -0.02 -0.02 -0.01 -0.01 -0.02

Andhra Pradesh 3.02 0.00 0.06 -2.96 -0.01 -0.07 -0.01 -0.01 -0.02 0.00 0.00 -0.01

Karnataka 3.03 0.00 0.06 -2.97 -0.01 -0.08 -0.01 -0.01 -0.01 -0.01 0.00 -0.01

Kerala 3.02 0.00 0.46 -2.94 -0.01 -0.46 -0.03 -0.02 -0.01 -0.01 -0.01 0.00

Tamil Nadu 3.00 0.00 0.03 -2.95 -0.01 -0.04 -0.03 -0.02 -0.02 -0.01 -0.01 -0.01

North-East 3.02 0.00 0.05 -2.96 -0.01 -0.05 -0.01 -0.01 -0.02 0.00 -0.01 -0.01

Union Territories 0.01 0.00 0.03 -0.02 -0.01 -0.04 -0.02 -0.03 -0.01 -0.01 -0.01 -0.01

Household real income per capitaPrice of

aggregate

intermedi

ate input

Price of

value

added in

agriculture

Price of

aggregate

agricultural

output

Aggregate

intermedia

te input

usage

Aggregate

agricultural

output

State Value

added in

agriculture

Page 14: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Aggregate agricultural output rises in all states

2.79% in Maharashtra to 3.13% in Jammu and Kashmir

Almost all gain in output is neutralised by fall in agricultural prices in all states

Hardly any gain in income for most households

Efficiency gain primarily through changes in cropping pattern / output mix within each state

Changes in shares of states across states

National output of commodities doesn’t change much

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 14

Impacts of TFP rise …

Page 15: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 15

Impacts of TFP rise …

Region Paddy WheatOther

CerealsPulses Sugarcane Oilseeds Fibres

Plantation

cropsFruits Vegetable

Other

crops

Milk & milk

product

Other

livestock

prod.

Poultry &

EggsFishing

Jammu & Kashmir 0.16 0.15 0.13 0.17 0.13 -0.27 0.25 0.00 0.13 0.00 0.35 0.13 0.23 0.13 0.16

Himachal Pradesh -0.01 -0.02 -0.04 0.00 -0.04 -0.44 0.08 -0.04 -0.04 -0.17 0.18 -0.04 0.06 -0.04 -0.01

Punjab 0.00 -0.01 -0.03 0.00 -0.03 -0.43 0.09 0.00 -0.03 -0.16 0.18 -0.03 0.07 -0.03 -0.01

Uttarakhand 0.03 0.02 0.00 0.04 0.00 -0.40 0.00 0.00 0.00 -0.13 0.22 0.00 0.10 0.00 0.03

Haryana 0.07 0.06 0.04 0.08 0.04 -0.36 0.16 0.00 0.04 -0.09 0.25 0.04 0.14 0.04 0.07

Delhi 0.00 -0.01 -0.03 0.01 0.00 -0.43 0.00 0.00 -0.03 -0.16 0.18 -0.03 0.07 -0.03 0.00

Rajasthan 0.16 0.16 0.14 0.17 0.14 -0.26 0.25 0.14 0.14 0.01 0.35 0.14 0.24 0.14 0.16

Uttar Pradesh -0.03 -0.03 -0.05 -0.02 -0.05 -0.45 0.06 -0.05 -0.05 -0.19 0.16 -0.05 0.04 -0.06 -0.03

Bihar 0.02 0.01 -0.01 0.02 -0.01 -0.41 0.11 -0.01 -0.01 -0.14 0.20 -0.01 0.09 -0.01 0.01

Assam -0.05 -0.06 -0.08 -0.04 -0.08 -0.47 0.04 -0.08 -0.08 -0.21 0.14 -0.08 0.02 -0.08 -0.05

West Bengal 0.05 0.04 0.02 0.06 0.02 -0.38 0.14 0.02 0.02 -0.11 0.23 0.02 0.12 0.02 0.05

Jharkhand 0.01 0.01 -0.02 0.02 -0.02 -0.41 0.10 0.00 -0.01 -0.15 0.20 -0.02 0.08 -0.02 0.01

Odisha -0.03 -0.03 -0.05 -0.02 -0.05 -0.45 0.06 -0.05 -0.05 -0.18 0.16 -0.05 0.05 -0.05 -0.03

Chhattisgarh 0.03 0.02 0.00 0.04 0.00 -0.39 0.12 0.00 0.00 -0.13 0.22 0.00 0.10 0.00 0.03

Madhya Pradesh 0.03 0.02 0.00 0.03 0.00 -0.40 0.12 0.00 0.00 -0.13 0.21 0.00 0.10 0.00 0.02

Gujarat -0.02 -0.03 -0.05 -0.02 -0.05 -0.45 0.07 -0.05 -0.05 -0.18 0.16 -0.05 0.05 -0.05 -0.03

Maharashtra -0.22 -0.23 -0.25 -0.22 -0.25 -0.65 -0.13 -0.25 -0.25 -0.38 -0.04 -0.25 -0.15 -0.25 -0.23

Andhra Pradesh 0.03 0.02 0.00 0.04 0.00 -0.40 0.12 0.00 0.00 -0.13 0.22 0.00 0.10 0.00 0.03

Karnataka -0.03 -0.03 -0.06 -0.02 -0.06 -0.45 0.06 -0.06 -0.05 -0.19 0.16 -0.06 0.04 -0.06 -0.03

Kerala 0.22 0.00 0.19 0.23 0.19 -0.21 0.31 0.19 0.20 0.06 0.41 0.19 0.29 0.19 0.22

Tamil Nadu -0.05 0.00 -0.07 -0.04 -0.07 -0.47 0.04 -0.07 -0.07 -0.21 0.14 -0.07 0.02 -0.07 -0.05

North-East 0.02 0.01 -0.01 0.03 -0.01 -0.41 0.11 -0.01 -0.01 -0.14 0.21 -0.01 0.09 -0.01 0.02

Union Territories 0.00 0.00 -0.02 0.01 -0.02 -0.42 0.09 0.00 -0.02 -0.16 0.19 -0.02 0.07 -0.02 0.00

All India 0.01 0.01 -0.01 0.00 -0.07 -0.40 0.06 -0.03 -0.06 -0.16 0.21 -0.01 0.09 -0.01 0.02

Page 16: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

16IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014

TFP rise in all States

+

50% fertilizer subsidy reduction

Page 17: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 17

Impacts of TFP rise + fertilizer subsidy

reduction

Rural

Decile

01-04

Rural

Decile

05-08

Rural

Decile

09-10

Urban

Decile

01-04

Urban

Decile

05-08

Urban

Decile

09-10

Jammu & Kashmir -9.71 -10.95 -14.72 -8.30 -6.98 -2.86 -1.14 -1.56 -1.68 -0.41 -0.89 -1.57

Himachal Pradesh 6.50 1.60 20.44 -8.20 -3.73 -18.78 -0.58 -1.17 -1.61 -0.09 -0.76 -1.43

Punjab -17.69 -16.86 -31.58 -19.83 -20.56 -3.46 -0.61 -3.04 -8.19 -0.98 -3.32 -8.00

Uttarakhand 7.71 1.45 16.18 -9.44 -3.79 -15.99 -0.97 -1.29 -1.63 -0.33 -0.98 -1.47

Haryana 3.17 0.09 0.40 -7.05 -4.16 -4.45 -0.49 -1.30 -1.87 -0.02 -0.92 -1.59

Delhi 3.83 1.59 -1.65 -5.85 -3.74 -0.57 -1.96 -2.16 -0.51 -1.09 -1.59

Rajasthan -2.89 -6.00 -4.71 -8.92 -5.86 -7.14 0.04 -0.94 -2.01 0.32 -0.91 -1.95

Uttar Pradesh 1.60 -0.74 -2.12 -6.60 -4.36 -3.00 0.16 -0.75 -1.47 0.35 -0.77 -1.49

Bihar 36.53 28.89 39.11 1.68 7.69 -0.23 0.40 1.48 6.18 1.17 1.89 6.17

Assam -19.02 -21.57 -20.89 -9.04 -6.04 -6.85 -0.10 -0.48 -1.03 0.21 -0.35 -1.57

West Bengal 8.52 6.13 3.40 -4.36 -2.19 0.39 -0.27 0.40 -0.87 0.31 -0.18 -0.26

Jharkhand 3.09 -1.40 2.84 -8.66 -4.45 -8.39 -0.77 -0.74 -1.16 0.27 -0.65 -1.15

Odisha 2.58 0.15 -0.89 -6.47 -4.16 -3.16 -0.36 -0.43 -0.82 0.27 -0.30 -1.04

Chattisgarh 1.16 0.00 -3.08 -5.32 -4.19 -1.15 -0.19 -0.74 -1.29 0.37 -0.63 -1.32

Madhya Pradesh -0.35 -3.41 -3.15 -8.38 -5.43 -5.69 -0.51 -0.64 -1.90 0.13 -0.92 -1.95

Gujarat 4.77 0.70 4.17 -7.75 -3.98 -7.18 -0.57 -1.05 -1.70 -0.13 -0.90 -1.39

Maharastra -31.87 -34.67 -32.74 -12.78 -8.96 -11.56 -1.19 -0.68 -1.75 0.11 -0.96 -2.59

Andhra Pradesh 3.07 1.54 -2.04 -5.16 -3.71 -0.19 -0.33 -0.95 -1.47 -0.10 -0.65 -1.07

Karnataka 3.01 0.58 -0.73 -6.34 -4.04 -2.78 -0.67 -1.13 -1.50 -0.04 -0.82 -1.43

Kerala 4.80 1.19 38.18 -7.36 -4.04 -29.73 -0.94 -1.27 -1.57 -0.32 -0.79 -1.34

Tamil Nadu 2.58 0.31 -4.22 -6.29 -4.14 0.39 -0.76 -1.21 -1.60 -0.12 -0.83 -1.40

North-East 2.50 1.60 -2.70 -4.61 -3.74 0.51 -0.76 -0.79 -0.81 -0.09 -0.20 -0.76

Union Territories 0.59 1.56 -1.87 -2.84 -3.75 -0.39 -0.20 -1.17 -1.78 -0.20 -0.81 -1.36

State Aggregate

agricultural

output

Value

added in

agriculture

Price of

aggregate

agricultural

output

Price of

value

added in

agriculture

Price of

aggregate

intermedi

ate input

Household real income per capitaAggregate

intermedia

te input

usage

Page 18: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Fertilizer price rises by 4%, demand falls by 6%

Level and direction of change in state-level agricultural output is not same Large output loss – J&K, PB, RJ, AS, MP, MH

Value added changes in states are modest but mostly similar in direction

Considerable changes in the national agricultural commodity output basket Rise – Vegetables, other crops, livestock, fishery & fibres

Fall – Foodgrains, sugarcane, oilseeds, plantation crops, fruits, dairy

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 18

Impacts of TFP rise + fertilizer subsidy

reduction …

Page 19: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 19

Impacts of TFP rise + fertilizer subsidy

reduction …

Commodity Domestic

output

Total

domestic

demand

Total

househol

d

demand

Imports Exports Sales

price

received

by

producer

s

Price of

composit

e good

Paddy -1.43 -1.58 -0.04 -9.59 2.69 2.98 3.05

Wheat -2.33 -3.37 0.07 -39.67 14.22 -12.66 -12.27

OCereals -0.22 -0.38 0.01 -25.52 8.06 -5.49 -5.43

Pulses -1.78 -1.83 0.09 -15.29 12.59 -5.62 -5.58

Sugarcane -1.74 -1.74 -1.86 -0.40 -0.40

Oilseeds -2.18 -2.21 -6.52 -1.66 0.65 7.07 7.09

Fibres 2.41 2.12 -35.05 36.10 -26.95 -26.78

Plantation crops -0.96 -1.54 -1.02 -10.20 7.99 -1.61 -1.13

Fruits -1.11 -1.87 -2.17 -7.71 5.89 0.79 1.45

Vegetables 13.02 10.42 13.41 -26.59 24.70 -25.48 -24.02

Other crops 13.63 12.24 40.41 -47.58 58.63 -43.97 -43.40

Milk and milk products -1.74 -1.74 -1.78 -12.32 3.94 1.38 1.38

Other liv.st. produ. & Gobar Gas 13.00 12.06 35.59 -32.46 32.35 -30.47 -29.98

Poultry & Eggs 3.19 2.92 5.04 -13.95 11.33 -8.24 -8.04

Natural resources 3.77 -2.65 -2.35 -6.29 1.03 -1.27 3.42

Fishing 10.80 10.07 12.94 -16.64 13.88 -15.78 -15.31

Agro-processing -0.98 -2.21 -2.41 -11.70 3.42 -0.87 0.16

Textiles & garments 2.86 1.21 0.59 -16.73 3.07 -5.13 -4.21

Fertilizers -8.32 -5.86 16.17 5.69 4.24 19.99

Manufacturing -1.58 -3.90 -5.38 -7.27 2.68 1.87 4.25

Transport -2.24 -2.81 -2.92 -9.74 3.94 -0.40 0.38

Storage and warehousing -4.17 -4.17 -1.69 -1.69

Trade -1.29 -1.73 -0.73 4.46 -3.02 -2.41

Services -1.32 -2.06 -1.75 -10.48 3.99 -1.82 -0.95

Page 20: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

20IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014

TFP rise in all States

+

Irrigation expansion in all states

Page 21: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

5% of rain-fed land in each state is converted

into irrigated land

Stock of irrigated land in each state expands by

more than 5% by state-specific cropping

intensity factor

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 21

TFP rise in all States +

Irrigation expansion in all states

Page 22: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 22

Impacts of TFP + Irrigation

Rural

Decile

01-04

Rural

Decile

05-08

Rural

Decile

09-10

Urban

Decile

01-04

Urban

Decile

05-08

Urban

Decile

09-10

Jammu & Kashmir 17.57 13.09 16.19 -0.89 3.04 0.29 0.21 0.21 0.33 0.15 0.18 0.27

Himachal Pradesh 4.95 1.72 3.21 -3.46 -0.37 -1.81 0.01 0.19 0.11 0.19 0.15 -0.03

Punjab 2.40 -0.33 -1.81 -4.92 -2.30 -0.83 0.31 0.07 -0.47 0.11 -0.09 -0.57

Uttarakhand 9.46 5.60 8.35 -2.68 0.89 -1.67 0.35 0.34 0.35 0.24 0.19 0.24

Haryana -0.24 -2.85 -4.00 -4.58 -1.99 -0.83 0.32 0.28 -0.01 0.20 0.08 -0.23

Delhi 2.16 -0.58 -1.58 -3.82 -1.14 -0.15 0.23 0.11 0.11 0.07 -0.02

Rajasthan 11.79 8.05 10.29 -1.85 1.55 -0.51 -0.01 0.24 0.87 0.29 0.43 0.81

Uttar Pradesh 2.34 -0.65 -0.62 -3.75 -0.83 -0.86 0.30 0.20 0.03 0.19 0.09 -0.07

Bihar 0.16 -2.44 -3.25 -4.27 -1.70 -0.87 0.23 0.06 -0.39 0.15 -0.05 -0.50

Assam 9.12 5.65 6.70 -2.84 0.37 -0.62 0.21 0.21 0.20 0.14 0.13 -0.04

West Bengal 1.47 -1.43 -1.63 -4.14 -1.30 -1.10 0.10 -0.18 0.08 0.09 -0.06 -0.43

Jharkhand 5.28 1.80 2.92 -3.48 -0.17 -1.25 0.22 0.29 0.17 0.21 0.16 0.17

Odisha 3.39 -0.07 0.77 -3.93 -0.58 -1.41 0.24 0.25 0.14 0.18 0.14 0.06

Chattisgarh 2.46 -0.63 -0.45 -3.88 -0.88 -1.06 0.15 0.10 0.15 0.16 0.13 0.01

Madhya Pradesh -5.98 -7.32 -9.65 -4.71 -3.32 -0.82 -0.86 0.16 -0.20 0.09 -0.19 -0.95

Gujarat 2.19 -0.66 -1.07 -3.79 -1.01 -0.60 -0.82 -0.21 -0.17 0.02 -0.08 -0.34

Maharastra 5.70 2.73 2.49 -2.94 -0.12 0.12 -0.02 -0.06 -0.01 0.07 0.10 0.08

Andhra Pradesh 2.36 -0.55 -0.74 -3.63 -0.80 -0.62 -0.10 0.15 0.09 0.14 0.08 -0.10

Karnataka 2.67 -0.31 -0.34 -3.48 -0.58 -0.55 -0.16 0.00 0.14 0.05 0.09 0.02

Kerala 3.54 0.62 -3.32 -3.14 -0.33 3.74 0.09 0.11 0.05 0.11 0.11 -0.01

Tamil Nadu 4.13 1.05 1.35 -3.33 -0.37 -0.66 0.03 0.03 0.03 0.07 0.03 -0.01

North-East 1.71 -0.89 -1.66 -3.55 -1.00 -0.22 0.14 0.10 0.06 0.10 0.08 0.02

Union Territories 0.07 0.12 -0.08 -0.20 -0.25 -0.05 0.15 0.07 -0.09 0.10 -0.02 -0.06

State Aggregate

agricultural

output

Value

added in

agriculture

Aggregate

intermedia

te input

usage

Price of

aggregate

agricultural

output

Price of

value

added in

agriculture

Price of

aggregate

intermedi

ate input

Household real income per capita

Page 23: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Favourable impacts on agricultural output in

most states

But, output in Punjab, Haryana, UP, Bihar & WB is

slightly lower than in TFP only scenario

Impact on value added shows variation in

magnitude & direction

Negative in about half the states

National-level output

Rise – sugarcane, fibres, fruits & livestock

Fall – cereals, pulses, poultry & fishery

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 23

Impacts of TFP + Irrigation …

Page 24: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

24IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014

TFP rise in all States

+

Greater market integration

Page 25: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

3% reduction in inter-state price differentials of

goods & all types of labour

Rise in marketing efficiency

Improved mobility of goods & factors within the country

Price-differentials in agricultural commodities

derived from NAS data on state-wise value of

commodity output and agricultural data on

state-wise (physical) quantity output

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 25

TFP rise in all States +

Greater market integration

Page 26: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 26

Impacts of TFP rise + market integration

Rural

Decile

01-04

Rural

Decile

05-08

Rural

Decile

09-10

Urban

Decile

01-04

Urban

Decile

05-08

Urban

Decile

09-10

Jammu & Kashmir 5.85 1.28 5.72 -1.13 3.35 -1.00 5.52 5.40 4.59 3.67 3.63 3.67

Himachal Pradesh 1.19 -1.42 -4.08 -0.10 2.54 5.39 5.05 5.66 4.75 3.82 3.95 2.84

Punjab 2.66 -0.36 -0.20 -0.49 2.53 2.36 6.02 6.24 5.57 4.07 4.24 3.91

Uttarakhand 36.44 29.96 40.96 7.83 13.15 4.32 5.58 5.96 6.10 3.67 4.11 4.80

Haryana 2.48 -0.59 -0.24 -0.35 2.73 2.36 5.85 6.97 6.21 4.06 4.41 3.53

Delhi 65.69 53.83 95.39 15.35 24.14 -2.27 6.23 5.83 3.76 3.92 4.10

Rajasthan 7.48 3.94 5.83 0.79 4.21 2.36 5.10 5.92 6.02 3.72 4.31 4.08

Uttar Pradesh 0.88 -2.25 -1.81 -0.75 2.44 1.98 4.72 5.25 4.65 3.28 3.74 3.37

Bihar 5.16 1.10 3.75 -0.60 3.40 0.76 4.52 5.15 5.27 3.24 3.92 4.08

Assam -2.70 -5.51 -5.60 -0.52 2.44 2.54 4.24 4.48 3.85 2.86 3.01 2.00

West Bengal -4.23 -7.20 -6.53 -2.52 0.62 -0.11 3.98 2.75 3.96 2.83 2.76 1.43

Jharkhand 1.27 -1.69 -1.66 -0.36 2.65 2.61 4.71 4.35 4.77 3.21 3.69 3.41

Odisha -2.18 -5.48 -4.62 -1.54 1.92 1.00 4.33 3.57 4.18 2.96 3.08 2.62

Chattisgarh -0.22 -3.57 -2.78 -1.90 1.53 0.70 4.37 3.71 4.57 3.16 3.32 2.98

Madhya Pradesh -10.07 -11.32 -13.59 -2.64 -1.24 1.36 2.34 5.12 4.45 3.24 3.09 1.66

Gujarat 1.18 -2.13 -0.92 -1.07 2.29 1.04 2.99 5.07 4.94 3.46 3.49 2.96

Maharastra 7.53 4.27 4.56 0.57 3.72 3.43 3.63 4.40 4.44 3.05 3.37 3.13

Andhra Pradesh 1.17 -2.60 -0.49 -1.69 2.12 -0.04 3.67 4.79 4.43 3.15 3.20 2.75

Karnataka 8.70 3.95 7.78 -0.47 4.09 0.39 4.14 4.32 4.30 2.84 3.18 3.06

Kerala 9.36 6.39 -1.48 1.07 3.89 12.19 4.33 4.18 3.47 2.99 3.10 2.85

Tamil Nadu 1.43 -1.92 0.87 -0.78 2.62 -0.21 4.86 4.64 3.78 3.42 3.29 2.80

North-East 2.99 -2.01 2.46 -2.62 2.38 -2.09 4.15 4.14 3.53 2.70 3.01 2.88

Union Territories 0.74 -0.57 4.62 1.47 2.81 -2.30 4.79 4.62 3.10 3.31 2.86 2.63

Price of

value

added in

agriculture

Price of

aggregate

intermedi

ate input

Household real income per capitaState Aggregate

agricultural

output

Value

added in

agriculture

Aggregate

intermedia

te input

usage

Price of

aggregate

agricultural

output

Page 27: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Gainers in terms of agricultural output

Delhi, Rajasthan, Uttarakhand, J&K, Maharashtra,

Karnataka & Kerala

Output of several commodities rise

Milk (9%), oilseeds (5.6%), fibre (4.5%), sugarcane

(4.4%), fruits (2.3%) & vegetables (1.5%)

Unit price of agriculture falls in almost all states

leading to fall in commodity prices

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 27

Impacts of TFP rise + market integration …

Page 28: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Integration of labour markets helps improve

value added in agriculture even though output

price falls

Rise in real income of all households

Rural – Output & value added effect > over price fall

Urban – Price fall

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 28

Impacts of TFP rise + market integration …

Page 29: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

29IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014

TFP rise in all States

+

Export barriers removal

Page 30: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Higher export at the prevailing prices

10% increase in intercept of export demand

function

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 30

Removal of export barriers

Page 31: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 31

Impacts of TFP + Export barriers removal

Rural

Decile

01-04

Rural

Decile

05-08

Rural

Decile

09-10

Urban

Decile

01-04

Urban

Decile

05-08

Urban

Decile

09-10

Jammu & Kashmir 13.31 8.19 13.64 1.19 6.00 0.91 -0.24 0.32 0.60 -0.37 0.04 0.68

Himachal Pradesh -0.95 -1.17 -17.86 2.94 3.17 24.13 -0.69 -0.79 -0.11 -0.96 -0.43 0.81

Punjab 10.28 5.44 16.53 6.10 10.96 0.40 -1.38 -0.17 2.66 -0.50 0.74 3.54

Uttarakhand -3.09 -1.30 -16.31 5.07 3.15 21.64 0.04 0.07 0.43 -0.23 0.18 0.55

Haryana 3.69 0.23 2.05 0.15 3.63 1.79 -1.28 -1.74 -1.02 -1.12 -0.54 0.57

Delhi 2.18 -1.23 0.70 -0.30 3.16 1.18 0.04 0.54 -0.23 0.16 0.77

Rajasthan 2.33 -0.43 -1.40 0.59 3.40 4.42 -0.75 -0.87 -0.64 -1.03 -0.54 0.30

Uttar Pradesh 5.31 1.32 3.44 -0.10 3.85 1.73 -0.15 -0.06 0.32 -0.48 0.08 0.84

Bihar 4.11 0.41 2.17 -0.02 3.69 1.91 0.33 0.14 0.40 -0.19 0.07 0.66

Assam 23.90 20.48 19.84 2.78 5.71 6.28 -0.16 -0.20 0.38 -0.25 -0.01 1.49

West Bengal -1.78 -4.43 -5.20 -0.72 2.05 2.88 0.32 -0.30 0.42 -0.12 0.05 0.33

Jharkhand 1.04 0.86 -6.10 3.51 3.70 11.39 0.74 0.15 0.11 -0.15 -0.07 0.26

Odisha 2.63 1.44 -1.85 2.62 3.82 7.31 0.59 0.26 0.31 -0.12 -0.02 0.68

Chattisgarh 3.38 0.44 0.31 0.75 3.72 3.85 0.72 1.01 1.12 0.00 0.45 1.10

Madhya Pradesh 14.77 9.91 12.52 3.15 7.72 5.21 1.87 0.11 1.33 -0.10 0.86 2.65

Gujarat 1.38 -0.77 -3.33 1.08 3.28 6.02 0.11 0.07 0.59 -0.35 0.14 0.61

Maharastra 12.53 10.73 7.43 3.75 5.44 8.67 0.90 0.35 0.93 -0.29 0.23 1.40

Andhra Pradesh 3.86 0.55 1.28 0.40 3.72 2.97 0.66 0.44 0.82 -0.10 0.30 0.97

Karnataka 2.32 0.57 -2.22 1.90 3.69 6.64 0.89 0.99 1.03 0.08 0.56 1.18

Kerala 1.75 -1.24 -0.06 0.31 3.36 2.13 0.74 0.80 1.04 0.16 0.42 1.04

Tamil Nadu 1.94 -1.06 -0.90 0.28 3.34 3.17 0.35 0.36 0.66 -0.28 0.18 0.80

North-East 3.06 -1.22 1.61 -1.16 3.16 0.29 0.80 0.68 0.47 0.25 0.05 0.47

Union Territories -0.71 -1.28 0.88 2.56 3.15 0.94 0.23 0.64 1.27 -0.11 0.45 0.94

State Aggregate

agricultural

output

Value

added in

agriculture

Aggregate

intermedia

te input

usage

Price of

aggregate

agricultural

output

Price of

value

added in

agriculture

Price of

aggregate

intermedi

ate input

Household real income per capita

Page 32: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Output rises in several (not all) states

Assam, Madhya Pradesh, Maharashtra, J&K, & Punjab

Export rise – paddy, wheat, o.cereals, fibres & fruits

Prices of oilseeds, vegetables, milk, other livestock rise considerably

Exchange rate appreciates – adversely affects non-agricultural exports

Real income of several households fall, especially urban poor

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 32

Impacts of TFP + Export barriers removal …

Page 33: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

33IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014

Combined scenario

TFP rise +

Fertilizer subsidy +

Irrigation expansion +

Market integration +

Export barrier removal

Page 34: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 34

Impacts of combined scenario

Rural

Decile

01-04

Rural

Decile

05-08

Rural

Decile

09-10

Urban

Decile

01-04

Urban

Decile

05-08

Urban

Decile

09-10

Jammu & Kashmir 13.34 7.06 16.33 -0.42 5.43 -2.97 4.27 4.72 4.45 2.99 3.29 3.57

Himachal Pradesh 10.73 6.94 11.91 1.77 5.37 0.70 3.78 4.21 3.89 2.84 3.13 2.95

Punjab 1.34 -1.59 -1.71 -2.22 0.70 0.84 4.64 4.48 3.50 2.89 3.01 2.60

Uttarakhand 6.23 2.22 6.03 0.11 4.04 0.30 4.88 4.85 4.47 3.10 3.33 3.47

Haryana -0.60 -3.74 -2.76 -1.44 1.78 0.76 4.49 4.70 4.14 2.97 3.35 3.02

Delhi 8.40 3.54 11.66 -0.45 4.23 -3.35 5.05 4.64 3.08 3.28 3.27

Rajasthan 2.86 -0.58 1.47 -0.34 3.12 1.03 4.21 4.50 4.35 2.95 3.39 3.38

Uttar Pradesh 2.19 -1.56 0.22 -0.74 3.05 1.22 4.50 4.72 4.17 2.99 3.40 3.37

Bihar 4.66 0.84 2.89 -0.18 3.61 1.55 4.27 4.49 4.63 2.91 3.48 3.84

Assam 23.87 18.64 24.70 1.23 5.68 0.54 3.33 3.65 3.75 2.26 2.78 2.69

West Bengal -18.13 -19.75 -22.44 -4.64 -2.69 0.68 3.17 0.83 3.90 2.35 2.05 -0.02

Jharkhand 30.34 23.42 32.57 2.73 8.47 0.99 4.97 5.30 4.59 3.04 3.68 4.64

Odisha 10.52 5.22 9.23 -0.51 4.51 0.67 3.77 3.48 3.84 2.47 2.99 3.34

Chattisgarh 10.82 5.01 9.70 -0.03 5.50 0.99 4.14 4.45 4.53 2.77 3.46 4.18

Madhya Pradesh -3.47 -6.27 -6.28 -1.94 1.00 1.02 3.17 5.16 4.73 3.20 3.35 2.60

Gujarat 6.50 2.52 5.47 0.24 4.13 1.21 3.84 4.55 4.91 3.18 3.54 3.99

Maharastra 10.70 6.08 9.38 0.14 4.51 1.36 3.37 4.02 4.28 2.68 3.07 3.23

Andhra Pradesh 6.88 2.69 5.49 0.24 4.33 1.56 4.41 4.49 4.75 2.99 3.47 4.12

Karnataka 6.76 2.54 5.19 0.08 4.20 1.58 4.73 4.92 5.00 3.13 3.53 3.55

Kerala 2.61 -0.44 2.04 0.43 3.51 0.99 4.48 4.42 3.92 3.12 3.41 3.22

Tamil Nadu 1.05 -2.15 -0.39 -0.16 3.10 1.29 4.28 4.08 3.58 2.77 2.94 2.89

North-East 5.24 -0.63 5.72 -2.61 3.16 -3.04 3.78 3.84 3.38 2.42 2.71 2.87

Union Territories 0.30 -1.34 5.21 1.60 3.28 -3.15 4.15 4.32 3.30 2.91 2.77 2.80

Price of

value

added in

agriculture

Price of

aggregate

intermedi

ate input

Household real income per capitaState Aggregate

agricultural

output

Value

added in

agriculture

Aggregate

intermedia

te input

usage

Price of

aggregate

agricultural

output

Page 35: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Agricultural output rises everywhere

Exceptions – WB, MP & Haryana

Agricultural value added also rise everywhere

Exceptions – WB, MP, Haryana, Punjab, Tamil Nadu

Agricultural prices fall in several states

Household real income rises everywhere for

everyone

Sole exception urban-rich in WB

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 35

Impacts of combined scenario …

Page 36: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

36IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014

Concluding remarks

Page 37: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Base output pattern within and across states

Expenditure elasticities of various commodities

across household classes

Absence of any other shock on the demand side

Immobility of certain factors (land) combined

with full employment specification

Full employment specification may not be unreasonable

w.r.t. land given the small land holding sizes

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 37

Main drivers of the results

Page 38: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Significant spatial inter-relationships exists and need to be recognised

Over and above the importance of inter-sectoral and inter-agent inter-relationships

TFP scenario shows that significant scope to improve resource allocation across states exist

Over and above resource allocation across commodities

Spatial impacts of agricultural policies vary substantially

Depend upon the policy change itself & the combination of policies

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 38

Concluding remarks

Page 39: IGIDR-IFPRI -Spatial Effects of Agricultural Policy Choices, A-Ganesh Kumar, IGIDR

Objective of the policy needs to be stated clearly

Output or household income (proxy for welfare) or multiple

objectives?

Combined scenario has worthy multiple objectives

E.g., fertilizer subsidy removal may be desirable from fiscal &

environmental perspectives

But income gain is lower for several households than in the

“TFP + Market integration” scenario

IGIDR-IFPRI Conference on “Harnessing Opportunities to Improve Agri-Food Systems”, 24-25 July, 2014 39

Concluding remarks …