Key facts of Agriculture in South Asia
• About 75 percent of South Asia’s poor live in rural areas.
• Agriculture employs about 60 percent of the labor force in South Asia and contributes 22 percent of the regional GDP.
• Agricultural growth in South Asia is less than 3 percent, which is far below the growth rates of other economic sectors.
• Most of the rural poor depend on rain-fed agriculture, livestock, fragile forests, and/or casual often migratory employment.
Agriculture Growth and Rural Poverty
• Agricultural growth is especially effective in reducing poverty. Estimates show that overall GDP growth originating in agriculture is, on average, at least twice as effective in benefiting the poorest half of a country’s population as growth generated in nonagricultural sectors. Agriculture was key to India’s substantial long-term decline of poverty.
• Agricultural growth can reduce poverty directly, by raising farm incomes, and indirectly, through labor markets and by reducing food prices. Studies from India show that, in the long term, the food price effect has the largest influence on poverty reduction.
• In South Asia, the number of rural poor has continued to rise and will likely exceed the number of urban poor until 2040. A high priority is to mobilize agriculture for poverty reduction.
• India moved from the agriculture-based category to the transforming category over 15 to 25 years, but with little change in the rural share in poverty.
• India, overall a transforming country, also has agriculture-based states such as Uttar Pradesh and Bihar and a few urbanized states.
• In India, growth in rural services was estimated to contribute at least as much as growth in agriculture toward reducing poverty.
• In the mid-1980s, cereal yields were comparably low and poverty was comparably high. Fifteen years later in South Asia, yields had increased by more than 50 percent and poverty had declined by 30 percent.
Water and Irrigation
• Access to water and irrigation is a major determinant of land productivity and the stability of yields. In South Asia, 39 percent of the area in production is under irrigation.
• In South Asia, the decline of farm size is expected to continue because the rural population is growing at 1.5 percent a year and is not expected to peak until at least 2020. Continued population growth, declining farm size, and growing landlessness puts huge pressures on rural jobs.
• In South Asia 25 percent of the active rural males, usually the poorest, are primarily employed as wage laborers in the agricultural sector.
Investment and Diversification
• Evidence from rural India show that the highest returns, in terms of both growth and poverty reduction, are from investments in agricultural research, rural roads, and education.
• Demand for lower value traditional crops like wheat and rice is slowing. The demand for higher value products offers new avenues to revitalize the agriculture sector through diversification and value-addition. These higher value products include fruits, vegetables, meat, dairy and fish.
• Underinvestment in agriculture is further compounded by misinvestment— that is, spending on private goods, such as input subsidies and transfers, that benefit richer farmers more. Public budget allocations to subsidies and transfers in India hovers 75 percent. In India, agricultural subsidies as a share of agricultural GDP have risen steadily from 1975 to 2002. Increasing subsidies have crowded out investments in core public goods such as technology, market support services and rural infrastructure, which have fallen.