The South Asia Region is known for its past achievements in agriculture and consequent improvements in rural poverty. Despite these achievements, poverty in South Asia is still concentrated in rural areas. Most of the rural poor depend on rainfed agriculture, livestock, fragile forests, and/or migratory employment.
Although it is expected that agriculture's contribution to the economy will decline with economic development, and that an increasing share of labor will move out of agriculture over time. This means the current high concentration of poor in the sector and the need to raise the productivity of those who chose to stay in agriculture will be critical to overall economic growth and poverty reduction in South Asia.
With agriculture employing about 60% of the labor force and contributing 22% of the regional GDP, fostering employment intensive agricultural and rural non-farm growth in the medium term will be a critical contributor to reaching the MDG of halving the number of poor people by 2015.
A number of obstacles need to be addressed if the sector is to reach its full potential, in particular:
- The persistence in some countries of state subsidies for grain prices, food, power, irrigation and fertilizers, which encourages farmers to stay with traditional crops and reduces productivity enhancing public spending on e.g., technology, market support services and rural infrastructure. These subsidies, in distorting farming incentives and behavior, also threaten sustainable productivity growth by inadvertently causing nutrient imbalances, over-extraction of groundwater, and water-logging and salinity in high potential irrigated areas;
- Government over-regulation of domestic trade, agro-processing, enterprise size, and factor markets such as land and credit, which discourage private investments in rural areas;
- Weakened agricultural technology and innovation systems, hampering the adoption of improved technologies and practices; and
- Deteriorating irrigation systems in need of rehabilitation and institutional reform.
The World Bank is providing technical and financial assistance to help South Asia deal with these challenges. This assistance includes:
Water Resources Management/Irrigation: The Bank will take advantage of new opportunities to support a combination of infrastructure modernization/creation and institutional reforms, including the provision of required technical assistance packages for these measures, particularly in Pakistan and India; and where possible at the state or provincial level.
The approach in this sector would focus on:
- Promoting an integrated and multi-sectoral approach to water resource planning and management by emphasizing the adoption of comprehensive approaches (surface and groundwater, rural and urban, quantity and quality) at the river basin/sub-basin level;
- Establishing decentralized, efficient, participatory and financially sustainable service delivery mechanisms (including corporatization, public private partnerships and water users associations) with clearly defined responsibilities with respect to operation and maintenance; and
- Improving the efficiency of irrigation to increase output per unit of water used through improved irrigation technologies coupled with agricultural intensification and diversification to higher value crops.
Technology and Innovation: Improved technologies represent a key foundation for agricultural growth. The Bank will continue to support the renewed government commitment in India, Bangladesh and Sri Lanka to increase the relevance and poverty reduction impact of agricultural research and innovation programs and support well-defined national extension strategies. The efforts will be aimed at developing the basis for public-private partnership for technology generation and access, and intermediation schemes that would facilitate small farmers’ integration into the marketing chain.
Agriculture in Rainfed Areas: Addressing problems in rainfed areas is critical due to the high concentration of poor people in these regions. The Bank will continue to support government program for watershed development in rainfed and drought-prone areas, which puts priority to soil and water conservation interventions and complementary livelihood generation activities (e.g. livestock, marketing and value addition, non-farm activities) to reduce the impact of weather-related risks.
Agricultural Diversification and Market Development: The Bank will continue to scale up its support for agricultural marketing and value chain development in India, Sri Lanka, Bangladesh and Nepal, with emphasis placed on policy reforms.
It will contribute to community development programs by supporting household and community-based agribusiness activities. Improvements in rural electrification and road systems are essential.