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Why have some Indian states lagged behind the others in improving agriculture sector performance?

Vinod Ahuja (), Bhamoriya Vaibhav and Lalit Dipti

No WP2007-12-01, IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: While India has sustained annual GDP growth rate of over 6 percent over the last more than two decades, the distribution of this growth across various regions of the country has been highly uneven with significant year-to-year variations. Improving agricultural performance is critical to sustaining future economic growth and continued poverty reduction. As the country moves forward towards identifying newer ways of improving farm competitiveness, it is important to recognize that agriculture in India is extremely heterogeneous and the trajectory for agricultural development will be significantly influenced by area specific (i) natural endowments, (ii) access to markets, and (iii) overall policy and institutional environment. In the light of that motivation, this paper examines the differences in above sets of variables across four different categories of states ranked by per capita income and attempts to outline the strategic options to address these constraints. The paper argues that the challenge of accelerating agricultural growth in these poor states can not be met without public investment in irrigation, research and extensions, enhanced credit flow and improved delivery systems for improved seeds. It is further argued that while paying careful attention to public investment in agriculture, it must also be understood that the problems of agriculture will not be solved only through on-farm investment. Non-farm activity is essential for farmer prosperity. Non-farm activities tend to have the greater proportional impact on the income of poorest members of the village. But, this requires adequate social and physical infrastructure to ensure that the rural non-farm sector has the capacity to adjust and modernize in response to conditions brought about by increasing competition, and changing demands from consumers. Broadly, therefore, agricultural growth strategy has to work towards (i) establishing a healthy investment climate to encourage entrepreneurial action in commodities and value chains, (ii) support human resource development through improved quality and access to social services, and (iii) strengthen agricultural technology support services.

Date: 2007-12-01
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