Agriculture. In Bangladesh

11 Growth and Equity in IndianAgriculture and a Few Paradigmsfrom Bangladesh This is the html version of the file http://www.ifpri.org/pubs/books/Mellor85/Mellor85ch11.pdf. G o o g l e automatically generates html versions of documents as we crawl the web. To link to or bookmark this page, use the following url: http://www.google.com/u/Oxford?q=cache:K7Zv_u2zgJIJ:www.ifpri.org/pubs/books/Mellor85/Mellor85ch11.pdf+land+holdings+redistribution+india&hl=en&ct=clnk&cd=191&ie=UTF-8 Google is neither affiliated with the authors of this page nor responsible for its content. These search terms have been highlighted: land redistribution india These terms only appear in links pointing to this page: holdings Page 1 11 Growth and Equity in IndianAgriculture and a Few Paradigmsfrom Bangladesh RAISUDDIN AHMED In chapter 10 of this volume, M. L. Dantwala presents an excellent overview of growth-with-equity issues in Indian agriculture. Although he does not attempt to define the problem of measuring inequality and absolute poverty, his arguments imply that absolute poverty is the most urgent concern of Indian policy makers. 1 Since my disagreements with Dantwala are few, I shall attempt primarily to amplify and supplement some of his points on institutional policies and present some paradigms from Bangladesh. Institutional Policies Dantwala asks whether the emphasis on the new seed-cum-fertilizer technology has resulted in the neglect of institutional changes and tilted the balance of social justice against the poor. Development of market institutions, particularly those related to new technology, has been impressive. Credit and marketing cooperatives, special programs for small and marginal farmers, intensive agriculturaldevelopment in selected districts, and special employment programs for rural laborersare someof the institutional arrangements that have fewparallels in otherlow-income market economies. Some studies indicate that in recent years about 33 percent of the institutional credit was shared by small farms holding less than 2 hectares, which had only about 25 percent of the total cultivated area (as reviewed in Sarma 1981). The interest rate was reduced 10-15 percent in the informal credit markets of the Punjab and Haryana by innovative credit institutions and new technology. Although most of these institutions did not reach their goals, their achievements are by no means inconsequential. The new market institutions contributed only marginally to alleviating poverty because they contributed littleto the income ofthose whohad no access to land. Egalitarian distribution of land not only redistributes 124 Page 2 Growth and Equityin Indian Agriculture 125 access to productive assets but also broadens the power structureinrural areas, so that benefitsfrom other policies are spread more evenlyamong rural people. Dantwala hasindicated that the distribution ofland maybe less unequal than it appears if differences inqualityof land are considered. But even if these differences and thosecaused bythe positive correlation between farm sizeand family sizeare allowed, the inequalitycouldstill be large. 2 The setting of land ownershipceilings in India has inpracticeprovided little land for distribution. Even with a lower ceiling (say, 4-12 hectares, depending on the state), the supply of surplus land for redistribution to small and landless households is adequate only in the northwestern states, where other employmentopportunities are available. In the eastern and most southern states, where landlessness and absolute poverty are widespread, there is not enough land to redistribute even with a low ceiling (Singh 1982). Bangladesh Paradigms Because of similarities in regional resource endowment, population density, and production patterns, the experience ofBangladeshhasmuch in common with that of India, particularly eastern India. A little more than 90percent of the population of Bangladesh livesin rural areas. Most have few assets of any kind. A large proportion of cultivators are small and marginal. About 50percent ofthe farms are less than 2.5 acres, 19percent of the cultivated areas beingunder some form of tenancy. These small and marginalfarms buy muchof theirfoodgrain supply from the market (Ahmed 1981). They supplement income from their farm by earnings from petty trades, services, and labor, which themselves are closely related to agriculture. The AgriculturalCensusof 1977 indicates that the proportion of rural households not operating any land and depending primarily on wages from work as hired agricultural laborers ranges from 23percent in Tangail to 34percent inRangpur.The country average is29percent. If economic progress isasslowinthe future as in the past, and if the population continues to grow,even ifat aslower rate, the proportion of landless households in rural areas will double by the year 2000. The behavior of wage rates and employmentof unskilled agricultural labor in the wake ofagricultural growth isone ofthe most important links between poverty and agricultural growth.The average index of the real agricultural wage rate fell from 97in the first half of the 1960s to 51in the first half of the 1970s and 72 in the second half. The choice of different years would still lead to the same conclusion. Apparently, failureof the money wage rate to keep pace with the prices of commodities generally Page 3 126 Raisuddin Ahmed consumed by laborers resulted in this decline. But a primarycause of the decline in real wages was the failure of agricultural productivity to keep pace with the growth of the labor force. Econometric analysis shows significant and positive relationships between real wage rates of agri- cultural labor and agricultural production. However, the growth rate of agricultural production hasto be higher than the growth ratein population to affect real wage rates perceptibly. If the aggregate demand for labor does not grow as much asfamily labor supply, then the demand for hired labor tends to stagnate or fall, and so does the real wage rate (Ahmed 1981). Between 1960 and 1980, agricultural production grew byabout 1.8 percent annually, and the population grew by2.6percent. Some estimates indicate that agricultural employment grew byonly 1.2percent. 3 High-yield varieties have covered no more than 18percent of the area sown with rice. Although high-yield varieties are 50-60 percent more labor-intensive, the resulting increase in employment has been sub- stantially offset by a reduction in the area sown with jute, which also is labor-intensive. Rural trade, services, and industries, which provide some employment for the rural poor, indirectly depend on agricultural production. Therefore, the growth in employment in these pursuitsmay not have been much different from that in agriculture. This implies that stagnation in agriculture, high population growth, and the increasing proportion of landless households in rural areas caused rural poverty to increase. Redistribution of land has often been suggested as a prerequisite for fast agricultural growth that includes the poor. The immediate question in Bangladesh iswhether enough surplus land isavailable fordistribution. Eleven percent of rural households in Bangladesh did not own any homestead land in 1977, 22 percent owned land only to accommodate homesteads, and 38 percent cultivated less than 2.5 acres per household (Government of Bangladesh, Bureau of Statistics 1979). Assume that a six-person household owning 3.0 acres of land is a subsistence unit 4 and also the ceiling for land ownership. This ceilingwouldresult inabout 4.44 million acres of surplus land. This would only be enough to provide homestead land to landless households and to raise the size ofmarginal farms to 0.5 acre per capita. Even if it were politically possible, there is not enough land in Bangladesh to organize farming into viableunitsand provide land to all landless and small, submarginal farm households for long. Although labor-intensive nonagricultural development isemphasized as a long-run solution to the problems of Bangladesh, agricultural development will be crucialduringthe comingdecade. Production canbe doubled with known technology. Presently, only about 12percent of the cultivated area has a controlled supply of irrigationwater; no more than Page 4 Growth and Equity in Indian Agriculture 127 20 percent of the area under rice is sown with high-yield-varietyseeds; and only about 40 percent of crop area is fertilized at two-thirdsof the recommended amounts. Until 1973/74, about 80percent of government allocations for irrigation went to large-scale projects, which covered only about 10percent of the area irrigated under all projects (Ahmed 1977). In recent years larger shares of public resources have gone to small-scale irrigation, but a big push to develop irrigation primarily through small-scale tubewellsisyet to come. Technical studies indicate that enough groundwaterisavailable (World Bank 1972). Incentives involving a large number of farmers would be a key factor in the success of such a strategy. Formation oflocal institutions to organize farm groups to operate tube wells would be a second important element. The new agricultural technology and tube-well irrigation do not dis- criminate against small farmers as much as has been suggested (Gauhar 1982). Independent studies by the Bangladesh Institute of Development Studies show that much of the criticism is baseless (BIDS 1980). The proportion of total irrigated land operated by the small farmers under these projects is no less than the proportion of total land operated by small farmers. No evidence was found in the project area of anyunusual transfers of land. Nevertheless, withthe new emphasison private initiative in small-scale irrigation, large farmersprobably wouldbenefit morethan small farmers. But increases in the demand for labor and in the expenditures ofwell-to-dofarmerson consumergoodswouldoffset some of these negative consequences. Notes 1. This concern is expressed explicitly in Government of India, Planning Commission (1973). 2. The Indian National Sample Survey (26th Round) indicatesthat in 1970/71, 75 percent of Indian farmers were classified as small and marginal, owning only about 25 percent of the total cultivated land. On the other hand, only about 2 percent of the large-farm households owned about 23 percent of the land. The trend was a slight increase in the proportion of small and marginal farms with a decreasing share of land. 3. This includes family labor. The employment of wage labor must have increased at a slower rate because aggregate demand increased at a slower rate than did the growth infamilylabor. For growthin aggregateemployment see Clay and Khan (1977). 4. The average farm size in Bangladesh is about 3.5 acres. Calculations based on farm income, costs, and living expenses indicate a subsistence unit ofabout 3.0 acres for a family of six, at the current level of technology. Technological change would change this subsistence threshold, aswould population growth.