Special articles

Agriculture Diversification in South Asia

Patterns, Determinants and Policy Implications
South Asian countries are gradually diversifying with some inter-country variation in favour of
high value commodities, namely, fruits, vegetables, livestock and fisheries. Agricultural
diversification is strongly influenced by price policy, infrastructure development (especially
markets and roads), urbanisation and technological improvements. Rainfed areas have
benefited more as a result of agricultural diversification in favour of high value crops by
substituting inferior coarse cereals. Agricultural diversification is also contributing to
employment opportunities in agriculture and increasing exports. The need is to suitably
integrate production and marketing of high value commodities through appropriate institutions.
Market reforms in developing and strengthening desired institutions through required legal
changes would go a long way in boosting agricultural growth, augmenting income of small
farm holders and promoting exports.
P K JOSHI, ASHOK GULATI, PRATAP S BIRTHAL, LAXMI TEWARI

I mass of small and marginal holders. This study is an attempt

Introduction in this direction. Specifically the study intends to (i) examine
the extent, nature and speed of agricultural diversification in

M
ost of the south Asian economies have been undergoing south Asian countries, (ii) identify determinants of agricultural
a process of economic reforms since the late 1980s. diversification, and (iii) assess implications of agricultural
They are gradually adopting trade liberalisation as a diversification on food security, employment and sustainable use
policy plank. The unfolding globalisation of agriculture, of natural resources.
however, has thrown new challenges and opportunities to the The study is confined at two levels: (i) macro-level, and
agrarian sector in these countries. While there are apprehen- (ii) meso-level. At macro level, all seven countries, namely,
sions on the one hand, that the influx of subsidised cheap Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and
imports from the developed countries would adversely affect Sri Lanka, have been studied in terms of diversification of
their agriculture, on the other hand, there is evidence that agriculture. At meso level, more disaggregated analysis across
these countries are able to raise their agricultural export, different regions in India has been attempted.
especially of high value and labour intensive commodities.
This seems to open up a window of opportunities when south II
Asian agriculture is experiencing shrinking size of its holdings, Mapping Patterns of Diversification
decelerating technological advances in staple crops, declining
investment in agriculture and increasing degradation of natural The concept of diversification conveys different meaning to
resources. different people at different levels. For example, at the national
Diversification of agriculture in favour of more competitive level, it generally conveys a movement of resources, especially
and high-value commodities is reckoned an important strategy labour, out of agriculture to industry and services, a sort of
to overcome many of these emerging challenges. If carried out structural transformation. Within agriculture, however, diversi-
appropriately, diversification can be used as a tool to augment fication is considered a shift of resources from one crop (or
farm income, generate employment, alleviate poverty and con- livestock) to a larger mix of crops and livestock, keeping in view
serve precious soil and water resources. Several micro-level the varying nature of risks and expected returns from each crop/
studies support the above proposition [von Braun 1995; livestock activity, and adjusting it in such a way that it leads
Pingali and Rosegrant 1995; Ramesh Chand 1996; Ryan and to optimum portfolio of income.
Spencer 2001]. This definition of diversification needs to be distinguished
A sound understanding of the patterns of agricultural diver- from movement of resources from low value commodity mix
sification and the constraints it faces would help in crafting (crops and livestock) to a high value commodity mix (crops and
appropriate policies regarding institutional arrangements and livestock), as it may often be reflected in an increasing degree
creation of adequate infrastructure, which could benefit a large of specialisation (reducing diversity) to high value activities,

Economic and Political Weekly June 12, 2004 2457

especially at the farm level. And it is precisely this movement influence the diversification include per capita income and
to high value agriculture, which is of great interest to us in this urbanisation. On supply side forces, the diversification is largely
paper because it indicates yet another way to augment income, influenced by infrastructure (markets and roads), technology
besides the traditional ways of increasing yield, area or cropping (relative profitability and risk in different commodities), resource
intensity. endowments (water and labour), and socio-economic variables
Thus, based on these various definitions, the nature of diver- (pressure on land and literacy rate).
sification can be broadly described as (i) a shift of resources from Generalised Least Square (GLS) technique with fixed-effect
farm to non-farm activities, (ii) use of resources in a larger mix model was applied to examine how different forces have influ-
of diverse and complementary activities within agriculture, and enced crop and livestock diversification in India. The analysis
(iii) a movement of resources from low value agriculture (crops is based on pooling of cross section and time series information
and livestock) to high value agriculture [Hayami and Otsuka from major states (19 out of 28)1 in India for the period 1980-
1992; Vyas 1996; Delgado and Siamwalla 1999]. 81 to 1998-99. The GLS eliminates the effect of heteroscedasticity
arising due to cross section data, and autocorrelation as a result
Measuring Diversification of time series data. Following model was used to examine the
determinants of diversification:
There are quite a few methods, which explain either concen-
Dc or Dl = f (TECH, INFR, PROF, KNOW, DEMA, RAIN)
tration (i e, specialisation) or diversification of commodities or
activities in a given time and space by a single indicator. Important The variables were defined as follows: The dependent variable,
ones include: (i) Index of maximum proportion, (ii) Herfindal Dc or Dl, was defined in two ways: (i) Simpson index of diversity
Index, (iii) Simpson Index, (iv) Ogive Index, (v) Entropy Index, in crop sector (SIDc) and livestock sector (SIDl), and (ii) index
(vi) Modified Entropy Index, and (vii) Composite Entropy Index of output values of horticultural commodities and livestock
[Kelley Ryan and Patel 1995; Pandey and Sharma 1996; Ramesh commodities at constant prices with base 1980-81. Results for
Chand 1996]. Each method has some limitation and/or superiority the latter were found statistically superior, therefore, used for
over the other. Considering our objective of assessing the extent discussion.
of diversity in crop, livestock and fisheries activities, we used Independent variables were broadly grouped into (i) technology
Simpson Index. The index provides a clear dispersion of com- (TECH) related, (ii) infrastructure (INFR) related, (iii) profitabil-
modities in a geographical region. The index ranges between 0 ity (PROF) related, (iv) resources and information (KNOW)
and 1. If there exists complete specialisation, the index moves related, (v) demand (DEMA) side, and (vi) climate (RAIN)
towards 0. The index is easy to compute and interpret, as follows: related. To capture their effect, few proxy variables were used
n in the model. For technology (TECH), these included: propor-
SID = 1 – ∑ Pi2 tionate area under high yielding varieties of food grain crops (per
i=1 cent), fertiliser use (kg per ha), proportion of gross irrigated area
Where, SID is the Simpson Index of Diversity, and Pi is the to gross cultivated area (per cent), mechanisation (number of
proportionate area (or value) of ith crop/livestock/fishery activity tractors per 1,000 ha area). For infrastructure (INFR) the proxy
in the gross cropped area (or total value) of output. variables were market density (number of markets per 1000 ha
The nature and patterns of diversification were examined by of gross cropped area), and roads length (square km per 1,000
looking into temporal changes in area, production and value of ha of gross cropped area). Relative profitability of high value
different crops, and quantity (and/or value) of livestock and enterprises with cereals and other crops was the proxy for profit-
fisheries activities. To estimate the speed of diversification in ability (PROF) related variables. Average size of landholding (ha)
favour of high-value commodities, annual compound growth and proportion of small landholder in total holdings were used
rates of area, production and yield of different crop/livestock proxy for available resources, and rural literacy (per cent) for
activities were computed. information (KNOW) related variables. On demand side (DEMA)
For south Asian countries, the SID was computed for crop variables, urbanisation (per cent urban population) and per capita
sector only, while the livestock sector was assessed separately income (rupees per person) were used in the model. Annual
to examine its performance in different countries. The diversity rainfall (mm) was used to define the climate (RAIN) related
was probed within the crop sector, dividing it into broad sub- variable in the model. The specification of variables and their
sectors like cereals, pulses, oilseeds, fruits, vegetables, spices and expected signs are given in Annexure.
other crops. For India, the SID was computed for the entire Different combinations of independent variables were tried to
agricultural sector comprising crop, livestock and fishery sub- arrive at the best-fit equations. Both linear and double log equations
sectors, as well as within each sub-sector. were estimated and the best ones were selected.

Determinants of Diversification Data

Several forces influence the nature and speed of agricultural The study covers a period of two decades from 1980-81 to
diversification from staple food to high value commodities. 1999-2000. These two decades were divided into two periods:
Earlier evidence suggests that the process of diversification out (i) 1980-81 to 1989-90, and (ii) 1990-91 to 1999-2000. There
of staple food production is triggered by rapid technological were two obvious reasons for studying the past two decades. First,
change in agricultural production, improved rural infrastructure, the historical evidence showed that the impact of ‘green revo-
and diversification in food demand patterns [Pingali and Rosegrant lution’ in south Asian countries was gradually fading during the
1995]. These are broadly classified as demand and supply side 1980s. Second, the process of economic reforms started in most
forces. The demand side forces that have been hypothesised to of the south Asian countries in the late 1980s or early 1990s,

2458 Economic and Political Weekly June 12, 2004

and also most of them bound themselves to the commitments Availability of improved and high yielding rice and wheat va-
under the WTO, which is likely to have serious implications for rieties induced specialisation in favour of these crops. These
their respective agricultural sectors. The hypothesis is that slow- replaced sorghum, millets and barley. Performance of pulses was
ing down of green revolution and gradual opening up of the disappointing during 1990s.
economy will lead to greater diversification of agriculture in These were relegated to marginal environments. With the
favour of high value commodities. availability of irrigation and improved varieties of rice and wheat,
The data for the study was collected from various published a large share of pulses area was shifting in favour of rice and wheat.
sources. For south Asian countries, the most important data There are some exceptions as well. For example, lentil and
source for crop and livestock was the FAO statistical database pigeonpea are coming up in a big way in Nepal. Black gram and
(FAOSTAT). This was complemented by the country specific green gram and to some extent chickpea are emerging in Indian
statistical yearbooks. For India, the study covered more disag- rainfed regions. In Pakistan, chickpea is gaining importance.
gregated analysis by including the states, therefore, relied heavily Different countries grow a large number of vegetable and fruit
on the national statistical bulletins [CMIE 2001]. crops. Fruits (both fresh and dry) and vegetables have shown
good performance during 1980s and 1990s. Fruits and vegetables
III are highly diversified in all the countries. Livestock and fisheries
Patterns of Agricultural Diversification sectors also flourished during the last two decades (Table 3).
Evidence shows that agriculture is gradually diversifying in the
Agriculture is the mainstay of economic growth in south Asia. sub-continent with some inter-country variation. Diversification
A large proportion of population depends on agriculture for
income, employment and food security. Agricultural perfor- Table 1: Extent of Diversification and Its Sources
in South Asian Countries
mance in south Asia is improving over time. The annual com-
pound growth rate of agriculture was 3.7 per cent during 1990s Country Simpson Index of Diversity Sources of Diversification
in Triennium Ending (Per Cent)*
as against 3.2 per cent in 1980s. Besides continuing role of high- 1981-82 1991-92 1999- Cropping Crop
yielding rice and wheat varieties in south Asian countries, the 2000 Intensity Substitution
agricultural growth is attributed to diversification in favour of 1991-92 to 1999-01
high-value commodities. South Asia is diverse in climate, soils Bangladesh 0.39 0.36 0.35 64.67 35.33
and other agro-ecological features. Diversity permits south Asian Bhutan 0.37 0.48 0.44 97.82 2.18
farmers to cultivate variety of crops, rear different species of India 0.61 0.65 0.66 36.63 63.37
livestock and catch wide range of fish species from various Maldives 0.77 0.77 0.77 83.22 16.78
Nepal 0.39 0.40 0.41 84.79 15.21
sources. The Simpson Index of Diversity (SID) for south Asia Pakistan 0.54 0.56 0.57 76.56 23.44
was 0.64 in triennium ending (TE) 1999-2000, up from 0.59 in Sri Lanka 0.76 0.77 0.75 78.90 21.10
TE 1981-82. This shows that south Asia is gradually diversifying South Asia 0.59 0.63 0.64 42.98 57.02
its crop sector in favour of high value commodities, especially * The columns were computed as follows: Gains in Cropped Area (A) = Change
fruits, vegetables (Tables 1 and 2). Among countries, Bangladesh, in Gross Cropped Area (B) + Crop Substitution (C). Since (A) and (B) are
Bhutan and Nepal show less diversity as compared to other known, (C) is the residual.
Source: Computed by authors from the data derived from FAOSTAT.
countries. Bangladesh has specialised in rice. More than three-
fourths of the area in the country is under rice. But the remaining Table 2: Annual Compound Growth Rates (Per Cent)
one-fourth area is highly diversified, which was a result of some of Area, Production and Yield of Major Commodity Groups
policy initiatives taken up in different plan periods. Nepal and in South Asian Countries
Bhutan are aiming to have higher degree of self-sufficiency in Commodity 1980-90 1991-2000
basic foodgrain than what it is today, and therefore, concentrating Group Area Production Yield Area Production Yield
more towards cereals, particularly rice, wheat and maize. Cereals -0.01 3.08 3.09 0.34 2.45 2.11
There are two sources of crop diversification. These are (i) area Pulses 0.04 2.37 2.33 -0.02 0.72 0.74
augmentation, and (ii) crop substitution. Area augmentation Oilseeds 1.72 5.46 3.68 0.95 2.05 1.09
Vegetables 1.41 3.33 1.89 2.44 2.59 0.14
comes through utilisation of fallow lands and rehabilitation of Fruits 1.71 2.61 0.89 2.40 5.61 3.14
degraded lands, or increasing cropping intensity.2 Table 1 shows Dry fruits 1.98 3.56 1.55 3.62 4.30 0.66
that in most countries, crop diversification derives from area Spices 1.46 4.27 2.77 0.68 2.47 1.78
expansion, with some exception of crop substitution in India and
Sri Lanka. Incidentally, in Nepal, Pakistan and Sri Lanka, area Table 3: Growth Performance of Livestock Activities
expansion is also from deforestation, which is a cause of concern and Fish in South Asia
from environmental point of view. Commodity Annual Compound Growth Rates (Per Cent Per Annum)
To examine the nature and speed of agricultural diversification, Group 1981-90 1991-2000
production performance and area expansion of different com- Number Production Yield Number Production Yield
modities was assessed. Annual compound growth rates in area, Milk
production and yield of major commodity groups in south Asia Cow 2.33 4.86 2.53 2.10 5.50 3.40
during the decades of 1980s and 1990s are given in Table 2. Buffalo 4.11 4.84 0.73 2.53 5.10 2.57
Total – 4.93 – – 5.17 –
Production performance of non-food commodities was superior Poultry
to the food commodities. Among foodgrain group, cereals Chickens 9.26 10.51 1.25 5.72 5.66 -0.06
performed better than pulses. Cereal sector was specialising in Eggs 4.43 7.19 2.76 4.76 4.49 -0.27
favour of rice and wheat. It was because of overriding concern Total Meat – 4.30 – – 2.12 –
Fish – 5.20 – – 3.50 –
for food self-sufficiency in all the south Asian countries.

Economic and Political Weekly June 12, 2004 2459

was observed in favour of high value commodities. Since their Crop, livestock, fisheries and forestry constitute the core sub-
share in area and production was too low in comparison to sectors of agriculture. Crop sub-sector is the principal source of
foodgrain crops, the extent of diversification was unnoticed. It generating income in agriculture followed by livestock sector
came despite little policy initiatives and poor infrastructure in (Table 4). There exists strong synergy in crop and livestock sub-
the sub-continent, therefore, its pace slowed down. It is reflected sectors, both being complementary to each other. Fisheries sub-
from the performance of different commodity groups, which was sector is prominent in the coastal areas, and forestry in the hilly
better during 1980s than 1990s. During 1980s, growth in produc- regions.
tion was mainly attributed to yield increase, while area expansion The share of crop sector in the agricultural gross domestic
was the major source during 1990s. Slowing down in yield levels product marginally declined during 1980s (from about 76.25 per
is ascribed to (i) technological slack, (ii) weak input delivery cent in TE 1981-82 to 73.65 per cent in TE 1990-91) and then
system, and (iii) poor infrastructure. To accelerate the pace of recovered slowly during 1990s (rising to 74.91 per cent in
diversification and harness its potential benefits, there is a need TE 1997-98). There are two obvious reasons: (i) normal monsoon
to introduce appropriate technologies and create suitable insti- during most of the years in 1990s, and (ii) greater emphasis on
tutions and infrastructure. Domestic market reform to support horticultural crops, which led to their higher production. On the
agricultural diversification is necessary. This calls for correcting other hand, there was a quantum jump in the share of livestock
several outdated market acts, which impede the pace of agricul- sub-sector during 1980s, which escalated from about 18 per cent
tural diversification in favour of high value enterprises. For in TE 1981-82 to 23 per cent in TE 1990-91.
example in India, the existing agricultural produce market com- Later, though the value of livestock (at constant prices) during
mittee (APMC) empowers the state governments to set-up markets 1990s has nearly doubled, its share in agriculture remained
for agricultural development of efficient and transparent agri- stagnant at 23 per cent. It was because the value of bigger crop
marketing, the use of modern pre- and post-harvest techniques, sub-sector increased relatively higher than that of livestock sub-
setting-up quality standards and their enforcement. It discouraged sector; hence masked the latter’s performance. The same was
private sector participation in developing markets and led to true for fisheries sub-sector. The value of fisheries sub-sector
inefficiencies in marketing. Similarly, many processing units/ has swelled by about 50 per cent during 1990s, but its share in
products are still reserved for small-scale and cottage industry. agricultural gross domestic product has marginally reduced
to about 1 per cent in TE 1997-98 from 1.35 per cent in
IV TE 1990-91. This is despite the fact that fisheries production
Patterns of Agricultural Diversification in India during the decade of 1990s increased at an annual rate of
5.35 per cent.
Agricultural diversification in India is gradually picking Regionally, the patterns, by and large, reveal shifts from crop
momentum in favour of high value crops/livestock/fishery ac- to livestock sub-sector during 1980s and 1990s. The exceptions
tivities to augment incomes rather than a coping strategy to were eastern and north-eastern regions, where the shares of both
manage risk and uncertainty. However, the nature of diversifi- crop and livestock sub-sectors in total value of agricultural output
cation differs across regions due to wide heterogeneity in agro- were rising at the cost of fisheries and forestry. In the southern
climatic and socio-economic conditions. Therefore, it would be region also, the share of fisheries and forestry in total output
interesting to delineate the key regions and sub-sectors of ag- during 1980s and 1990s was diminishing. The livestock sub-
riculture where diversification is catching up fast. This section sector across different regions has grown as a result of growing
is an attempt to unfold these features and diagnose the regional demand for livestock products, like milk, meat, eggs, etc. The
patterns of agricultural diversification in India. ‘cooperative model’ linking growers, processors and retail
Table 4: Share of Individual Sectors (Per Cent) in Gross Value of Agricultural Output in India at 1980-81 Prices
Region Crop Livestock Forestry Fishing
1981-82 1990-91 1997-98 1981-82 1990-91 1997-98 1981-82 1990-91 1997-98 1981-82 1990-91 1997-98

Eastern 73.90 70.65 75.84 16.83 24.44 21.36 6.65 2.35 0.89 2.62 2.56 1.92
North-east 77.48 75.95 78.96 13.74 18.44 18.26 5.68 3.08 1.19 3.10 2.54 1.60
Northern 75.73 73.98 72.87 21.62 24.94 26.45 2.44 0.75 0.41 0.21 0.33 0.27
Southern 80.06 78.46 77.38 15.64 19.10 21.19 2.29 1.28 0.56 2.01 1.16 0.88
Western 75.71 71.65 73.01 18.95 23.79 24.53 4.08 3.40 1.60 1.25 1.16 0.86
All-India 76.25 73.65 74.91 18.27 23.09 23.24 3.95 1.91 0.85 1.53 1.35 1.00

Table 5: Share of Food and Non-Food Crops in Cropping Pattern and Value of Output in India at Constant Prices
Region Simpson Index of Crop Share of Food and Non-Food Crops (Per Cent)
Diversity
TE 1981-82 TE 1998-99 TE 1981-82 TE 1998-99
Food Crops Non-Food Crops Food Crops Non-Food Crops
Area Value Area Value Area Value Area Value

Eastern 0.50 0.53 81.63 51.73 18.37 48.27 73.83 43.04 26.17 56.96
North-east 0.43 0.46 70.11 44.43 29.89 55.77 65.06 35.80 34.94 64.2
Northern 0.53 0.51 77.42 54.92 22.58 45.08 76.86 53.74 23.14 46.26
Southern 0.68 0.75 62.86 41.82 37.14 58.18 53.08 28.20 46.92 71.80
Western 0.66 0.72 71.92 44.44 28.08 55.56 61.85 36.10 38.15 63.90
All-India 0.63 0.66 70.34 48.05 29.66 51.95 65.44 39.85 34.56 60.15

2460 Economic and Political Weekly June 12, 2004

distribution seems to have attained a reasonable degree of success of fruits and vegetables, but the future of these crops relies on
contributing to increased livestock production. developing appropriate infrastructure for suitably linking pro-
duction and consumption.
Crop Sub-Sector The eastern region is the most backward region with respect
to per capita income, growth in agriculture and development of
The crop sector is steadily diversifying in India. The SID slowly infrastructure. The yield levels are comparatively low because
moved-up from 0.63 in TE 1981-82 to 0.66 in TE 1998-99 (Table 5). of uncertain production environment and poor adoption of
The trends showed that the non-food grain crops have gradually improved varieties and technologies. Overall, the region is food-
replaced food grain crops, with the latter going up from about based and the extent of diversification is relatively low as compared
30 per cent of area in TE 1981-82 to 35 per cent in TE 1998-99, to other regions. This region is largely concentrating in rice. The
but in value terms it went up significantly from about 52 per humid and high rainfall makes cultivation of rice more favourable
cent to 60 per cent in respective periods. Non-food grain crops, in this region. However, there is high diversity in non-rice area
like oilseeds, fruits, vegetables, spices and sugar cane have mainly allocation. This region is an important vegetable growing area
substituted coarse cereals while in search for higher incomes. in the country with a share of about 44 per cent in the total
Regional patterns in diversification of the crop sector were vegetable area in the country in TE 1998-99 [Government of India
quite stark (Table 5). The southern region was highly diversified 2001]. Cultivation of fruits is also gradually rising. This region
followed by western region. The process of diversification was has also emerged as oilseed producing region with crops like
modest in these regions during the decades of 1980s and 1990s. rapeseed-mustard, groundnut, sesame and soybean.
It may be mentioned that these were the only regions, which During the post-green revolution period, oilseeds, fruits and
accomplished higher agricultural growth during 1990s over the vegetables performed impressively in all the regions. While the
preceding decade. These regions swiftly moved towards more success of oilseeds was largely under high tariff barriers on
non-cereal crops, which perhaps contributed to accelerating imports of edible oils, it was constitution of National Horticul-
agricultural growth. These are relatively less developed in irri- tural Board in 1984 that encouraged horticulture production by
gation and largely rely on rainfall. Pulses and oilseeds are low coordinating, production and processing of fruits and vegetables.
water requirement crops, therefore find niche in these regions. Export of different fruits and vegetables also grew during the
Like pulses and oilseeds, these regions also witnessed substantial last decade as a result of emerging infrastructure facilities (cold
increase in area under fruits and vegetables. Government sup- storage and cargo handling) at international airports.
ported programmes promoted the cultivation of fruits and veg-
etables. Among others, watershed programme facilitated conser- Livestock Sub-Sector
vation of rainwater and gave higher priority for cultivation of
fruits and vegetables. Among cereals, maize is picking up fast The livestock sector is growing at a fast rate and therefore its
in the southern region and to some extent in the western region. share in total value of agricultural output is progressively rising
Maize is gaining importance to meet the growing demand for in India [Birthal and Parthasarthy 2002; Birthal et al 2002]. But
poultry feed in these regions. Among all the crops gaining in these the SID within the livestock sub-sector is modest (0.508), and
regions, oilseeds are under serious threat in the wake of import also slowly decreasing. The modest SID is mainly due to a large
liberalisation of edible oils as the cost of imported oils, especially share of milk in total value of livestock products (around 68 per
palmolean is much lower than the domestic price prevailing in cent during the past two decades (Table 6). The remaining share
the economy. To sustain oilseed production, technical efficien- of livestock products (32 per cent) is distributed to several items
cies in their production and processing will have to be improved like meat, poultry, wool, etc. Milk production more than doubled,
through better management and technology adoption. from 33 to 71 million tonnes over the period TE 1981-82 to TE
The northern region was specialising more in favour of rice 1998-99, with an annual compound growth rate of about 4.62
and wheat crops. Favourable government pricing policies, as- per cent during the last two decades. The growth of milk pro-
sured procurement, high-yielding technologies, and irrigation duction was much higher (5.23 per cent) during 1980s than 1990s
development have encouraged farmers to allocate more area in (3.46 per cent).
favour of these crops. Rice and wheat have replaced coarse cereals Meat and poultry sub-sectors have also registered good per-
and pulses from the region. Over time, the region is concentrating formance, increasing from a low of 0.80 million tonnes in TE
more in cereals and only marginally diversifying in to non-cereal 1982-83 to 2.73 million tonnes in TE 1991-92 and finally to 4.41
commodities. With the availability of short duration black gram, million tonnes in TE 1998-99, giving an annual compound
green gram and pigeonpea, pulses are slowly regaining impor- growth rate of about 5.81 per cent during the 1980s vis-à-vis
tance in this region. Other crops that are gaining importance in just 3.90 per cent during the 1990s. The high increase in meat
this region are sugar cane, vegetables and fruits. Ironically, there production during 1980s was partly contributed by the severe
are reports that extensive cultivation of rice and sugar cane are drought in 1987 (often claimed to be the severest of the century)
causing negative externalities related to soil and water resources. in most parts of the country. Acute shortage of green and dry
The soil fertility with respect to macro- and micro-nutrients is fodder forced people to dispose-off less productive animals for
declining with continuous cultivation of these crops. The water slaughtering at a large scale. The poultry also flourished during
resource of the region is also depleting. The negative externalities the 1980s contributing to higher growth of livestock sector during
have adversely affected the total factor productivity of rice-wheat the 1980s. The share of poultry and goat meat in total value of
based cropping system in this region [Kumar et al 1998]. To meat production went up from 66 per cent in TE 1982-83 to 77
sustain the food security, and further augment export of rice (both per cent TE 1998-99. Similarly, egg production also increased
basmati and non-basmati), there is a need to improve the water by 8.46 per cent annually during 1980s as against 4.60 per cent
use efficiency. The region has potential for cultivating a variety annually during 1990s. It is interesting to observe that, unlike

Economic and Political Weekly June 12, 2004 2461

dairy, the poultry sector grew at the instance of private organised sector can significantly contribute to enhancing farm income,
sector, which controls roughly 80 per cent of total poultry pro- offering employment opportunities in rural areas and meeting
duction in the country. the food and nutritional needs of small farm holders.
Regional patterns are dissimilar due to agro-climatic vari-
ability, food habits and status of economic development (Table 6). Fisheries Sub-Sector
Diversification of livestock activities was least in the northern
region and highest in eastern and north-eastern regions of the Fisheries sub-sector has also diversified over the years. The
country. In northern region, there is more specialisation of live- SID of fisheries sector has shown marginal improvement to 0.49
stock sub-sector primarily in dairy, with some emergence of in TE 1999-2000 from 0.47 in TE 1981-82 (Table 7). It is mainly
poultry lately. Share of milk in total value of livestock was as due to gradual shift from marine to inland fisheries. Traditionally,
high as 80 per cent in TE 1998-99 in the northern region. The the marine fisheries used to dominate the fish production in the
western region is also concentrating in favour of milk production. country, which was more than 75 per cent in 1960-61. Recognising
Gujarat, located in the western region, witnessed the evolution the importance and potential of fish sector in the inland areas,
of dairy cooperatives and led a revolution often called the ‘white a greater impetus was accorded to the inland fisheries. The share
revolution’. of marine fish in the total production has fallen to about 54 per
The southern region is showing relatively higher diversity in cent in TE 1999-2000, while that of inland fisheries has risen
livestock sector as compared to northern and western regions. to about 46 per cent in TE 1999-2000 from less than 25 per cent
Milk and poultry together contributed about 81 per cent in the in 1960-61. The annual compound growth rate of inland fisheries
total value of livestock in southern region in TE 1998-99. After was higher (6.54 per cent) during 1990s than 1980s (5.27 per
milk, poultry has emerged as an important activity in the cent). The marine fish production, which performed poorly during
southern region. 1980s (0.12 per cent) improved during 1990s (2.53 per cent) due
The eastern and north-eastern regions showed a highly diver- to greater impetus accorded to the fisheries sector. The inland
sified livestock sector. It is distributed between milk, meat and fish potential is still higher with a well spread location of rivers,
poultry. With few exceptions, the share of milk production is canals and reservoir.
decreasing and that of meat and poultry increasing. The higher growth in inland fisheries was mainly attributed
Livestock production brought out revolutionary changes in the to overwhelming progress in aquaculture, both in fresh and
country during 1980s and these continued during 1990s, though brackish water. The share of culture fisheries in inland sector
at a slower pace. In the dairy sector, the breakthrough is ascribed has went-up from about 43 per cent in 1984-85 to high level
to the implementation of the ‘Operation Flood Programme’ of about 84 per cent in 1994-95 [Kumar et al 2001]. A bulk of
through the national dairy development board (NDDB), which growth in culture fisheries has come from the fresh water aqua-
developed cooperative model for procuring and marketing of culture [Krishnan et al 2000]. There is good scope to expand
milk and milk products. The programme established about 170 production of culture and other products in the brackish water
cooperative milk unions, operated in over 285 districts and areas. Only 10 per cent of the available brackish water area (12
covered nearly 96 thousand village level societies in different million ha) in the country was exploited until 1995-96 [IASRI
states by making nearly 10.7 million farmers their members until 2001]. The expansion of inland fisheries has also led to some
1999-2000 [NDDB 2002]. Realising the success of the programme, negative externalities related to degradation of arable lands due
an Integrated Dairy Development Programme was launched in to salinity.
the non-Operation Flood, hilly and backward areas in 1992-93 The remarkable progress in fisheries sector was the outcome of
to enhance production, procurement and marketing of milk, and a well-knit strategy to accomplish multiple goals of augmenting
to generate employment opportunities in those areas.
The future of livestock sector is quite promising in the country, Table 7: Temporal Changes in Fish Production (000 tonnes)
as there still exists huge potential to augment production, con- and Diversity
sumption and export of different livestock commodities. The Period Marine Fish Inland Fish Total Simpson Index
meat production is mostly confined to the unorganised sector, of Diversity
and is crying for setting up of modern slaughter facilities and TE 1981-82 15 (62.50) 9 (37.50) 24 0.47
development of cold chains. TE 1991-92 21 (60.00) 14 (40.00) 35 0.48
Strengthening the livestock sector would benefit the small farm TE 1999-2000 29 (53.70) 25 (46.30) 54 0.49
holders in rural areas. Incidentally, the small farm holders in rural Note: Figures in brackets are the percentage share in total fish production.
and peril-urban areas largely control the livestock sector. This Source: Kumar et al (2001).

Table 6: Share of Individual Commodities (Per Cent) in Gross Value of Livestock Sub-Sector in India at 1980-81 Prices
Region Milk Meat Poultry Miscellaneous
TE TE TE TE TE TE TE TE TE TE TE TE
1982-83 1991-92 1998-99 1982-83 1991-92 1998-99 1982-83 1991-92 1998-99 1982-83 1991-92 1998-99

Eastern 54.63 53.65 47.14 11.96 20.24 22.08 11.91 11.38 11.19 21.50 14.74 19.59
North-east 53.81 55.84 56.83 15.63 16.61 17.58 18.92 18.21 17.05 11.65 9.33 8.54
Northern 76.32 77.87 79.87 2.67 4.54 5.06 2.93 5.13 5.46 18.07 12.46 9.62
Southern 63.75 64.64 64.72 9.91 7.47 7.20 14.94 16.26 16.58 11.40 11.64 11.50
Western 69.16 73.81 74.13 5.61 3.30 3.85 6.27 6.20 7.31 18.96 16.68 14.71
All-India 68.09 69.22 68.96 6.57 7.92 8.39 7.85 8.97 9.58 17.48 13.88 13.07

Notes: Meat includes cattle meat, buffalo meat, sheep meat, goat meat, and pig meat.
Poultry includes poultry meat and eggs.

2462 Economic and Political Weekly June 12, 2004

production, enhancing export and overcoming poverty of fish- The technology was defined by area under high-yielding variety
ermen. The outlay in the fisheries sector was raised from around of cereals, irrigated area and extent of mechanisation. But it was
2-3 per cent of total agricultural outlay during 1970s to over 5.5 irrigated area that turned-out to be significant and represented
per cent during 1980s and 1990s. Several production and de- the technological advancement in the region. The regression
velopment-oriented programmes were launched in the potential coefficient of this variable was showing negative relationship
areas. These programmes were implemented in both marine and with diversification. It means that the crop diversification in
inland areas as development of freshwater aquaculture, Integrated favour of horticultural commodities is declining with increasing
Coastal Aquaculture and Development of Coastal Marine Fish- irrigated area. This suggests that crop diversification is more
eries. Under these programmes, Fish Farmers’ Development pronounced in rainfed areas, which are deprived of technological
Agencies (FFDAs) were established in fresh water areas, and advancement in terms of irrigation. These areas are characterised
Brackish Water Fish farmers’ Development Agencies (BFDAs) as rainfed, low resource endowed with abundant labour force
in brackish water areas. To encourage the aquaculture, the and by-passed during the ‘green-revolution’ period.
programmes were initiated to upgrade the technology, and Relative profitability of horticultural commodities with other
encourage involvement of private sector for activities such as crops is also an important determinant for diversification in their
quality seed, feed and other inputs and creation of suitable favour. The regression coefficient is significant and positive.
infrastructure for storage, transport, marketing and credit. Obviously, the higher profit of these crops would induce farmers
Seed production is very important to sustain fisheries produc- to diversify in their favour. Fruits and vegetables are highly
tion. To meet this objective, more than 50 seed hatcheries at the profitable in comparison to cereals and other crops. Relative
national level were established. The results were quite rewarding: profitability of fruits was more than 8 times higher than cereals.
the seed production rose manifold from only 409 million fry in The corresponding figure for vegetables was 4.8. Although high
1973-74 to about 20,000 million fry in 1999-2000. To develop profits of horticultural crops encourage their cultivation but
better infrastructure facilities, ‘fisheries industrial estates’ were uncertain prices and high yield instability limit their wide spread
developed by grouping the cluster of fishing villages. The major cultivation. The price instability is more in case of fruits and
accomplishment until 1998-99 was construction of 30 minor vegetables compared to cereals [Subramanian et al 2000]. The
fishing harbours and 130 fish landing centres besides the major high price variability of fruits and vegetables is due to poor
fishing harbours at Cochin, Chennai, Paradeep, Roychowk and vertical linkage between production, marketing and processing.
Visakhapatnam [Kumar et al 2001]. This calls for developing appropriate institutional arrangements
The future of fisheries sector is bright with the opening-up of for minimising the price uncertainty. Some scattered success
the economy. There exists a good export market for both marine stories are available for strengthening farm-firm linkages. These
and inland fish and aqua products. In this context, the Sanitary are contract farming by Pepsi and Hindustan Lever for potato
and Phytosanitary (SPS) issues are more important to tap the and tomato, and cooperative societies under the banner of ‘Safal’
export potential. The need is to focus more on quality control, for fruits and vegetables. Contract farming is becoming popular
modernise the crafts used in marine areas and utilise the full in many developing countries. But it is still based on informal
potential of the inland fisheries.
Table 8: Determinants of Diversification in Favour of
Horticultural Commodities: Double-log Estimates
V of Generalised Least Square
Determinants of Diversification
Explanatory Dependent Variable: Index of Gross Value of
Variables Horticultural Commodities at 1980-81 Prices
Agricultural diversification is influenced by a number of forces Equation 1 Equation 2 Equation 3
both from the supply-side and the demand-side. This section
examines the determinants of diversification in crop and livestock Irrigation -0.4575*** -0.4697*** -0.5073***
(0.0614) (0.0607) (0.0564)
sectors separately, and results are given in Tables 8 and 9. Relative profitability 0.3549*** 0.3329*** 0.3152***
(0.04450) (0.0411) (0.0441)
Roads 0.2873*** 0.2843*** -
Crop Sub-Sector (0.0664) (0.0665)
Markets 0.1261* 0.1870*** -
To examine the forces, which are influencing the diversifica- (0.0710) (0.0528)
tion in favour of high value commodities, a number of explanatory Rural literacy -0.7976*** -0.8415*** -0.5497***
variables were studied. The variables were related to infrastruc- (0.1458) (0.1419) (0.1389)
Small landholders 1.1964*** 1.2016*** 1.6043***
ture development, technology adoption, relative profitability, (0.2283) (0.2285) (0.2002)
resource endowments and demand-side factors including Urbanisation 0.1840 - 0.3050***
urbanisation and income level. The estimated double-log equa- (0.1438) (0.1094)
tions of Generalised Least Square are given in Table 8. Income 0.4892*** 0.5082*** 0.4671***
(0.0668) (0.0652) (0.0686)
To capture the effect of infrastructure development, two Rainfall -0.0583 -0.0712* -0.0949**
important variables, namely, markets, and roads, were included (0.0422) (0.0411) (0.425)
in the model. Both the variables yielded positive and significant
influence on diversification of crop sector. Obviously, better Time dummy: 1981-90=0; 0.8944*** 0.8839*** 0.8960***
1991-99=1 (0.0700) (0.0696) (0.0722)
markets and road network induced diversification in favour of R-square 0.7735 0.7722 0.7572
horticultural commodities. Better market and road network means Adjusted R-square 0.7642 0.7637 0.7490
low marketing cost and easy and quick disposal of commodities. F-statistic 82.82*** 90.00*** 91.40***
It also reduces the risk of post-harvest losses in case of perishable Figures in parentheses are standard errors of the respective coefficients;
commodities. ***, **, * significant at 1 per cent, 5 per cent and 10 per cent respectively.

Economic and Political Weekly June 12, 2004 2463

arrangements. This area needs legal changes to encourage ef- also plays crucial role in influencing the prospects of livestock
fective role of processing industries to give further impetus to sub-sector. Road network and markets were included in the
agricultural diversification. There is evidence that well managed model to represent the infrastructure development. These variables
contract farming has proven effective in linking the small farm were significant and have positive bearing on the growth of
sector to sources of extension advice, mechanisation, seeds, livestock.
fertiliser and credit, and to guaranteed and profitable markets The two demand-side variables, per capita income and
for produce [FAO 2001]. urbanisation showed a positive and significant influence on the
There is a positive relationship between growth of horticultural growth of livestock activities. The rising per capita income and
commodities and the proportion of small holders. This indicates growing urbanisation are raising the demand for livestock pro-
that diversification in favour of horticultural commodities is more ducts in the consumption basket leading to diversification in the
confined with the small holders. Such a move of small farm livestock sector [Kumar and Mathur 1996].
holders in favour of high-value commodities is expected to Annual rainfall was significant with a positive sign indicating
enhance their income. Cultivation of horticultural crops suits the that higher rainfall areas have more inclination towards livestock
small farm holders. The advantage is that these are labour- activities. This may be due to availability of green fodder from
intensive and generate regular flow of income. The caution is fallow areas. This is unlike the crop sector, where diversification
that absence of appropriate markets and rise in supply may was more in low rainfall areas. This has important implications
adversely affect the prices and opportunities for higher income for designing appropriate strategies for promoting livestock sub-
[Tewari et al 2001]. sector.
Rainfall is another variable, which was included in the model
to assess the effect of climate on crop diversification. The variable VI
was highly significant with negative sign indicating that crop Implications of Diversification
diversification is limited in higher rainfall areas. Obviously, high
rainfall areas specialise towards rice, while farmers go for di- Several benefits of agricultural diversification are reported in
versification in medium and low rainfall areas to increase income the literature. In the short run these are (i) shifting consumption
and minimise risk. pattern, (ii) improving food security, (iii) increasing income,
Demand-side factors such as urbanisation and per capita in- (iv) stabilising income over seasons, (v) generating employment
come showed positive and significant impact on crop diversi- opportunities, (vi) alleviating poverty, (vii) improving produc-
fication. tivity of scare resources (e g, water), (viii) promoting export,
The above discussion suggests that assured markets and good (ix) improving environmentally sustainable farming systems
road network could stimulate agricultural diversification in favour through conservation and enhancement of natural resources [Jha
of high value crops as they help maximise profits and minimise 1996; Ramesh Chand 1996; Vyas 1996; Delgado and Siamwalla
uncertainty in the output prices. Inadequate markets may deprive 1999; and Ryan and Spencer 2001]. These short-run benefits have
farmers to take potential benefits of cultivating high-value crops. implications for the prospects of long-run growth in agriculture,
Encouraging appropriate institutional arrangements for better regional equity and sustainable farming systems. The benefits
markets through cooperatives or contract farming would go a are more clearly captured at micro-level. In the present study,
long way in strengthening farm-firm linkages. Besides, role of we have assessed implications of diversification at macro-level
technology cannot be ignored. The high-yielding and more stable
genotypes in fruits and vegetables need to be propagated through Table 9: Determinants of Diversification in Favour of Livestock
developing a strong seed sector. Sub-Sector: Double-log Estimates of Generalised Least Square
Explanatory Dependent Variable: Index of Gross Value
Variable of Livestock at 1980-81 Prices
Livestock Sub-Sector Equation 1 Equation 2 Equation 3
The results of Generalised Least Square for livestock sub-sector Irrigation -0.1993*** -.0294 -
are given in Table 9. Technological progress in the crop sub- (0.0214) (0.0332)
Relative profitability 0.2009*** - 0.1736***
sector has strong influence on the diversification of livestock sub- (0.0222) (0.0288)
sector. Irrigated area, one of the proxy variables for technological Roads - 0.0534* -
progress, was significant with negative effect on expansion of (0.0292)
livestock sub-sector. Markets 0.0368 0.0906*** -
(0.0260) (0.0312)
Farmers’ resource endowment (particularly the size of land Rural literacy -0.2049*** - -0.0672
holding) was captured by the proportion of small holders in the (0.0479) (0.0545)
total holdings in the region. The regression coefficient was highly Small landholders 0.6790*** - 0.5689***
significant and positive, indicating the prospects of livestock (0.0705) (0.0760)
Urbanisation 0.1114** - 0.0569
activities are higher on small farm holdings. Livestock activities (0.0482) (0.0455)
are often well integrated with crop activities and generate regular Income 0.1521 *** - 0.2033***
income and quick returns to the small holders. (0.0239) (0.0216)
Rainfall -0.0029 0.0524** -
Rural literacy, which is a proxy for level of knowledge, is signi-
(0.0148) (0.0221)
ficant with negative sign. Obviously, higher literacy is indicating Time dummy : 1981-90=0; 0.2479*** - -
shift from agriculture (including livestock) to other job oppor- 1991-99=1 (0.0255)
tunities. Relative profitability of livestock in comparison to crop R-square 0.7472 0.0637 0.5299
Adjusted R-square 0.7376 0.0448 0.5188
sector was also found significant with positive relationship for F-statistic 78.45*** 3.37*** 47.67***
the growth of livestock activities. Infrastructure development

2464 Economic and Political Weekly June 12, 2004

on (i) improving food security, (ii) generating employment Interestingly, the consumption basket is changing over time.
opportunities, and (iii) promoting export. The food consumption is shifting from cereals to non-cereals in
both rural and urban areas (Table 10). The per capita cereal
Food Security consumption in rural and urban areas has declined, while those
of milk, milk products, vegetables and fruits have increased
Food security at the national and household level is an im- significantly [Kumar 2002]. Most remarkable increment in
portant issue in the context of agricultural diversification. Pro- consumption was witnessed in case of fruits.
ducing additional food is a major challenge when population and The available evidence clearly reveals that diversification of
incomes are rising, and natural resources degrading. There are crop and livestock sectors has not only increased production of
apprehensions that shift in crop portfolio from food to non-food non-cereal commodities, but also raised their consumption pattern.
crops may lead to food insecurity. Incidentally, the diversification A more favourable environment for diversification towards high-
in majority of the states in India was coming as a result of value commodities will not only ease the pressure of storing
expansion in cropping intensity. The crop substitution was also huge surplus of rice and wheat, but also accelerate growth of
taking place, which was diverting area in favour of high-yielding agricultural sector through high-value commodities.
cereals from low-yielding inferior cereals. Rice, wheat and maize
gained while sorghum and millets lost the area. The high-yielding Employment
nature of foodgrain crops has improved their availability. The
production trends reveal that the per capita daily availability of Generating employment avenues in rural areas is critical. The
foodgrains has increased from 448.56 grams in TE 1981-82 to question is how diversification of crop sector can generate
475.4 grams in TE 1999-2000. Similarly, the per capita daily additional employment opportunities in the rural areas. Some
availability of milk has substantially gone up from 128 grams information was collated from labour use in production of different
in 1980-81 to 214 grams in 1999-2000 [Government of India crop activities (Table 11). It may be noted that labour use for
2002]. cultivation of non-cereals is substantially higher than cereals
(except rice).
Table 10: Per Capita Consumption Pattern of Food Items Area shift from cereals to vegetables would generate substantial
(Kgs/person/annum) employment opportunities in rural areas. Rough estimates sug-
Item 1977 1987 1993 1999 gest that 1 ha shift in area from wheat to potato would generate
145 additional man-days. Similarly, 1 ha area shift from coarse
Rural
Rice 86.5 88.1 85.4 81.0 cereals (sorghum and pearl millet) to onion would generate 70
Wheat 49.4 61.6 53.5 53.9 man-days more employment opportunities in rural areas. In case
Coarse cereals 56.7 29.8 24.1 17.7 of substitution from coarse cereals to other vegetables (for example,
Total cereals 192.6 179.5 163.0 152.6
cabbage, cauliflower, eggplant, tomato, lady finger), it is ex-
Pulses 8.7 11.5 9.2 10.1
Milk and milk products 24.6 58.0 51.4 50.5 pected to generate 70 man-days/ha additional employment. A
Edible oils 2.7 4.3 4.6 6.0 marginal shift in area from wheat and coarse cereals in favour
Vegetables 24.7 50.8 53.2 66.0 of high-value crops can thus generate enhanced employment
Fruits 2.6 10.3 9.8 17.0
Meat, eggs, fish 2.7 3.3 4.1 5.0
opportunities. Generating additional employment in rural areas
Sugar and gur 13.5 11.0 9.2 10.1 has welfare and equity implications.
Urban
Rice 67.6 68.1 64.2 62.5
Wheat 64.6 60.4 57.4 55.4 Export
Coarse cereals 14.8 10.6 7.7 7.1
Total cereals 147.0 139.1 129.3 125.0 Indian exports during the decade of 1990s grew at an annual
Pulses 11.7 12.2 10.5 12.0 rate of 10.1 per cent, as against 7.4 per cent during 1980s
Milk and milk products 39.7 64.9 68.3 72.4 [Government of India 2001]. The exports of agricultural com-
Edible oils 4.8 6.8 6.3 8.6
Vegetables 39.7 66.4 63.1 70.0 modities during 1990s, however, grew at an annual rate of 8.1
Fruits 5.9 18.8 20.1 19.0 per cent, as against only 3.3 per cent during 1980s. However,
Meat, eggs, fish 4.8 4.9 6.3 6.8 share of agriculture in total exports has declined from 24 per
Sugar and gur 17.1 12.3 11.8 12.0
cent during 1980s to 18 per cent in 1990s.
Source: Kumar (2002). A large share in agricultural export was contributed by
diversification of crop and livestock sectors. It was noted that
Table 11: Average Labour Use in Vegetables, Cereal diversification of agricultural commodities has promoted export
and Non-Cereal Crops
(Man-days per ha)
of many non-traditional items. Historically, there was virtually
no export of fruits, vegetables, and livestock and fish products.
Vegetables Cereals and Non- Cereals The exports of these commodities, as well as rice, have remark-
Crop Labour use Crop Labour use
ably picked up during 1990s. For example, exports of rice went
Potato 200 Rice 105 up from 440 thousand tonnes in TE 1981-82 to 656 thousand
Onion 125 Wheat 55 tonnes in TE 1991-91 and reached to 3,145 thousand tonnes in
Cabbage 110 Sorghum 55
Cauliflower 120 Pearl millet 50 TE 1997-98. India’s share in world rice trade went up to more
Eggplant 70 Cotton 100 than 10 per cent in 1990s, up from a mere 3.7 per cent in 1980-81.
Tomato 195 Sugarcane 190 Similarly, exports of fruits and vegetables more than doubled
Source: Derived from several sources (i) Subramanian et al (2000) and during the last two decades (from US$ 110 million in TE 1981-82
Government of India (2000). to US$ 262 million in TE 1999-2000. The exports of fish shot

Economic and Political Weekly June 12, 2004 2465

up from $320 million in TE 1981-82 to $1125 million by TE diversification. The rainfed areas are becoming a hub of non-
1999-2000. More progress was registered in processed fruits and cereals due to their low water requirement and abundant labour
juice. Further, exports of milk, milk products, eggs and fish supply. The evidence confirmed that the regions, which were
products have also made entry into the export markets. The, diversifying in favour of non-cereals, have accomplished better
exports of milk and milk products increased from US$ 1.1 million growth performance as compared to those specialising in cereals.
in TE 1981-82 to US$ 1.7 million in TE 1991-92 and reached Besides, relative profitability of high-value commodities in relation
a peak of US$ 3.2 million in TE 1999-2000. Exports of eggs, to other crops also played important role in determining status
although too erratic, increased from a low of US$ 0.4 million of diversification. This calls for further strengthening R and D
in TE 1981-82 to US$ 25.3 million in TE 1999-2000. It may efforts for improving the productivity in a sustainable manner.
be noted that the production of all these commodities increased Most important is that the high-value commodities are more with
substantially during 1990s, which led to their entry into export small farm holders.
markets. The study also highlighted the implications of diversification
The progress in export of non-traditional items was quite on food security, employment generation and export earnings.
impressive during the decade of 1990s as compared to 1980s. The macro-level information showed that the food security was
This implies that diversification of agriculture can substantially not adversely affected as a consequence of agricultural diver-
contribute to exports provided a congenial environment through sification. Similarly, the high-value crops have substantial po-
infrastructure development and institutional innovation is cre- tential for generating employment opportunities. Most of the
ated. It must be supported by appropriate domestic policies and high-value crops are high labour requirement crops. Incidentally,
legal changes, which encourage development of new institutions the small and marginal farmers have abundant labour, which can
for linking production, marketing and processing. be effectively utilised for production of high-value commodities.
The high value commodities have also witnessed good perfor-
VII mance in the international trade.
Conclusions and Policy Implications To speed-up the process of agricultural diversification of high-
value commodities, the south Asian countries need to take series
The study diagnosed the status of agricultural diversification of measures to reform institutional arrangements, which can
in south Asian countries. Detailed investigations were carried- appropriately integrate production and markets. Among others,
out for India to examine the determinants of diversification. The the immediate measures include ensuring markets, developing
results of the study revealed that agricultural sector in south Asia roads, creating appropriate infrastructure and encouraging pri-
is gradually diversifying in favour of high-value commodities, vate sector participation for value addition and processing.
namely, fruits, vegetables, livestock and fish products. Much of Domestic market reform is a pre-condition for agricultural di-
the diversification came, if at all, with only little support from versification in favour of high-value enterprises. The most in-
the governments. It was because food security issues are still tricate puzzle is how to ensure greater participation of small and
critical in the subcontinent and government policy is still ob- marginal landholders in the process of agricultural diversification
sessed with self-sufficiency in cereals, which presumably con- for sharing benefits of globalisation. They are moving in favour
tributes to a large share of area still being allocated to cereal of high-value commodities but this group of farmers has high
crops. Countries like Bangladesh, India and Sri Lanka have transaction cost due to tiny marketable surplus, which negate their
achieved food self-sufficiency at the national level, but the Annexure
emphasis is still increasing production of rice and wheat. Coun- Specification of Variables and Their Expected Signs for
tries, like Bhutan, Nepal and Pakistan, which are still deficit in Diversification
foodgrain production making serious attempts in augmenting Drivers Indicator Unit Expected
their production. Sign
Despite focusing efforts towards foodgrain production, a silent
Technology Area under HYV Foodgrain HYV area to total –
revolution is witnessed in high-value commodities. Production of foodgrains foodgrain area ( per cent)
of fruits, vegetables, livestock and fish products have increased Fertiliser use Kg/ha –
remarkably in most of the south Asian countries. Due to their Irrigated area Proportionate irrigated are to the
gross cropped area (per cent) –
low share in gross value of agricultural output, the silent revo- Mechanisation No of tractors 1000/ha –
lution was unnoticed. The production of these commodities was
demand-driven, which is unlike the supply-driven ‘green revo- Infrastructure Market density No of markets/1,000 ha of +
gross cropped area
lution’. During 1980s, production increase was attributed to the Road length Square km/1,000 ha of +
rise in their yield levels. During 1990s, production increase came gross cropped area
Profit Relative profitability Profit from fruits and vegetables +
from area augmentation. in relation to cereals, pulses,
In Indian context, the determinants for high-value commodities oilseeds, sugarcane
(horticultural and livestock) were studied. Markets and roads Resources and Holding size Proportion of small holders in +/–
information total holdings ( per cent)
were the key determinants, which were influencing the status Literacy Per cent literate population in +
of diversification. Other important determinant was the techno- rural areas
logy absorption in the region. Higher the technology adoption Demand side Urbanisation Urban population in per cent +
Per capita income Rs/person +
of cereals (particularly irrigation) less was the diversification in Climate Rainfall ‘millimetre –
favour of high value commodities. Diversification in favour of Period Dummy 1981-90= 0; 1991-99=1 +
horticultural and livestock commodities was more pronounced In case of livestock, proportion of crossbred cattle of total cattle (per cent) was
in rainfed areas, which were by-passed during the ‘green used as a proxy for technological advancement, with an expected negative sign
revolution’ but now could take advantage of agricultural for diversification.

2466 Economic and Political Weekly June 12, 2004

higher production efficiency. Future research may be initiated Hayami, Y and K Otsuka (1992): ‘Beyond the Green Revolution: Agricultural
to assess how appropriate institutional arrangements would convert Development Strategy into New Century’ in Jock R Anderson (ed),
Agricultural Technology: Policy Issues for the International Community,
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[The authors are grateful to Nicholas Minot for his very constructive and Kumar, Anjani, P K Joshi and P S Birthal (2001): Fisheries Sector in India:
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International Workshop on ‘Strategies and Options for Increasing and
1 Nineteen states in the country are major ones. Remaining nine states are Sustaining Fisheries Production to Benefit Poor Households in Asia’,
small with respect to geographical area, production and population. August 20-25, 2001, ICLARM, Penang, Malaysia.
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Cropped Area (B) + Crop Substitution (C). Since (A) and (B) are known, Areas’, Personal communication.
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