Spending on agri R&D alleviates poverty substantially: Study

Spending on agricultural research and development, including extension services, is at least 10 times more effective in reducing poverty than spending on fertiliser or power subsidies, an ongoing study has shown.

Spending ₹10 lakh on agricultural R&D can help lift 328 people out of poverty, whereas allocating the same for fertiliser or power subsidies can bring only 26 and 23 peopleabove the poverty line, according to a study being carried out by researchers at the Indian Council of Research on International Economic Relations (ICRIER).

The ICRIER team, led by noted agricultural economist Ashok Gulati, includes Anisha Samantara, Prerna Terway and former bureaucrat Pravesh Sharma. They looked at the public expenditure by the Centre and States between 1991 and 2013 for road construction, education and irrigation, and subsidies on power, fertiliser and irrigation, apart from agricultural research and extension (R&E).

Every ₹10 lakh spent on roads can move 130 people out of poverty, and for education, 42 people, but spending the same amount on irrigation would have a positive impact only on 10 people, said Gulati during a roundtable meeting on the study, supported by the Bill and Melinda Gates Foundation, in the Capital, last week.

“This is a clear message that the government needs to spend more and more on agriculture R&D and on building roads. These are two powerful variables. The reality today, however, is the other way around. India spends around 80 per cent of public expenditure on subsidies and only 15-20 per cent go into investment,” said Gulati, who is Infosys’ chair professor for agriculture at ICRIER.

The study also found that every rupee spent on agriculture R&E has given the country a return of ₹11.2; roads come second with a return of ₹1.10. The returns on similar investment in other fields, however, are poor with irrigation being the least at 33 paise.

According to Gulati, the research focused on agricultural growth because studies in the past had shown that agricultural growth is 2 to 3 times more effective in reducing poverty than the similar growth coming in from the non-agricultural sector. “Among various types of government spending, expenditure on agricultural research and development is one of the most critical for promoting agricultural growth,” he said.

For instance, China, which commenced its economic reforms in the 1970s in the agricultural sector, could reduce poverty by half in six years, whereas India took 18 years (between 1993 and 2011) to do so.

The ICRIER study looked particularly at the correlation between agricultural R&E and agricultural growth in six States – Bihar, Madhya Pradesh, Odisha, Uttar Pradesh, Gujarat and Punjab.

The study also showed that public spending on agricultural R&E intensity has a positive correlation with agricultural growth in the first four States, while this correlation was somewhat low in Punjab (this was because the State already has high level of productivity) and Gujarat. Gujarat was a curious case as its stupendous agricultural growth (it grew at CAGR of 8 per cent between 2003 and 2013) was largely due to the extension work carried out by private input dealers, not the public-funded extension services. The study, however, hasn’t taken into consideration the role played by private sector in extension services.

But the quality of extension services available in different States changes from one State to another, said Samantara. While private-public partnership in agricultural extension in Madhya Pradesh has immensely helped soyabean farmers, potato farmers in Agra in Uttar Pradesh, which have public-run extension services, didn’t get much help. “We found that many farmers were not visited by an extension worker for a year or more, whereas the norm was to have at least two visits a month,” said Samantara.

The study also found there was disproportionate allocation of agricultural R&E funds within the sector. While crop husbandry cornered 70 per cent of the R&E funds in 2014-15, its share in gross value of agricultural output in 2013-14 was just 45 per cent. Animal husbandry, on the other hand, received 10 per cent of the funds, but its contribution to the gross value output was 26 per cent.