Both higher investments and technology improvements can address variations in output and income levels.

There are wide variations in the income levels of farmers on a per hectare basis across the States, as farmers grow crops under different farming conditions using various technologies. As information on income is not often available, yield per hectare doubles as a proxy for farm income. It is not a comprehensive measure but it does capture variations in income from the farm sector.

Punjab and Haryana or, indeed, western UP have enjoyed a pre-eminent position in productivity rankings for many decades now. Of course, farmers across the country may get varying prices for the same crop, depending on their access to markets, either offsetting or reinforcing the income gap induced by yield differentials.

Individual farmers try hard to achieve higher yields to get more income. They may also try and increase the size of their land holdings to offset the lower productivity of their land. Of course, chances are that both these responses are more likely to work towards increasing disparities, rather than the reverse. What should the policy response be?

Differences in income and productivity are not static. There are large variations in the rate at which productivity has increased across the States.

Farm investments

These productivity differences are not new. However, it is important to understand the implications of these differences. The static and dynamic differences in productivity across regions can be expected to set in motion a variety of self-sustaining forces and also certain adjustment processes.

The fact that higher productivity per unit of land is often the result of higher capital intensity of production also implies that capital accumulation in such regions would further reinforce their productivity advantages.

The increasing levels of mechanisation of farming, on the one hand, and inability of small farmers in dryland conditions to make new investments in farm equipment only reflect the continuing contrast in India's farming practices.

If the productivity differences are to be narrowed, there should be other investments in farming coming from either public resources or private enterprise. However, if there are no technology improvements, new investments alone may not sustain the productivity differences between the leading and laggard States. New investments finally would move to the low productivity regions. What is likely to be the regional complexion of Indian agriculture given the pulls and pressures of commercial incentives for farmers and policies affecting public investment in agriculture?

Will the tendencies leave large tracts of land under low productivity agriculture and hence also low income farmers? While low farm incomes may lead to the rise in non-farm sectors, this outcome need not be assured one. The economic forces that reduce the gap in farm income will require investments in low productivity regions. The prospect that investments flow from more prosperous farming regions to less productive regions appear small.

This scenario of increasing regional disparity in agricultural productivity is likely to be countered by public policies. Will such policies be pursued by the less productive regions or by the external forces such as the Central government programmes?

Policy effects

There is a greater need for understanding the implications of the persistence of regional disparity. Growing disparity should not lead to deterioration of income levels for farmers in the low productivity regions. There is a need for measures to promote regional balance in development in the form of policy responses countering regional productivity differences.

Development of rural infrastructure on a normative basis rather than any income-based approach is one leveller in terms of access to connectivity. But this alone would not be adequate. There will be a need to invest in institutions and technology improvements in the low productivity regions. Low productivity will have to be compensated by greater efficiency and less wastage of resources.

What remains to be seen is at what stage local policies will take the initiative to raise the flow of resources for local development. The unfolding regional complexion of Indian agriculture is likely to be more balanced if there is a happy coincidence of more investments, technology diffusion and enabling policies in the less productive regions.

(The author is Senior Research Counsellor, NCAER. Views are personal.)

(This article was published on October 18, 2011)
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