“Some Policies
for Agricultural Growth and Their Impacts on Southern India: An Assessment
Using a Regional Computable General Equilibrium Model”
Citation: Ganesh-Kumar, A. and M. Panda. 2016.
“Some Policies for Agricultural Growth and Their Impacts on Southern India: An
Assessment Using a Regional Computable General Equilibrium Model”. Paper
presented at the Workshop on Prospects for Agriculture in India’s Southern
Region over the Medium Term: Setting an Agenda for Strategies to Meet
Challenges, Madras Institute of Development Studies, Chennai.
Abstract: In this study, we analyse impact on
the four southern states of some national level agriculture policies aimed at
promoting agricultural growth in the country using a reginal computable general
equilibrium model for India. More specifically, we examine questions related to
improvement in agricultural productivity, irrigation development, and expansion
of agricultural exports. Some of the major findings are the folowing:
·
When
agricultural total factor productivity rises in the country, product-mix of the
agricultural activity in the states is expected to change considerably, though
it may not result in national level growth in the agricultural output basket.
·
The
results indicate that productivity rise per say in the states does not lead to
major income gain by farmers since the the increase
in output gets virtually neutralized by decline in prices. An exogenous
productivity increase by itself without policies on demand expansion is likely
to be ineffective in practice. This happens even when productivity improvement
is confined to the southern states only, wherein the output gain in the state
gets neutralized by decline in prices.
·
When
all the states raise their irrigation capacity simultaneously along with an
improvement in productivity, agricultural activity in every region may not
benefit due to changes in comparative cost advantage.
·
If,
however, irrigation development and productivity improvement is confined only
to the southern states, then an improvement in output and value added is seen
in Andhra Pradesh and Kerala, but not in Karnataka and Tamil Nadu.
·
Expansion
of exports, possibly as an outcome of export promotion policies, does not have an uniform impact on the southern states. In Andhra Pradesh
and Kerala, the impact on output and value added is positive or negative
depending upon the commodity that experiences a rise in export demand. In
Karnataka, both output and value added expands following the rise in exports,
while Tamil Nadu does not benefit in terms of value added though output
expands.
·
The
main message that emerges from these simulations is that focusing on supply
side measures such as improving productivity, irrigation measures, etc., can
have and output expanding effects but need not improve the income of farming
households. An expansion of of demand for
agricultural commodities is critical for improving incomes.
·
In
this paper, we have attempted only a limited exercise pertaining to export
demand. The simulations show that export demand expansion can have a positive
effect, though the benefit may not accrue to all states. It is conceivable that
the magnitude of export expansion simulated here is too little to have a
positive effect on all states.