5.

6: Modernizing Agriculture and Rural Welfare:

Lesson and Policy Issues

5.6:1 Mechanization and the Demand for Labor

Demand for labor is an area that has been discussed in several parts of this book. In the agricultural sector, the main concern is
when and where mechanization should be introduced. As noted earlier, in most of the Asian countries, agriculture is highly
labor-intensive. Rice is the staple crop and it requires a significantly higher labor input than wheat, other grains, and most
secondary food crops.
Several studies have shown that a shift to modern varieties has increased the amount of labor input per hectare but probably
decreased the amount of labor per ton of production because of yield increases.

5.6.2 Technological tranfer ,Growth, and Equity

The introduction of new technology, be it higher-yielding varieties or new methods of crop rotation and cropping systems,
or improved irrigation and fertilization, has been the major factor contributing to increased productivity in agriculture
in Asia during the past fifty years. For example, the use of high- yielding varieties developed thirty years has ago brought
about substantial increases in productivity for rice and wheat. This process of technological transfer must be continued if
agriculture is to remain viable and dynamic.
 Impact of new technology on income growth and income distribution in Asia, particularly in the context of the Green
Revolution. While the Green Revolution has led to increased average per-capita income, it may have adversely affected
income distribution due to several factors:

1.Farm size and Fertilizer use: Studies in India, Indonesia, and Pakistan have shown that larger farmers
tend to use higher levels of fertilizer and obtain higher yields. Given the correlation between farm size and
income, this suggests that the Green Revolution may have negatively impacted income distribution in these
countries.

2. Income Distribution among Factors of Production: Research has shown that most of the increased farm
income has gone to factors of production other than labor. For instance, a study on wheat production in the
Uttar Pradesh region of India found that only 10% of the increased income went to labor.

3. Immiserizing Growth: It's argued that the Green Revolution led to increased production beyond demand,
which depressed prices and reduced incomes for rice producers and workers involved in rice harvesting.
5.6.3 Genetic engineering
Another issue is the impact of genetic engineering. Rice still remains the most important food crop. and the sector employs
the major part of the agricultural population. In recent years, rice productiv- ity growth has declined. It is now necessary
to implement ongoing technological developments that have taken place in rice and in other food crops, horticulture, and
livestock. For example, in China a method of planting different rice varieties together has cut the incidence of loss from
pests and increased yields dramatically (see Box 5.3).

5.6.4 Zero Tillage

As its name suggests, zero tillage minimizes or eliminates tilling of the land and retains crop residues as
ground cover. Zero tillage saves on labor and energy required to overturn the soil, conserves soil fertility,
increases tolerance to drought, and reduces greenhouse gas emissions. However, it requires more weeding
and the occasional use of pesticides. Zero tillage has recently been adopted in South Asia in the Indo-
Gangetic plain, which stretches from northern Pakistan across India to Bangladesh, and which is fed by
several rivers with headwaters in the Himalayas. It is applied in this region in a rice-and-wheat
combination. Wheat is planted immediately after rice, without tillage, and the wheat seedlings germinate
without irrigation, using the residual moisture from the previous rice crop. The system saves water, and
reduces production costs and the incidence of weeds and pests. Rates of return are reported to be very
high-as much as 50 percent or more (see World Bank, 2008, Chapter 8).
RESEARCH AND DEVELOPMENT : It has been widely documented that agricultural research and
development (R&D) yields high returns in the developing countries (see World Bank, 2008, Chapter 8;
and Alston, Chan-Kang, Marra, Pardey, and Wyatt, 2000). The International Food Policy Research
Institute (IFPRI) in Washington, D.C., estimates that investment returns in Asia are about 50 percent but
the rates of return in other regions are also high. These high payoffs suggest that agricultural research is
grossly underfunded. The most important reason is that private investment in agricultural R&D is limited
because the benefits cannot always be realized by those who develop them. Seeds can be reused and/or
shared with others, but few technologies can be protected by intellectual property rights. Fur- thermore,
most of the agricultural research is carried out in the industrial countries where there is little interest in
developing new varieties that only the poor will pay for and benefit from. As a result, most agricultural
R&D is carried out by government agencies or institutes funded by consortiums in the industrial
countries, such as the Consultative Group on International Agricultural Research (CGIAR).
5.6.5 Food prices and the Linkages to energy

In the past few years, there has been increasing volatility in the prices of primary products and energy.
Between 2000 and 2007, international prices of wheat more than tripled and rice nearly doubled as the
price of oil skyrocketed. High demand in China and India, as well as the industrialized countries was
responsible for the price acceleration in food grains, while oil demand increased in the indus- trial and
developing countries alike. With the onset of volatility in the financial markets and the global recession in
late 2007 and 2008, prices made an about turn. By the end of 2008, oil prices had fallen back to 2004 levels,
and higher levels of production, together with slower demand growth, have resulted in price declines for
commodities.

5.6.6 International Trades and Resources Transfer

The relationship between the agricultural sector and international trade in agricultural products will be
discussed in more detail in Chapter 7. However, a few details are relevant here. The role of agricultural
exports in earning foreign exchange was very important at the beginning of the growth phase for these
countries in the 1950s and 1960s.
All the Asian countries were primary product exporters, includ- ing Korea and Taiwan, both of which exported rice. As
development progressed, agricultural exports diminished in importance as Asia became more specialized in industrial
exports.
 : The structure of tariffs and the level of protection of agriculture from international
competition tend to vary inversely with the level of income.
: Although previous trade negotiations have aimed to reduce tariffs, agricultural tariffs in
industrialized countries remain high. To address this issue, developing countries need to
advocate for a gradual reduction of these tariffs. This would create more opportunities for
their products in international markets. Unfortunately, progress in trade negotiations, such as
the Doha Round, has been slow, partly due to the failure to address these imbalances.
5.6.7 Shift out of Primary Grain Production

There has been a gradual shift in the mix of agricultural goods produced in
Asia from primary food grains, such as rice, wheat, and sorghum to
secondary food crops, such as livestock, tree crops, horti- culture, and
fishing. These shifts have occurred in line with changes in comparative
advantage, relative prices, and profitability, which have encouraged the
diversification of agriculture.
As incomes have grown, consumers have demanded more protein and greater
choice by incorporating meat, fish, and fowl in their diets.
The range of agricultural products has also expanded as incomes increase and
tastes become more diverse.
Higher productivity in secondary food crops, aquaculture, livestock nutrition,
and horticulture together with higher tree crop yields has been made possible
by a combination of better technology and advances in cross breeding,
scientific advances, and genetic engineering. Mixed farming where livestock
and agriculture are combined is also playing a more important role (see Haan,
Steinfeld, and Blackburn, 1996).
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