What Can Agriculture Do for the Poorest Rural Groups?

Abstract

A general equilibrium model of India's agricultural sector is used to ask how much the poorest rural group can gain from agricultural development measures once output price and employment effects are accounted for. The paper first examines what happened to the income of different income groups during the last two decades of very successful agricultural growth. It then explores technical change as it applies to different crops under alternative trade assumptions, and considers the effects of expanding irrigation, declining fertilizer prices and removing trade restrictions on rice. The results suggest that consumer benefits are more important for the welfare of the largely landless than employment effects, and that they can benefit very substantially from agricultural growth only if food prices decline. This raises difficult policy dilemmas because declining prices erode the gains of the rural sector as a whole. It therefore explores food rations and direct income transfers as alternative means for the assistance of those in poverty.