Dairy Development in India: A strategy for pro-poor growth?

Mara SquicciariniAnneleen Vandeplas

Johan Swinnen

LICOS, KU Leuven

Introduction• India is home to 1/3 of the world’s poor• Poverty headcount around 400 million• Growth in agriculture is considered far more

effective for poverty reduction and ensuring food security than in manufacturing or services (Ravallion, 2009)

Introduction• Dairy is considered a sector with great potential

for pro-poor development and increasing food security• With poor access to land, activities which require

less land offer more potential for poverty reduction than e.g. crop farming

• Dairy is said to have potential for “huge employment generation”

• Important nutritional benefits

Research Question• Does dairy production contribute to rural

livelihoods?• Does dairy production offer potential for pro-poor

growth?

• Micro-econometric analysis of a unique primary dataset on 1000 rural households in Andhra Pradesh (India)

Relevance• Agricultural policies in India• International trade negotiations• Poverty reduction strategies by NGOs• Wider bio-economy: importance of preconditions

for successful pro-poor innovation

Dairy in India• India is largest milk producing country in the

world• India’s milk market is the 2nd most important

food market in the world • after China’s pork market• 40 billion $/year• 120 million MT/year

• Dairy is a very traditional rural activity:• Animals for draught power• Fresh milk for home consumption

Dataset: Andhra PradeshRegion under study Sample districts

• 4 districts• 50 villages• 20

hh/village

Descriptive statistics   Sample Population

AVG SD AVG SD

Age HH head Years 47.0 11.1 46.3 11.3

Education level hh head

Years 3.4 5.0 3.3 4.8

HH with dairy animals % 80 51

HH producing milk % 79 50

Nr of DA 2005 Nr 2.5 3.2 2.2 2.5

Nr of DA 2010  Nr 3.1 2.6 2.5 2.0

Productivity DA L/day/DA 3.4 3.2 3.3 2.7

Descriptive statistics    No DA 1-2 DA 3-5 DA >5 DA AVG

Land owned (acres) 1.6 3.1 4.4 5.9 2.6

Total income (Rs/year)

91,047 112,600 242,280 276,667 125,615

Income from dairy

(Rs/year)

n.a. 12,810 29,471 65,670 10,482

Income from crops

(Rs/year)

39,194 64,053 173,664 146,825 70,114

Income per capita

(Rs/year)

29,462 30,061 55,111 53,450 34,066

Asset index 2010   -0.26 -0.13 0.26 0.79 -0.2

Low caste (SC/ST)

(%) 31.5 27.9 17.4 12.4 27.7

Income effects of participation

• : income per capita, asset index, land ownership• : household characteristics: age & education of hh

head and spouse, caste, religion, family engaged in dairy, elderly hh members, lagged land and asset ownership

• Land is included in 2 different specifications• : village fixed effects (+clustered SE)

1 2 3 4Income per cap. Income per cap.

Household characteristics Unit Coeff. SE Coeff. SE Coeff. SE Coeff. SEMilk producer 1 if milk producer 0.228*** 0.086 0.274*** 0.088 -0.080 0.061 0.109** 0.048Age HH head years 0.014 0.032 0.016 0.033 0.020 0.020 0.007 0.016Age2 HH head -0.000 0.000 -0.000 0.000 -0.000 0.000 -0.000 0.000Education level HH head years 0.002 0.005 0.002 0.005 0.015* 0.008 0.002 0.004Age HH head's spouse years 0.013 0.032 0.014 0.033 -0.011 0.012 -0.000 0.011Age2 HH head's spouse -0.000 0.000 -0.000 0.000 0.000 0.000 0.000 0.000Education level HH head's spouse years 0.001 0.011 0.005 0.011 0.004 0.008 -0.002 0.006SC/ST 1 if SC/ST -0.009 0.096 -0.038 0.091 -0.132** 0.060 -0.097** 0.048HH members over 55 number 0.005 0.055 0.020 0.054 -0.027 0.043 -0.058** 0.025Nr of HH members in ad. eq. number -0.135*** 0.026 -0.137*** 0.025 0.072*** 0.022 0.027** 0.012Owned land 2005 log (acres) 0.245*** 0.051 0.117*** 0.043 0.717*** 0.060Asset index 2005 0.159*** 0.033 0.148*** 0.033 0.726*** 0.059 0.029 0.033Marginal farmer 1 if marginal farmer -0.106 0.090Small farmer 1 if small farmer 0.333*** 0.071Medium farmer 1 if medium farmer 0.197 0.127Large farmer 1 if large farmer 0.441*** 0.169Intercept 9.596*** 0.509 9.617*** 0.509 -0.182 0.367 -0.038 0.276Village FE Yes Yes Yes YesNumber of observations 863 863 863 863Adjusted R-sq 0.135 0.147 0.628 0.664Notes: The four specifications have been estimated through an OLS regression with village FE and clustered SE at the village level. Key: * significant at 10%, ** 5%, *** 1%

Asset index Land in 2010

Findings • Income per capita• Positive impact of dairy• Positive impact of land and other asset ownership

• Asset index• No impact of dairy• Positive impact of land and other asset ownership

• Land accumulation• Positive impact of dairy• Positive impact of land and other asset ownership

Who is producing milk?,

with

• : household characteristics: age & education of hh head and spouse, caste, religion, family engaged in dairy, elderly hh members, land and asset ownership

• Land is included in 3 different specifications• : village fixed effects (+clustered SE)

Household characteristics Unit Coeff. SE Marg.Eff SE Coeff. SE Coeff. SEAge HH head years 0.061 0.067 0.008 0.009 0.064 0.069 0.061 0.068Age2 HH head -0.000 0.001 -0.000 0.000 -0.000 0.001 -0.000 0.001Education level HH head years -0.005 0.017 -0.001 0.002 -0.005 0.018 -0.006 0.018Age HH head's spouse years -0.037 0.051 -0.005 0.007 -0.045 0.054 -0.047 0.054Age2 HH head's spouse 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000Education level HH head's spouse years -0.032 0.026 -0.004 0.003 -0.040 0.027 -0.041 0.027SC/ST 1 if SC/ST -0.004 0.209 -0.001 0.027 0.055 0.223 0.078 0.216Muslim 1 if Muslim 0.105 0.320 0.013 0.037 0.166 0.325 0.117 0.339Christian 1 if Christian 0.540* 0.306 0.051*** 0.019 0.550* 0.314 0.550* 0.306Parents with DA 1 if parents had DA 1.849*** 0.210 0.347*** 0.036 1.927*** 0.207 1.951*** 0.203Related HHs with DA number 0.122*** 0.038 0.016*** 0.004 0.119*** 0.037 0.117*** 0.037HH members over 55 number 0.018 0.146 0.002 0.019 0.016 0.147 -0.005 0.146Nr of HH members in ad. eq. number 0.087 0.069 0.011 0.009 0.089 0.069 0.092 0.071Owned land 2005 log (acres) 0.433*** 0.122 0.057*** 0.016 0.022 0.144Asset index 2005 0.227** 0.102 0.030** 0.014 0.248** 0.107 0.274** 0.110Land ownership 1 if owning land 0.865*** 0.265Marginal farmer 1 if marginal farmer 0.980*** 0.206Small farmer 1 if small farmer -0.305 0.218Medium farmer 1 if medium farmer 0.305 0.361Large farmer 1 if large farmer 0.474 0.585Intercept -1.211 1.258 -1.268 1.228 -1.102 1.209Village FE Yes Yes Yes YesNumber of observations 863 863 863 863Pseudo R-sq 0.399 0.399 0.412 0.416Notes: The three specifications have been estimated through probit regression including a full set of village dummies and clustered SE at the village level. Column 2 represents the marginal effects of the regression in Column 1. Key: * significant at 10%, ** 5%, *** 1%

4Milk producerMilk producer

1 2Milk producer

3Milk producer

Findings• Participation in dairy is mainly determined by• Family tradition • Cultural factors• Asset ownership

• wealthier hh more likely to participate in dairy• Land ownership

• hh with land (even if small) more likely to engage in dairy

Discussion of results• Dairy contributes positively to livelihoods • Both in terms of income per capita and in terms of

land accumulation• No significant impact on other assets • Maybe because for hh with a positive attitude towards

agriculture, investing in land has higher returns• However, when looking at who is involved in dairy

production, we seem to find a pro-rich rather than a pro-poor bias • Land seems an important complementary asset

• We do not (yet?) find much employment in dairy sector for external laborers• Maybe elsewhere?

Implications• Unless factor market imperfections are solved,

dairy development may not offer as much potential for pro-poor growth as is often hypothesized• Mainly as a result of constrained access to land

• If self-sufficiency in milk is their objective, policymakers need to address these constraints• Already milk has been found to contribute

importantly to food inflation (Mishra & Roy 2011)• Milk price inflation increases incentives for

adulteration of milk, as in China (Gale and Hu 2009)

Thank you!