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Dynamic Supply Response for pulses in India: Role of price and non-price factors
Akshay Bhatnagar Pramod Kumar Joshi
Avinash Kishore Devesh Roy
May 31st, 2016 , New Delhi
Introduction
• Neglected by Green Revolution
• India’s position in the world:
• 33% of area
• 25% of production
• 27% of consumption
• Imports 3 - 4 million tones of pulses every year
• Important source of protein
• Per capita availability decreasing – 60 g/day in 1950 & 31.6
g/day in 2011
Increasing domestic supply is critical
Government tried several schemes to boost production
• Pulses Development Scheme (4th FYP) (1969-70 to 1973-74)
• National Pulses Development Project (7th FYP) (1985-86 to
1989-90)
• Special Food Grain Production Program (1988-89)
• ISOPOM – (2004)
• NFSM-Pulses (A3P) – (2007-08)
• Special Plan to achieve 19+ Million tonnes of Pulses
production during Kharif (2012-13)
• To study the dynamic supply response of pulses
• To study the factors affecting relative area allocation to pulses
• Price versus non-price factors
• If supply not price responsive- why?
Objectives of our study
Preview of results
• Price factors do not account for supply response
• Non-price factors like rainfall deficit significant
• There can be issue of risk premium precluding response to prices
• Do farmers intensify cultivation instead of increase cropped area in response to increase in prices?
7
Crops Particulars
(1960-70)
-
(1971-90)
-
(1991-2000)
-
(2000-2010)
Chick Pea
Area -21.64 - 18.46 17.68 6.43
Production - 9.73 - 18.06 39.19 12.3
Yield 14.98 0.51 19.02 5.12
Pigeon Pea
Area 8.26 32.54 -1.89 3.37
Production 10.68 42.6 -5.81 7.64
Yield 2.4 7.32 -3.99 3.91
Total Pulses
Area - 8.02 3.31 - 0.93 2.25
Production - 0.87 10.34 2.15 14.08
Yield 7.97 6.72 3.67 11.23
Wheat
Area +26.11 48.53 15.62 3.18
Production 95.54 171.58 42.55 12.13
Yield 55.13 82.98 23.33 8.73
Paddy
Area 11.88 10.46 8.72 - 1.53
Production 33.77 70.56 28.55 10.34
Yield 19.72 54.00 18.54 12.09
(Percentage change)
Comparative Performance of pulses & cereals
Pulse landscape in India
• Not much increase in area and yield over the last 5 decades • Crowded out by cereals
• Moved away from green revolution belt
• Moved away from irrigated areas
• 87% of pulses are grown in rainfed areas
Pigeon pea Production (‘000 tons) across districts of India: 1970 & 2007
Pigeon pea yields (kg/ha) across districts of India: 1970 & 2007
Changing composition of Indian pulses production basket – TE 1991
Chickpea 36%
Pigeonpea 19%
Lentil 5%
Blackgram 12%
Greengram 10%
Peas 4%
Others 14%
Chickpea 47%
Pigeonpea 16%
Lentil 6%
Blackgram 10%
Greengram 8%
Peas 4%
Others 9%
Changing composition of Indian pulses production basket – TE 2012
Methods
• Arrellano-Bond, difference GMM Estimation technique specifically designed for "Small T and Large N • a linear functional relationship;
• a dynamic left-hand-side variable which depends on its own past realizations
• Endogeneity and dynamic panel bias
Data
• Estimation based on dataset combining two secondary datasets • ICRISAT-VDSA Meso Level dataset and plot-level Cost of Cultivation
data from CACP
• VDSA-comprehensive long district-Level panel-data on key agriculture and socioeconomic variables
• Farm harvest price for each plot/farmer from CACP combined with crop area in a district from VDSA meso-data
• A Balanced panel of 305 districts in 18 states over 2005-06 to 2011-12.
Some motivating statistics
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE] [CELLRANGE]
[CELLRANGE] [CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE] [CELLRANGE]
[CELLRANGE]
0
50
100
150
200
250
300
350
400
450
Area under Pulses in Drought Years & Normal Years
Drought Non Drought
Motivating statistics: continued- variation across districts
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
1 9 6 6 - 1 9 8 0 1 9 8 1 - 1 9 9 0 1 9 9 1 - 2 0 0 0 2 0 0 1 - 2 0 1 1
PULSE SHARE
Ambala Bareilly Budaun Gwalior Indore Jhansi
Mainpuri Rampur Saran Shahjahanpur Ujjain
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
1 9 6 6 - 1 9 8 0 1 9 8 1 - 1 9 9 0 1 9 9 1 - 2 0 0 0 2 0 0 1 - 2 0 1 1
PULSE SHARE
Bahraich Balangir Bulandshahar Cuddapah Dhanbad Dhenkanal
Ganjam Gorakhpur Keonjhar Nellore Rohtak The Dangs
(1)
VARIABLES Normal
regression with
NIA
L.newPPEA_TA -0.155
(0.188)
L2.newPPEA_TA -1.208***
(0.141)
newCOTN_TA -0.000710
(0.157)
newRICE_TA -0.0190
(0.0207)
newRICE_TAI_share -0.000461***
(8.88e-05)
newPPEA_TAI_share -0.00144***
(0.000423)
L.newPPEA_TAI_share 0.000295
(0.000186)
L2.newPPEA_TAI_share -0.00218***
(0.000654)
newN_TC -0.000225***
(7.11e-05)
newP_TC 0.000415***
(0.000141)
drought_12 -0.184
(1.400)
drought_13 -5.688***
(1.964)
drought_14 -4.303*
(2.465)
ln_State_med_FHPCreated1 2.214
(3.784)
L.ln_State_med_FHPCreated1 5.298
(3.994)
L2.ln_State_med_FHPCreated1 1.712
(1.829)
ln_State_med_FHPCreated9 5.274
(4.424)
ln_State_med_FHPCreated21 -4.569
(3.810)
newNIA -0.0464**
(0.0191)
Observations 276
Number of distcode91 138
Take away
• Farm gate prices do not seem to affect area under pulses in a well-specified dynamic model
• Question: Is the supply curve vertical? • Unlikely
• Conjecture: It is probably piece wise vertical • Beyond a threshold price change it is upward sloping
• Results are robust to varying lag lengths
Policy implications
• Big price increases needed to overcome risk
• Calls also for better transmission of prices to farmers
• Can minimum support prices work?
• Do they cover risk? Are changes in MSP countercyclical?
• Price policies can have limitations
Major Findings
• July rainfall – Negatively
associated with relative area
allocation to pigeonpea
• Take soil conservation,
drainage, agronomic measures
to address flooding and
drought problem in pigeonpea
• Developing short duration
varieties in pigeonpea to
compete with cereals
• Big price changes possibly
needed
Policy Implications
Thank you !!!!!