What would it be like to be someone in agricultural production andor marketing in a developing country
In last two decades, agricultural production structure in developing countries has radically changed. World Bank and various institutes of agriculture research invented the method of industrial agricultural growth Green Revolution, which promises to yield high quality and greater quantity using the miracle seeds and landfall yields. The economic and financial crisis in the developing countries led to International financial institution loan package propagation. Many developing countries are forced to borrow this loan. This provides the developing countries with forced liberalization and domestic agricultural production conversion for exports. Almost all the developing country farmers experience the same situations. Many countries face the pressure to switch on monoculture for market in the overseas from traditional cultures.
The need for food increases as the population grows. Long term future forecast indicates around 8 billion people can be fed only when there is significant increase in cereals production (more than 40), meat (60) and tubers and roots (40). The global need for wheat, maize and rice will increase by 1.3, 1.4 and 1.2 per year. This demand increase is anticipated to instigate in the developing countries, and for many reasons supply of food cannot be improved by raising imports. Fertilisation, soil erosion, soil degradation and leakage, water scarcity, change in climate, biodiversity, rural areas poverty these are some ecological impacts of food production doubling.
The history of the developing countries agriculture markets states its attempt to ascertain the government response to the agricultural inefficiency created by unframed institutions, infrastructure and inadequate competition. To resolve this issue, the governments intervention came up with economic liberalization in 1990s to get price right and get right institution. But openness in the market may emphasize the modern latent dualism, marketing sector efficient, reachable for those with adequate capital and the scale.
Government should commence with certain policy measures at both international and national level, which will in turn improve the market functioning and smallholders will get the benefit. Agriculture production and marketing trend towards the economic concentration are the results of the farmers, businessmen and government efforts to make the agriculture more profitable and efficient source by adopting modern techniques. Because of these new technology adoptions farmers are able to increase their resource productivity, profit margin and moreover they supply higher quality products at low prices to consumers.
Government tax law and programmes on farm have eliminated the risk in the price and as a result the income of the farmers through price support policy increases. And thus both large and small farmers have the effect to indulge in capital investment, but large farmers investment is attractive comparing to small farmers. Large farmers are even stimulated by the tax laws.
Inadequacies in the open market system cause some problems as well and they cause inefficiency of economics in the logistics area and the quality control, instability in the price, farmers unacceptable level of risk to their incomes. The scales of economies have led large farm growth in both production of livestock and crop.
The main advantage in market production co-ordination is initiated in scale of economies - raw material movement and labour supervision.
Governments of developing countries need to encourage and motivate to adopt macroeconomic policies, in particular fiscal and monetary policies, which do not distort activities of the economies.
Policy of trade needs to be considered and reconsidered with a base of wider development context. Better reforms and governance are needed to attract and increase the opportunities of trade and investment.
In your opinion, what are the most important sources of growth for India
Indian Economic Growth has witnessed a positive tendency in the recent years. Discussing and debating on this issue has become the subject matter for everyone in the home country as well as abroad, by those facing strict competition with Indias growth. National goal of the developing countries (India) is rapid economic growth. It has been proved that the growth rate of Indian economy has accelerated after the economic liberalization process in mid 1980s.
After analysing the report of the Indias economic growth, I would like to state that the acceleration in economic growth has not been based on the manufacturing sectors strong growth. Instead, it is because of the rapid growth and development of the service producing industries. India has not seen much impressive improvement in physical capital accumulations. Illiteracy rate remains the same with the rate of illiteracy being rather high. To empirically examine the acceleration of economic growth in India, it is very important to analyse factors that induce the growth, whether the concentration is because agriculture, service producing sector or industry.
To analyse the economic growth of a country, it is common to use the growth accounts, characterizing the economic growth in aggregate level. I would agree that growth undeniably increased during the past couple of years. Indias growth rate has achieved a high rate of 6.1 for the 1st quarter of 2009-10. I would say that Indian economy growth rate step up was due to the momentous expansion in investment of domestic and the saving rates. Investment rate has increased to 39 in 2008 from 25 in 2002. Private consumption role acted as supportive aspect for Indian economic growth, it has risen to 7 from 5 for the above said period.
Moreover, this growth in investments spurt was chiefly because of the private fixed income and not because of the inventories build up. From my point of view, an increase in economys productive capacity, in the medium term would help the economy to hit the increased countrys growth rate.
When we consider the neoclassical growth theory, economic growth can be analysed through examining the changes in investment or the capital accumulation, employment to the total factor productivity.
There is a need for analysing the conventional two sector classifications to examine the source of Indias growth. The classifications are agriculture and non-agriculture sector. And non-agriculture sector is further disaggregated into non-agriculture public sector and private sector.
Annual growth rate of agriculture was around 4 during the period 2003-2008. Food grains productions have increased at all time high level of 230 million tonnes in 2008. Non-agricultural sectors like manufacturing registered a growth of 9.5, in which the share of communication and constructions accounts for the growth of 27 and 13.5 in 2008. The service producing industry is considered as the major source of Indias growth gush and it has maintained an average growth rate of 7 every year. The growth of investment rested at 30 per annum.
The growth rate of agriculture sector accelerated to around 2 points, where in non-agriculture by around 4. It is quite interesting to say that 95 of accelerated growth of agricultures GDP has resulted from TFP accelerated growth and 5 is of total factor input. The acceleration in the economic growth transpires because of the green revolution, in which it gains account to both agriculture TFP and reallocation of sectoral sections. Productivity of labour has declined in both service and industry. I would say that source of Indias growth is also accounted by fiscal expansion and policy reforms. There is decline in employment and moreover the investment botched to account for growth of rapid employment.
The contribution of education also accounts for the countrys growth. Capital deepening has also made some contribution to the Indias growth. Private sectors are much concentrated with increased investment when compared to public ones. Output growth is a little bit associated with job creation rates.
Increasing the standard of living further requires employment and labour productivity increase. In agriculture, the labour productivity is one fifth, which implies significant gains in productivity from the sectoral reallocation of labours. India should aim to make a step towards industrial sector expansion, particularly in manufacturing. The country needs to execute the policies to build an attractive environment for doing business. The reforms and policies should be directed to increase the domestic production and aim to create attractive place for producers in foreign countries.
Identify a fact from Dr. Dasguptas presentation and from one of the topics delivered by one of your peers - a surprising or interesting fact that you could reflect on.
Dr. Das Guptas presentation on Agriculture - rice, wheat, lentils, goatssheep, seafood is quiet interesting one which I would like to discuss.
Agriculture is the mainstay for many developing countries and it is the principal means of occupation. It acts as a fuel for human civilization development, with that of husbandry of plants and domesticated animals. System of cropping varies among the farms and its dependency on the actual resources that are available, the climatic and geography conditions of the farm, policy of the government, social, economic and economic pressures.
The products of the agriculture are grouped as food, fibers, raw materials and fuel. I would agree with statement of Dr. Das Gupta, for there are many products that constitute the major portion of the production of agriculture rice, wheat, lentils, goatssheep and seafood.
Around 40 of the global value of agricultural production is contributed by the livestock. Rapid income
rise and urbanization combined together with the increase in population are driving the demand for animal products, meat. Worlds rice production has increased steadily to 130994000 (Int ) 657413530 mt, wheat contributes 611101664 mt meat contributes around 13109465 mt. But yet it is recommended to include maize, roots tubers, vegetables, pulses, lie animals and livestock which contribute a good share to agriculture and help the population to meet its demand for food.
My peer presented that around 50 of people in India depend on farming. It is easy to explain this fact because developing country like India gets one fifth of share of GDP from agriculture and moreover it accounts for 10 percent of the total exports. It acts as a livelihood for 50 of population in India. Only because of inclusion of major population in this field India holds the credit of second rank in worldwide farm output. 52 of the workforce is involved in the agriculture and hence it plays a vital role in socio-economic development. But now overregulation of agriculture has raised the issue of increased prices, prompting risks and uncertainty as well as intervention of Indian government in land, labour and credit markets, where it has inadequate service and infrastructure. Backwardness in socio economic condition is because of illiteracy and progress regarding the land reforms is relatively very slow. Due to illiteracy, infrastructure of irrigation is also weakening.
However the agriculture production must be increased without destroying the water and soil as they are the basic resources. Irrigation and farming techniques have to be improved for the better results for both agriculture production and for the farmers to bring income raise and better living standards. Programmes and training should be given to increase their capability in farming land betterment. In view of farmers welfare, the Indian government has to come up with several new policies and reallocation of some existing policies, in which it should eliminate the tax law that currently exists and government needs to provide better subsidies.
Contract farming should be increased, plugging in more people into agriculture, therefore increasing the employment opportunity, making sure that small growers are guaranteed with significant potential increase in production, as well as markets and the prices of their products are joined together with credit and extension service, reducing the bargaining concept. These types of negotiations happen between the individual farmers and larger contracting firms, rather than through farmers association with government stores.
What role does (should) agriculture play in economic development As agriculture contributes a lesser share to overall GDP in a developed economy, should it play a lesser role in development
In the last decades, the agriculture contribution to potential growth was considered as subject of controversy and agro-pessimism. There were many arguments that agriculture is no longer a cause for growth. 1990s policy of liberalization had given chance for trade openness and therefore accounts for reduction in rural sectors economic potential. The contribution of the agriculture to GDP is relatively more, even then it employs more than any other sector. The contribution of the agriculture to economic growth and development is based on these factors
(i). Labour Supply Supplying the surplus labour to industrial sectors. (ii). Domestic Consumption Supplying food for domestic consumption. (iii). Market Availability For industrial output a suitable provision of market. (iv). Supplying the saving of domestic for investment in industry. (v). Foreign exchange supply from the earnings of agriculture exports to finance the capital goods import. These are direct linkages of market based economy. The indirect linkages of non-market are better nutrient supply, availability of food for the poor, reduction in poverty.
Many developing countries are facing this agriculture issue. The reasons for the low contribution level of agriculture to economic growth are engagement of unskilled workforce in the field, using of old, worn out and outdated technology in the field and old style of cultivation which also determines the reasons for low level of contributions. The low wages, in turn reduce the farmers interest which in turn results in low returns from field and therefore, it is responsible for low share in GDP.
Economic policies of many countries are framed in such manner that it does not extend its hands to support agriculture activity. This type of policies creates frustration among the agriculturists.
Developed countries provide agriculture subsidy to facilitate its farmers in their productivity, wherein the developing countries impose taxes on the farmers, which overburden them. Pessimistic economist forgets about raw material value provided by the agriculture sector to the industry. Best solution for the agriculture industries is to implement the modern technology so that the industries can maintain a fair supply chain of food and raw materials for industry.
Vital reasons Why agriculture can initiate and contribute to the growth
Large Sectors In the initial stage of transformation for low income generation countries its large share of agriculture to GDP implies that agricultures growth is indispensable for the growth of economics. In case of developed countries, GDP per capita increases, wherein the share of agriculture in GDP comes down, but agriculture still remains important in those developed countries.
Reducing the prices of food Food staple productivity is one of the key sources which influence the economic growth. In countries like Sub-Saharan Africa, food relics are imperfectly tradable, this is because of the staple food pervasiveness, which are traded lightly internationally (roots, local cereals and tubers). Even for widely traded staples, economy of domestic food rests insulated from the international markets, because of marketing costs and high transport. In these countries, the productivity of agriculture determines the food price, which in turn determines its competitiveness in the international market.
Comparative Advantage most of the developing countries economies depend upon the processed and unprocessed prime based exports. Over many years, the comparative advantage in the developing countries has been based on the agro processing, because agriculture is favoured by the endowment of natural resources and skilled labour force lack that reduces the manufacturing goods competitiveness.
Linkages to Growth the growth of agricultural sector has a strong linkage in determining growth of other economic sectors. When the income from the agriculture is spent on the domestic goods, it fuels the domestic industry and service demands.
Food staples production needs to be improved to keep the prices of food from rising in competitive tradable sectors. To enhance the agriculture growth, policies should be framed in right manner. The policy approach includes producer incentive improvement, providing public goods, a better climate for private investment, constructing effective institutions and proper use of natural resources.
Balance in agricultural taxation and their incentives. To stimulate the growth many countries have invested in agriculture. Over the past few decades, many developing countries have improved their policies in a motivation to support and stimulate the growth. There is need of more and better investment in this agriculture sector as rapid growth is essential to reduce the poverty.
What are the differences between the food systems, policies, and economics in India and Indonesia
The character of the food system and the food policy nature changes when there is technical change and urbanization and the food system industrialization transforms the way food is produced, consumed and marketed. Policy makers do think and analyse the developing countries food problem they usually term as food security. They usually focus on issues on malnutrition, hunger, subsidies of food and programmes related to feeding, dearth shocks and rehabilitation. Poor countries do face these concerns as well.
Globalisation, urbanization and industrialization state that system of food is not viewed simply as a moving from staples to plates. Commercial growers produce the food, with long feeding, classy supply chain and marketing and supplying mainly to urban consumers. In India by 2020, there will be an additional urban dwellers, they may account around an addition of 300 million dwellers.
Global food system is seeking a transformation and this factor causes change in production of food and marketing in India though at the slower rate than in any other developing countries in the world. But it has some positive consequences on the horticulture, where the domestic market for horticulture is growing and hence raises in horticultural production in both tradition and exotic vegetables. Urbanization demand and diet change demand are forces which affect the production and marketing, and they respond to this change in demand.
Indian government has sponsored many schemes in favour of horticulture development, in which it has mixed results and the scheme generated more jobs than the production of the cereal, but reaches the larger farmers than the smaller and the landless households. Beyond the Governments direct intervention a new farm of relationship and scheme exist, i.e. a fair relationship in between the contractual and share cropping relations between the farmers and the private dealers. 10 of the farmers in India are covered under crop insurance. India currently puts attention on biodiversity, important for agriculture and food in overall dry lands of India.
The planning has endorsed all the objectives. They are particularly emphasized on
Expanding an alternative system of public distribution PDS has played a vital role in prevention and avoiding the famine on the large scale in India. And this favour is done by purchasing the surplus gains in view of transferring it to food deficit areas. The Indian government thus distributes this food to low income people at affordable prices. Wheat and rice are crops evolved on the part of market driven and the agricultural policies of irrigation. PDS values these crops and persuades the monoculture.
Deliberative food future and democracy - government supported these actions in a view to broaden the deliberation of democracy and decision making on the food systems in future. Several steps have been taken to strengthen the farmers, both men and women programmes based on indigenous knowledge, capacity, management, biodiversity conversion. Policy has made efforts to link the rural and urban farmers by providing an easy and fair access to reach the local market. Training of farmers was also introduced in the food policy, to be more exact - farmers to farmers exchange training.
When comparing the food policy of India and Indonesia, their historical record on food policy shows a successful contribution to its economy. In Indonesia, BULOG food logistic agency is considered as best example for institution building. This binds twofold rice price stabilization and monthly rice rations provision to the services like military and civil population. The community IPM programme in Indonesia will be closing down, in which it will be replaced by the foundations called FIELD- Farmers Initiatives in Ecological Literacy and Democracy. Ex-Staff of FAO will be placed to train them and give ongoing technical support. Local food system sustaining, biodiversity in agriculture and livelihood are the part of FIELDS programme. Indonesia is popular and has seen success for its innovative and initiative approach to train the farmers through the Farmers Field School in which it trains the farmers in integrated pest management (IPM) in production of rice.
This training programme also facilitates on farmers capacity strengthening - to measure, observe, analyse dynamics of the plant-pest-predators. In Indonesia, there are around 1 million farmers involved in this IPM community. Besides these policies, few people are still trapped in the poverty, food security is boosted by the surplus of rice available in their regional areas. Governments intervention in production, regulation and economies control is very small. Therefore, the food security system in Indonesia needs macroeconomic policy integration.
Part B- Facts on Business and Trade
Auto Makers to Go Electric
In future, roads will be almost filled with the electro type vehicles. Just a few years ago automakers of the world aimed to develop an alternative source for fuel technologies, pursuing from fuel cells of hydrogen, ethanol, biodiesel and natural gas. Increasing gas prices and the concerns with environmental issues make the electric car more popular. Owing to this current trend, a well defined approach is taking place in electric car manufacturing. The administration of Obama is proposing to encourage and urge the production of electric cars with an offer of build one, get one free. Now all the automakers are charged up with manufacturing the electric cars. Tesla Motors already joined the race, GM plans to build a factory in the U.S. to assemble the advanced batteries, Ford Motors has interest in BEV Nissan Motors, Chrysler LLC and Volkswagen AG also aim at developing electric cars.
Within next few years, we will probably see the new generations hybrid electric vehicles arrival. There is long term doubt whether the market will dependent on subsidies from government of financial and regulatory character or whether it can sustain itself without anyones interventions.
One main reason for the auto makers rushing in electric vehicles production is advanced technology, those produced in advance of 2012 will generate a credit to auto makers, covering the failure in achieving the target in mileage in this real competition world. Charging woes is one top issue that rises when discussing the EVs. Charging stations are going to be set up, and it will take around 3 hours to charge the vehicle with charging equipment possible to be carried out everywhere. Distance EVs can travel around 100 miles on average on a single charge. EVs of lack power is a problem as it lacks power in acceleration and climb up. Using other car accessories like radios, air conditioner will drain up the battery even more. Batteries in these cars are very expensive as they cost about 10000. A major technology hurdle is battery weight it weighs up to 1000 pounds. Difficulty in buying some models are very difficult to obtain, they are advertised heavily and the demand by the consumers is high.
Hybrid electric vehicles with low emissions finally, electric vehicles are available only to the buyers of most elite cars which creates a disparity between the communities of rich and poor. Poor people will drive old eight cylinder cars which create a lot of emission, while rich people will drive the expensive ones. Probably, the biggestdisadvantage of electric vehicles is that they are cost prohibitiveto the poor people.
Report Protectionist Measures Rise
Leaders of G-20 signed a vow in November 2008 to avoid protectionist measures. Many countries, including g-20 17 countries, have executed certain measures which restrict the trade at the other countries expenses. There are 47 measures to restrict the trade. Since the beginning of the financial crisis all over the world, officials have responded to it and executed 78 measures for trade. Of these, 66 are involved in the restrictions of trade and 47 on trade restriction measures. These measures are executed but its impacts on trade are significantly lower when compared to the adverse effect on exporters lock out of the global market.
Till date, most countries have not yet increased tariffs, however if the recession continues to deeper many countries will be tempted to act. To strengthen the brittle compromise against further protectionism, G-20 should aim at adopting and implementing additional measures.
Transparency G-20 should commit to transparency at greater level by agreeing to give new trade restrictions quarterly reports as well as the subsidies on agriculture and industry to World Trade Organization. A report on analysis on trade restriction on employment should also be added to it.
Aid Supporting the low income countries by providing a greater aid
Global Trade support is implemented to get hold of the opportunity to support the trade globally in that particular time when it is urgently needed.
A study of World Bank shows that the effects of the protectionist measures are minor relative to its unaffected size of the market. In some countries, because of the tightened standards, the import entry has been cut down. Example is Chinas ban on import of Belgian chocolate, Italian brandy, British sauce, Dutch eggs and Spanish dairy products, likewise Indias ban on Chinese toys.
Subsidies on export are particularly egregious because they flout the draft Doha modalities. Industry is overloaded with surfeit capacity these subsidies hamper the adjustment on exit and delay.
Many study reports state that several factors clearly put pressures on the protectionist measures and distinguish its downturn from the 1930s pressure. Countries are more inter-reliant and supporting of each other with the supply chain, imported inputs and their services. Interests towards exports are far more powerful than before. And the producers for their own market i.e. domestic market are more dependent on imported inputs as the chain in the production links the global market through the trade web in parts and components.
Bernanke Recession Likely Over
Chairman of Federal reserve Ben Bernanke said that recession was very likely over, as the consumers showed the sign of spending again. The worst recession since 1930s is probably at the end stage. Moreover, he cautioned of pain of unemployment i.e there are around 15 million of unemployed Americans.
By December 2007, the recession started and asserted a net total of 7 million jobs. There is expectation towards recovery which will be very lethargic and he predicts that unemployment will still persist till this year, reaching around 10 percent, while the highest post World War II unemployment has been during the period of 1982.
It will take at least four to five years to recover from the unemployment problem or to reduce the jobless rate to a normal range of 5. Even if the economy registers a moderate growth in 2010, the problem of unemployment is likely to stay. It does not mean that it will continue being the same it will come down but as a slower process.
It is predicted that economy of the U.S. has seen a growth in the 2nd quarter of 2009 at the annual rate of 3 to 4 percent. It is proven that consumers and businessmen had a hard time in getting credits savings of the households increased, in turn less spending and debts are trimmed. The prices of the houses are falling, but this could hamper the broader return. And many analysts reported that slide down of home price will not stop until the next summer, continuing to fall deeper until it touches 10.5 by this year end. Cities like New York, Salt Lake City, Fort Lauderdale, Fla., and Baltimore will face the biggest decline in the prices.
Congress will endorse a refurbish on financial rule book of nations to prevent the crisis that might come in future. Congress will change the nations structure of regulations comprehensive reform will be forthcoming to overcome this situation. Creation of new type of authority called resolution authority is supposed to undo the giant firms failure and act on its improvement, because these giant firms negative results might place the economy at stake.
The downturn of economy and its slow recovery were considered the subject of remarks. Many debates and discussions were made and many steps are implemented to help the economy rise to its older position. And to conclude, this will happen, taking some time to retrieve from this level towards complete recovery.
Sterling Weakness
Pound value was stabbed this week and it panicked many in the markets. By March 1st it pitched down lower than dollar by 2 but recuperated a little bit since then. Sterling is facing a continuous slide down for a couple of consecutive weeks. From the start of February, it has lost around 6 against the dollar and against euro it lost 4. The continued slide down of sterling would make the UK government hard to fund the gap between the income and expenditure. This situation is added to the pressure of inflation. Now the inflation rate is above 3 and thereby there is increase of oil price.
However the news of sterling weakness is not the worst one as it will increase over the period. But this slide down of sterling will boost up the U.K. exporters their competitiveness will prevail and it is likely to encourage a still more struggling economy. The market is reacting to the current situation, which will probably mean deficit in public sector, staying for longer. To add to it, the advantage of a weak currency is a route for escape from the choice of deflationary pose.
To react on this situation and on some measures, pound is undervalued against its partners in the trading and there is some long term record for the economy to get back from the challenging situations. To describe the impact of the currency weakness, this will lead to sluggish growth of the economy, discouraging revenue of tax, and further stressing that the UK will face the burden of large debt. To help this situation, UK can privatize its state owned enterprises to help the finance stress relief.
Public debt may arise fast, but its opening point was much lower when compared to other advanced countries. At 14 years, debt of British government average maturity will be long, which means a very little portion has to be refinanced every year.
Despite the concerns on the currency market, there has been no public borrowing cost spike. Gilt of ten year yields 4 may be considered high, but they have fallen from the beginning of 2010. Sterling is highly devalued, the trade weighted value fell by 30 in middle of 2007 and by the end of 2008 it raised a bit. Power parties purchasing indicates the long run sustainable rates, it is now priced fairly against the U.S. dollar and was some 15 undervalued against Euro.
World Trade Recovery Progress
Netherlands Bureau for Economic Policy Analysis closely watches the volume of the global trade and releases the figure that global trade volumes increased by 6 percent over the last quarter of 2009.
From this figure it can be understood how trade was affected because of the recession of the global economy shrunk by 13.2 during 2009. This type of global trade decline happened during two other years, it declined by 1.9 in 1975 and 0.9 in 1982. When compared, 2009s decline was huge. But yet the revival of trade is under clear vision. Trade volume has increased around 5 in December 2009 alone. There was weak and flattering growth in October and November with 1.2 and 1.1. According to the World Bank report, export value of sample of 56 countries is intended to increase at slower rate.
This trade value data partially reflect the fluctuations of the exchange rate. The global demand is still sustained by the intervention of the government on a massive scale.
These figures on world trade point to state the world is divided between the rich OECD economies and the upcoming or emerging economies. The emerging economies have outperformed the loss in the global trade recorded growth in intra Asian trade.
2009 world trade reflects the trend in general economics in the consequences of major slump of Western world.
China, the leading exporter among the emerging countries and rich world champion Germany is a case in point. Last year, China took over the Germanys place, becoming the worlds largest exporter of goods. Germanys sales abroad were 1121 billion while Chinas sales abroad were 1202 billion in 2009.
But there is the fact that Chinas trade also witnessed a decline when compared to 2008 export records. The emerging economies are increasing their trade, though they are more concentrated on exports, it grew by 7.4 in the 2009 last quarter. And rich countries import grew by 3.9.
By the end of the year 2009, trade values had increased by around 30. The economists of World Bank state they were 20 lower than before the global crisis.