Size-class and returns to cultivation in India

'Size-class and returns to cultivation in India: a cold case reopened' is the title of a recent working paper from IGIDR that Sarthak Gaurav and I have co-authored. This revives the age-old debate on farm size and productivity that started in the early sixties  by Amartya Sen. Some excerpts from the abstract, introduction and conclusions of the working paper are given below. An abstract of its revised version published in Oxford Development Studies is also given below.

Abstract

This paper investigates the relationship between returns to cultivation per hectare and size-class of land cultivated in India, using unit level data from the 59th round National Sample Survey, 2003. The analysis is done separately for ‘kharif’ and ‘rabi’ − for total value of cultivation from all crops at the all India level. The empirical evidence rejects the null hypothesis of no relationship and points to the existence of an inverse association. We argue that the efficiency of the small-holders has to be taken with a pinch of salt because their low absolute returns brings into focus the question of their livelihood sustainability which is further aggravated on account of higher unit costs. Being the first exercise in a series of proposed explorations into disaggregated analyses across states, and for specific crops, it opens up the classic debate on farm size and productivity in the 21st century.

Introduction

In recent years, Indian agriculture has been reeling under a crisis and one of the concomitant outcomes is poor returns to cultivation which has rendered farming as an unsustainable livelihood option – particularly for the marginal and small holders.2 This also raises the long debated question of inverse relationship between size-class and productivity, that is, whether marginal and small farmers are relatively efficient vis-à-vis larger size-class farmers? The current paper explores this aspect of Indian agriculture using unit level data from the Situation Assessment Survey of Farmers, administered in the 59th round of the National Sample Survey (NSS).This survey was conducted during 2003 and collected information for the agricultural year 2002-03.This is the latest (and the largest) nationally representative data set for analyzing the state of farming in India. By conducting the analysis at the unit level, to the best of our knowledge, we provide the first baseline for the 21st century. An attempt has been made to assesses the relationship between size-class and returns to cultivation; and in doing so, it expects to contribute and open-up the long drawn out, and till recently dormant debate.

...

Conclusions

An analysis of size-class and returns to cultivation using nationally representative data from the Situation Assessment Survey of Farmers (SAS) of the 59th Round of the National Sample Survey, for the period 2002-03 opens up the classic debate on the efficiency of the small holder. Our empirical results, computed separately for kharif and rabi, at an aggregate all India level as also for each size-class reject the null of absence of any relationship between size-class and productivity and indicate the existence of an inverse relationship. While the small holder seems efficient the low absolute returns raises questions on livelihood sustainability. This is also important from the perspective of the risk bearing capacity of the small-holders given the fact of their per hectare costs being higher.

To the best of our knowledge, these are the first estimates for the 21st century and at the pan-Indian level; and could be used as a baseline for comparative analyses in the future. Our empirical evidence can be considered as an important contribution to the literature on size-class and productivity relationship. While opening up this cold case we are aware that one needs to go down to further details and control for other factors that may affect returns to cultivation. It would be equally important to analyse the variation across states, social groups as also the crop-specific patterns. We plan to do some of these in a series of future exercises.

In spite of the limitations of our study, it is a first attempt at a fundamental problem in Indian agricultural using a nationally representative sample. Given the relevance of our findings in corroborating the story of a crisis in Indian agriculture on one hand, and with the promise to reopen the classic debate on farm size and productivity on the other, we argue for the need for further inquiries, and if feasible, a future round of the SAS as it is almost a decade since the first (and only) survey.

Those interested in the full paper can click, 'Size-class and returns to cultivation in India: a cold case reopened'.

A revised version of the paper is now available as 'Farm size and returns to cultivation in India: revisiting an old debate' Oxford Development Studies, Published online 21 Nov 2014.

The abstract of the revised version is as follows. This paper revisits the long-debated question of the relationship between farm size and productivity by studying the relationship between area cultivated and net returns to cultivation in India using a nationally representative data-set. The analysis is carried out separately for the two major agricultural seasons, kharif and rabi, and for both the seasons pooled together. Our findings suggest the existence of an inverse relationship, even when we control for a number of household and farm characteristics and even when we treat factors such as household type (occupation), social group (caste), agro-climatic zone (region) and agricultural season as fixed effects. The result is also robust to correction for selection bias. However, the efficiency of the smallholder as a result of this greater productivity has to be treated with some caution as it ignores the low absolute levels of their returns, which raise questions about the sustainability of their livelihoods. This is further aggravated by the fact that they pay relatively higher unit costs and because of their greater dependence on purchased inputs.