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Issues & Analysis

Biotechnology Regulatory Policy
Economics of Cotton Quality in India
Developing Country Modern Food Retailing Study
Investing in India's Agricultural Markets: A Source of Growth and Equity?
Irradiation for the Mitigation of Pest Risks from Imported Fruit and Vegetables
Scenarios for Indian Agriculture
India Productivity Analysis
Growth, Policy, Governance and Food Security: Household Evidence across India's States

Biotechnology Regulatory Policy

In the United States and some other parts of the world, agricultural biotechnology has allowed the development of innovative plant technologies that have reduced production costs and improved farmer incomes, enhanced quality attributes desired by end-users, and provided environmental benefits in the form of reduced pesticide use. In India, however, only one of the many available genetically modified (GM) genes-the Bt gene used in cotton-has been approved for cultivation by the Government of India. The adoption of hybrid Bt cotton has contributed to the rapid growth in Indian cotton yields and output since the early 2000s. So far, however, the Government has struggled to build consensus for a more transparent, science-based regulatory framework to govern agricultural biotechnology, thus slowing the development and spread of new GM varieties, compared with efforts of some other countries.

Using funds from USDA's Emerging Markets Program, ERS has contributed to research on various aspects of biotechnology regulation in India, including India's regulatory system for GM crops, the costs of GM crop regulation compared with those of other countries, and the impacts of Bt cotton adoption on seed markets and the use of pesticides in India. Published research from this project includes:

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Economics of Cotton Quality in India

India is among the world's largest producers of cotton and textiles, and these sectors are increasingly competitive in global markets following the removal of international trade restrictions that existed under the Multi-Fiber Arrangement, recent reforms to domestic textile policies, and rapid gains in cotton production due to adoption of hybrid Bt cotton. Although higher cotton output has led to sharply higher exports of raw cotton, the demand for more high quality cotton-free from trash and contaminates-from some Indian textile and garment manufacturers has led to continued imports of quality cotton from the United States and other suppliers. Reflecting the traditional lack of attention to quality in India's domestic market, the International Textile Manufacturer's Federation has found Indian cottons to be among the most contaminated in the world. Ongoing ERS research is examining the role of quality characteristics in India's cotton market and the extent to which the marketing system is adjusting to quality needs of the increasingly export-oriented textile sector.

References:

  • Markets, Institutions, and the Quality of Agricultural Products: Cotton Quality in India. MacDonald, S., G. Naik, and R.  Landes, Selected Paper, Agricultural and Applied Economics Association, 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado.
  • Growth Prospects for India's Cotton and Textile Industries   . ERS, Cotton and Wool Outlook special report no. (CWS-05d-01), June 2005 .

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Developing Country Modern Food Retailing Study

Responding largely to the opportunity afforded by rising incomes and urbanization, domestic and multinational chain retailers are expanding their share of food sales in many developing countries, with potentially significant implications for food demand and trade. In some cases, chain retailers introduce supply chain efficiencies that can influence demand patterns by reducing consumer prices for some foods. Because developing country consumers often spend relatively large shares of income on food and are relatively responsive to price changes, significant food cost reductions could trigger economywide impacts on investment, output, and demand. In other cases, chain retailers may focus on introducing enhancements in food quality, safety, and shopping convenience that appeal particularly to higher income consumers. Finally, there may be direct influences on demand for imported food, as chain retailers strive to improve the diversity, quality, and safety of their offerings; reduce the cost of imported foods due to greater supply chain efficiencies; and provide a more viable platform than do traditional unorganized retailers for promoting new products. To the extent that investment in chain retailing in developing countries strengthens food demand, including demand for imported foods, these investments complement, rather than compete with, efforts to expand U.S. exports.

Ongoing ERS research is examining the implications of modern food retailing for food demand and trade across several developing and transition countries, including India, Brazil, China, Indonesia, and Russia. These countries provide a useful diversity of economic and policy environments for study of the modern chain food retailing phenomenon.

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Investing in India's Agricultural Markets: A Source of Growth and Equity?

India's high agricultural tariffs and growing farm subsidies have received much attention, but the implications of domestic policies that have discouraged agribusiness investment and created inefficient domestic markets have received less attention. This research examines the potential impacts of improvements in marketing efficiency that might be associated with reforms leading to increased private investment in agricultural markets and agribusiness. Results are compared with those of more "traditional" reform scenarios involving elimination of agricultural subsidies and tariffs. The analysis uses a computable general equilibrium framework that accounts for the impacts of changes in food expenditures and farm output associated with increased marketing efficiency, as well as the distributive impacts of urban and rural households by income class. The results suggest that improved agricultural marketing efficiency could yield substantial economy-wide gains in income and employment, positive price impacts for both producers and consumers, and distributional gains favoring low income households. See Investing in India's Agricultural Markets: A Source of Growth and Equity?

References:

Estimates of Supply Response for Major Indian Crops

New econometric estimates indicate that production of major crops in India has become more responsive to changes in output prices during the post-reform period. The estimates, using Indian state level data for 1970/71-2004/05, show that area response for most crops has increased 20-40 percent since the economic reforms of the early 1990s. For cereal crops, yield response to price changes is shown to now be larger than area response, indicating that farmers are increasingly responding to price incentives by adjusting use of non-acreage inputs rather than crop area.

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Estimates Agricultural Policy Reform

Faster economic growth, weak farm sector performance, and political changes in India have brought agriculture to the center of policy discussions, but it has been difficult to reach consensus on the reform agenda. Developments since the early 1990s highlight the need for consensus in several areas, including separation of producer price stabilization and income support policies, change in trade policies that tax producers or constrain emergence of competitive domestic markets, and reform of a web of regulatory measures that impede domestic and foreign private investment in market infrastructure and agribusiness. 

Reference:
  • Farm Sector Performance and Reform Agenda," Economic and Political Weekly, Vol. XXXIX, No. 32, Mumbai, India, August 7, 2004.

Irradiation for the Mitigation of Pest Risks from Imported Fruit and Vegetables

Expanding U.S. import demand for fresh fruits and vegetables gives rise to concerns with adequately addressing risks to U.S. producers and consumers associated with invasive and non-native insect pests-or quarantine pests-that may enter the country along with fresh produce. Examples of invasive pests borne on imported produce that imposed significant costs on U.S. agriculture include the outbreaks of various species of fruit flies beginning in the 1970s. A substantial and growing share of U.S. fresh produce consists of new products sourced from a diverse set of developing country suppliers, creating demand for new pest risk mitigation strategies and treatments that can be applied and adequately verified in those environments.

Irradiation, a post-harvest treatment that can neutralize a range of quarantine pest and food safety problems, that maybe reliable and cost-effective relative to other options in facilitating access of fresh produce into the U.S. market.  Since 2006, irradiation has been certified by USDA as an effective quarantine treatment against a range of pests.  Further, irradiation may prove to be a viable and cost-effective approach for addressing pest problems for developing country suppliers where the alternative may be substantial changes in production and handling that are difficult to implement and, particularly, to enforce.

This study will document recent growth in U.S. imports of fresh produce, characterize the pest risks associated with food imports, and assess the potential applicability of irradiation technology. It will then examine the economic costs and benefits of irradiation using a case study of Indian mango exports to the United States. This research is being conducted in cooperation with Virginia Polytechnic and State University (Virginia Tech).

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Scenarios for Indian Agriculture

The environment for Indian agriculture and Indian agricultural policy has changed significantly since the onset of rapid economic growth in the early 1990s. Rapid growth in incomes and urbanization are now strengthening and diversifying consumer demand and placing pressure on existing production systems, marketing institutions, and infrastructure. Increased trade openness is challenging policies and structures that were established in a closed economy.

Alongside the accelerating growth and investment in India's industrial and service sectors, agriculture has, in most respects, been faring poorly. Yields of most crops remain well below world averages, and output and yield growth have been slowing. Budget outlays for subsidies on food grains and farm inputs have been rising, while investment in agriculture and agribusiness remains low-in part due to restrictive regulatory and trade policies. Although it has proven difficult to transform Indian agricultural policies-with only modest reforms in recent years-further changes in policies, investment, technology, and market structures could have significant impacts on global an U.S. agricultural markets for a number of major crop and livestock commodities.

The goals of this project are to identify the key areas where Indian domestic and trade policies are most likely to change, and analyze the implications of those changes for global and U.S. markets. Areas likely to be addressed include tariff barriers, domestic price support policy, input subsidies, technical change, consumer subsidies, feed demand, and structural change in domestic markets. The simulation model will be built with the ERS Excel-based multi-commodity spreadsheet model-builder. The model will be compatible with the ERS baseline modeling system and capable of both standalone (exogenous reference prices) or linked (endogenous reference prices) solution. Primary data sources will be USDA, FAO, and the Government of India.

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India Productivity Analysis

An ERS research project on global agricultural productivity focuses on the ability of agriculture to provide for the growing global demand for food, feed, fiber, and fuel needs through advances in agricultural productivity. In poor, agrarian developing countries, raising the rate of agricultural productivity growth is essential for poverty reduction and food security. For middle- and upper-income countries, success or failure in sustaining growth in agricultural productivity will have major consequences for agricultural trade patterns, natural resource conservation, ability to address climate change challenges, and, in some cases, political stability. The project objective is to improve understanding of the patterns of international agricultural productivity growth, and how different factors - including government policies - influence productivity trends. The project will develop new methods and data sources to extend and improve estimates of global and country-level agricultural productivity through 2005 and beyond; analyze policies, institutional, and environmental factors that affect productivity; and examine the implications of the research findings on future agricultural trade, environmental impact, and food security.

Current plans are to study agricultural productivity growth in a number of major countries, including India, as well as Brazil, China, and the Former Soviet Union. The India research is in process and is being conducted in cooperation with the International Food Policy Research Institute.

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Growth, Policy, Governance and Food Security: Household Evidence across India's States

Despite rapid economic progress and reduced incidence of poverty since the early 1990s, India continues to encompass the largest share of the world's poor and food insecure population. Economic performance, agricultural policies, and governance factors have varied substantially across India's 26 states, as has progress in reducing poverty. Growth in incomes and employment are likely to be key determinants of poverty impacts, but impacts may vary depending on whether growth is in the agricultural, services, or manufacturing sectors. The performance of agriculture, which is the primary source of income for nearly 60 percent of the population, is likely to play an important role in poverty outcomes. Because agricultural policies can vary by state in India, differences in farm sector performance, poverty, and food security outcomes may also be associated with variations in policies. Additionally, progress in achieving food security goals may be affected by governance factors, including the consistency of elected state governments, or the influence of electoral cycles on economic and agricultural policies.

This study will exploit variations in economic growth, poverty, policies, and governance across India's states, by drawing on a large, multi-year dataset on Indian households. The study will use data from National Sample Survey Organization (NSSO) "large sample" rounds for 1987, 1993, 1999, and 2005, which include extensive information on household employment, expenditures, and program participation. Additional sources will include farm production data from India's Ministry of Agriculture, state economic growth data from India's Ministry of Statistics and Program Implementation, policy data from Indian state government sources, and official Indian elections data. Analysis will be conducted with standard econometric techniques to be determined.

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Last updated: Wednesday, May 30, 2012

For more information contact: Maurice Landes

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