50 Years of Economic Development in India: Palanpur’s Experience

Nicholas Stern

IG Patel Professor & Chair Asia Research CentreLondon School of Economics and Political Science

Distinguished LectureUniversity of Hyderabad

25th October 2010

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Changes in India

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GDP in India has grown at more than 5% since the mid- 1980s. Since 2005-06, the Indian economy grew at more than 9%

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Key Drivers of Change in Palanpur

• Population

• Agricultural techniques

•Outside jobs

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Caste % of literates (7+) [Male]

1957-58 1962-63 1974-75 1983-4 1993 2008

Thakur 41 59 62 48 56 75

Murao 11 29 42 37 39 65

Muslim 5 20 10 23 20 52

Jatab 3 12 3 4 12 28

Other 14 33 26 23 38 58

All Castes 18 34 34 30 37 58

Literacy

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Caste % of literates (7+) [Female]

1957-58 1962-63 1974-75 1983-4 1993 2008

Thakur 0 8 11 8 19 39

Murao 0 3 0 1 2 20

Muslim 0 0 0 2 2 15

Jatab 0 3 0 0 0 6

Other 0 3 4 4 8 28

All Castes 0.5 3 6 6 9 23

Literacy

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Changes in Palanpur-Agriculture

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Land ownership by caste groupCaste Land owned per capita (bi)

1957 1962 1974 1983 1993 2008Thakur 8.7 6.8 4.4 3.5 2.4 2.05Murao 8.7 7.7 5.5 5 3.5 2.56Muslim 2.8 2.3 1.6 1 1.2 0.76Jatab 3.4 3.4 2.1 1.8 1.3 0.74Others 2.4 2.4 1.6 1.5 1.1 1.17All hh 5.2 4.7 3.3 2.7 2.1 1.58Gini Coefficient among land owners0.49 0.47 0.49 0.5 0.52 0.52

Land Owned

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Assets (Per capita ownership 1993 to 2008)

Asset Ownership (Per 1000)

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Agriculture (produce per bigha)

Crop yields in Palanpur (Kg/bigha)

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Agriculture (produce per bigha)

Normal Wheat Yields in Palanpur (Kg/bigha)

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Agriculture

• Agricultural productivity has more or less kept pace with population growth.

• Change in technology not a direct result of government efforts.

• Mechanization has allowed reduction in labor input.

• This seems to have allowed an increase in outside activities.

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Tenancy

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• Net leased in area for the village as a proportion of operated area: 2% in 1983-84 to 13 % in 2008-09

• Result of migration and sales to outsiders.

Years Land Owned Land Cultivated Net Leased In AreaNet Leased In Area as

% of Operated Area1957 2747 2331 -416 -17.84641962 2723 2783 60 2.1559471974 2498 2438 -60 -2.461031983 2596 2650 54 2.0377362008 1998 2298 300 13.05483

Sales to outsiders

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Tenancy

• Amount of net leased-in influenced by land owned, family members available to work in agriculture and ownership of agricultural equipments

• Major contracts – Peshgi (fixed-rent), Batai (50-50 sharecropping) and Chauthai (75-25 sharecropping)

• Since 1983, major shift towards fixed-rent & chauthai.

• Land owned by outsiders - supervision problems implies more land leased to Palanpur farmers on fixed-rent?

• Increasing wage rate led to shift towards chauthai?

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Trends in Tenancy Contracts (As a % of total leased-in area)

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Efficiency of Sharecropping?

• Hypothesis to test:

Sharecropping is an inefficient system of tenancy as compared to fixed rent or own cultivation.

• Methodology

• Get the data on the households who have cultivated the crop on own land as well as on sharecropped land and then test if the difference in yields as obtained on these 2 different groups of land is significantly different.

• This method is precise in testing the question of efficiency as it controls for various aspects which can vary across farm households.

• We test the hypothesis by running paired t-tests to check if the means belong to the same population.

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Efficiency of Sharecropping?

Crops

Self-cultivated own land Sharecropped landSignificance

Level aNo of Obs

Mean Std. Dev. Mean Std. Dev.

Wheat 31 213.06 59.99 230.28 54.44 16

Mentha 15 3.18 2.25 3.28 1.76 85.6

Paddy 7 191.66 95.44 166.3 49.29 52.3

a. Level shows the minimum significance level at which the means are statistically different across two categories

Result: Yields on sharecropped land not less than yields on self-cultivated own land.

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Changes in Palanpur– Income & Outside Jobs

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• Increase in non-farm outside jobs: continuation of the earlier trend of commuting from village

• Most non-farm jobs casual with little growth in regular non-farm jobs

• Most migrants belong to richer classes: Very little migration among Jatabs

• For Jatabs and Muslims, commuting is still the dominant form of accessing non-farm jobs

Income & outside jobs

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Importance of Outside Palanpur: Palanpur in 1993 and in 2008

(Males 15+)

STATUS FREQ 1993 % 1993 FREQ 2008 % 2008

Work Inside Palanpur

252 72.21 222 59.2

Work Outside Palanpur

97 27.79 153 40.8

Total 349 100 375 100

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Outside Jobs: driver of change

• In contrast to the past, Thakurs are migrating out of the village.

• Jatab’s involvement with the outside world has gone up, both in terms of migration and outside work, more so in case of the latter.

• Closer integration with the outside labour market has strengthened bargaining power of Jatabs in the village labour market.

• Significant wage increase since 2006.

• Drivers of change in wage rate such as agricultural productivity & NREGA seem to be less relevant.

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Did Palanpur Residents Become Better-off?

• Per-capita income doubled between 1983 & 2008.

• But agricultural income per-capita roughly constant.

• Non-farm income per-capita rose by a factor of 4.

Illustrative breakdown of per-capita income

1983-84 2008-09

100 200

Non-Farm Farm Non-Farm Farm

33 67 133 6740

Changes in Palanpur-Government Institutions and

Politics

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The School in Palanpur• The infrastructure of the primary school has

improved. The school now have three rooms, toilets and a kitchen

• However, one permanent teacher who almost never comes and two para-teachers (shiksha mitra) from the village who are also very irregular

• On most days there are some in children in school but limited activity takes place

• Many children go to neighbouring villages to study, in private schools

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Health Services• The pulse polio programme is the only

government programme that is functioning • There are two unqualified private “doctors”

in the village whom people consult for minor illnesses

• Otherwise, most go to private hospitals in Bilari and Chandausi

• The ICDS centre is not functioning but the newly appointed ASHA is slightly more active 43

Other Services

• A few job cards have been distributed under NREGA in the village

• Very few old people and widows get pensions

• Only 7 families in the village have BPL cards

• The co-operative bank has more or less shut down

• Seed store is opened once in a while44

But some things are improving...

• This time Palanpur had a reserved seat for the village pradhan

• The person who was first elected was impeached by the villagers on charges of corruption

• A Jatab person now elected as pradhan in his place

• Villagers also contributed towards getting rid of the monkeys which were causing a lot of damage in the fields and homes

• Work has begun under the NREGA 45

Conclusions

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Role of Economics in Understanding Change

• Farmers taking advantage of new technological innovations

• Risk matters as well as opportunities: migration (commuting), type of tenancy, choice of input level.

• Rural dwellers take advantage of new external opportunities: knowledge and access important

• Formation of wages and operation of labour market

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India & Palanpur

• Overall growth in income per capita without much growth in agricultural income per capita.

• Rising non-farm income and move out of agriculture: but much more by daily commute than migration.

• Large inequalities in gender and caste remain but gaps closing.

• Inequality in land constant but increasing in incomes.

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Institutions

• Public provision and institutions are weak in contrast to stronger movement in private actions.

• Schools• Health services• Agricultural extension• Credit • Public distribution system

• But politics function, in a ‘sort-of’ way.49