Micro Irrigation in Northern India

an analysis of Micro Irrigation and its potential to change agricultural industry in Northern India
By Matthew Terpstra

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Micro-Irrigation-System-Post

source: https://www.tes.com/lessons/GFrasG4idfQ0bg/micro-irrigation-image

Farmers in Northern India are in the midst of a water crisis. Due to droughts and over usage of ground water supply farmers are faced with decisions to make about their irrigation technology.  Northern India is home to some of the largest farms in the nation, which are responsible for the growth of some very essential foods. The state of Haryana, located in Northern India, has come up with an idea to require farms within 36 of their blocks to begin using micro irrigation. This change could help India’s agriculture in more ways than one, “This shift in the irrigation system would not only help in maintaining eco-balance but also lead to energy conservation” says the Economic Times Bureau.

 

Micro irrigation is an alternative technique to get water to massive amounts of plants throughout a farm. It has many benefits as well as costs associated with it. Along with more efficient use of water while simultaneously minimizing pests and diseases within each plant. It also allows for specialization among plants of different ages. For example, newer plants might require more water than older ones and micro irrigation allows you to spray more water on the roots of newer plants and less water on that of the older plants. Yet micro irrigation has some downsides, to start, it costs a lot of money to run the pipes through each row of plants. Additionally, it requires a lot of maintenance, the various filters within the system must be cleaned and replaced periodically. In order to make this program worth it for the many farms in the state of Haryana, the government has decided to provide incentives to farmers who take up this new technology.

 

India’s agricultural industry has been facing various issues with their agricultural expansion. Some of these issues include agricultural productivity, poverty in agriculturally based communities, and environmentally friendly sustainable solutions to agricultural productivity(WorldBank.org). Micro irrigation could be the solution that India needs to solve these issues. An inspiring story of a farmer in Southern India using micro irrigation provides farmers in Northern India with hope. The District Collector in the area credits micro irrigation to the success of this farm, “If it can improve yield and also cut on costs, nothing like this facility” (Nadul). Even with these facts it is unknown whether or not farmers in these 36 blocks of Haryana will use the technology.

 

Take Up of technological advancements

 

It is difficult to know whether or not farmers will take to this new technology. Throughout history it is evident that farmers will only use new technology if they are clear of the costs and benefits of the technology. Since the farmers will be heavily subsidized by the government they may be able to get a larger take up on the technology. Yet they may still face issues with take up due to the complications of micro irrigation. Because the plants require far less water they run on a system and this system may be too complicated for the average farmer in India to use.  This is where a system of social learning and Target Input Models could be extremely useful to the farmers of Haryana.

 

We also see in various studies in Development Economics that take up of technological advancements in the agricultural industry is extremely low unless farmers see success stories or are able to learn from their neighbors. This is evident in not only stories of micro irrigation but any form of technological advancements. This situation in Haryana is similar to the situation outlined in Conley and Udry. This paper describes the use of a fertilizer on Pineapples in Ghana and how farmers use their “information neighbors” in order to make decisions for their farm. Along with these “information neighbors” farmers use a Target Input Model in order to make a decision of whether or not to use a new technology. This target input model is essentially an outline of what they know about the new technology and how it could either benefit of cost them more in the end. This farmer learns about the inputs that they use once their yield comes in. Like the story in Ghana, Northern Indian farmers could be the lead farmers in water conservation technology.

 

Conclusions

 

The take up of micro irrigation in Haryana could have huge implications to the future of agriculture in India. Micro Irrigation would not only provide a sustainable solution to the growing groundwater problem within the entirety of India, but would also increase crop yield and lower costs for farmers. The people of Haryana need to realize that they are on the cornerstone of an agricultural revolution and could have major implications to the health of farms in the future. The Haryana government has taken a big step in making this a requirement in their 36 blocks and could be leading the charge to more efficient water usage within India. These farmers are in a unique situation from other developing countries, where the classic learning by doing model may not happen fast enough. Farmers must take the subsidies that they can get from the government and implement this system to not only save their farms but also that of many farms in the future.

 

Works Cited

 

India: Issues and Priorities for Agriculture. Retrieved April 24, 2017, from http://www.worldbank.org/en/news/feature/2012/05/17/india-agriculture-issues-priorities

 

Nadu, T. (2012, July 19). Drip irrigation, a success story. Retrieved April 24, 2017, from http://www.thehindu.com/todays-paper/tp-national/tp-tamilnadu/drip-irrigation-a-success-story/article3660659.ece

 

Saving Water: Micro-Irrigation. Retrieved April 24, 2017, from http://www.sjrwmd.com/waterconservation/savingwater/microirrigation.html

 

Times, E. (2017, April 12). Haryana government to promote micro irrigation by providing incentives to farmers. Retrieved April 24, 2017, from http://economictimes.indiatimes.com/news/economy/agriculture/haryana-government-to-promote-micro-irrigation-by-providing-incentives-to-farmers/articleshow/58149242.cms

Inflation in India: The Same Old Story or Something More?

A summary and analysis of the current inflationary predicament India faces, and the decisions that have yet to come.
By: Perry Bloch

Developing countries often experience faster economic growth rates than more developed nations. However, rapid growth doesn’t come without significant costs, whether they be inflationary or otherwise. Drs. Laurence Ball, Prachi Mishra, and Anusha Chari in their paper “Understanding Inflation in India” dive deep into discovering the core driving factors that caused inflation in India to skyrocket from 3.7% in 2001 to an unsustainable rate of 12.1% in 2010.

Inflation

At first glance, some attribute India’s inflation to the same thing as many other countries’ key inflationary driver; fluctuations in the prices of food and energy. The Reserve Bank of India’s Governor Rajan leads a pack of mass speculation that “high levels of inflation may become embedded in the expectations of price setters” which Rajan labels as an “inflationary spiral”, or as I prefer to call it, a self-fulfilling prophecy. Simply put, the idea that higher inflation rates are caused by expectations, means that the economic forces that set prices are anticipating what they believe to be the upcoming period’s inflation rate. However, their very expectations now reflected in the prices are the cause of what they initially believed the inflation would be, ensuring its realization and hence why I call it a ‘self-fulfilling prophecy.’

Core Inflation versus Headline Inflation

The authors importantly highlight the differentiation between core and headline inflation, which is important in any conversation about understanding the sources of inflation.

Core inflation refers to an “underlying trend in the inflation rate determined by inflation expectations and the level of economic activity.” Basically, the core inflation observation is inflation that is driven by natural economic forces working over time. Headline inflation, the more volatile measure of the two, is core inflation with inflationary supply shocks added in. Short run supply shocks are often measured by the relative price changes of the two main drivers of inflation in any country: Food and Energy. It is for this precise reason, that core inflation measures price variations without considering the fluctuations in both the food and energy sectors.

The overarching goal of this important differentiation is to be able to discern a long-run trend of inflation rates for any particular economy over time, without the influence of short-term price variation. In India however, the food sector possesses the largest share of the aggregate economic output. Discounting the food sector from consideration in India’s economy over time would leave a measure that does not accurately represent a long run trend. Therefore, the authors instead try to work with a weighted median inflation measure, which does not discount the important industries, but rather does strip away most of the quarter-to-quarter outlying price fluctuations, resulting in a measure similar to the core inflation. Specifically, the paper studies the rate of change in the headline Wholesale Price Index (WPI), and observes the core inflation in the WPI measured using a weighted median inflation rate. The Wholesale Price Index was chosen because beginning with data collected in 1994, it has a “relatively high level of disaggregation” of varying industries inflation rates, which was not available in the more commonly used Consumer Price Index (CPI), when the data collection began. The WPI has typically been the most common price index to measure inflation specifically in India.

The Indian Inflation Problem

Wanting to be among the “big boys” of advanced economies such as that of the U.S. and Europe, India is implementing specific monetary policy to work its economy at full power, so it no longer will be discounted in major global considerations. However, no vehicle can immediately become a high flying sports car, without progressing through the proper development. Most macroeconomic textbooks teach inflation through the classic Phillips curve model, where future inflation is dependent on expected inflation and supply shocks (which we discussed earlier), and the level of output of the economy relative to its historical output trend. As you can see, this model relies heavily on the most recent preceding inflationary data to predict the future set. It is this very model that advanced economies work to move away from as they become more developed, and it is this model that India is still unable to escape on its quest to more economic respect.

The main problem lies in something I’ve touched on but have yet to fully explain. Controlling inflation to create stable and sustainable growth is not easy, nor is it free. The authors in Understanding Inflation in India make a very cold, and fact-driven analysis on the economic conditions in India. Specifically, the concept of sacrificing output to reduce inflation can have severe consequences to the population relying on the sacrificed output. In India especially, the “output” that is so vaguely described in the paper, really refers to the food that so many men, women, and children rely on for their sustenance and their lives. I’ve mentioned that food is one of the primary drivers of the Indian Economy (and most economies for that matter). In India however, there aren’t many other significant goods and sectors, like manufacturing, for the economy to fall back on. Thus, an effort to control inflation isn’t simply a far removed monetary policy decision, but rather a directive that will immediately impact the lives of millions of Indians across the country.

The Effects and Potential Outcomes

With a decision that has the potential to affect the lives of so many Indians who already struggle to make ends meet, it is critically important to consider the impact such a decision will have on the already spiraling poverty and inequality. According to data from the World Bank, the poverty headcount ratio in India in 2009 at the $1.90/day poverty threshold, was 31.1%. With the understanding that so much of India’s economy is not only driven by, but also dependent upon the food industry, sacrificing output from that essential sector can devastate entire portions of the population further increasing the poverty headcount. Aside from being a horrific reality to consider, this would have adverse long-term economic effects as well.

Conclusion? Not Exactly

Unfortunately, the issues and dilemmas I’ve explained above, that are discussed in significantly more detail in the paper, are very real and immediate. There is no one right answer or solution to solving India’s current inflationary instability. It is certainly worth noting that as recently as early 2015, inflation has fallen to 5.2%, although there is nothing to anchor or lock in that rate. India faces economic uncertainty in the future which the Reserve Bank of India can only attempt to mitigate through various monetary policy implementations, and observing the results. The challenges lie in the fact that with such significant historical fluctuations, it is nearly impossible to discern a future trend. We can only hope that the Indian government continues to keep the best interests of its citizens at the forefront, and minimize any political turmoil that might hurt the lives of millions of Indians in the years to come.

The Effects on Demonetization on Women

An article on the effects of demonetization on Indian women is discussed and connected to the household bargaining model. By the ECON 416 TA

On November 8th, 2016, Prime Minister of India Narendra Modi announced that all existing Rs 500 and Rs 1,000 notes in circulation would be invalid within four hours. While the old notes could be exchanged at banks for currency through November 25th or deposited into bank accounts until December 30th, the prime minister’s announcement kicked off an economic shock that has affected most Indian households. This is policy shock and its effects on Indian women in poor and rural areas is the focus of Nishita Jha’s article “Note demonetisation: What of the women who hide cash to feed their children or to escape abuse?”.

The crux of the issue, as Jha describes it, is that many Indian women save their money purely in cash, often in secret, and have limited or no access to the formal banking sector. Women commonly maintain these savings in order to purchase medicine for their children or food for the family when regular income is scarce. Others maintain separate savings as a safety net when faced with abuse in the household. Keeping these cash savings secret from their husbands allows women to maintain control over how the money is spent.

Demonetization presents these women with a dilemma—either lose most or all of your cash savings, or risk revealing them in an attempt to deposit them into a bank account. With as many as 80% of Indian women outside the formal banking sector, those with hidden cash savings are attempting to recoup some of their losses by selling their defunct notes for new notes, at a huge loss (Selim et al. 2005). However as Jha notes, even setting up women with a bank account is not without hurdles. Just opening an account risks revealing the existence of the secret savings. Even getting to the bank to make a deposit is especially challenging for women in poor, rural areas, because they are discouraged from leaving the home after dark.

Household Bargaining Framework

Jha’s reporting on the effects of demonetization takes the framework of the household bargaining model as given and as the proper lens through which to understand the decision problem these women face at home. The situation she describes is one where husbands and wives have different spending priorities, and women are keeping cash secretly in order to fund their priority expenditures. Beyond the anecdotes Jha offers that support the bargaining model, there is a body of academic literature that suggests this model is a useful lens through which to understand household dynamics. These include Dulfo 2003, which found that South African pensions sent to grandmothers increased child nutrition (measured as weight-for-height) whereas those sent to grandfathers did not. Under the standard neoclassical model of the household, who received the pension should not make a difference, only the size of the transfer.

If we choose to accept the evidence in favor of the household bargaining model and accept it as a good approximation of household behavior, we can then consider what the model predicts will be the effects of India’s demonetization policy. In the bargaining model, each spouse has their own set of preferences for allocating the household’s resources. For example, the wife may want to purchase food for a child, while the father may want to use that money for alcohol. Each spouse also has a threat point—a level of utility below which the spouse will leave the household or marriage. Continuing the example, if the husband spends too much money on alcohol the wife may opt to take the children and leave the household. As shown in the graph below, the position of the threat points determines which resource allocations are possible, and the maximum level of utility each spouse could attain if they had all the bargaining power, while still keeping the household intact. Bargaining between spouses determines which allocation is ultimately chosen, and this Nash equilibrium is shown in the figure as U*1—which is somewhere between the husband and wife’s preferred points, conditional on not triggering the other’s threat point.

Demonetization plays a role in this model by removing or vastly reducing the wife’s secret cash savings. Following the terminology presented in McElroy 1990, this shock to the wife’s savings can be thought of as one type of extrahousehold environmental changes (EEP). The savings allow the wife to have some money to fall back on should her husband attempt to enforce an allocation that breaches her threat point. The cash acts as an upward shifter for the wife’s threat point, which is at Tw1 prior to demonetization. The corresponding Nash equilibrium for the household is U*1. Even with full bargaining power, the best the husband could do without violating the wife’s threat point is Uh(max)1.

However, the rollout of demonetization destroyed or greatly reduced this fallback option for the wife, due to the challenges women face changing or depositing defunct notes that Jha highlighted. This pushes the wife’s threat point from Tw1 to Tw2, and moves the Nash equilibrium to U*2. Notice that compared to the original equilibrium, the wife’s utility has decreased while the husband’s has increased. This can also be seen in the movement of the husband’s maximum attainable utility rightward to Uh(max)2. Notice too that the graph assumes that the wife’s secret savings were not included in the households shared assets and thus the decrease in these savings does not shift the household’s utility frontier inward.

threat_points

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