Agriculture Reference
In-Depth Information
lized prices at various levels. For example, compared to world rice prices, the
Philippines has maintained its domestic prices above, India has almost always
kept its prices below, and Indonesia has stabilized its prices at world levels. The
policies for wheat have also been different in India and Pakistan, the two main
wheat-growing countries in our sample. In India, wheat prices were supported
above international prices until 1989, below international prices during 1990-98,
and above international prices during 1999-2002. By contrast Pakistan has
always maintained wheat prices below international levels; to make this stabi-
lization policy effective, the government has heavily taxed agriculture over the
past three decades.
20
Does stabilizing at various levels matter in terms of growth and public
spending? A rigorous analysis-based answer to this question is beyond the
scope of this study. However, available studies from two countries in our sam-
ple, Indonesia and Bangladesh, suggest that stabilizing around the international
parity did pay off well in the initial years of the policy. In Indonesia, where do-
mestic prices of rice were maintained around world prices until about the early
1990s, Timmer (1997) has demonstrated that price stability did contribute to
the country's growth rates. In particular, his econometric estimates suggest that
stabilized rice prices raised the growth rate of Indonesia by about 16 percent
during 1969-74, 14 percent during 1974-79, and 4 percent during 1989-91 over
what they otherwise would have been. In Bangladesh, where major reforms
have been implemented to bring domestic prices to international parity, there
has been a reduction in food subsidy bills and, compared to earlier periods, price
variability has declined in the 1990s (Ahmed, Haggblade, and Chowdhury 2000;
Del Ninno et al. 2001).
PERFORMANCE OF THE AGRICULTURAL SECTOR
. In Asian countries, most
of which have practiced price stabilization during the past thirty years or so, the
performance of the agricultural sector has been remarkable. Compared to years
before the Green Revolution, cereal production has more than doubled (even
quadrupled in many cases), poverty has declined in both relative and absolute
terms, and many countries in the region are now enjoying overall economic
growth and prosperity (Table 2.8). Rice production has increased from 99 mil-
lion tons in the 1960s to about 260 million tons during 2000-03; the proportion
of undernourished people has declined by about 40 percent; and per capita in-
come in terms of purchasing power parity (PPP) has more than tripled. Suc-
cesses are spectacular when measured by poverty reduction in Indonesia
and India, by rice production in Indonesia, and by wheat production in India
and Bangladesh. In just two decades, the proportions of undernourished people
declined from 26 percent to 6 percent in Indonesia and from 38 percent to
20. The information on varying policies comes from Gulati and Narayanan (2003) for In-
dia; Clarete (2003) for the Philippines; Schiff and Valdes (1992) and Salam and Mukhtar (2003)
for Pakistan; and Timmer (1997) for Indonesia.
