Agricultural Trade and Poverty Reduction in Nepal

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Agricultural Trade and Poverty Reduction in Nepal

• Dr. Shiva Sharma
• National Labour Academy
• nla_at_mail.com.np
• Presented in Media Workshop, "Role of Trade in
  Poverty Reduction"
• Nagarkot, December 1-2, 2006

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What is Happening to Poverty

• from 42 in 1995 to 31 in 2004
• 45 in rural, and 10 in urban area are poor
• 54 are poor among agricultural labour households
• 50 poor among small land holders
• 2/3 of Nepali poor come from small holders
• Poverty among Dalits about 50
• Muslims 44 poor in 1995, 41 poor in 2004
• What Contributed to Poverty Reduction?
• Remittance income1/3 of household receive it
• Increase in non-farm wage income

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Agriculture Growth and investment

• 1992/93-2005/6
• GDP growth was 3.9
• AGDP growth was 3.3
• Public sector expenditure in agri sector (-)3.57
• Agriculture (-)5.17
• Irrigation (-)5.55
• Land Reform ()4.0
• Forest ()1.0

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Investment Growth rate After APP (1997-2005)

• Agri sector (-)2.5
• Research (-)5.3
• Extension ()1.2
• Subsidy (-)42.4
• Irrigation (-)6.4
• Feeder Roads (-)9.8
• Rural Roads ()11.9

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Output growth rate 1997-2005

• Cereal growth 3.2
• Fruits 3.5
• Vegetables 4.9
• Milk 3.1
• Meat 3.0
• Egg 4.2
• Per capita food production from 170 kg in 1992 to
  193kg in 2005

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Trade channels through which poverty is affected

• income and employment effect
• expenditure effects arising of price changes
• effects on revenueenabling higher expenditure on
  poverty reduction
• But not that simple these are must for impact on
  poverty
• backward linkages to resources owned by poor
• labor intensities of activities
• labor market conditions (wage, security, safety
  at work)
• Poor with these characteristics are least
  affected by trade
• lack of assets and capital
• physical isolation
• lack of access to created opportunities

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Characterizing Agricultural Export/Import

• Export accounts 3 to 4 of AGDP
• Imports accouts 7 to 8 of AGDP
• Dominated by India 70 of export 55 percent of
  import
• Likely beneficiaries of trade policy reforms
• Market surplus of paddy 27
• Market surplus of lentil 42
• Top 20 of farmers account 90 of sales of
  cereals
• Subsistence farmerslack ability to respond to
  price changes
• Little diversification
• Weak, fragmented markets

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After reform outcomes

• prices are falling-rice, fruits
• inputs prices are rising
• cheaper imports of rice from India productivity
  and subsidy high in India
• supply responses weakmany reasons related macro
  policies
• diversificationbut who do that taking risks
  (prices, inputs)? Large farms?

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Policy Outlook

• "Utilizing trade for poverty reduction needs
  reorienting production structure and developing
  linkages with rural resources, resources owned by
  the poor"
• Strategic interventions to build 'supply side'
  capability and capacity
• enabling poor to benefit from growth, tradeasset
  ownership employment
• subsidy
• tariff policy to halt cheaper imports
• infrastructureexample of shallow tube wells
• public good character of agri investment

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• Thank you