A paper by Pratap Birthal, Devesh Roy and Digvijay Negi published in the journal World Development investigates the impact of crop diversification on the poverty levels of farming households in India. The cultivation of HVCs, such as fruits, vegetables and spices, have been identified by numerous scholars as an alternative to the cultivation of staples and can help alleviate poverty. This is because HVCs, despite being more labor intensive, generally provide higher net returns per land area compared to staple crops. This suggests that in the context of India, where agricultural areas are generally contextualized by a surplus of rural labor but a shortage of land, the cultivation of HVCs, especially by smallholder famers, has the potential to reduce poverty. However, while showing that farmers with HVCs are generally better off than their counterparts, previous studies have not made an empirical link between crop diversification and poverty; this paper examines the link.
The study used data from a nationally-representative survey conducted by the National Sample Survey in India, this survey included data from 6,638 villages in 566 districts representing over 50,000 households. Alongside agricultural data, such as type of crops grown as well as their costs and returns, the survey also provided information on household characteristics and access to agricultural institutions (such as extension services). This data was then used to assess whether a farmer fell above or below the poverty line, which was then compared with crop choices and land sizes. The linkage was also assessed in terms of per capita household expenditure. Building on these findings, the study estimated also the relationship between the degrees of diversification (proportion of land devoted to growing HVCs) and poverty.
It is important to consider that the cultivation of HVCs can influence poverty levels in four main ways: HVCs generally require higher agricultural inputs than traditional crops; this demand for increased inputs can generate employment. Second, through higher prices, HVCs can influence farmers’ incomes. Third, an increase in the number of HVCs cultivated can affect the demand for labor. Fourth, an increase in the number of HVCs grown can change the prices of food commodities for consumers. The findings of this paper specifically focus on how HVC’s can influence farm incomes. It is likely that the adoption of HVCs will have impacts on the poverty rates of consumers and other sectors but this is outside of the scope of this study.
The main finding of this paper is that the likelihood of a farmer being poor is 3-7 percent lower if he or she grows HVCs. The biggest impact of growing HVCs on poverty is for small farmers who cultivate less than or equal to 2 hectares. Specifically, the paper finds that there is an inverse size to productivity relationship, namely, the smaller the area devoted to cultivating HVCs, the higher the productivity. Additionally, findings in the paper also suggest that poverty rates are lower for those farmers that cultivate vegetables.
With regards to the relationship between the degree of diversification and poverty, after controlling for other forms of household heterogeneity that exists, the paper finds that the higher the degree of diversification, the lower the probability of a household being poor. For small- and medium-scale farmers this trend holds true until approximately 60 percent of land is cultivated by HVCs and after this point the effect of diversification on poverty becomes marginal. Currently the average Indian farmer uses around 25 percent of his/her land to grow HVCs. For marginal famers to move out of poverty the paper finds that they need to allocate 50 percent or more of their cultivated area to HVCs.
Overall, this suggests that future increases in the adoption of HVCs can help alleviate poverty. The paper highlights that the potential for HVCs to reduce poverty is “good news” as consumption patterns in India have been moving away from cereals for two decades and will continue to do so in the foreseeable future. Despite this and the apparent benefits of adopting HVCs, there are a number of important reasons why many farmers choose not to switch to HVCs. The most significant reason cited is that HVCs are more prone to risk as compared to staple crops. There are a number of reasons for this position: in certain areas there is a lack of information on HVC’s which often increases farmer perception of risk; and HVCs are also susceptible to a range of production risks, such as weather fluctuations and disease, as well as marketing risks, such as perishability. Larger and wealthier farmers are comparatively more able to bear these risks. Similarly, some HVCs require significant investments of capital and/or time--for instance, fruit trees have a gestation period of around 3-5 years-- and poorer farmers generally do not have the savings or access to credit necessary to make these investments. Additionally, certain conditions and areas in India may not be suited for cultivating HVCs.
In conclusion, the main finding of this paper, that the adoption of HVCs helps alleviate poverty, is especially important in the Indian context. Agriculture in India is currently characterized by declining land sizes, and excess labor. Due to demographic growth and only a negligible shift of labor from agriculture as compared to other sectors, the role HVCs play in poverty reduction in the near future is likely to increase. This is especially the case as the demand for HVCs in India is expected to triple by 2030. This paper illustrates that increased diversification helps reduce poverty and that promoting diversification should be an important consideration for Indian policymakers. These findings also imply that if the threshold costs to adopting HVCs are reduced and productivity in HVCs is further increased, this is likely to lead to significant decreases in rural poverty.
This paper appeared in the journal World Development, Volume 72 in August 2015 and can be found online here: http://www.sciencedirect.com/science/article/pii/S0305750X15000480
BY: Bas Paris, IFPRI
 In the context of this paper, diversification refers to the adoption of high value crops and does not include other types of diversification (methods or activities).