Ideas for growth session 1: Agriculture

Chaired by Tavneet Suri (MIT; IGC), the Agriculture session began with a presentation by Maitreesh Ghatak (LSE) who addressed the question of compensation policies for rural communities that lose their traditional lands and livelihoods to make way for business (e.g., industry, commercial agriculture, urban development). Households in affected areas as well as neighbouring non-affected areas were surveyed in order to estimate the income losses for the former, and assess the suitability of compensations offered by the government in relation to these losses. Ghatak explained that the land acquisition strategy has been inadequate mainly because there is a large discrepancy between government records of offered compensation and household reports for particular kinds of land. He expects to provide guidelines for the design of compensation policies that could be used in the future, which most likely would have an impact on the policy debates on land acquisition in India, which has traditionally been one of the most sensitive issues.

Guush Berhane (IFPRI) presented research that aims to introduce an index-based drought insurance product in 15 areas in rural Ethiopia, via their informal insurance groups, the local funeral societies. In Ethiopia, these groups are widespread, highly inclusive and well structured. They charge premiums against risks and increasingly offer other products beyond funeral insurance. The weather index product, calibrated for local circumstances is sold via a private insurance company, Nyala Insurance. The main objective is to improve product uptake, and at the same time ensure basis risk—the difference between risk insured and the actual risk experienced—is reduced and informal insurance mechanisms are not undermined but used to increase coverage. The project uses a randomized controlled trial to investigate the uptake among groups and farmers, and the way it affects their functioning and the behavioural impact on agricultural technology choices and productivity. It also assesses how the introduction of these products will affect existing informal insurance arrangements.

Douglas Gollin (Oxford) talked about how high transportation costs—affecting both domestic and international trade—influence the current structure of African economies and consequently contributes to the slow transformation from agrarian to industrial and service-oriented economies. The study developed a calibrated model of spatial production and consumption to examine how public-policy interventions, such as investment in the rural road network or in exposing domestic transport and distribution activities to greater competition, impact on the spatial and sectoral structure of production in the economy.

Both discussants, Former President of Zanzibar, Amani Karume and Alex Kanyankole, Director General of the National Agricultural Export Development Board of Rwanda pointed out that it is crucial to find a common ground between farmers and the government when negotiating adequate compensation policies. They also argued that drought insurance is the beginning, but may not be sufficient to address all risks related to the agricultural sector, therefore, a holistic approach must be taken into consideration.