Does intensity of crop diversification by large farmers differ from intensity of crop diversification by small farmers?: a case study of Punjab
Student name: Ms Sonal Dhingra
Guide: Dr Kavita Sardana
Year of completion: 2012
Host Organisation: TERI University
Supervisor (Host Organisation): Dr Namrata Gulati
Abstract: Crop diversification is an important component of growth which can bring in growth in
farm incomes, productivity of crops and employment generation. Diversification
assumed high importance in the recent past due to two reasons; fatigue in other gears of
growth in Indian agriculture and new opportunities for diversification towards high
value crops due to both the demand and supply side factors. In this context, we
investigate major guiding factors in the decision making by farmers to shift the area
under food crops towards non-food crops. However, heterogeneity in resource and
capital endowments of farmers and difference in their access to input and output markets
also play a role in decision-making. The decision is also based on the characteristic of
the crop to which farmer is shifting to. It is believed that non-food crops are riskier than
food crops because of the price and output demand volatility.
It could be hypothesized that farmers with greater farm land possessions and higher
incomes may diversify more than farmers who possess less of these assets and higher
incomes. In other words, though all the farmers are risk averse, large farmers are in a
better position to diversify due to their economic strength with which they can overcome
the risk involved in diversifying from food crops to non-food crops. This study provides a
conceptual framework which proves that higher risk aversion of farmers will encourage
them to put less land under the cultivation of non-food crops. This study pertains to
Punjab and data from 177 households is calculated to gauge the decision making. The
analysis in this study is based on Two-Tier model. Interestingly, the results show that the
decision to diversify is based on market incentives like availability of irrigational
facilities and markets and the extent to which they diversify depends on their household
income and acres of land they operate on. Small and large farmers differ in the
availability of markets, irrigational facilities, and income and landholding size and
hence, there is a difference in the extent to which they diversify.
Keywords: Crop Diversification; Punjab; small farmers; large farmers; risk; Two-Tier
model
