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close this bookAid to Agriculture: Reversing the Decline - Food Policy Report (IFPRI, 1993, 24 p.)
View the document(introduction...)
View the documentPreface
View the documentPayoffs to Investment in Agriculture
View the documentRole of Aid in Agricultural Investment
View the documentChanging Patterns of External Assistance to Agriculture
View the documentTrends and Outlooks for Major Donors
View the documentDeveloping-Country Responses
View the documentReasons for the Decline
View the documentProspects for the Future
View the documentConclusions

Payoffs to Investment in Agriculture

Agriculture is central to economic growth and development in low-income countries, particularly the least-developed countries. It provides food, generates employment and income, and is a powerful engine of growth. Through its linkages to industry and services generated directly and indirectly through production, consumption, and employment of the farm population, agricultural growth generates sizable employment, income, and growth in the rural nonfarm and urban economies.2 Because poverty in most low-income countries is concentrated in rural areas, agricultural growth is critical for alleviating poverty and improving household food security. Moreover, sustained agricultural growth restrains excessive migration of rural poor people into cities in search of jobs.

2. J. W. Mellor, "Agriculture on the Road to Industrialization," in Development Strategies Reconsidered, ed. J. P. Lewis and V. Kallab (New Brunswick, N.J., U.S.A.: Transaction Books for the Overseas Development Council, 1986), and S. Haggblade, P. B. R. Hazell, and J. Brown, Farm/Nonfarm Linkages in Rural Sub-Saharan Africa: Empirical Evidence and Policy Implications, AGRAP Economic Discussion Paper 2 (Washington, D.C.: World Bank, 1987).

Few low-income countries have achieved rapid nonagricultural growth without corresponding rapid agricultural growth (Figure 1). Most of the developing countries that grew rapidly during the 1980s experienced rapid agricultural growth in the preceding years. For instance, China's astonishing annual growth rate of 9.5 percent in the 1980s was stimulated by agricultural policy reform and support of the farm sector in the late 1970s and early 1980s. Indonesia's annual agricultural growth of 4.3 percent during 1965-80 facilitated annual GDP growth of 5.5 percent during 1980-90. Thailand's agricultural growth of 4.6 percent per year during 1965-80 contributed to annual GDP growth of 7.6 percent in 1980-90.3 While quite different policies may have led to these associations in each case, the relationship between agricultural growth and overall economic growth is generally strong in low-income countries and strongest in the poorest countries.

3. Growth rates from World Bank, World Development Report 1992 (New York: Oxford University Press, 1992).

The agricultural sector in many low-income countries, particularly the least-developed countries, is large; neglecting it adversely affects the rest of the economy. It is difficult, if not impossible, to stimulate sustained economic growth in the least-developed countries without first moving the largest sector, agriculture.

Figure 1 - Agricultural growth and economic growth in low-income developing countries, 1965-89

Source: World Bank, World Development Report 1991 (New York: Oxford University Press, 1991).

Note: Countries are Bangladesh, Burundi, China, Ghana, India, Indonesia, Kenya, Malawi, Mali, Nepal, Niger, Nigeria, Pakistan, Sri Lanka, Tanzania, and Zambia.